Filed by EchoStar Communications Corporation
Pursuant to Rule 425 under the Securities
Act of 1933 and deemed filed pursuant to
Rule 14a-12 under the Securities Exchange
Act of 1934
Subject Company: Hughes Electronics Corporation
Commission File No. 0-26035
Date: August 6, 2001
The following is a slide show presented at an analyst conference held by
EchoStar on August 6, 2001.
0 COVER PAGE
----------------------------------------------------------------------------
[ EchoStar Logo]
[Hughes Logo]
A Powerful Platform
August 6, 2001
1 SAFE HARBOR
This presentation contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause our actual results to
be materially different from historical results or from any future
results expressed or implied by such forward-looking statements. The
factors that could cause actual results of EchoStar Communications
Corporation ("EchoStar") or a combined EchoStar and Hughes Electronics
Corporation ("Hughes") to differ materially, many of which are beyond
the control of EchoStar include, but are not limited to, the
following: (1) the businesses of EchoStar and Hughes may not be
integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; (2) expected benefits and
synergies from the combination may not be realized within the expected
time frame or at all; (3) revenues following the transaction may be
lower than expected; (4) operating costs, customer loss and business
disruption including, without limitation, difficulties in maintaining
relationships with employees, customers, clients or suppliers, may be
greater than expected following the transaction; (5) generating the
incremental growth in the subscriber base of the combined company may
be more costly or difficult than expected; (6) the regulatory
approvals required for the transaction may not be obtained on the
terms expected or on the anticipated schedule; (7) the effects of
legislative and regulatory changes; (8) an inability by EchoStar to
obtain certain retransmission consents; (9) EchoStar's inability to
retain necessary authorizations from the FCC; (10) an increase in
competition from cable as a result of digital cable or otherwise,
direct broadcast satellite, other satellite system operators, and
other providers of subscription television services; (11) the
introduction of new technologies and competitors into the subscription
television business; (12) changes in labor, programming, equipment and
capital costs; (13) future acquisitions, strategic partnership and
divestitures; (14) general business and economic conditions; and (15)
other risks described from time to time in EchoStar's periodic reports
filed with the Securities and Exchange Commission. You are urged to
consider statements that include the words "may," "will," "would,"
"could," "should," "believes," "estimates," "projects," "potential,"
"expects," "plans," "anticipates," "intends," "continues" or the
negative of those words or other comparable words to be uncertain and
forward-looking. This cautionary statement applies to all
forward-looking statements in this presentation. Subject to future
developments, EchoStar may file with the Securities and Exchange
Commission a registration statement at a date or dates subsequent
hereto to register the EchoStar shares to be issued in the proposed
transaction. Investors and security holders are urged to read the
registration statement (when and if available) and any other relevant
documents filed with the SEC, as well as any amendments or supplements
obtain a free
copy of the registration statement (when and if available) and other
relevant documents at the SEC's Internet web site at www.sec.gov. The
registration statement (when and if available) and other relevant
documents may also be obtained free of charge from EchoStar by
directing such request to: EchoStar Communications Corp., 5701 South
Santa Fe Drive, Littleton, CO 80120, Attention: Investor Relations.
EchoStar and certain executive officers of EchoStar may be deemed to
be "participants" in EchoStar's solicitation of proxies from GM and
GMH shareholders. A detailed list of the names, affiliations and
interests of the participants in the solicitation was filed with the
Securities and Exchange Commission on August 6, 2001.
2 PROPOSED TRANSACTION
----------------------------------------------------------------------------
Stock-for-stock transaction
0.75 DISH / GMH share (1.0B new DISH shares issued)
Values Hughes at $32B*, including debt of $1.9B
$42 - $56 billion of additional present value to combined company from
DirecTV / DISH Network synergies
Economic ownership = 66% Hughes : 34% EchoStar
Tax free to GM and GMH shareholders
Note: Based on the closing market price of DISH on the Nasdaq Stock Market
on August 3, 2001.
