EchoStar in $1.05-Billion Satellite TV Deal

EchoStar Communications Corp. will buy the satellite television assets of News Corp. and MCI WorldCom Inc. for $1.05 billion in stock, enabling EchoStar to transmit more than 500 channels with the new licenses and satellites.

News Corp. and MCI WorldCom will exchange satellite transmission licenses, two satellites, a satellite broadcast facility and other assets for a 37% stake in EchoStar, the No. 3 U.S. satellite TV provider.

News Corp., controlled by Rupert Murdoch, and MCI WorldCom acquired the satellite licenses in 1996 in hopes of becoming partners to operate a major U.S. satellite TV company. The companies never began broadcasting, though, and searched for buyers after deciding that existing satellite broadcasters had too big a lead.

The transaction is the second such deal between the companies. Littleton, Colo.-based EchoStar last year sued News Corp., the world’s fifth-largest media company, after it backed out of plans to buy 50% of EchoStar.

Under the new agreement, EchoStar will call off its $5-billion lawsuit against News Corp. if the latest transaction is approved. As part of the agreement, EchoStar will carry News Corp.’s Fox News on its satellite network and gain rights to retransmit the programming of Fox-owned TV stations.

EchoStar said it will be able to transmit more than 500 channels with the new licenses and satellites. It also will sell a minimum of 500,000 set-top boxes, an order worth $75 million to $100 million, to News Corp. for its satellite TV operations elsewhere in the world.

“I think the long-term benefits [for EchoStar] are clear,” said Rob Kaimowitz, an ING Baring Furman Selz analyst.

Under the agreement, EchoStar will transfer 24 million newly issued Class A common shares to News Corp. and 5.9 million to MCI. At Friday’s closing price, the stock is worth $1.05 billion.

Kaimowitz said the partners paid $682.5 million for the licenses for 28 satellite frequencies and are giving EchoStar satellites worth $450 million. EchoStar also will acquire a satellite uplink center worth $100 million.

News Corp. is based in Sydney, Australia, and MCI WorldCom is based in Jackson, Miss.

The agreement follows last month’s collapse of Primestar Inc.’s proposed $1.1-billion purchase of American Sky Broadcasting Co., which is jointly owned by News Corp. and MCI WorldCom, because of regulatory hurdles. Primestar is the nation’s second-biggest satellite broadcaster.

The Federal Communications Commission and Justice Department each will review the transaction, EchoStar said. The FCC will consider if it’s in the public interest, while Justice will look at whether it violates antitrust laws.