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 |  | Hughes Acquires Terrestrial Broadband Provider
By Stew Magnuson
Spacenews.com Staff Writer
posted: 12:19 pm ET
21 December 2000
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NEW YORK (Reuters) - Satellite giant Hughes Electronics Corp
WASHINGTON — Hughes Electronic Corp. will acquire terrestrial broadband provider Telocity Inc. to supplement its direct-to-home satellite-based Internet service, Hughes announced Dec. 21.
Los Angeles-based Hughes [GMH] will purchase Telocity [TLCT], Cupertino, California for $2.15 per share in cash for a total purchase of $180 million, the two companies announced in separate conference calls. The deal is pending regulatory approval, which is expected late in the first quarter or early second quarter of 2001.
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Hughes, a unit of Detroit-based General Motors Corp., operates direct-to-home television provider DirecTV, with about 9 million subscribers, and satellite-operator PanAmSat [SPOT], Greenwich, Connecticut.
Telocity had been seeking a strategic partner because it was having difficulty raising capital, said Telocity’s CFO Ned Hayes during a conference call. Hughes will extend Telocity a $20 million advance to cover any funding shortfalls until the transaction closes, Hayes added.
Telocity’s digital subscriber lines (DSL) service extends across 140 U.S. metropolitan areas, which account for 40 percent of the country's population. The company is expected to bring approximately 41,000 subscribers to the merger, Hayes added.
"This acquisition is strategically important for Hughes and DirecTV," Michael Smith, Hughes chairman and chief executive officer said in a statement. "We currently offer DirecPC as our primary nationwide Internet and broadband offering, but the projected demand for broadband exceeds our existing capacity to deliver it by satellite."
A bundled service will initially be offered to DirecTV’s base of 9 million customers, officials from the two companies said. DirecTV will then market the service to new customers where DSL is available to expand its subscriber base.
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