----------------------------------------------------------------------------
3 BENEFITS TO SHAREHOLDERS
----------------------------------------------------------------------------
o Massive synergy opportunities
o 100% digital nationwide platform with 16M+ subscribers
o Creates stronger competitor to large, US cable / broadband providers
o 100M US households offer powerful growth opportunity
o Leverage already compelling DBS economics
o Superior management team with proven success
----------------------------------------------------------------------------
4 VALUE OF THE PROPOSED TRANSACTION
----------------------------------------------------------------------------
ESTIMATED
INCLUDING PV OF SYNERGIES
EXCHANGE -------------------------
RATIO ONLY* LOWER UPPER
----------- -------------------------
Value per GMH Share $23 $43 $49
Premium to Current GMH Stock Price ($19) 18% 121% 155%
Equivalent Value to GM Shareholders 0.76 0.76 0.76
Per GM Share $17 $33 $38
% of Current GM Stock Price ($63) 28% 52% 59%
Value per DISH Share $30 $57 $66
Premium to Current DISH Stock Price ($30) -- 87% 116%
Note: Based on the closing market price of DISH on the Nasdaq Stock Market
and GM and GMH on the NYSE on August 3, 2001.
----------------------------------------------------------------------------
5 BENEFITS TO CONSUMERS
----------------------------------------------------------------------------
o More channels and better service would be available
-Increased local to local service
-Increased HDTV offerings
-Increased VOD/PPV offerings
-Additional speciality content
o Significant cost savings expected from synergies
o Effective containment of cable price increases
o Bridges the "Digital Divide"
-Broadband availability
-Nationwide competitive pricing
----------------------------------------------------------------------------
6 MULTI-CHANNEL TV PROVIDERS
----------------------------------------------------------------------------
[Bar Chart
By Number of Subscribers
(in Millions)
14.4 (AT&T) to
between 17.4
and 27.1
(including other
cable) 16.1 12.7 8.4 6.9 6.2 5.8 3.0
AT&T+ DISH NETWORK TIME COMCAST CHARTER COX ADELPHIA CABLEVISION]
ANY MAJOR DIRECTV WARNER
CABLE PRO FORMA CABLE
PRO FORMA
NOTE: SUBSCRIBERS ARE AS OF JUNE 30, 2001, PRO FORMA FOR ALL ANNOUNCED
TRANSACTIONS. ADELPHIA AND CABLEVISION ARE AS OF MARCH 31, 2001.
----------------------------------------------------------------------------
7 MULTI-CHANNEL TV PROVIDERS
----------------------------------------------------------------------------
[Bar Chart
BY REVENUE
($ IN MILLIONS)
$8,964
(AT&T) to
between
$10,861 and
$15,309
(including
other cable) $8,925 $6,345 $4,982 $3,974 $3,426 $3,098 $1,897
AT&T+ DISH NETWORK TIME COMCAST CHARTER COX ADELPHIA CABLEVISION]
ANY MAJOR DIRECTV WARNER
CABLE PRO FORMA CABLE
PRO FORMA
Note: Revenue figures reflect core cable or DBS revenue for the pro forma
quarter ended June 30, 2001, annualized, except for Adelphia and Cablevision
which are as of March 31, 2001.
----------------------------------------------------------------------------
8 HUGHES VS. CABLE
----------------------------------------------------------------------------
Key to Success Who has the
-------------- -----------
Advantage?
----------
Fattest Pipe DBS
Nationwide Footprint DBS
Cost per Home Passed DBS
100% Digital Quality DBS
Channel Capacity DBS
Plant Upgrades DBS
Customer Service DBS
Incumbency Cable
Broadband ?
