DirecTV to boost Murdoch's clout

LAS VEGAS — Rupert Murdoch's takeover of DirecTV, the nation's largest satellite television provider, could hold down cable costs while giving the media mogul clout to launch and sell new Fox channels, analysts said Thursday.

Murdoch's News Corp. agreed Wednesday to acquire control of Hughes Electronics Corp., DirecTV's parent, in a $6.6 billion cash and stock deal. Murdoch would transfer control of DirecTV to his Fox Entertainment Group subsidiary, which includes the Fox News Channel.

Consumers are unlikely to see any impact soon, especially since the deal, if approved by regulators, won't close until the end of the year. And Murdoch said Thursday that substantial changes to DirecTV will probably not show up until 2005.

But DirecTV's 11 million subscribers will give News Corp. strength in negotiating with program producers such as The Walt Disney Co. and AOL Time Warner Inc., who want to hike the cost to cable systems of airing their popular channels.

"The leverage will keep prices down or give them some added profitability so they don't have to raise prices as much," predicted Steve Mather, an analyst with Sanders Morris Harris. "As an industry, distributors are growing their ability to fight back against increasing programming costs."

DirecTV, its rival Dish Network, and cable companies have been fighting hikes sought for channels such as Disney's ESPN and AOL Time Warner's CNN. Now that he has his own distribution outlet, Murdoch can use the leverage he has with his own popular networks, such as Fox News, to negotiate better deals for DirecTV.

Analysts praised Murdoch's pledge to add 1 million subscribers a year to DirecTV and boost profits. But investors have disapproved of some aspects, such as having Fox house the satellite TV system. Analysts said that will dilute Fox earnings because of Hughes's losses from its Latin American operations. The deal also adds $4.5 billion to Fox's debt load.

Shares of Fox plunged more than 17 percent to $22.60 Thursday on the New York Stock Exchange. Shares of Hughes Electronics, which runs DirecTV, were down nearly 10 percent at $10.36.

Murdoch, who already runs satellite television services in Britain, Australia, Asia and Italy, could also use DirecTV to launch the kind of interactive television offerings that have been popular in Europe but so far haven't found a U.S. audience.