PrimeStar Workers Get Word


DirecTV Inc. management spent last Wednesday at PrimeStar
Inc.'s headquarters in Englewood, Colo., notifying employees of their long- and
short-term fates with the company as DirecTV prepares to integrate PrimeStar's
medium-power business into its direct-broadcast satellite operations.

A spokesman for DirecTV said roughly 100 PrimeStar
employees, or 10 percent of the work force, received 60-day severance notices last
Wednesday, adding that PrimeStar is responsible for those severance payments.

Another 100 employees will remain on PrimeStar's
payroll, but they will be loaned to DirecTV as "transition employees" for
varying lengths of time.

DirecTV also offered "transfer positions" to 80
percent of PrimeStar's roughly 1,000 workers. Transfer employees would be brought
over to DirecTV's payroll once the deal closes, and they would stay with DirecTV for
six to 30 months. Only some of the transfer positions would be based in Englewood.

The employee notifications were further indication that
DirecTV's $1.8 billion deal to acquire PrimeStar's assets is on track to close.

But in an annual report filed last Thursday at the
Securities and Exchange Commission, PrimeStar confirmed that it had failed to reach an
agreement with its bondholders to buy back its outstanding debt.

If ongoing negotiations with the bondholders prove
unsuccessful, PrimeStar said, it does not intend to sell its medium-power subscriber base
to DirecTV. Instead, PrimeStar would continue to operate its medium-power business, but it
would cut back significantly on sales and marketing expenses.

As structured, the deal allows DirecTV to walk away by
April 30 if certain conditions for closing have not been satisfied.

Sources indicated last week that PrimeStar was likely to
reach a settlement with the bondholders soon, with the company offering roughly 90 cents
on the dollar to buy back its debt.

Bondholders had balked at the 67 cents per dollar that
PrimeStar proposed in recent tender offers, pointing to the hundreds of millions of
dollars that the company paid to PrimeStar's cable owners last spring, when the
company rolled up from a partnership.

Because DirecTV is not assuming most of PrimeStar's
debts, once the deal closes, PrimeStar must still meet a number of financial obligations,
including employee-severance payments.

PrimeStar officials could not be reached for comment last
week regarding which top officials would stay with the company through the transition.