Primestar sets to go public
DBS compeition, biz efficiency spur decision
Sources close to PrimeStar say the company will shift from a partnership format, led by TCI Satellite Entertainment Inc. and Time Warner, to a publicly held corporation. Other partners now include Cox Communications, MediaOne and Comcast Corp.
The partners had hoped to make the switch to a publicly traded company at the same time that they entered the high-powered DBS market through the purchase of a satcasting license now controlled by News Corp. and MCI. But both the Justice Dept. and the Federal Communications Commission have held up the News Corp./MCI deal while they investigate charges that the cablers will use the high-powered DBS license to protect their current monopolies.
Opponents of the deal, which include potential rivals and public interest groups, argue that cablers should not be given one of the few DBS licenses with full coverage of the U.S.
Competition at issue
With cable prices rising at four times the rate of inflation, regulators are desperate to spur competition to the cable industry. One hope is that the DBS industry will provide that competition, but opponents claim that is unlikely if cablers take control of the News Corp./MCI license. They argue that PrimeStar has no incentive to use a DBS license to compete with the core cable market.
PrimeStar argues that as a publicly traded company it will have an obligation to its shareholders to compete vigorously. The company also argues that it needs to make the transition to the high-powered DBS business, with its pizza-sized receiving dish, to remain competitive. Current PrimeStar subscribers have larger dishes that are difficult to conceal in urban and suburban environments.
The partners also say they need to make the switch to a traditional corporate format in order to make more efficient business decisions. Under the partnership format any of the partners could slow down a business decision. PrimeStar has argued that it needed to make the switch in order to make quicker decisions based on changes to in the marketplace.
High-power play
The switch of the partnership to a corporation has no impact on PrimeStar's efforts to secure a high-powered DBS license, said PrimeStar's Washington lawyer Philip Verveer. "Obviously they are still seeking the high-power (license) without regard to the roll-up," said Verveer.
Time Warner chairman Gerald Levin said Tuesday at a press briefing on Time Warner's quarterly earnings that he expected the PrimeStar roll-up to occur despite "some delay" in the approval of the New Corp./MCI part of the deal. "I think eventually (it) will happen," Levin said, but "probably" with conditions imposed by the FCC.
PrimeStar has already said that as a condition of the transfer it is willing to give up a high-powered DBS license that it currently controls through TCI Satellite Entertainment (TSAT) subsidiary Tempo Satellite. That DBS license does not have as much channel capacity as the News Corp./MCI license. However, TSAT must do something with the license by May 8. The FCC has said that it will take back the license unless it is in operation by the deadline.
Lawyers for PrimeStar have also said that they are willing to sell any programming carried on their satellite service to other DBS companies, which include potential rivals DirecTV and EchoStar.
