UVSG May Seek DBS Alliance for C-Band

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United Video Satellite Group Inc. may seek "marketing
alliances" with direct-broadcast satellite providers following the demise of its deal
to sell 1.2 million C-band subscribers to PrimeStar Inc.

The Tele-Communications Inc. subsidiary disclosed that
possibility last week, while announcing its third-quarter earnings.

UVSG chairman and CEO Gary Howard also discussed with
analysts, in general terms, UVSG's aborted attempt to join with News Corp. in buying
out PrimeStar's cable MSOs in order to appease the Department of Justice and win
approval for PrimeStar's $1.1 billion deal to buy News Corp.'s high-power DBS
assets.

In April, UVSG agreed to sell its Superstar/Netlink Group
to PrimeStar for about $480 million in preferred stock, which could have been converted to
about 10 percent equity in PrimeStar.

But the sale hinged on PrimeStar's successfully
migrating from a medium-power DBS service to high power, which uses a smaller receiving
dish, similar to those used by DirecTv Inc. and by EchoStar Communications Corp.'s
Dish Network.

Facing government opposition, on Oct. 7, PrimeStar dropped
its year-old deal to acquire a pair of satellites and a DBS license from American Sky
Broadcasting Inc., a joint venture between News Corp. and MCI Communications Corp. News
Corp. has said that it is looking for other options to sell the ASkyB assets.

Howard told Wall Street analysts during a conference call
that UVSG's participation with News Corp. in a PrimeStar deal would have taken the
form of UVSG's buying one or two of the high-power satellites and leasing the
capacity to PrimeStar.

That transaction would have been
"tax-advantaged," Howard added. UVSG has been looking for deals that would
reduce its tax obligations, he said.

UVSG wasn't prepared to write a check to buy
additional PrimeStar equity, he said, "because I think that we have other uses for
that money."

Meanwhile, cost-cutting measures and price increases have
helped to boost the C-band business's cash flow significantly, UVSG officials said.
In the third quarter, Superstar's cash flow was up 64 percent versus the same period
a year ago.

UVSG president and chief operating officer Peter C. Boylan
III said Superstar was able to negotiate some programming-cost reductions, and it also
passed through a rate increase -- the first one in memory, he added.

Superstar -- which added Turner-Vision Inc.'s C-band
business (no relation to Turner Broadcasting System Inc.) in a deal announced last
December -- now provides programming to more than 60 percent of domestic C-band
subscribers.

Howard told analysts that he likes the C-band business as
"a pure cash machine," which UVSG was only willing to give up in order to own
equity in a high-power DBS business.

That option is still open, but it seems more likely that
UVSG will seek a marketing deal with a DBS provider to migrate C-band customers who opt to
switch, executives said. UVSG discussed such alliances with PrimeStar and DirecTv before
opting to sell the C-band business to PrimeStar.

Eventually, C-band dish owners -- most of whom bought their
equipment in the past five years -- will come to a point where they have to fix or replace
their dishes, UVSG officials said. There are about 175,000 fewer C-band programming
subscribers nationwide than a year ago, while DBS is growing strongly.

In the third quarter, UVSG's consolidated revenue rose
22 percent, to $154 million, or about a $615 million annualized business. When UVSG
completes its pending $2 billion buyout of News Corp.'s TV Guide assets, the
size of the company will roughly double, because TV Guide is about a $650 million
(annual revenue) business.

The TV Guide deal is expected to close by the end of
the year or in early January.

Cash flow in the quarter rose 33 percent, to $36.3 million,
and net income rose 22 percent, to $14.5 million, or 22 cents per share of stock. Other
than Superstar, double-digit cash-flow gains were recorded at UVSG's Prevue Networks
Inc. and UVTV units.

Prevue's cash flow rose 34 percent, to $7.5 million
from $5.6 million, and the unit's revenue rose 27 percent, to $19.8 million from
$15.6 million.

Excluding expenses related to UVSG's failed $2.8
billion hostile takeover of Gemstar International Group Ltd., Prevue's cash-flow rise
would have been about 41 percent, Boylan told analysts.

UVSG is preparing to rebrand various Prevue products --
including the analog version of The Prevue Channel -- with TV Guide names. The new
products are scheduled to be shown to cable operators at the Western Show in December,
with launches or relaunches in February or March, Boylan said.

Prevue Interactive, the company's electronic program
guide, is in about 1.1 million digital set-top devices, UVSG said. The third quarter was
the first in which Prevue reported revenue ($1.3 million) from that product.

UVSG's stock, which sold in the low $20s as recently
as July, has traded mostly in the $11 to $13 range lately. Because of that, UVSG has been
buying back stock, except for a period before and after the earnings announcement, Boylan
said. With the stock at current levels, UVSG will continue to buy back shares
aggressively, he added.

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