EchoStar Chair and CEO Charles Ergen did the math for analysts in a conference call regarding his company's unsolicited bid for Hughes Electronics.
Aside from financials, Ergen said a combined company would be slightly larger than AT&T, although AT&T Broadband's potential consolidation "by the time we would consummate this deal," would land EchoStar-Hughes a distant No. 2 among multichannel providers.
Ergen also noted that his bid wouldn't combine first- and second-place players in the market, "or even the number one and four players, like Comcast and AT&T (who'd discussed a merger)." Rather, it would combine Nos. 3 and 7, creating more effective competition to cable incumbents.
Revenue-wise, the EchoStar-Hughes combo would be smaller than AT&T alone, but if AT&T merges with another cabler, Ergen's company would run a distant second.
Ergen also noted cable's 77-percent advantage in the market, and said satellite "has a long way to go" in proving its economics.
But cable claims a whopping $2,000 debt per subscriber, Ergen says, while the "EchoStar Hughes combination on a pro forma basis is only $429 of debt." Even on a net basis, or if the combined entity took on additional debt, it could support it and still be far below cable's debt per subscriber.
Ergen also noted that PanAmSat, which EchoStar may be required to buy as part of a bid, was "a very valuable asset if properly managed, but it's certainly not critical to the business."
Asked if he would go directly to shareholders if General Motors, Hughes' parent, refused the bid: "I don't want to go there with that question," he said.
Finally, David Moskowitz, EchoStar's senior VP and general counsel, said the company's antitrust filing in Denver against Hughes' unit DirecTV has been stayed through mid-August, "at which time there'll be another discussion with the judge, and we'll see how that goes."
Meantime, in related news …
… GM's board met Tuesday, but was mum on discussions. The company is well into talks with News Corp. over a purchase of Hughes Electronics, and observers say it was a topic for Tuesday's meeting, prompting Ergen to make his bid this week. …
… A Hughes tracking stock shareholder sued to block a sale to News Corp., saying GM was favoring the cash sale when EchoStar's stock transaction was better for shareholders, The Denver Post reports. …
… EchoStar got a $1 billion offer from Kudelski to back its bid, The Financial Times reports. The supplier of pay TV security access systems has a long-standing deal with EchoStar, from which it gets 25 percent of its revenue. DirecTV uses conditional access systems from Kudelski's rival, NDS Group, leaving a chance EchoStar would switch.