News Corp., DirecTV Dance Around a Deal

News Corp.’s Rupert Murdoch and DirecTV’s Eddy Hartenstein circled around each other and the subject of their stalled merger at a semiannual satellite industry conference. Both proved to be coy speakers, revealing only that a deal between the companies hasn’t been ruled out.

With Murdoch scheduled for the morning keynote and Hartenstein set up for the afternoon, there was little chance the two men would bump into each other at SkyForum, the Satellite Broadcasting and Communications Assn. meeting.

Notably, the other U.S. satellite player, EchoStar, was not represented on the stage throughout the day.

News Corp., hungry for a deal that would give it a piece of the U.S. market, has floated the idea of teaming with EchoStar instead of DirecTV, even though EchoStar has half as many subscribers. Separately, DirecTV has been floating the idea of merging with EchoStar. EchoStar has stayed silent on the subject.

That has left Murdoch to play the part of aggressor. His latest tactic is to sell Wall Street on a stripped down initial public stock offering of his Sky Global Networks, which has been stalled until he could add DirecTV as the crown jewel of a global empire that includes BSkyB in England and StarTV in Asia.

“Is Sky Global viable without U.S. presence?” Murdoch asked as optimistic slides of BSkyB revenue growth flashed on the giant screen behind him. “Of course it is,” he said. “That’s a bit like asking whether the Louvre could exist without the “Mona Lisa.” A U.S. presence is nice to have, but it’s not necessary to the overall success of the operation. We, like the Louvre, have plenty of other treasures to show off.”

Hartenstein, for his part, gave the impression later in the day that DirecTV parent General Motors would be just fine without what he would only specify as a “transforming transaction.”

He wouldn’t confirm whether talks were ongoing, let alone their status, saying, “We won’t do any transaction just for the sake of doing one. We have a pretty good hand as we have it.”

Then he said, “There is a transaction out there. There are entities out there that we could get what we all want out of a deal.” The philosophy applied to a “stand-alone company or a combined company,” he said.

Hartenstein reiterated at least three times that he expected an announcement about the future of DirecTV sooner rather than later, which is something he has been saying in almost the same exact way since the fall when the deal with News Corp. started to take a definite shape.

While conference-goers were split on what all the cryptic talk meant, a panel of top satellite industry analysts was bullish on the deal eventually going through.

Tom Eagan, director of equity research at UBS Warburg, picked Hughes, the owner of DirecTV, as his top stock and predicted for 2001: “I do think a deal happens. And if what Murdoch does with DirecTV is anything like what he has done in England, with giving away satellite dishes, he will be pretty competitive with the cable industry.”