Filed by General Motors Corporation
Subject Company - General Motors Corporation
and Hughes Electronics 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
Commission File No.: 001-00143
The following will be made available on Hughes' website beginning
January 8, 2002:
Salomon Smith Barney
12th Annual Global Entertainment,
Media & Telecommunications Conference
Jack Shaw
President & Chief Executive Officer, HUGHES
Eddy Hartenstein
Chairman & Chief Executive Officer, DIRECTV
January 8, 2002
[HUGHES LOGO]
SEC Guidelines
In connection with the proposed transactions, General Motors, Hughes and
EchoStar intend to file relevant materials with the Securities and Exchange
Commission, including one or more Registration Statement(s) on Form S-4 that
contain a prospectus and proxy/consent solicitation statement. Because those
documents will contain important information, holders of GM $1-2/3 and GM Class
H common stock are urged to read them, if and when they become available. When
filed with the SEC, they will be available for free at the SEC's website,
www.sec.gov, and GM stockholders will receive information at an appropriate time
on how to obtain transaction-related documents for free from General Motors.
Such documents are not currently available.
General Motors and its directors and executive officers, Hughes and certain of
its officers, and EchoStar and certain of its executive officers may be deemed
to be participants in GM's solicitation of proxies or consents from the holders
of GM $1-2/3 common stock and GM Class H common stock in connection with the
proposed transactions. Information regarding the participants and their
interests in the solicitation was filed pursuant to Rule 425 with the SEC by
each of GM and Hughes on November 16, 2001. Investors may obtain additional
information regarding the interests of the participants by reading the
prospectus and proxy/consent solicitation statement if and when it becomes
available.
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy, nor shall there be any sale of securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended.
Materials included in this document contain "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
General Motors Corp. ("GM"), EchoStar Communications
1
SEC Guidelines - Cont
Corporation ("EchoStar"), Hughes Electronics Corp. ("Hughes"), or a combined
EchoStar and Hughes to differ materially, many of which are beyond the control
of EchoStar, Hughes or GM 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 ordifficult 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 to obtain certain
retransmission consents; (9) an 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 periodic reports filed by EchoStar, Hughes or GM 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," "forecast," "designed," "goal," 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 included in this
document.
2
HUGES Overview
--------------------------
| HUGHES |
| |
| 2001E Revenues ~ $8.3B |
--------------------------
|
|----------------------------|--------------------------|
| | |
------------------------ ------------------------ --------------------------
| | | HUGHES | | |
| DIRECTV | | NETWORK SYSTEMS | | PanAmSat |
|2001E Revenues ~ $6.3B| |2001E Revenues ~ $1.3B| | 2001E Revenues ~ $0.9B |
------------------------ ------------------------ --------------------------
o United States o DIRECWAY o Transponder Leasing
o Latin America - Consumer
o DIRECTV Broadband - Enterprise
o DIRECTV Receiver
Equipment
3
HUGHES 2002 Guidance
Increase from 2001
------------------
HUGHES Revenue: $9.0-9.2B ~10%
HUGHES EBITDA: $750-850M 50-90%
Business Unit Highlights
DIRECTV U.S. EBITDA Expected to More Than Double to $525-575M While
Adding Over 1M New Subscribers
DIRECTV Latin America Targeting EBITDA Break-even
HNS' Broadband Products and Services Division is Expected to Grow
Revenues by 20-25% While Reaching EBITDA Break-even
PanAmSat is Targeting EBITDA Margin of 70% or Higher
4
DIRECTV U.S. - A Profitable
Growth Strategy
Increase Financial Returns While...Growing Our Subscriber Base
[Chart showing DIRECTV Value Drivers, [Chart showing 9.5M in 2000, 10.7M in
which include Improve Margins, Increase 2001 and 11.7-11.9M in 2002E.]
Subscriber Retention and Reduce SAC.]