----------------------------------------------------------------------------
9 EXTREMELY LOW LEVERAGE
----------------------------------------------------------------------------
Total Basic Total Debt /
Debt ($M) Subs (M) Subscriber
---------------------------------------------
AT&T $17,202 14.4 $1,191
Comcast 11,699 8.4 1,390
Charter 15,571 6.9 2,243
Cox 9,114 6.2 1,478
Adelphia 12,474 5.8 2,137
Cablevision 7,599 3.0 2,560
---------------------------------------------
Average $1,833
EchoStar / Hughes $6,891 16.1 $429
Net Debt 3,523 16.1 219
Notes: Total debt includes convertible notes. All statistics are as of June
30, 2001 except for Adelphia and Cablevision which are as of March 31, 2001.
Subscribers are pro forma for all announced swaps. AT&T debt is per UBSW
estimate.
----------------------------------------------------------------------------
10 LEVERAGING INVESTED CAPITAL
----------------------------------------------------------------------------
Homes Basic Invested Per Per Basic
Passed (M) Subs (M) Capital ($M) Home Sub
Passed
-------------------------------------------------------------
Comcast 13.5 8.4 $23,727 $1,761 $2,818
Cox 9.9 6.2 21,107 2,139 3,423
Charter 11.2 6.9 23,984 2,135 3,455
Adelphia 9.5 5.8 17,998 1,900 3,083
Cablevision 4.3 3.0 4,846 1,125 1,632
----------------------------------------------------------------------------
Total 48.4 30.3 $91,662 $1,857 $3,022
EchoStar 100.0 6.1 $4,664 $47 $768
Hughes 100.0 10.0 9,180 92 918
Pro Forma 100.0 16.1 $13,844 $138 $861
----------------------------------------------------------------------------
11 MASSIVE SYNERGIES
----------------------------------------------------------------------------
Expected Synergies o Incremental subscribers
o Improved ARPU
o Increased EBITDA
o Reduced Churn
Aggregate Benefit o 9.4M incremental subscribers
o $5.0B annual EBITDA increase by 2005
o $12.3B cumulative EBITDA increase '02-'05
Shareholder Value o Creation of $42-$56B in PV synergies
o $20 - $26/share for GMH shareholder (0.75 ratio)
o $15 - $20/share for GM shareholder
o $27 - $35/share for DISH shareholder
----------------------------------------------------------------------------
12 SYNERGY OVERVIEW
----------------------------------------------------------------------------
Estimated ($ in millions)
PV of Cost Savings PV of Revenue Synergies
----------------------------- ------------------------------------------
SAC $13,128 Advertising / Interactive $10,349
Churn 9,345 Local Service 7,449
Programming 7,890 Digital Divide 2,759
G&A 4,943 VOD / PPV 1,003
CapEx 317 HDTV 502
----------------------------- Box Swaps (1,981)
Subtotal $35,624 ------------------------------------------
Subtotal $20,080
----------------------------- ------------------------------------------
[Pie chart showing cost savings of 64% and revenue synergies of 36% of total
present value of synergies]
Total Present Value of Synergies = $55.7 billion
13 SYNERGIES BREAKDOWN
-----------------------------------------------------------------------------------------------
Estimated ($ in Millions)
Projected
2005 EBITDA
Cost Synergies Assumption Impact
------------------------------------------------------------------------------------------------
Reduced SAC o Standardization of set-top boxes $1,041
o Increased production volumes
o $125 /Gross add (blended)
Reduced Churn o 0.3% reduction 778
o Increased services and higher customer loyalty
Reduced Programming Costs o 5% cost reduction in 2002 664
o Additional 5% reduction thereafter
Reduced G&A o Elimination of duplicative overhead 427
Reduced CapEx o Elimination of a portion of corporate 100
and satellite capex
Subtotal - Cost Savings $2,910*
------------------------------------------------------------------------------------------------
Note: Excluded $100 million of CapEx synergies
------------------------------------------------------------------------------------------------
14 SYNERGIES BREAKDOWN
-----------------------------------------------------------------------------------------------------------
Estimated ($ in Millions)
Projected
2005 EBITDA
Results Impact
-------------------------------
Revenue Synergies Assumption Sub ARPU Churn
-----------------------------------------------------------------------------------------------------------
Advertising/Interactive o Incremental Revenue Up Up Down $925
o $30/year by 2005
Local Service o Approx. 60 new markets Up Up Down 740
o $5.99/month
Digital Divide o Offer broadband to more Up Up Down 278
areas
o ARPU from $70 down to
$55
VOD / PPV o Offer more content Up Up Down 108
o Additional 0.5 buy/month
o $3.99/buy
HDTV o More content, $10/month - Up Down 73
...........................................................................................................
