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DirecTV Drops Terrestrial Broadband

13 Dec, 2002 By: Hive News

Just days after scuttling its merger with primary competitor Echostar, Hughes Electronics Corp. today announced that its DirecTV Broadband, Inc. subsidiary would close its terrestrial high-speed Internet service business in approximately 90 days.

Hughes acquired DirecTV Broadband, based in Cupertino, Calif., in April 2001. The service has 160,000 subscribers that DirecTV will transition to other DSL providers.

"The landscape of the terrestrial broadband industry has changed dramatically since we purchased this business nearly two years ago, and, despite continuing subscriber growth, DirecTV Broadband cannot operate profitably now or in the foreseeable future," said Eddy W. Hartenstein, chairman and CEO of DirecTV, Inc. "The immediate priority will be to work toward transitioning customers to alternative service providers as quickly as possible, to minimize customer disruptions."

As a result of this action, Hughes expects to record a fourth quarter 2002 EBITDA charge of between $100 million and $150 million. Roughly half of DirecTV Broadband's 400 employees were notified of layoff today, with a minimum of 60 days notice during which time they will continue to be paid, followed by receipt of a severance package. The remaining employees will work with customers during the approximate 90-day transition process and to wind down business operations.

"Hughes and its subsidiaries have worked steadily over the past months to improve our businesses in anticipation of the merger with Echostar," said Jack A. Shaw, president and CEO of Hughes. "When the merger agreement was terminated earlier this week, we promised our shareholders and customers that we would move quickly to strengthen the profitability and efficiency of our company. This decision by DirecTV Broadband is the first of those moves."

Hughes will continue to offer its Direcway satellite-delivered consumer broadband service, which has 160,000 subscribers. The company will continue to add new Direcway customers but will not increase the subscriber base aggressively in the near term to avoid the cash requirements from the subscriber acquisition costs.

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