EchoStar to invest $1 bn in Spaceway

NEW YORK: Months before US regulators are set to rule on satellite TV

provider EchoStar Communications Corp's $26-billion purchase of Hughes

Electronics Corp, EchoStar's head said he planned to expand Hughes' Spaceway

unit, The Wall Street Journal reported on Wednesday.

The newspaper quoted Charles Ergen, EchoStar's chairman and chief executive,

as saying he hoped to put at least $1 billion into expanding Spaceway, which is

designed to provide high-speed Internet connections via satellite.

In an interview, Ergen also said EchoStar was likely to keep and grow its

stake in PanAmSat Corp, one of the largest communications satellite operators,

81 per cent owned by Hughes.

Satellite industry insiders have speculated Ergen would sell PanAmSat after

the Hughes purchases closed, and at the same time cut back or exit Spaceway, to

which Hughes has already invested more than $1.4 billion, the newspaper said.

The newspaper report comes days after the US Federal Communications

Commission kicked off its review of the proposed EchoStar purchase of rival

Hughes, a General Motors Corp subsidiary, and its DirecTV unit by seeking public

comment.

Officials at the agency have already raised concerns about the deal, which

would combine the No. 1 and No. 2 direct broadcast satellite (DBS) services,

because it would result in "significant concentration," said FCC

Chairman Michael Powell.

EchoStar and DirecTV have argued that the deal would increase competition in

the pay-television market, reduce inefficient use of spectrum to deliver

programming, and give consumers more local channels and high-speed Internet

service.

The new company would have 16 million subscribers. The US Justice Department

will review the antitrust implications of the deal on competition. It already

has sought additional information from the two companies. Comments are due on

February 4 with reply comments due on February 25, the FCC said.

The Wall Street Journal cited Ergen as saying that Spaceway was an

"extremely risky" pursuit and that "shareholders may not like me

too much" because "I'm passionate about trying to develop that

technology".

Proposing to develop a new generation of satellites to boost Spaceway, the

merger would give "the financial structure and subscriber base" needed

to avoid "betting the entire company on the outcome" of the project,

the newspaper quoted Ergen as saying.

As for PanAmSat, Ergen said the company had a "lower growth, predictable

business that marries pretty well" with the more volatile satellite-to-home

broadcast business, the newspaper said. Ergen stressed that he thought some of

DirecTV's Latin American businesses were core operations that would likely not

be considered for disposal or potential joint ventures, The Wall Street Journal

reported.

(C) Reuters Limited.