5
Taking SAC Down
SAC Reduction Initiatives
o Eliminate Manufacturing Subsidies [Chart showing $575 in Q2 '01,
$555 in Q3 '01, $560 in Q4
'01E and $525 in 2002E.]
o Attacking Signal Piracy
- "Out-of-Box" program
- Activation-based retail model
o Emphasize Less Expensive Distribution
Channels
6
DIRECTV U.S. - Key
Operational Objectives
Increase Margins Reduce Churn
o G&A Savings o Acquiring Committed Long
Term Customers
- Staff reductions
- 12 month service commitment
- $50M annual cost savings
o New Incentive Plans with
o Programming Margin Initiatives Retail Partners
- New program packages o More Stringent Credit
Screening Practices
- New CRM (Customer
Relationship Management) o Significantly Improved
system Customer Service and
Installations
- Leverage large subscriber
base to negotiate favorable
terms
7
DIRECTV'S New Spot Beam Satellite
[Graphic of DIRECTV's new
Spot Beam Satellite]
Highlights
o Capacity for 300 New Channels
o Meets Must-Carry Requirements
o Added 220 New Local Channels as of 1/1/02
8
DIRECTV U.S. - New Strategies Result
In Improved Financial Returns
[Chart Showing Accelerating [Chart showing Increasing Subscriber
EBITDA: $151M in 2000, IRRs(2): 41% in 1H '01, 43% in 2H '01E
$200-250M(1) in 2001E, and 47% in 2002E.]
and $525-575M in 2002E.]
(1) Excludes one-time severance charge of $48M
(2) Assumptions for 1H'01/2H'01/2002E: SAC: $555/$560/$525; Monthly Churn:
1.75%/1.70%/1.60%; ARPU: $55.50/$56.90/$56.00
9
DIRECTV - Latin America
o Over 1.5M Subscribers [LOGO]
2002
o Exclusive Programming FIFA WORLD CUP
KOREA JAPAN
o World Cup Rights
o Launched Interactive [LOGO] [LOGO]
Services Disney Channel HBO Ole
o Aggressive Cost and
Churn Reductions
o Targeting EBITDA
Break-even in 2002
10
Hughes Network Systems
[DIRECWAY LOGO] - One Platform That Leverages Both
Enterprise and Consumer Markets
Enterprises Consumers
o World Marketshare Leader o ~100,000 Subscribers
- 67% in 2000 o Focused on "Powered by
o >300,000 VSAT Terminals DIRECWAY" Wholesale Model
Installed in 85 Countries o Bundled with DIRECTV
- Leading provider of DIRECTV
set-top boxes
[ARCO LOGO] [AOL LOGO]
[GM LOGO] [PEGASUS COMMUNICATIONS LOGO]
[CIRCUIT CITY LOGO] [DIRECTV LOGO]
[BLOCKBUSTER LOGO] [EARTHLINK LOGO]
[KMART LOGO]
[BMW LOGO]
[JACK IN THE BOX LOGO]
[MOBIL LOGO]
[WENDY'S LOGO]
[CHEVRON LOGO]
[FORD LOGO]
[WALMART LOGO]
11
SPACEWAY: The Next Generation
[Graphic of Satellite] o Service Launch in 2003
o Key Differentiators
- Spot beam satellites
- Peer-to-Peer architecture
- Packet switching
- Bandwidth-on-Demand
o HUGHES Broadband Alliance Formed
- Sun Microsystems and Polycom
are first to join
o Established Peer-to-Peer
Application Center of Excellence
SPACEWAY Will Deliver High-Speed, Low-Cost Multimedia Services to Both Consumers
and Enterprises Beginning in 2003
12
PanAmSat
New Leadership: 3-phase Strategy [Graphic of Earth with satellites
(1) Refocus on core operations circling Earth and Ka-Band slots
(2) Increase profitability noted intermittently.]