Cost to Swap Boxes o 2.5 billion over 4 years - - - (625)
Subtotal - Revenue Synergies $2,124*
...........................................................................................................
Note: Excludes $625 million of cost to swap boxes, which is non-recurring.
15 SUBSCRIBER SYNERGY IMPACT
----------------------------------------------------------------------------
Estimated Incremental Subscribers in 2005 (In Millions)
[Bar Chart showing subscriber synergy impact in millions of subscribers
Local to Local 2.6
Reduced Churn 3.3
HDTV / Specialty Content 2.5
VOD / PPV 1.0
Total 9.4]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
16 PRESENT VALUE OF SYNERGIES
----------------------------------------------------------------------------
Estimated ($ in Billions Except per Share and Share Amounts)
Range
------------------------
Lower Upper
------------------------
Total EBITDA from Synergies in 2005* $5.0 $5.0
Terminal EBITDA Multiple 10.0x 14.0x
------------------------
Terminal Value $50.3 $70.5
Discount Rate 10.0% 10.0%
Present Value of Terminal Value $34.4 $48.1
Present Value of Cash Flows from 2002 - 2005 7.6 7.6
Present Value of Synergies $42.0 $55.7
Pro Forma Shares Outstanding (millions) 1,578 1,578
Present Value of Synergies per DISH Share $26.58/sh. $35.29/sh.
----------------------------------------------------------------------------
Note: Excludes cost to swap boxes, which is non-recurring.
17 VALUATION BASED ON SUBSCRIBERS
----------------------------------------------------------------------------
Estimated ($ in Billions Except per Subscriber and Share Amounts)
Range
------------------------
Lower Upper
------------------------
Incremental 2005 Subscribers (M) 9.4 9.4
Enterprise Value / Subscriber $3,000 $4,500
------------------------
Total Incremental Subscriber Value $28.3 $42.4
Total Pro Forma 2005 Subscribers (M) 32.0 32.0
Incremental Value / Subscriber (Ops., Churn, etc.) $500 $1,000
------------------------
Total Multiple Expansion Value $16.0 $32.0
Total Incremental Value $44.3 $74.4
Discount Rate 10.0% 10.0%
Present Value $30.2 $50.8
Pro Forma Shares Outstanding (millions) 1,578 1,578
Present Value per DISH Share $19.16/sh. $32.20/sh.
18 PREMIUM TO GMH SHAREHOLDERS
----------------------------------------------------------------------------
Estimated
Range
------------------------
Lower Upper
------------------------
Current EchoStar Stock Price* $30.44 $30.44
Present Value of Synergies per Share 26.58 35.29
Total $57.02 $65.73
Exchange Ratio 0.75x 0.75x
Total Offer Value per GMH Share $42.76 $49.30
Current GMH Stock Price* $19.36 $19.36
Premium - ($/share) $23.40 $29.94
Premium - (%) 121% 155%
----------------------------------------------------------------------------
Note: Based on the closing market price of DISH on the Nasdaq Stock Market
and GMH on the NYSE on August 3, 2001.
19 VALUE TO GM SHAREHOLDERS
----------------------------------------------------------------------------
Estimated
Range
--------------------------------
Current Lower Upper
-----------------------
Current EchoStar Stock Price* -- $30.44 $30.44
Present Value of Synergies per Share -- 26.58 35.29
Total -- $57.02 $65.73
Exchange Ratio -- 0.75x 0.75x
Total Offer Value per GMH Share -- $42.76 $49.30
Equivalent Value to GM Shareholder 0.76 0.76 0.76
Value - ($/share)* $14.71 $32.60 $37.58
Current GM Stock Price* $63.28 $63.28 $63.28
% of GM Share 23% 52% 59%
Note: Based on the closing market price on August 3, 2001 on the Nasdaq
Stock Market for DISH and NYSE for GM and GMH.
