GM EXPECTED TO MAKE FINAL DECISION ON HUGHES

GM was expected to make decision on sale of Hughes Electronics over weekend as speculation mounted that it would select EchoStar over News Corp. Board had meeting scheduled for Sat. in N.Y. However, industry sources said top GM management still was divided on which offer was best for stockholders and company. Deal with EchoStar was contingent on EchoStar’s completing transaction for $5.5 billion line of credit from UBS Warburg and Deutsche Bank.

Analysts said EchoStar had best “on-the-table” offer of $28 billion, but sale involving top 2 U.S. satellite companies would result in intense antitrust scrutiny from regulators. GM must decide whether it’s better to sell to EchoStar and create single DBS provider with 16.7 million subscribers, including 10.3 million owned by DirecTV, or side with News Corp., which would provide latter with long-sought presence in U.S. satellite market. Top executives at News Corp. reportedly had told GM that it would cut off negotiations. News Corp. also reportedly spent last week in Washington attempting to gain support for its bid and arguing that EchoStar deal would violate antitrust regulations. “We are confident that excellent competitive justifications and consumer benefits exist for either transaction,” GM spokeswoman said. EchoStar and News Corp. refused to answer specific questions about transaction.

EchoStar’s reported offer of $28 billion would give Hughes shareholders 0.75% of DISH shares for each share of Hughes. EchoStar also would pay $5.5 billion in cash that it’s currently trying to raise and has promised GM $500 million breakup fee and $5 billion for PanAmSat unit if deal were blocked by regulator. Analysts said there was widespread speculation PanAmSat no longer was up for sale after topping projections in profitable 3rd quarter.

News Corp. offer of $22 billion is more complex and packaged differently, industry sources said. It’s lower, but Hughes shareholders will receive opportunity to own part of new Sky Global unit. Plans reportedly call for Microsoft to invest $2.9 billion cash and Liberty Media to chip in $1 billion. GM would receive $4.5 billion in cash for majority ownership in Hughes along with 4% of Sky Global. News Corp. has arranged $5 billion line of credit through Citigroup and J.P. Morgan Chase for operational funds.

Senate Commerce Committee Chmn. Hollings (D-S.C.) was “troubled by prospect” of top 2 DBS companies’ merging, telling reporters Thurs.: “That kind of consolidation would leave consumers with few, if any, choices.” Staffer for House Energy and Commerce Committee Chmn. Tauzin believes “any marriage” of companies “that eliminates competition is going to get a chilly reception” from Congress. News Corp. lobbying effort on Capitol Hill has won support of Sens. Bunning (R-Ky.), Schumer (D-N.Y.) and Boxer (D-Cal.) and Rep. Waxman (D-Cal.).

Sen. McCain (R-Ariz.) said “policymakers” shouldn’t make decision, but matter would be better off in hands FCC and Dept. of Justice. Consumers Union was indifferent as to which company GM selected. Spokesman said GM deal with News Corp. might not pose as many regulatory issues as one with EchoStar, but for consumers new company would be “enormous nightmare.”