PrimeStar Inc. last Friday reported higher losses in its
first quarterly financial results since rolling up from a partnership into a single
corporate entity April 1.
For the three months ended June 30, PrimeStar reported that
it lost $87.4 million. In the same period last year, TCI Satellite Entertainment Inc.
(TSAT) -- the only one of the partners to report its results publicly -- lost $55.1
million. TSAT represented 45 percent of PrimeStar's subscribers.
PrimeStar's operating loss stood at $100.2 million in
the second quarter, compared with $37.7 million for TSAT last year. Revenues rose from
$137.4 million to $371.5 million.
During the second quarter of 1998, PrimeStar added only
44,400 net subscribers, compared with 96,800 among the partners during the same period
Despite the results, PrimeStar chairman and CEO Carl Vogel
was upbeat in a conference call with reporters last Friday.
"The net-subscriber additions are not acceptable to
us. We think that a good portion of our downs are behind us," he said.
PrimeStar's consolidated management team is "100
percent focused on getting to high-power," Vogel said.
But he would not elaborate on the status of any particular
talks for cable operators to sell their stakes in the company.
One Wall Street analyst reported that TCI Ventures Group
president Gary Howard said the company's United Video Satellite Group Inc. unit would
be interested in acquiring PrimeStar and merging it with UVSG's existing C-band
satellite business, assuming that it could do such a deal in a tax-efficient manner.
According to widespread reports, UVSG and News Corp. are in
talks to buy a controlling interest in PrimeStar.
Goldman Sachs & Co. cable and satellite analyst Lou
Kerner said UVSG would have a lot of hurdles to overcome in pulling off such a deal. He
said PrimeStar's cable partners have different views about the value of the company,
and they may not want to put further competition in the hands of News Corp.'s
chairman, Rupert Murdoch.
When asked why PrimeStar hasn't yet announced a plan
to restructure its ownership, Vogel said such a deal requires a tremendous amount of
discussion, capital and due diligence. And it needs Department of Justice and Federal
Communications Commission approval.
"I feel that our company is worth more than the stock
price," Vogel said. He placed the market value of the company -- based on recent TSAT
stock prices and an added $1 billion in debt -- at around $2.1 billion.
And while he would like to see a quick resolution to the
problem, Vogel said he would not push the process forward simply to have a high-power
product on the market in time for the holiday season.
"If the process causes us to miss the Christmas season
with high-power, you will not see us shrink from competing during the season with our
existing product, which is a compelling offer," Vogel said.
Over the years, PrimeStar has invested much money to create
"an extremely strong brand name," Vogel said, "and we don't intend to
throw that over."
PrimeStar president Dan O'Brien said customer
satisfaction and churn reduction are two key focuses. The company's goal is to reduce
churn to 1.8 percent per month. A solid credit-check process should help, O'Brien