(3) Grow revenues
Key Financial Targets
- Increase EBITDA margins to 70%
or higher in 2002
- Decrease operating expenses by
$25-30M per year
- Reduce capital expenditures by
~$700M over 5 years
VISION: To Be the Financially Strongest
Premier Satellite Operator
13
[ECHOSTAR LOGO]
[HUGHES LOGO]
A Powerful Combination
14
Transaction Summary
o HUGHES and EchoStar to Merge
- EchoStar shareholders to receive about 1.37 HUGHES shares for each
EchoStar share
- Equivalent to 0.73 EchoStar shares per HUGHES share
o Before the Merger, HUGHES Pays a Cash Dividend of Up to $4.2 Billion to GM
Which Reduces GM's Retained Interest in HUGHES
o Up to Six Months After the Closing, GM May Offer Up to 100 Million Shares
of HUGHES Equity in Exchange for GM Debt Securities
o Fully-Committed Financing Totaling $5.5 Billion
15
Pro Forma Economic Ownership
---------------- -------------------
| GM Class H | | EchoStar Public |
| Shareholders | | Shareholders |
---------------- -------------------
53% \ / 18%
\ /
\ /
New Company
(EchoStar)
/ \
/ \
11% / \ 18%
----------- -----------------
| General | | Charles Ergen |
| Motors | | |
----------- -----------------
Note: Assumes $4.2 billion dividend paid to GM, and a corresponding reduction of
GM's retained interest in HUGHES, at an illustrative price of $18.44 based
upon the implied deal value. Does not include the offer of up to 100
million shares of HUGHES equity in exchange for GM outstanding debt.
Excludes Vivendi Universal's planned ownership in EchoStar.
16
Key Merger Synergies
o Efficient Utilization of Scarce Spectrum
o Reallocation of Approximately 500 Duplicate Channels
o New Content and Services
o Significant Cost Savings
17
DBS Satellites and CONUS(1)
Orbital Slot Locations
119(degrees)WL 110(degrees)WL 101(degrees)WL
DIRECTV-6 11 Frequencies DIRECTV-1 3 Frequencies DIRECTV 1-R 8 Frequencies
EchoStar 2,4,6 21 Frequencies EchoStar 5 29 Frequencies DIRECTV-2 8 Frequencies
DIRECTV-3 8 Frequencies
DIRECTV 4-S 8 Frequencies
[Graphic of Earth and Satellites.]
(1) CONUS stands for Continental United States
18
Channel Duplication
EchoStar DIRECTV Channels
Channels Channels Duplicated
---------------------------------------------------------------------------
Basic(1) 122 116 99
Premium 34 31 28
Local Channels ~400 ~450 ~300
Currently Carried(2)
Other:
PPV 24 50 24
Sports(3) 23 23 22
A la carte (4) 64 49 30
Total ~667 ~719 ~503
---------------------------------------------------------------------------
(1) Total Choice, America's Top 100
(2) In addition, DIRECTV expects to broadcast local channels to ten new markets
in 2002 from the 119(degree) WL orbital location
(3) Does not include professional and college sports packages
(4) Includes Spanish-language channels, Adult, Family Pack and additional
content in America's Top 150
19
Competitive Benefits of the Merger
o Increased Competition with Cable
- Cable still has ~80% of the U.S. multichannel subscribers
- Cable continues to increase prices each year (37% since 1996 vs. CPI
of 10%)
- On-going cable industry consolidation
- Digital cable and bundled broadband offering increasingly threatens
DBS
o More Services, More Choices and Competitive Prices
- Local channels covering approximately 85% of TVHH population (versus
60% today)
- More High Definition TV channels
- Expanded services: interactive, ethnic, video-on-demand, sports and
news
- Nationwide broadband services at affordable prices
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Providing More Local and HDTV Channels
--------------------------------------------------------------------------------
Before Merger
--------------------------------------------------------------------------------
Total Channels % of # of
Used for Local(1) Population HDTV Channels
----------------- ---------- -------------
DIRECTV ~450 61% 2
EchoStar ~400 58% 3
After Merger
New Co(2) 850 85% 12
--------------------------------------------------------------------------------
The New Company Will Provide Local Channels to More Than 85% of TVHHs (Versus
Around 60% for 2 Separate Companies) and Will Be Able to Offer Many New HD
Channels to Meet Growing Consumer Demand
(1) In addition, DIRECTV expects to broadcast local channels to ten new markets
in 2002 from the 119(degree) WL orbital location
(2) Assumes minimum post merger local channel offering and population coverage
with reallocation of channels duplicated
21
Benefits to Rural America
o Greater Availability of Digital Quality Local Channels
o National Pricing Which will be Competitive Against Cable
o More Services Offered at a Single National Price
- New Content
- High Definition TV
- Interactive
- Video-on-demand
- Specialty
- Foreign language
o Improved Broadband Services
- Affordable pricing
- Expanded services
22
Potential Synergies of The Merger
---------------------
2005 EBITDA Estimates
---------------------
Revenue Synergies Cost Synergies
[Pie chart showing [Pie chart showing
Advertising $900-1,000M, SAC $900-1,200M,
Broadband $250-300M, G&A $400-450M,
HDTV $50-100M, Programming $600-700M,
VOD/PPV $75-125M, Churn $750-850M,
Local Services $700-800M, Subtotal: $2.65-$3.2B]
Subtotal: $1.975-2.325B]
23
There Are Approximately 92 Million Multichannel Subscribers in the U.S.
