NEW YORK (AP) - Rupert Murdoch has finally found a new partner in the satellite TV business: Primestar.
Murdoch's News Corp. has agreed to fold its nascent satellite operation, ASkyB, into Primestar as part of restructuring of the satellite partnership into a publicly traded company.
The deal, announced today, ends considerable speculation about both Murdoch's satellite business and Primestar, which has 1.8 million subscribers.
The combination of ASkyB, also known as American Sky Broadcasting, and Primestar gives Murdoch a way to expand his global satellite empire. His previous try - a proposed deal to combine with EchoStar Communications - collapsed in February.
For Primestar, the merger will help it to move ahead with its advance into pizza-sized high-powered satellite dishes. Primestar made its initial mark with larger, medium-powered dishes.
``From a consumer point of view, subscribers will be guaranteed nationwide competitive choices in services, pricing and programming, with greater ease of access,'' said James L. Gray, chairman and chief executive of Primestar Partners. He will hold the same title in the new company, to be called Primestar Inc.
The largest shareholder of Primestar Inc. will be TCI Satellite Entertainment, a publicly traded spinoff of Tele-Communications Inc. Murdoch will receive nonvoting stock and convertible bonds worth $1.1 billion.
The direct-broadcast satellite television business is something of a wild frontier in telecommunications. It poses the greatest direct threat yet to cable television as it can provide a multitude of channels and crystal-clear picture and sound quality.
Primestar, the emerging industry's No. 2 player behind DirecTV, by merging with ASkyB takes a major step in a consolidation of the industry analysts have expected.
Deeper pockets and combined resources may be necessary to compete with the entrenched cable companies. While the satellite industry has only about 5 million subscribers, cable stands at about 65 million.
The ASkyB-Primestar deal makes cable a winner both ways, since the big cable companies are Primestar's largest owners.
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