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SBC Invests in EchoStar, Adds DISH TV Bundle

Regional telecom SBC has invested $500 million in satellite TV provider EchoStar and will add that company's service to its bundled voice and data offerings.

The companies will deliver "SBC DISH Network" service to customers in SBC's coverage area (13 states in the Midwest and West) in early 2004. Work will begin immediately to combine order entry, service and billing operations.

They will also develop co-branded set-top boxes that can handle DSL, TV and possibly home networking tasks.

"We have made no secret about the strategic importance we place in video to our service bundle," Edward E. Whitacre Jr., said in a conference call with reporters. "(This deal)allows us to get to market quickly in a way that brings greater value to our customers."

For SBC, the pact rounds out services, which include wireline and wireless phone, DSL Internet access, and in the near future Wi-Fi, and allows it to better compete with cable rivals, most notably Comast.

The co-branding agreement mirrors SBC's DSL/content partnership with portal player Yahoo! which has helped it win new broadband customers and retain existing ones.

Battling cable companies was also a motivator for Littleton, Colo.-based EchoStar.

"Our customers will have greater exposure to the benefits of satellite TV with the added value and convenience of a bundle," said Charles Ergen, EchoStar chairman and CEO. "With this partnership, we continue our efforts to make DISH Network even more competitive with cable TV providers."

EchoStar will continue offering DISH Network service in SBC areas through its retailers. The new agreement gives it a chance to increase sales, as well as offer existing customers new services without adding new infrastructure costs.

EchoStar executives said they were encouraged by the year-long working relationship between the two companies. Several months into it however, they came to realize that expanding it would be more attractive to consumers.

The deal illustrates the fast changes in the industry over the last year. Previously, Echostar was set to merge with fellow satellite TV provider DirecTV but the deal was scuttled after federal regulators objected. Shortly after, SBC was mentioned as a possible buyer for DirecTV.

SBC's investment came in the form of 3 percent convertible subordinated note due in 2010.

A few hours after the SBC/EchoStar agreement, Denver-based telecom service provider Qwest announced a marketing pact with with satellite TV player DirecTV.

Qwest will make satellite TV services available to its residential customers in Phoenix, Tucson and Seattle. The company expects to cover more markets throughout the remainder of 2003 and into 2004.