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EchoStar, Liberty Media might make joint offer for Intelsat

Jeff Smith, Rocky Mountain News

Published June 15, 2007 at midnight

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Two of Colorado's richest men appear to be cozying up to each other to strike a deal - which could lead to others - to benefit their business empires.

Charlie Ergen's EchoStar Communications and John Malone's media holding company, Liberty Media, were reported Thursday to be preparing a joint offer for satellite-communications provider Intelsat. A formal bid wasn't considered a sure thing.

The news also rekindled speculation that Ergen's EchoStar ultimately could merge with rival DirecTV, a deal that regulators quashed in 2002. Malone's Liberty is buying a 38 percent stake in DirecTV, the nation's No. 1 satellite provider ahead of EchoStar.

Intelsat, which is on the auction block, was accepting final bids Thursday and could command as much as $5.5 billion, The Wall Street Journal reported. The newspaper cited people familiar with the matter.

EchoStar and Liberty, both based in Douglas County, declined to comment.

Intelsat also declined to comment. The Bermuda company, owned by four private-equity firms, provides wholesale capacity to programmers such as ABC and HBO, as well as other businesses, via a global network of 51 satellites.

Sanford C. Bernstein & Co. analyst Craig Moffett wrote in a research report Thursday that "the joint participation of Liberty and EchoStar . . . clearly indicates" the companies are "working together on at least one front, a sign that further cooperation is possible after Liberty takes control of DirecTV later this year or early next."

The prospect of a joint EchoStar and Liberty bid comes as EchoStar and DirecTV struck a joint broadband distribution agreement with Clearwire Corp. to offer Clearwire's wireless high-speed Internet service to homes and offices miles away.

Moffett said the Intelsat and Clearwire developments together "hint at what might be a cozier working relationship going forward" between EchoStar and DirecTV - "and/or soon-to-be parent Liberty Media."

In March, Forbes magazine reported EchoStar CEO Ergen's personal wealth at $10 billion, putting him in the No. 1 spot among Colorado's billionaires for the sixth straight year.

Malone, Liberty's chairman, snagged the No. 3 spot in the state, with an estimated $2 billion fortune.

Although Liberty and EchoStar could decide against making a formal bid for Intelsat, the Journal report reflects a bold cooperative agreement.

The newspaper noted that if EchoStar and Liberty succeed in getting Intelsat, the joint ownership "would create a highly unusual partnership between two strong-willed rivals who run satellite-to-home broadcast systems that currently compete with each other."

A joint Intelsat purchase could significantly cut operating costs for both EchoStar and DirecTV, the Journal said.

Any purchase would be expected to get close scrutiny from regulators, following their decision to block EchoStar's $26 billion bid for DirecTV.

But Jimmy Schaeffler, senior research analyst at the Carmel Group, said the potential teaming of EchoStar and Liberty "presages the combination" of the two satellite-TV operators.

He said that over time there's an "increased likelihood" a merger would pass regulatory muster. Why?

Schaeffler pointed to telephone companies - such as Qwest, AT&T and Verizon - "and the development of their competitive (TV) services nationwide." Those services compete with EchoStar and DirecTV.

Janco Partners Inc. analyst April Horace, however, discounted the likelihood that a successful Liberty and EchoStar joint bid for Intelsat would come about.

"If Liberty really was interested in this, they would do the bid with DirecTV because DirecTV is already underleveraged and Liberty owns 38 percent."

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