A bidding war is set to erupt over DirecTV, the largest satellite TV operator in the US with 9.5m subscribers.
DirecTV's current owner, General Motors, says it is willing to entertain offers from bothcurrent suitor News Corp as well as new would-be buyer EchoStar Communications,which is second largest satellite TV provider in the US with 5.3m customers.
In a filing with the with the Securities & Exchange Commission, EchoStarrevealed this week that GM is open to discussions about merging DirecTV withits fast-growing competitor having previously rebuffed EchoStar's interest.
Although much smaller than DirecTV, and certainly miniscule compared with Rupert Murdoch's News Corp, EchoStar is looking to swell its war chest in preparation for acounter-bid. A report in The Wall Street Journal suggested it had thecapacity to raise $2.3bn of its own money, which would then be supplementedwith backing from strategic investors for a quick cash offer of around $5bn.Both AOL Time Warner and NBC owner General Electric have been mentioned aspotential EchoStar partners in such a transaction.
For his part, Murdoch has already lined up the support of two heavyweights of hisown in Microsoft and John Malone's Liberty Media although those negotiations have been dragging on for some time now. "Our negotiations with Hughes and GM are progressing," insisted a News Corp spokesman yesterday. "The talks have been slow, but we continue to make progress."
Even if were able to raise sufficient financing to buy DirecTV, there are some doubts whether EchoStar would be able to win regulatory approval from Washington for amerger that unites the two leading satellite TV players in the US.
Most analysts still believe that Murdoch is the presumptive frontrunner althoughEchoStar's presence may force him to pay substantially more than he has wanted to until now. Which, of course, could be exactly what both GM and EchoStar are gunning for by initiating talks.