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EchoStar DirecTV deal falls with Murdoch in the wings

NEW YORK – The two US satellite television firms EchoStar and DirecTV have called off their merger after a year of talks, clearing the way for a fresh bid for the Hughes-owned DirecTV by Rupert Murdoch.

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The deal looked almost certain to be doomed last week when Hughes Electronics refused to extend the deadline for EchoStar, whose bid became mired in regulatory problems.

Murdoch revealed last month that he was preparing a new bid for DirecTV almost a year after he lost out at the 11th hour to a $18bn (£11.4bn) bid from EchoStar. The News Corporation chairman said that, should General Motors sell its shares in Hughes, he would be interested in buying them.

In a statement, EchoStar and DirecTV said: "The companies reached this settlement because the proposed merger could not be completed within the time allowed by the merger agreement."

EchoStar has paid Hughes $600m in cash as an agreed break-up fee and as a result it will take a $700m write-off in the fourth quarter for the "merger break-up fee and other related merger expenses".

Ultimately, the deal was killed by the anti-competition case being brought by the US Department of Justice and 23 states supported by the District of Columbia and Puerto Rico. It appears highly unlikely that it would have survived, considering the competition fears that plagued the deal. Core among these was that the merger would remove choice in rural areas not passed by cable.

Hughes CEO Jack Shaw said: "Since the merger couldn't be completed, we concluded that this settlement is the best alternative for Hughes and places us in the best position to move ahead with our business."

The news of a possible new Murdoch bid follows reports earlier this month that News Corp raised $1.3bn via a stock offering in Fox Entertainment Group. The money could be used to start new talks with General Motors about merging DirecTV into News Corporation's satellite TV operations, which also include BSkyB.

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