Ergen May Score in Satellite Merger

Monday, November 5th 2001, 12:00 am
By: News On 6

LITTLETON, Colo. (AP) _ Charlie Ergen swiped Rupert Murdoch's bride at the altar, but he isn't on a honeymoon yet.

After 18 months of negotiations, a frustrated Murdoch withdrew an offer to takeover DirecTV parent Hughes Electronics Corp. from General Motors Corp. That left Ergen alone with a $25.8 billion offer he first presented just three months ago for EchoStar's chief rival, DirecTV.

Now the dealmaker described as a hot-tempered workaholic from Tennessee has to persuade GM shareholders and federal regulators that EchoStar really is the best partner for DirecTV. If approved, the merger would create a company with a near monopoly in the satellite television industry.

``This is a very, very smart man who goes his own way. If you're looking for somebody who follows the established rules, you're looking for the wrong guy,'' said Evie Haskell, managing director of the home satellite industry research project SkyTrends, remembering their first meeting.

``Charlie's what my grandmother would call a street angel, house devil,'' said Stephen Keating, who wrote about Ergen in the book, ``Cutthroat: High Stakes & Killer Moves on the Electronic Frontier.''

``In public he's very charming. At home, you kind of drive everyone crazy. He's smooth, very well spoken, an advocate for the company. He's not going to have any problem making his case on Capitol Hill,'' Keating said. ``The problem he has is that any political leverage he has, he is totally outgunned by the cable industry, Murdoch and consumer groups.''

An EchoStar spokeswoman said Ergen was unavailable to comment last week, but in comments after the proposed merger was announced, Ergen said he was confident that EchoStar would win regulatory approval.

``We made a $600 million bet that there's going to be regulatory approval ... maybe we're confused. We've been confused before. I think GM bet that much or more. Maybe they're confused,'' Ergen said. ``But that's what's out there, and obviously I don't think anyone doubts the synergy and how strong the business is when they're put together.''

A former professional blackjack player, Ergen was working for Frito-Lay in his 20s when he, his wife and friend James DeFranco decided to start selling satellite television systems.

The company, then called Echosphere, was launched in 1980, with Ergen betting satellite dishes would be the next must-have item.

Their very first sale crashed on the highway as he and DeFranco were delivering the dish. Since then, it's been a series of risks, near brushes with failure and profits that have turned Ergen, 48, into the 22nd richest American just behind Murdoch, according to Forbes magazine.

Wall Street bet against Ergen when he entered the satellite business as an unknown. A mix of charisma and intense frugality have helped him turn the equivalent of a garage operation into a company worth $11 billion.

There have been bumps though. Dave Carlson, a former executive for 12 years, remembers discussing an industry downturn in the 1980s on a ride to the airport. ``Maybe we should open a pizza shop,'' Ergen suggested.

A few years later, EchoStar was about to send its first satellite aloft. Carlson remembered standing with scores of employees at a warehouse in Colorado, watching Ergen via a link to China and the launch.

``There was a 50-50 chance it was not going to blow up,'' Carlson said. ``But Charlie got the good side of the 50-50. He's a gambler.''

The first time Ergen tangled with News Corp.'s Rupert Murdoch, shrewd bidding from Ergen forced Murdoch to pay an unheard of $682.5 million for a satellite slot.

When a merger plan with News Corp. failed in 1997, EchoStar launched a $5 billion breach-of-contract lawsuit, then searched frantically for a new finance partner as it hurtled toward a liquidity crisis.

``It was one of the nastiest shots Charlie ever took,'' Carlson said.

Ergen emptied his pockets and News Corp. agreed to give EchoStar broadcast licenses and assets in 1998 in exchange for dropping the lawsuit.

EchoStar was back.

These days, EchoStar executives still share Wall Street Journal subscriptions and hotel rooms on the road. Barbara Sullivan Roehrig remembers having to get approval from the president before sending envelopes via FedEx during her year as EchoStar's vice president of marketing from 1995 to 1996.

``We had this despicable orange carpet that Charlie said was not going to be replaced until we launched the first satellite. And then you try to bring it up after that, and it was, 'Well, we gotta earn more revenue.' The carrot was always being put out further,'' she said.

``That can be motivating, but I think you have to have your own internal fire going on to be successful there.''

Roehrig and Ergen clashed over marketing strategies and the seven-day weeks Ergen wanted her staff to work.

``He runs a large corporation like a small business,'' said Chuck Hewitt, former president of the Satellite Broadcasting and Communications Association.