This is a partial transcript from Your World with Neil Cavuto, October 29, 2001.
NEIL CAVUTO, HOST: So what is the real dish on Dish? EchoStar's successful bid for GM-Hughes' DirecTV has turned the media world upside down. But was it a case of Charlie Ergen winning by strategy or by default? Rupert Murdoch pulled out of the talks on Saturday. Let's ask the men who crafted the deal, Charlie Ergen, the chairman and CEO of EchoStar, and John Devine, GM's vice chairman and the chief point man on the DirecTV negotiations.
Gentlemen, welcome to both of you.
CHARLIE ERGEN, CHAIRMAN & CEO, ECHOSTAR: Thank you for having us, Neil.
JOHN DEVINE, CFO, GENERAL MOTORS: Good to see you.
CAVUTO: Charlie, to you first, there are a lot of regulators who say there's no chance in hell that you'll get this. What do you say?
ERGEN: I haven't heard that from regulators. I've heard certainly some initial reactions, as you might expect, to the combination. But I don't think people have totally looked at it. For example, many of the concerns are coming from senators or people in rural constituents, rural states. And I would contend that they're doing their constituents a disservice before they hear all the facts.
For example, the only way we're going to get broadband services to rural America, such as people have in the cities with cable modems, or the only way we're going to get local-to-local channels to rural America is to combine these two companies together so we have the spectrum and the facilities to go out and do that across a broader base.
Now, we're cognizant of the fact, Neil, that there can be concerns from a pricing perspective on how we would do that, and we've offered nationwide pricing so the consumers in the rural areas pay exactly the same price where there's robust competition.
CAVUTO: So there will be no distinguishing between the two. Rural customers right now -- and you're their only game in town if this deal goes through -- will not be gouged?
ERGEN: Absolutely. We believe that there's a fair point, and we're certainly willing to talk with the Congress, with the regulatory agencies to make sure that consumers are protected, and at the same time, consumers get these added choices and options and new services.
CAVUTO: Gentlemen, maybe I can ask you, why did it take 18 months to get to this point?
DEVINE: Well, I think there's a lot of reasons, Neil. I think there's a lot of questions about the process. But at the end of the day, we had a very competitive process, the last period of time. The board went through a very intensive review of both very competitive bids, chose this one obviously. We think it's the best value for Hughes, it's the best value for the shareholders. I think it's a very good result. That's the way the process should work frankly.
CAVUTO: All right. Now, you say this was the best deal, but you were indicating, at least media sources report, as recently as Friday that, you know, Rupert Murdoch and News Corp looked like the candidate for this. Now, as you know, many at News Corp have countered that you were showing preferential treatment to that guy sitting next to you, waiting for him to get verbal commitment on financing, that he was your preferred guy from the start. What do you say?
DEVINE: No, I think that there's a lot of stories obviously. We had one focus: What's the best value for GM? What's the best value for the GMH shareholder? How do we get something done that works for Hughes, works for GM on a go-forward basis?
These competitive bids, which is just what the shareholder wants, are always difficult and creates some tough feelings back and forth. But again, I think we've gone through it. We have a result. We have to get on with it.
I think it's been a good result for the shareholder, frankly.
CAVUTO: Charlie, let me ask you something here. You're inheriting a company that has a great deal of problems. Losses have deepened considerably from 88 million to 227 million year over year. There's a concern here that you might have just inherited a turkey. Have you?
ERGEN: Well, I can tell you that, first of all, I understand the industry pretty well. We did a lot of due diligence on this. And certainly, there are some problems within the Hughes organization at various levels. Having said that, each and every of those problems is very easily fixable. And I think the key is that between the two companies we have put together a transition team to get the focused management possible to attack those issues, and that together, with the synergy that we have from this combination, this is going to be a very -- a good story from a financial perspective.
CAVUTO: Well, Charlie, let me follow up on that. Now, DirecTV and Dish systems are incompatible as they presently stand. So if you had your choice right now as you continue to roll out your network, would you be more inclined to roll out DirecTV systems or Dish systems?
ERGEN: It's an easy answer. One of the first things we're going to do in the transition team is to put both technologies in the same set-top box so that we have...
CAVUTO: So wait a minute. I'm a DirecTV holder, I have a DirecTV box. So I have to get a new box?
ERGEN: That decision hasn't been made. For current holders, for current holders, there will be at no cost to the consumers an upgrade program either to a different technology, whether you're a Dish holder or a DirecTV holder. We haven't made the decision as to which of those technologies...
CAVUTO: Which technology do you like better? I imagine you're more partial to yours, right?
ERGEN: Well, again, given the choice back in 1995, when we picked the technologies, I mean, obviously we picked the technologies to be picked. But this is 2001, and we're going to take a look at it with engineers on both sides who have used both technologies and come to the conclusion that makes the best sense financially going forward.
