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MURDOCH, IN DEFEAT, SELLS SATELLITE ASSETS TO NEW PRIMESTAR

It appears that Rupert Murdoch’s dreams of becoming a major player in the US satellite television market have finally gone up in flames. Only a month after News Corp’s proposed $1bn acquisition of a 50% stake in EchoStar Communications Corp collapsed (CI No 3,158), it is handing over the satellite assets it owns with American Sky Broadcasting partner MCI Corp for non- voting equity in a new corporation announced by Primestar Partners LP. The assets include one of only three licensed slots, or orbital positions, currently capable of beaming programs across the US. As a result of the sale, News Corp says it will now refocus its energies and resources in the US on its core content and programming businesses. Primestar, the second largest provider of direct broadcast satellite television in the US, will restructure itself into a new corporation that will include the ASkyB assets. The new company, called Primestar Inc, will be formed from the interests and 1.8 million subscribers of the partners in Primestar – TCI Satellite Entertainment Inc, Time Warner Inc, Cox Communications Inc, Comcast Corp, US West Media Group Inc and General Electric Co’s GE Americom unit. TCI, with 37%, and Time Warner, with 30%, will be the majority owners of the new entity. The transaction is subject to approval by the Federal Communications Commission, The Securities and Exchange Commission and the US Department of Justice, as well as shareholders, but Primestar hopes to close the deal by the fourth quarter of this year. The FCC, for its part, issued a statement saying that it would closely scrutinize the deal to determine what impact it might have on the market for multi-channel video services nationwide. As first hinted in May (CI No 3,169), News Corp and MCI will hand over their assets, which consist of two satellites under construction and the direct broadcasting license, in return for $1.1bn worth of non-voting Primestar securities. The package will consist of $600m of convertible preferred shares and $500m convertible subordinated notes. News Corp currently owns 80% of the ASkyB assets. According to Primestar, News Corp will have no involvement in the new company and the deal contains no special agreements on additional News Corp programming being added to the Primestar service.

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