Deal Rumors Flying Over PrimeStar Sale

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Direct-broadcast satellite industry observers tried last
week to put into perspective the various rumors surrounding PrimeStar Inc.'s attempt
to sign deals with new equity partners.

One scenario making the rounds has Liberty Media Group and
News Corp. taking ownership of PrimeStar, which is seeking government approval to move to
a high-power DBS business.

The U.S. Department of Justice this past spring filed suit
to block a proposed merger between News Corp.'s American Sky Broadcasting and
PrimeStar, citing anti-competitive concerns. PrimeStar is trying to sell down its cable
ownership to help appease the DOJ and avoid going to trial next February.

Several Wall Street analysts -- all of whom asked not to be
named -- last week said any deal that leaves control of PrimeStar in the hands of
Tele-Communications Inc. chairman and CEO John Malone is likely to raise red flags with
the DOJ.

The rumor mill claims that once the proposed TCI/AT&T
Corp. merger closes, Liberty Media won't be directly connected with a cable operator.
Even if the DOJ looked at it that way, Mickey Alpert, president of Washington, D.C.-based
Alpert & Associates, said the DOJ would be unlikely to approve a deal between Liberty
and PrimeStar until the AT&T deal closes.

Seeking DOJ approval for such a deal would ultimately delay
PrimeStar's entry into the high-power business, Alpert said.

And PrimeStar's competitors would likely object to a
deal that leaves two companies which control so much programming content also in charge of
DBS spectrum.

While the potential deal is risky from a political
standpoint, it makes sense as a business proposition, Alpert said.

"It's the kind of deal Malone has done in the
past," said Steve Blum, president of California-based Tellus Ventures Associates. He
added that he believes newly-named PrimeStar chairman and CEO Carl Vogel has more
ambitious plans.

"My best read is you're not going to see anything
until October," Blum said, blaming the recent crop of rumors on summertime boredom.

Alpert said a PrimeStar deal with Loral Skynet or any of
the Baby Bells would be "cleaner" than the Liberty deal when presented to the
DOJ.

Jimmy Schaeffler, chairman and CEO of The Carmel Group,
surmised that overseas telecommunications players are also looking at PrimeStar.

One Wall Street analyst said he's heard a rumor that
puts General Electric Co. and an unidentified financial player in the mix.

And some say it's not out of the question for
PrimeStar to raise enough debt to buy out the cable owners.

Whether Malone would ultimately allow that is another
matter.

"However this gets resolved, Malone is going to be the
sticking point in the whole thing," Blum said. "He's always got to extract
something more out of a deal."

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