Dish Network 2002 Annual Report Download - page 68

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8
1. Organization and Business Activities
Principal Business
The operations of EchoStar Communications Corporation (“ECC,” and together with its subsidiaries, or referring
to particular subsidiaries in certain circumstances, “EchoStar” or the “Company”) include two interrelated business
units:
• The DISH Network - a direct broadcast satellite (“DBS”) subscription television service in the United States.
and
• EchoStar Technologies Corporation (“ETC”) - engaged in the design and development of DBS set-top
boxes, antennae and other digital equipment for the DISH Network (“EchoStar receiver systems”) and the
design, development and distribution of similar equipment for international satellite service providers.
Since 1994, EchoStar has deployed substantial resources to develop the “EchoStar DBS System.” The
EchoStar DBS System consists of EchoStar’s FCC-allocated DBS spectrum, eight DBS satellites (“EchoStar I”
through “EchoStar VIII”), EchoStar receiver systems, digital broadcast operations centers, customer service
facilities, and other assets utilized in its operations. EchoStar's principal business strategy is to continue developing
its subscription television service in the United States to provide consumers with a fully competitive alternative to
cable television service.
Recent Developments
Termination of the Proposed Merger of EchoStar with Hughes
During October, 2001, EchoStar signed agreements with Hughes Electronics Corporation (“Hughes”) and
General Motors (“GM”), which is Hughes’ parent company, related to a proposed merger with Hughes in a stock-for-
stock transaction.
On October 10, 2002, the Federal Communications Commission (“FCC”) announced that it had declined to
approve the application for transfer of the licenses necessary to allow our merger with Hughes to close and designated
the application for hearing by an administrative law judge. On October 31, 2002, the U.S. Department of Justice
(“DOJ”), twenty-three states, the District of Columbia and Puerto Rico filed a complaint for permanent injunctive relief
in the United States District Court for the District of Columbia against EchoStar, GM and Hughes.
On December 9, 2002, EchoStar reached a settlement with GM and Hughes to terminate the proposed merger. In
connection with the proposed merger and subsequent termination, EchoStar recorded charges to earnings for the
following fees:
• Termination fee: Upon termination of the merger, we recorded a charge to earnings of approximately
$690 million related to merger termination costs. These costs consisted of a $600 million termination fee
paid to Hughes, approximately $57 million related to capitalized merger costs which were charged to
earnings upon termination of the merger and approximately $33 million related to unamortized bridge
commitment fees, which were expensed upon termination of the merger.
• Bridge Commitment fees: In connection with the proposed merger, EchoStar and Hughes obtained a
$5.525 billion bridge financing commitment and EchoStar paid approximately $55 million of
commitment fees. Approximately $7 million of deferred commitment fees were expensed upon issuance
of the 9 1/8% Senior Notes due 2009 by EchoStar DBS Corporation (“EDBS”) and approximately $15
million of deferred commitment fees were expensed upon closing of the $1.5 billion equity investment in
EchoStar by Vivendi. The remaining $33 million was expensed upon termination of the merger
explained above.