Washington, D.C. (July 24, 2006) — Rupert Murdoch, chairman of News Corp., says the federal government would likely approve a merger between E*hoStar and the News Corp.-owned DIRECTV.

Speculation has risen in the last week that the two satcasters will merge. But some analysts have expressed doubt, noting that the federal government rejected a similar merger in 2002 on grounds that it would stifle competition.

However, Murdoch says the marketplace has changed, leaving consumers with a variety of video choices.

“There are so many alternatives, ways of getting pictures and information,” Murdoch said last week on The Charlie Rose Show. “I think it would be much harder for the government to turn it down.”

Murdoch did not say if the two companies are in talks, but his comments have fueled talk that a deal could be forthcoming.

Still, Murdoch cautioned that a merger could be difficult because E*hoStar CEO Charlie Ergen might insist on running the company “at least for awhile.”
Murdoch did not say if he would oppose that arrangement.

Murdoch’s News Corp. and Ergen’s E*hoStar planned to merge in 1997 but the deal fell through when Ergen clashed with News Corp. executives prior to its completion.

DIRECTV and E*hoStar helped fuel merger speculation this month when they teamed up to bid in next month’s U.S. auction of wireless airwaves. And last March, Mike Palkovic, DIRECTV’s chief financial officer, told an industry conference that his company was interested in buying E*hoStar.

Swanni Sez:
Murdoch’s comments suggest that the merger is indeed possible. The 75-year-old media mogul would have never publicly suggested that a deal would be approved by the feds unless he was interested in pursuing one. He seems to be laying the groundwork for a lobbying campaign in DC in case DIRECTV and E*hoStar are able to make a deal.

However, you also can’t dismiss Murdoch’s cautionary comments about Ergen. He could be sending a message to Charlie that the deal could fall apart if he keep insisting on control.

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