--------------------------------------------------------------------------------
Cable DBS Other* (YE Est.)
--------------------------------------------------------------------------------
AT&T 15.1 DIRECTV 8.5 3.3
Time Warner 13.2 NRTC/Pegasus 1.8
Comcast 7.9 EchoStar 6.4
Charter 7.0
Cox 6.2
Adelphia 5.7
Cablevision 3.0
Other 13.6
71.7M 16.7M 3.3M
--------------------------------------------------------------------------------
Proposed Company Would Represent Approximately 18%
of the Total U.S. Multichannel Subscriber Marketplace
Source: Cablevision Magazine Website as of 10/01/01; SkyReport 9/30/01; Deutsch
Bank Report 9/6/01
*Other includes C-band, MMDS, SMATV and over-builders
24
Regulatory Overview
Market Definition - Relevant Points
-----------------------------------
o FCC's Original Allocation of DBS Spectrum Designed to Provide Competition
with Cable Monopoly
o SHVIA Enacted to Help DBS Compete with Cable
o In the 1998 Primestar/News Corp/MCI Cases, DOJ and FCC Defined Market to be
Multichannel Video Programming Distribution (MVPD)
- DOJ concluded that DBS and cable were in same market
- FCC endorsed DBS mergers so that DBS could better compete against
cable
o DBS Focuses their Advertising/ Promotions on Cable; Much of Cable's
Advertising Attacks DBS
25
Regulatory Overview
Market Concentration - Relevant Points
--------------------------------------
o The 2001 Heinz Case Held That Substantial Merger-Specific Efficiencies
Could Outweigh an Increase in Concentration
o Merger Spectrum Efficiencies Will Result in Extraordinary and Verifiable
Increase in Output
- The addition of local channels, HDTV, ethnic services, expanded
broadband services, etc. will increase the options for MVPD viewers
- The merger efficiencies cannot be achieved without combining EchoStar
and HUGHES
o No Likelihood of Collusion as DBS Competes Against Many Local Cable
Monopolies
26
GMH Shareholder Protections
o HUGHES Will Absolutely Manage the Business in an Aggressive and Effective
Fashion
- HUGHES management to remain totally focused on running the business
o Cash Available if Regulatory Approval is Not Received
- $600M fee paid to HUGHES by EchoStar
- EchoStar to purchase PanAmSat for ~$2.7B
- Potential for GMH spin-off in the future
o Continued Use of the DIRECTV Brand Name in Any Event
27
A Powerful Combination
o 100% Digital Nationwide Platform With More Than 16.7 Million Subscribers
(Including 14.9 Million Owned-and-Operated)
o Creates Stronger Competitor to Large, U.S. Cable and Broadband Providers
o 100 Million U.S. Households Offer Powerful Growth Opportunity
o Leverages Already Compelling DBS Economics
o Substantial Cost and Revenue Synergy Opportunities
o Superior Management Team with Proven Success
28