Satellite Firms Duke it Out
February 7, 2000
Even while the satellite sector was touted by some in the market as being poised to see some significant gains against the cable industry, there were some dissatisfied rumblings last week within the ranks of satellite broadcasters.
EchoStar Communications Corp. filed an anti-trust suit against its competitor DirecTV last week in U.S. District Court in Denver claiming that DirecTV is monopolizing the industry.
EchoStar has seen dramatic growth but without a big presence in electronics stores, and now it claims that DirecTV has a stranglehold on that aspect of the business. The suit alleges that DirecTV has prevented EchoStar from gaining access to the retail distribution networks of stores such as Best Buy and Circuit City.
While EchoStar's lawsuit against DirecTV may not have a huge impact on the long-term health of the outstanding securities, it still is something that bondholders, as well as stock investors, will keep on their radar screen, said Michael Plancey, a fixed income analyst who tracks the company for Merrill Lynch.
While EchoStar has seen tremendous growth (see related story on page 1) it can always look for more, Plancey said.
The suit also names Hughes Electronics, the parent of DirecTV, and Thomson Consumer Electronics Inc. as defendants. Thomson sells satellite dishes and other products under the RCA brand.
"We cannot be silent when companies like DirecTV and RCA decide to keep our product out of stores," EchoStar Executive Vice President James DeFranco said in a prepared statement.
DirecTV's parent Hughes Electronics, in turn, is a subsidiary of General Motors. And separately, General Motors said last week that it plans to cut back its position in its Hughes subsidiary to 35% from 68%.
Investors had pushed for such a move because some viewed the value of the new high-tech business as being retrained by industrial stalwart General Motors.
General Motors will continue to own Hughes' common stock, however, and still will have control of the unit.
EchoStar officials would not comment on the suit.