On Wall Street, conventional wisdom rules. The trick for investors is to stake out a contrarian position and wait for the rest of the crowd to catch up.

The conventional wisdom on EchoStar Communications Corp.'s unsolicited $33 billion bid to acquire El Segundo-based Hughes Electronics Corp., is that the deal won't withstand antitrust scrutiny. That's because EchoStar's Dish Network and Hughes' DirecTV are the two largest providers of satellite television services in the United States, with a combined customer base of 16 million. In rural markets where cable doesn't pass, they often compete with each other and nobody else.

Nevertheless, some pretty smart people think EchoStar's plan ultimately would gain regulatory approval. Those people are in the minority; EchoStar and its poker-playing chief executive, Charlie Ergen, are still the underdog in the two-way race with Rupert Murdoch's News Corp. to buy Hughes from its parent, General Motors Corp. News Corp. and GM have been dancing with each other it for some time, but now that EchoStar's bid is on the table, anything can happen.

"News Corp. is in the pole position but EchoStar is making an incredible case," said SG Cowen Securities Corp. analyst Rob Kaimowitz.

If regulatory obstacles can be surmounted, the EchoStar deal's long-term economic benefits called "synergies" in industry parlance are unassailable. EchoStar estimates them at $5 billion a year by 2005, between cost savings and revenue enhancements. The cost savings, which account for $3 billion of the total, would result from lower overhead, reductions in piracy (a big problem at DirecTV), reduced programming costs and the building of fewer satellites.

On the revenue side, combining EchoStar's broadcast system with DirecTV's would allow the resulting company to eliminate duplicate programming, freeing up bandwidth to offer more local channels in more places a key consideration for regulators.

News Corp.'s deal has its own logic. Essentially, it's a marriage of content and delivery, in the AOL Time Warner mold. DirecTV, as part of Murdoch's worldwide satellite TV system, Sky Global Networks, would be a delivery vehicle for News Corp.'s prodigious programming assets. Murdoch said his proposal would carry a "healthy premium and synergies that no other company can match." But it's unclear how News Corp. can top the surefire benefits that occur when two overlapping operations are folded into one.

"It seems to me that it's hard to define what the synergies are for Sky Global," Kaimowitz said. Over the long term, "you're more likely to benefit financially" with a Hughes-EchoStar link-up, he said.

Rebuffed suitor returns

GM brushed off earlier proposals by EchoStar due to fears that a deal wouldn't hold up to antitrust challenges. But some antitrust experts and some of Hughes' largest shareholders are of a different opinion. "I don't happen to agree" that an EchoStar deal would flunk antitrust tests, said Robert Torray, chairman of the Torray Cos., in Bethesda, Md. He controls more than 10 million Hughes shares, or around 1.2 percent, and though he won't make up his mind until he sees the News Corp. offer, he thinks it makes "a lot of sense" to pair DirecTV with EchoStar. "Ergen has been very aggressive and he's a very successful person," Torray said.

Kaimowitz, whose firm has no interest in who controls Hughes, said he was hearing so many conflicting views on the antitrust question that he hired Donald Russell, a career antitrust lawyer who spent 24 years with the Justice Department, to conduct his own review.

Russell's conclusion: while nothing is guaranteed, the Justice Department is likely to define the relevant market to include cable, not just satellite TV. In that context, a key question would be whether a combined EchoStar-DirecTV entity would provide more vigorous competition to the local cable companies that now dominate many U.S. markets. If EchoStar and DirecTV can show substantial pro-competitive benefits, "DOJ is likely to approve the merger," Russell's report stated.

How could competition be enhanced by reducing the number of pay-TV providers in many markets to two from three? The argument is simple. If the combined satellite operation is a more effective competitor to the local cable company, then consumers are better off. This is the case with EchoStar and DirecTV, Ergen maintains.

Expanded local competition

By eliminating duplication on its network, a single satellite operator would free up spectrum to roll out more of the services that currently set cable apart: interactive services such as video-on-demand, high-definition television, specialty programming, and, last but not least, local television coverage.

Due to spectrum constraints, DirecTV and EchoStar can each deliver local stations to only about 40 of the nation's largest markets, or 60 percent of all households. In smaller markets, such as Amarillo, Texas, or Billings, Mont., consumers can purchase satellite TV but it won't include their local stations. This puts satellite at a significant disadvantage to cable in those markets, said Jim Stroud, an analyst with Carmel Group, a media consulting firm in Monterey, Calif.

If EchoStar and DirecTV were combined, they would be able to expand their local reach to perhaps 85 percent of all households, Stroud said. "If satellite can take one of the last advantages that cable has left, then the playing field becomes much more even," he said.

Kaimowitz said this extension would bring local stations via satellite to many rural areas that now can't receive them unless they purchase cable. And the number of rural households without cable access at all the ones most endangered by an EchoStar-Hughes link-up is only around 5 percent. (Ergen has pledged to protect these subscribers with a nationwide pricing plan.)

Of course, in regulatory matters, nothing can be taken for granted. "Why go down that road?" said Larry Haverty, a senior vice president with State Street Research in Boston, another large Hughes shareholder. "The antitrust problems are very, very real and not likely to go away."

Torray, who's made a career of taking unpopular positions, then waiting patiently for the world come around, has a different concern. He wonders whether Hughes shareholders will support a News Corp. deal if GM's board chooses it over EchoStar's offer. "Then we'll be back to square one," he said.

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