As PrimeStar Inc. faces continued uncertainty over its move
to a high-power direct-broadcast satellite business, industry analysts last week gave the
company credit for doing what it can to boost its business.
PrimeStar's announcement late last month that it would
buy the Superstar/Netlink Group C-band satellite business from United Video Satellite
Group Inc. drew overall praise from analysts.
"It's a good deal for PrimeStar," said Steve
Blum, president of California-based Tellus Venture Associates. "They're getting
subscribers really cheap, and that's good."
PrimeStar bought SNG's 1.2 million C-band customers as
a way to improve its monthly cash flow and in hopes of eventually converting a large
number of those subscribers to its small-dish service. The cable-operator-controlled
company currently offers a medium-power service to 27-inch dishes, and is awaiting
government approval before it can move forward with a plan to offer a high-power DBS
service to 18-inch dishes.
"It really doesn't matter if your subscriber is
C-band or medium-power or high-power as long as they're sending you checks every
month," Blum said.
"It was a great strategic move," said Mickey
Alpert, president of Washington, D.C.-based Alpert and Associates, of PrimeStar's
C-band business purchase. "It gives them a whole new group of low-hanging fruit, and
it's getting more and more difficult to get new DBS subscribers now."
There's always the possibility that the Department of
Justice could look with disfavor on the C-band deal while reviewing PrimeStar's
proposed merger with News Corp.'s DBS interests. But Alpert argued that even if
PrimeStar's purchase of SNG's C-band customers was viewed as one more example
that PrimeStar goes after rural customers more aggressively than it competes in cabled
markets, the positives of the deal far outweigh the negatives.
"The deal allows PrimeStar to move ahead [with its DBS
business] more aggressively," Alpert said.
PrimeStar officials hit the road last week to help support
the firm's $400 million high-yield debt placement.
Moody's Investors Service assigned a caa1 rating to
the senior subordinated notes. According to a statement, Moody's outlook for
PrimeStar is stable. It pointed to the 1.2 million C-band subscribers from the pending SNG
acquisition as a positive consideration.
Standard & Poor's rated the $400 million senior
subordinated notes, due in 2008, a single-B.
Both Moody's and S&P raised concerns over the
uncertainty surrounding PrimeStar's plans to migrate its medium-power business to
PrimeStar is leasing 11 high-power DBS slots at the 119
degrees west orbital position from Tempo Satellite Inc.; PrimeStar and Tempo have asked
the Federal Communications Commission to extend Tempo's license for those slots until
the FCC and the DOJ rule on the PrimeStar/News Corp. deal, which would give PrimeStar
access to 28 transponders at 110 degrees west.
At press time, the FCC had not yet granted that extension.
The license for 119 is set to expire by May 8 unless Tempo had launched an operational DBS
Late last month, PrimeStar president and COO Dan
O'Brien vowed to start marketing the service through a limited number of RadioShack
stores -- the outlet for PrimeStar's medium-power service. As of early last week,
RadioShack had not heard from PrimeStar, the company said.