NEW YORK (CNN/Money) -
Federal regulators Thursday rejected the proposed $18 billion merger of satellite-TV operators EchoStar Communications and Hughes Electronics, a unit of General Motors Corp.
Federal Communications Commission Chairman Michael Powell said at a press conference Thursday that he would move to block the merger between EchoStar, the No. 2 satellite provider and Hughes, the No. 1 provider, because the commission cannot find that it is in the public interest.
Powell said the FCC unanimously voted to reject the merger and that he is referring the matter to an administrative law judge to sign off on the decision, routine FCC procedure when an application is rejected.
However, the FCC said in its press release announcing the decision that the companies have 30 days in which to file a revised merger proposal and to appeal the rejection. A source close to the situation said the companies intend to go ahead with previously announced plans to file an amended proposal with both the FCC and the Department of Justice. The companies are scheduled to meet with DOJ officials Oct. 28.
Opponents of the deal said it would create a monopoly in many areas, especially in rural places with no access to cable television.
"Those Americans would be left with only one choice for their subscription video service, now and in the foreseeable future," Powell said.
EchoStar and Hughes said in a joint statement Thursday that they still hope to get the nod for the merger.
"EchoStar, Hughes and General Motors are disappointed that the Federal Communications Commission has designated the matter for administrative hearing," the companies said. "We will continue to work aggressively within the context of this FCC process to achieve approval of the merger. We cannot comment further until we have had an opportunity to evaluate the order, which has not yet been released by the FCC."
On Monday, lawyers for EchoStar (DISH: down $0.01 to $17.00, Research, Estimates) and Hughes (GMH: down $0.29 to $8.11, Research, Estimates), which operates the DirecTV satellite service, asked the FCC to delay judgment on their proposed merger because they are revising the pact to address concerns about competition. EchoStar operates the DISH network.
DirecTV is considering selling frequencies and satellite slots as a way to meet the antitrust concerns, the Associated Press reported Thursday, citing statements by its CEO, Eddy Hartenstein.
The alterations follow a series of published reports that the agency planned to block the deal.
Though EchoStar is the nation's No. 2 satellite TV provider, it has posted solid growth in the last year that has put it in position to acquire its larger rival, Hughes. In August, Littleton, Colo.-based EchoStar reported a profit of $37 million, or 8 cents a share, reversing a loss of $6 million, or a penny a share, a year earlier and ahead of Wall Street's average forecasts.
In July, Hughes reported higher second-quarter cash flow and sales, but said subscriber growth was slower than expected.
Wall Street analysts expected the company to post a profit of 6 cents a share in the second quarter, according to research firm First Call.
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