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Hughes to acquire Telocity for $180 million

Hughes Electronics agrees to acquire the broadband Internet service provider in a move to expand its satellite and DSL offerings.

Hughes Electronics agreed to acquire broadband Internet service provider Telocity on Thursday for $180 million in cash.

The acquisition is intended to expand Hughes' broadband offerings by adding thousands of digital subscriber line (DSL) customers.

Hughes operates DirecPC, a satellite-based high-speed Net access service, which is set to unveil its new "two-way" capabilities shortly. Until now, DirecPC offered broadband downloads but also required a dial-up modem for uploading emails and information.

Hughes is now capable of delivering DSL, satellite Net access, and satellite television via its popular DirecTV service.

"With the addition of Telocity, we achieve nearly unlimited capacity and can offer our customers a choice of DSL, where it is available, and two-way satellite broadband in circumstances where customers prefer satellite delivery or where DSL is not, and will not be, available," Hughes chief executive Michael Smith said in a statement.

A unit of General Motors, Hughes will pay $2.15 per share for Telocity. The company expects to extend a tender offer by Feb. 1, which will expire no later than April 2, and will offer Telocity $20 million in funding until the deal is completed. Both companies' boards of directors have approved the deal.

For Telocity, a Cupertino, Calif.-based company, the deal marks the latest in a string of financial woes for broadband ISPs. Telocity is in the process of taking over many customer accounts for other broadband companies. For example, thousands of former Flashcom customers were transferred to Telocity as part of Flashcom's sale of assets.

Dozens of broadband providers and the high-speed ISPs they serve have struggled financially this year despite strong demand for their offerings.

The merger is subject to the necessary federal regulatory approvals.