CAVUTO: Now, you are committed to a half billion on a breakup fee as well as buying PanAm Sat from GM regardless, right?
ERGEN: Well, first of all, it's 600 million break-up fee and the purchase of PanAm Sat regardless of how this transaction works out. Now, obviously we think that regulatory approval will be forthcoming. So...
CAVUTO: Why are you so sure of that?
ERGEN: Because I talk to customers every day, and customers are asking me for broadband services, they're asking me for high-definition television, they're asking for more local channels. And the only way I can do that, the only way, is to put these companies together. It's what the American public wants. I think that regulators understand our industry, they understand we compete against the cable industry.
We're combining these two companies. They're only 17 percent of that market. We're smaller than AT&T today, and the cable industry is consolidating and has 81 percent market share.
I'm confident we're going to get this approved.
CAVUTO: John, maybe you can help me with something here. There was an impression, at least -- I know you were the point man on DirecTV, but you also had, you know, your chairman, Jack Smith, involved. You had your chief executive Rick Wagner involved, so a lot of people standing back from this. And just me as impartial observer -- nothing to where I work -- but it seemed like a Keystone Kops type of arrangement.
Was it that disorganized? Were you guys speaking out of different tongues? I mean, it was hard just as a media guy following what was the GM feeling.
DEVINE: Well, there were a lot of stories coming out. So it's some true and some not so true.
I can tell you two things: It was a very competitive process. We had two very strong bids. We had full interaction with the board. Frankly, that's the way the process should work. That's exactly the recipe for success.
And I think the winner here is going to be the consumer and the shareholder. So from our standpoint, I think it worked pretty well.
CAVUTO: All right. Your final conversation with Rupert Murdoch, what was it like?
CAVUTO: How would you describe difficult?
DEVINE: That's all I can tell.
CAVUTO: Was he cursing at you?
CAVUTO: Do you feel you misled him?
CAVUTO: Charlie, do you think that you were interested in this more for acquiring this for yourself or to spite Rupert Murdoch?
ERGEN: Because I thought it made a lot sense. I think that Mr. Murdoch and us at EchoStar saw exactly the same value in Hughes. We certainly were aware of any potential problems. We both realized we could fix them. He wanted to -- he wants to -- wanted to expand globally. We wanted to expand domestically, kind of two different business strategies. But I might add that he's called me personally and been very gracious and congratulated us on a hard-fought victory. And you know, our relationship, personal relationship is still very cordial. And we look forward to broadcasting a lot of the News Corp programming in the United States and working with them any way we can.
CAVUTO: So that continues? News Corp programming would continue on your system?
ERGEN: Absolutely. They're one of our most valued programmers and vendors on a lot of different areas.
And again, it's OK to compete, you know, to try to win something, but when it's over, you go back to doing what's best for your companies, and we both saw value there. There can only be one victor.
CAVUTO: So does that mean, Charlie, I'm sorry. But does that mean that you would be in fact open to doing something with Mr. Murdoch, maybe akin to what you did here down the road? Are you ruling that our or not?
ERGEN: Absolutely not. I can tell you that I have the most respect for the news -- not only Mr. Murdoch, but the news organization of all the companies I've dealt with in my business career. And again, I'm not that educated. I'm still relatively young.
But I've tried to model a lot of what we do with things I've learned from News Corp and a tremendous amount of respect. And I would look forward at any time. We've talked a lot together about this. We want to work...
CAVUTO: About what? About a combination of your satellite interests? In other words, if you he came back to you or you to him after, if you got this deal through, which is again debatable, but if you did get it through, would you come back to Rupert Murdoch and say let's work on something together?
ERGEN: Well, anything -- regardless of this transaction, any area where we can work with News Corp that's mutually beneficial to our two companies I want to do. And it's not just News Corp. It's other companies. But I have a special...
CAVUTO: Yeah, but what if he said, Charlie, I want to buy you? What id he said I want to buy you outright, what would you say?
ERGEN: Well, at this point, it's maybe not such of an issue, because I did give up control. The control was always an issue. But I gave up control on this particular issue. And we want to put this company together. We want to make this a great company. And you know, all of that would be very, very premature.
We've got to get the companies together, get the regulatory approval, and do the best thing for our shareholders.
CAVUTO: And John, to you finally, are you surprised all the players` stocks are down? Of course, it's a weak market thus far. But are you surprised?
DEVINE: Well, this has been a weak market today, Neil. Obviously, all the markets -- all the stocks are off today. These things happen.
I think what we believe is we've positioned Hughes for the future today, tomorrow and the future to be a very strong company. We think the combination makes a lot of sense, and we think this -- this is going to be a great deal for shareholders going forward.
CAVUTO: All right, John Devine, final word on the subject. I want to thank you.
DEVINE: Thank you.
CAVUTO: Charlie Ergen, you as well. Thank you, guys.
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