DirecTV Broadband Inc. will shut down its high-speed Internet access business in about 90 days and is working to move its customers to other service providers, parent company Hughes Electronics Corp. announced Friday.
The Cupertino, California, subsidiary provides its DirecTV DSL Internet service to roughly 160,000 customers in the U.S. It was acquired by satellite television provider Hughes in April 2001.
Hughes blamed the move on the collapse of its planned merger with EchoStar Communications Corp. Federal regulators rejected that US$18.5 billion marriage in October, saying competition between the two companies is the best way to keep prices low for satellite-TV subscribers. The companies officially pulled the plug on the deal earlier this week.
“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,” Jack Shaw, Hughes’ president and chief executive officer, said in a statement.
The broadband industry has “changed dramatically” since the merger was announced two years ago, and Hughes couldn’t see a way to operate DirecTV profitably in a reasonable time period, the company said.
About 200 employees were told Friday that they would lose their jobs. Another 200 workers will stay on for three months to help switch customers to alternative services and to wind down the business, Hughes said.
Hughes will continue its DirecWay satellite broadband service but won’t spend money acquiring new customers for that business for the time being. Hughes and DirecTV will “explore other strategic relationships that would allow the companies to offer future broadband services via both terrestrial and satellite technologies,” the statement said.
DirecTV DSL customers should check the
company’s Web site for information on transition plans for their Internet service.
As a result of the move Hughes said it expects to record fourth-quarter 2002 charge to earnings before interest, taxes, depreciation and amortization (EBITDA) of between $100 million and $150 million.