----------------------------------------------------------------------------
20 PREMIUM TO DISH SHAREHOLDERS
----------------------------------------------------------------------------
Estimated
Range
------------------------
Lower Upper
------------------------
Current EchoStar Stock Price* $30.44 $30.44
Present Value of Synergies per Share 26.58 35.29
Total $57.02 $65.73
Premium - ($/share) $26.58 $35.29
Premium - (%) 87% 116%
----------------------------------------------------------------------------
Note: Closing market price on the Nasdaq Stock Market on August 3, 2001.
21 ECHOSTAR HIGHLIGHTS
o Fastest growing multi-channel TV provider in the U.S.
o Powerful business model / EBITDA positive
o Superior, results-driven management team
o Proven track record of operational execution
o Historical ability to create shareholder value
22 PROVEN ABILITY TO EXECUTE
[Bar Chart showing a 93.3% compound annual growth rate in
EchoStar revenues from 1996 to Q2 2001 Annualized. Revenues ($M)
1996 1997 1998 1999 2000 Q2 2001 Annualized
$199 $477 $983 $1,603 $2,715 $3,865]
[Bar Chart showing an 88.5% compound annual growth rate in the
number of EchoStar's subscribers from 1996 to Q2 2001.
Subscribers (M)
1996 1997 1998 1999 2000 Q2 2001
350 1,040 1,940 3,410 5,260 6,070]
[Line Graph showing the net incremental market share of DISH
Network relative to DirecTV from Q3 2000 to Q2 2001.
Q3 2000 Q4 2000 Q1 2000 Q2 2001
DISH Network 50% 48% 58% 67%
DirecTV 50% 52% 42% 33%]
23 DISH NETWORK VS. DIRECTV
Dish Who Has the
Network DirecTV Advantage?
------- ------- ----------
Channel Capacity 500+ 300+ Dish Network
Q2 2001 Incremental Market Share 67% 33% Dish Network
Subscriber Growth (LTM) 40.8% 18.1% Dish Network
ARPU Growth (LTM) 10.6% 0.9% Dish Network
Est. Sub. Acq. Cost. (SAC) $100 less -- Dish Network
24 VALUE CREATION
[Chart showing that since 1998 EchoStar's stock price has
appreciated 1,354% compared to a 130% increase for cable
companies, a 71% increase for NewsCorp, a 57% increase for GMH
shares, a 26% increase for GM shares and a 25% increase for the
S&P 500 index.]
Source: FactSet
Note: Cable Composite consists of Comcast, Charter, Adelphia, Cox and
Cablevision.
25 REGULATORY OVERVIEW
We are confident this transaction will receive regulatory approval
Benefits to Consumers o Increased content
o Access to competitive broadband services
o More local-to-local
o Competitive pricing
Improved Market o Combined EchoStar (#7)/ DirecTV (#3) will
Dynamics represent only 18% of total MVPD
o FCC recently rescinded 30M subscriber cap
(est. 40-60%)
o Significantly increased competition for
incumbent cable operators
o Rural competition from various sources
o No content provider affiliations
Third Party Support o Donald Russell
Former Chief of the Department of Justice's
Telecom Task Force
o GM and GMH management believe regulatory
approval is likely
26 ROAD MAP TO COMPLETION
Proposed Process Expected Timing
---------------- ---------------
o Execution of Definitive Immediate
Agreements
o GM and GMH Shareholders 4 Months
Meeting
o Receive Regulatory 9 Months
Clearances
- DOJ, FCC, SEC
- Various state approvals
Close Transaction 9 Months
27 ECHOSTAR / HUGHES
A Powerful Combination EchoStar Provides
---------------------- -----------------
o Top tier pay TV provider o Compelling synergies
16M+ subscribers
o Undeniable DBS economics o Superior management team
o True competition to cable o Financial strength and
flexibility
o Value creation o Track record of stock price
performance
[EchoStar Logo]
INFORMATION REGARDING PARTICIPANTS
Echostar and the following persons may be deemed to be "participants" on behalf
of EchoStar in the solicitation of proxies from GM and GMH shareholders.
