Satellite TV Firm Sues News Corp. for $5 Billion

ENGLEWOOD, Colo. — EchoStar Communications Corp. is suing News Corp. for $5 billion in damages for allegedly violating their joint venture and said it soon will run out of capital to expand its satellite TV business.

The broadcaster also said it plans to seek another partner in a bid to build its satellite network. News Corp. had agreed to invest $1 billion and form a broadcaster intended to reach 75% of U.S. homes by 1999.

The lawsuit is “without merit and we’ll contest it,” said News Corp. spokesman Jim Platt. He said that “it looks extremely unlikely” the companies will continue with the venture.

EchoStar is likely to open talks with satellite TV provider Primestar Partners, analysts have said. A partner would provide needed cash and make EchoStar a bigger competitor in the satellite TV business, which is luring cable customers with more channels and sharper pictures.

“EchoStar’s game is they have to get a partner now in short order. They won’t get money from the courts or the lawsuit in time to solve their short-term financing problems,” said Marc Crossman, an analyst at Rauscher Pierce Refsnes.

EchoStar shares fell 50 cents to close at $13.125 on Nasdaq. News Corp. shares eased 12.5 cents to close at $18.625 on the New York Stock Exchange.

On Friday, EchoStar expanded a lawsuit filed in U.S. District Court in Colorado a day earlier. In the original suit, EchoStar sued News Corp. for allegedly breaking a promise to loan it $200 million. The February pact began unraveling two weeks ago as News Corp. Chairman Rupert Murdoch and EchoStar Chairman Charles Ergen clashed over control of the venture.

Englewood, Colo.-based EchoStar said it plans to speak with major vendors about possible financing; it said it can’t meet its business plan without material changes.

EchoStar said it plans to seek to recover from News Corp. any costs of financing the loan it says News Corp. agreed to provide.