AOL and Hughes Electronics Announce $1.5 Billion Satellite Internet Deal

Strategic Insights -

America Online Inc. has announced a massive $1.5 billion deal with Hughes Electronics Corp.'s DirecTV subsidiary, allowing AOL members to access the Internet through satellite dishes. The alliance is expected to accelerate growth and revenue for both companies, while extending AOL's reach for its new AOL TV interactive-television service and the AOL-Plus high-speed Internet service. The deal is a significant move by AOL to compete with AT&T's cable TV market, and demonstrates the company's commitment to providing high-speed Internet access to its users.

Key Takeaways:

  • AOL has acquired a 10% equity stake in Hughes Electronics' parent company, General Motors, as part of the deal.
  • The alliance will accelerate growth and revenue for both AOL and Hughes, with expected increases in subscriber growth and revenue-per-subscriber figures.
  • AOL will extend its reach for its new AOL TV interactive-television service and the AOL-Plus high-speed Internet service through the DirecTV/AOL TV package.
  • The deal is a major investment by AOL, with the company investing $1.5 billion in the partnership.
  • Hughes will market the DirecTV/AOL TV package to AOL's 16 million members and DirecTV's 7 million subscribers, as well as through its network of retail outlets.
  • The partnership will also help to bring along the development of Spaceway, Hughes' next-generation two-way broadband satellite system.

Statistics:

  • $1.5 billion: The amount invested by AOL in the partnership with Hughes Electronics.
  • 10%: The equity stake acquired by AOL in Hughes Electronics' parent company, General Motors.
  • 16 million: The number of AOL members who will have access to the DirecTV/AOL TV package.
  • 7 million: The number of DirecTV subscribers who will have access to the DirecTV/AOL TV package.
  • 3.4%: The increase in AOL's stock price on the day of the announcement.
  • 6%: The increase in Hughes' stock price on the day of the announcement.

Sources:

  • Newsbytes. "America Online Inc. to Acquire Hughes DirectTV Subsidiary in $1.5 Billion Deal." June 18, 1999.
  • Reported By Newsbytes.com, http://www.newsbytes.com.