Denver -- PrimeStar Inc.'s five partners have
reached a consensus, agreeing to cut down their ownership stakes -- or to sell out
completely -- if that's what it takes to appease the Department of Justice, PrimeStar
president and chief operating officer Dan O'Brien said.
PrimeStar filed legal comments last Tuesday in response to
last month's antitrust suit by the DOJ.
If PrimeStar cannot negotiate a settlement with the DOJ, it
will have to go to court for any chance at gaining access to American Sky Broadcasting
Inc.'s 28 high-power direct-broadcast satellite transponders at 110 degrees west
longitude.
The DOJ is seeking to block PrimeStar's proposed
merger with ASkyB, the DBS arm of News Corp. and MCI Communications Corp., citing
anti-competition concerns.
Speaking at the DBS Summit here, O'Brien said one of
the difficulties in negotiating an out-of-court settlement is that "you don't
get a specific road map from the DOJ." He added that PrimeStar has been working for
the past few weeks to find strategic and financial partners for a high-power DBS business.
There's plenty of speculation about just how large a
stake PrimeStar's cable owners would be able to retain. Some estimated that cable may
be able to keep as much as one-third of the company, or even 49 percent, and still be
considered a minority holder.
But others saw it differently. For EchoStar Communications
Corp., even 5 percent ownership would give the cable industry too much influence over the
DBS assets at 110, senior vice president and general counsel David Moskowitz said last
week.
O'Brien said at the conference that it's not
likely that an investor will come in and buy 80 percent or more of the PrimeStar business
because the $2 billion-plus financial commitment is so high. Even if cable held onto a
stake higher than 20 percent, he said, the supervoting interests could shift to the
noncable owners, and PrimeStar's cable partners could sell down their ownership over
time.
The fact that PrimeStar will bring new partners into the
fold is not in dispute, O'Brien said, but the details have not yet been worked out.
"We've been fairly gratified with the level of
interest among investors," O'Brien said. The risk to potential investors is
relatively low, he added, "because they're only buying in if we're
successful" in gaining access at 110. "We don't need a partner as a
medium-power business."
O'Brien does not think that possible delays in getting
a definitive answer from the DOJ should hurt PrimeStar's ability to negotiate with
potential investors, since "there's nobody else out there that wants to be in
high-power and doesn't already have an infrastructure in place."
PrimeStar needs more than a DOJ blessing, however, for the
ASkyB transaction to move forward. According to Tom Boasberg, chief counsel of the Federal
Communications Commission's International Bureau, it's up to those two companies
to convince the FCC that such a merger is in the public interest and that it is
pro-competitive.
Ted Henderson, research director at Janco Partners,
predicted that PrimeStar would ultimately gain access to the slots at 110.
"I expect cable ownership to get knocked down,"
he said, "and I would expect that within the next quarter, we will have some finality
to this."
