EchoStar Buying Hughes Communictions

EchoStar Corporation, which owns the Dish Network satellite television system, is purchasing Hughes Communications, Inc., which operates a satellite broadband Internet service, HughesNet.

The transaction is valued at approximately $2 billion, including Hughes debt expected to be refinanced in connection with the transaction. EchoStar said the deal will greatly enhance its capabilities for broadband transport of video and data.

Under the terms of the transaction, which has been approved by the Boards of Directors of both companies, Hughes' shareholders will receive $60.70 per share without interest, which represents a premium of 31 percent over Hughes' unaffected closing share price of $46.43 on January 19, 2011.

Regulatory approval required

The transaction is expected to close later this year, subject to certain closing conditions including receipt of federal regulatory approvals. Investment funds affiliated with Apollo Management IV, L.P., who own a majority of Hughes' outstanding stock, have approved the transaction by entering into a written shareholder consent.

"We are very pleased to announce this transaction as it brings together the two premier providers of satellite communications services and delivers substantial value to our shareholders," said Pradman Kaul, President and Chief Executive Officer of Hughes. "By combining Hughes' operational strength and proven record of customer satisfaction with EchoStar's expertise in cutting edge satellite video technology, customers will benefit significantly from our shared institutional excellence."

"There is a unique and compelling fit between Hughes and EchoStar," said Michael Dugan, President and Chief Executive Officer of EchoStar. "With a rich engineering culture, an extensive fleet of owned and leased satellites, and experienced personnel in communications centers around the world, the combination of EchoStar and Hughes will create a powerful leader in video and data transport."

Rural service area

HughesNet offers broadband Internet services to customers in mostly rural areas, who do not have access to traditional wired or wireless broadband. Consumers often complain about bandwidth allotments and slow speeds.

"I have run numerous speed tests that point out that I am running at six percent of my hosts average speed," Kevin, of Moran, Kan., told ConsumerAffairs.com. "I call and complain and they tell me it will be fixed in two hours and to call back if the problem continues. I can't run very many speed tests because of their dismal download allowance."

Dish Network started as a mostly rural television provider but, in recent years, has begun competing in urban and suburban areas with cable TV providers.