VIVENDI SPREADING WINGS FIRM PUTTING $1.5 BILLION IN ECHOSTAR.

Byline: Greg Hernandez Staff Writer

Vivendi Universal announced Friday that it is investing $1.5 billion in EchoStar Communications, the second-largest satellite company in the country. The eight-year agreement widens the French conglomerate's ability to distribute its films, television programs and music in the U.S.

The deal comes on the heels of news this week that Vivendi, parent company of Universal Studios, is in talks to acquire USA Networks Inc.'s television and film assets. The USA talks include ongoing negotiations with media mogul Barry Diller about taking over the reins of most operations at Universal Studios.

``First we will see if we can reach a deal,'' Vivendi Universal Chairman Jean-Marie Messier said during a conference call with analysts and reporters Friday. ``Business matters will be resolved before any personnel decisions are made.''

Messier said teaming with EchoStar makes a potential deal with USA Networks even more attractive. The deals would give the media giant the foothold in the U.S. television market that it has been seeking since purchasing Universal film studios and Universal Music Group from the Canadian group Seagram last year. The distribution deal would assure Vivendi of at least 6 million subscribers for new channels to be devoted to Universal's film library.

``We think that this kind of alliance is able to create value for respective shareholders,'' Messier said. ``This is all strategy looking to the U.S. distribution market, to build commercial agreements and a few very strategic partnerships.''

As part of the deal, which gives the French group a 10 percent stake in EchoStar, Messier will serve on EchoStar's board of directors. The announcement comes as EchoStar is set to buy El Segundo-based Hughes Electronics, the owner of rival satellite TV service DirecTV from General Motors in a $30 billion deal which is awaiting approval from U.S. regulators.

``The additional $1.5 billion, it puts us on strong financial footing in light of our pending merger with Hughes,'' said Charlie Ergen, chairman and chief executive of EchoStar.

As part of the agreement, Vivendi Universal plans to offer EchoStar's Dish Network customers five new channels of basic and niche programming including action, suspense, music, youth-oriented channels and interactive game channels. Vivendi Universal will also offer expanded pay-per-view and video-on-demand movies from current Universal films and films from the studio's library beginning in the fall of 2002.

``This alliance is part of our vision to compete against cable companies while providing consumers, no matter where they live in the U.S., more channel choices and the latest technology,'' Ergen said.

The two companies will also work together on developing new satellite- delivered broadband channels featuring interactive games, movies, sports, education and music to be launched within three years.

In regards to USA Network and Diller, Messier said the ongoing negotiations are ``very fluid'' and repeatedly stressed that they ``may or may not lead to an agreement.

``I can assure you that I am taking a lot of care,'' he said.

It has been widely reported that if Diller were to come on board as chief executive of Universal Studios, he would oversee all film, television, and theme park operations. Universal Studios President Ron Meyer would report to Diller with Universal Picture CEO Stacey Snider continuing to report to Meyer.

``There is an outstanding team led by Ron Meyer and Stacey Snider,'' Messier said. ``They succeeded in turning around Universal Studios. Their commitments, as Barry's commitments for the future, would be absolutely key for the future.''

Messier was expected to meet with Vivendi's board of directors Friday afternoon to update them on the USA negotiations. He said that if a deal is reached, a separate board meeting would be convened.

Vivendi shares were up 42 cents Friday closing at $48.95 a share on the New York Stock Exchange while EchoStar shares gained two cents to close at $25.92 per share on Nasdaq.