--------------------------------------------------------------------------------
Charles W. Ergen Chairman and Chief Executive Officer
--------------------------------------------------------------------------------
David K. Moskowitz Senior Vice President, General Counsel and
Secretary
--------------------------------------------------------------------------------
Michael R. McDonnell Senior Vice President and Chief Financial
Officer
--------------------------------------------------------------------------------
Jason Kiser Treasurer
--------------------------------------------------------------------------------
As of August 6, 2001 EchoStar beneficially owned 1,000 shares of General Motors
common stock and 185,000 shares of Hughes tracking stock. Mr. Ergen beneficially
owns approximately 1,000 shares of General Motors common stock and approximately
10,000 shares of Hughes tracking stock.
Other than as set forth herein, as of the date hereof, neither EchoStar nor any
of the other participants listed above has any substantial interest, direct or
indirect, by security holdings or otherwise, in General Motors or Hughes.
Certain other persons named below may assist EchoStar in the solicitation of
proxies from GM and GMH shareholders. Pursuant to a letter agreement between UBS
Warburg LLC ("UBS Warburg") and EchoStar, EchoStar has agreed to pay UBS Warburg
for its financial advisory services in connection with the proposed transaction
involving Hughes a financial advisory fee of (1) up to $5,000,000 in connection
with the public announcement of the proposed transaction and (2) $20,000,000
upon the closing of a transaction involving Hughes, subject to certain fee
credits. EchoStar also has agreed to provide UBS Warburg and certain related
parties with customary indemnification. UBS Warburg does not admit that it or
any of its directors, officers, employees, affiliates or controlling persons, if
any, is a "participant" as defined in Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended, in the solicitation of proxies, or
that Schedule 14A requires the disclosure of certain information concerning it
or them. The following sets forth the name and title of each of the UBS Warburg
employees who may assist EchoStar in the solicitation of proxies: James Brennan,
Managing Director, Stephen Ketchum, Managing Director, James Neissa, Managing
Director, Lee LeBrun, Executive Director and Lee Ann Gliha, Director.
UBS Warburg and its affiliates engage in a full range of investment banking,
securities trading, market-making and brokerage services for institutional and
individual clients. In the normal course of business, UBS Warburg and its
affiliates may trade the debt and equity securities of General Motors for their
own account and the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities, or option contracts or other derivatives in or relating to such
securities. UBS Warburg has informed EchoStar that, as of the close of business
on August 3, 2001, UBS Warburg, for its own account, held a net long position of
less than 1% of General Motors common stock and less than 1% of shares of Hughes
tracking stock. UBS Warburg and certain of its affiliates also may have voting
and/or dispositive power with respect to certain shares of General Motors and
shares of Hughes tracking stock held in asset management, brokerage and other
accounts. UBS Warburg and such affiliates disclaim beneficial ownership of such
shares of General Motors and Hughes tracking stock.
Subject to future developments, EchoStar may file with the Securities and
Exchange Commission a registration statement at a date or dates subsequent
hereto to register the EchoStar shares to be issued in the proposed transaction.
Investors and security holders are urged to read the registration statement
(when and if available) and any other relevant documents filed with the SEC, as
well as any amendments or supplements to those documents, because they will
contain important information. Investors and security holders may obtain a free
copy of the registration statement (when and if available) and other relevant
documents at the SEC's Internet web site at www.sec.gov. The registration
statement (when and if available) and other relevant documents may also be
obtained free of charge from EchoStar by directing such request to: EchoStar
Communications Corp., 5701 South Santa Fe Drive, Littleton, CO 80120, Attention:
Investor Relations.