PrimeStar Eyes DOJ Consent Decree

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PrimeStar Inc. and the U.S. Department of Justice confirmed
last week that the two sides are in discussions that could lead to a consent decree and
avert an antitrust trial scheduled for Feb. 1.

"It's in the hands of the DOJ," said Leo J.
Hindery Jr., president and chief operating officer of Tele-Communications Inc., while
attending the Great Lakes Cable Expo in Chicago last Thursday

The DOJ filed an antitrust suit against PrimeStar in May,
nearly one year after the company announced plans to merge with American Sky Broadcasting
Inc., the U.S. satellite division of News Corp. The DOJ sought to block PrimeStar's
access to the last full-CONUS (continental United States), high-power direct-broadcast
satellite spectrum, citing anti-competitive concerns due to PrimeStar's heavy cable
ownership.

Earlier this month, attorneys for the DOJ, PrimeStar,
Tele-Communications Inc. and TCI Satellite Entertainment Inc. (TSAT) filed a joint motion
that asked for, among other things, a two-week extension for discovery motions to allow
the parties "to devote the necessary time and attention to a currently ongoing effort
to negotiate a resolution of this matter."

A federal district court judge for the District of Columbia
agreed to the extension.

The motion, filed Sept. 18, stated that PrimeStar and the
DOJ "have undertaken serious negotiations directed toward a possible set of
transactions and a related consent decree," adding that the two sides "hope and
expect to have those efforts substantially completed in approximately the next two
weeks."

Many industry observers believe that the DOJ will
ultimately endorse a restructured PrimeStar, but they have become jaded trying to predict
the timing. Hindery also said the deal could come down in about two weeks.

A spokeswoman for the DOJ declined to discuss the status of
the government agency's discussions with PrimeStar, other than to say that the Feb. 1
trial date still holds, and that it's not unusual for the DOJ to have ongoing
discussions with parties involved in antitrust suits.

And a PrimeStar spokesman said the recent negotiations with
the DOJ provide no guarantee that the company will have a consent decree to announce
within the two-week time frame discussed in the court documents.

PrimeStar officials have declined to outline the specifics
of a deal that would buy out five cable owners' stakes in PrimeStar. Industry
analysts and observers have speculated that News Corp. will increase its stake in the
company, along with United Video Satellite Group Inc.

Hindery said last week that published reports concerning a
huge investment by Canal Plus were not true.

Funding from a strategic partner or financial player may be
crucial to a deal, since it is unlikely that PrimeStar would be able to raise money in the
high-yield market, which Wall Street analysts said is currently "nonexistent."

Wall Street has not expressed much confidence in
PrimeStar's ability to close its deal in recent weeks. Stock prices for TSAT -- of
which PrimeStar is a subsidiary, pending the merger with News Corp. -- have plummeted from
about $8 per share in May to below $3 last Friday.

Janco Partners analyst Ted Henderson said the incoming
investors may be asking why they should pay the reported $6 per share to PrimeStar's
current cable investors when TSAT's stock is trading at under $3.

Even if DOJ approval were a given, PrimeStar's move to
small-dish, high-power DBS could face a few more bumps: The Federal Communications
Commission must still give its own blessing to the PrimeStar/ASkyB merger.

And depending on the timing of government approval,
PrimeStar is almost certain to miss launching its high-power service in time for the
upcoming holiday selling season.

Bob Berzins, senior vice president of high-yield research
at Lehman Bros. Inc., predicted that even if government approval for PrimeStar's move
to high-power came through within the next few weeks, the company would still need to move
its in-orbit satellite and get its retail distribution up to speed to sell the new
service. Even in a best-case scenario, Berzins predicted, such a market launch is not
likely before January.

One analyst, who asked not to be named, speculated that if
TSAT's stock continues to decline before a deal can be completed, PrimeStar's
cable owners might choose to exit the satellite business entirely.

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