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Satellite partners spar
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May 9, 1997: 8:22 p.m. ET
Joint venture turns ugly after EchoStar seeks $200 million from News Corp.
From Correspondent Steve Young
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NEW YORK (CNNfn) - Satellite company EchoStar Friday fired a shot across News Corp.'s bow, asking a federal judge to force Rupert Murdoch's company to come through on a promised $200 million loan.
It's the clearest sign yet that Murdoch's plan to build a mammoth satellite service in the United States appears to be unraveling.
Murdoch's quest to turn A Sky B into a monster satellite operation began to run into trouble last week. The company had thought the venture was well on its way after it and EchoStar agreed on a venture to blanket the United States with direct broadcast satellite service.
Problems began to surface when a top News Corp. executive quit, claiming he could not get along with EchoStar Chief Executive Officer Charlie Ergen.
Now, EchoStar has filed suit in federal court, demanding that News Corp. fork over a $200 million loan it says it was promised. News Corp. said the suit has no merit.
Some industry observers think Murdoch is simply trying to squeeze financially-strapped EchoStar into giving News Corp. a better deal.
"I think that there are huge, huge hurdles, but he's shown he's been able to overcome obstacles in the past to get what he's looking for. I would be surprised in the extreme if he walked away from this one," said Porter Bibb, managing director of Ladenburg Thalman.
Murdoch is struggling to find U.S. programming outlets to air programming created by his new ventures.
Stuart Rossmiller, media analyst at Deutsche Morgan Grenfell, said the cable and broadcasting industries regard his proposed direct broadcast satellite venture as tantamount to a "death star."
"If I was a cable operator, there's no way I'd assist News Corp. in launching its programming ventures at the same time he's trying to kill me. That's the brick wall News Corp. ran into. I think that is what's going to kill the EchoStar venture," he said.
Murdoch's link to MCI is also fraying. MCI is supposed to be a partner in Murdoch's U.S. satellite service. MCI spent more than $600 million bidding on satellite frequencies and is now forced to bide its time while News Corp. and EchoStar slug it out.
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