News Corp: Murdoch abandons US satellite ambitions
THURSDAY JUNE 12 1997
------------------------------------------------------------------------ By
Christopher Parkes in Los Angeles
------------------------------------------------------------------------ Mr Rupert
Murdoch has abandoned his bid to compete in the fast-growing US satellite television
industry and agreed to sell his fledgling ASkyB operation to his avowed enemies in the
cable business.
The surprise retreat marks a setback for his News Corporation media group, which
pioneered satellite broadcasting in the UK and has interests in similar projects in Japan
and Latin America.
It follows the collapse last month of a deal to merge ASkyB into EchoStar, the US
satellite television provider, which has since prompted a $5bn breach of contract
lawsuit against News Corp.
In return for its two high-power satellites and a federal licence purchased last year for a
record $682m, News Corp will take a non-voting 30 per cent stake, valued at $1.1bn,
in PrimeStar, the second-biggest US satellite operator. News Corp said the deal was
worth the equivalent of its investment in ASkyB so far plus interest.
PrimeStar, a limited partnership run by a consortium of cable operators, including
Tele-Communications (TCI), Time Warner, US West and Cox Communications, will
transform itself into a publicly quoted company.
News Corp said the move was a "step back" which took it out of the satellite operating
business.
PrimeStar had agreed, as part of yesterday's deal, to transmit News Corp's Fox
Sports and Fox News networks, it added.
News Corp was also expected to announce a $1.7bn deal yesterday to extend its
programming range with the acquisition of the International Family Entertainment cable
programming company which owns The Family Channel, the ninth most-watched
service in the US, and a keep-fit channel.
News Corp's retreat from satellite operations seems to leave the way clear for
PrimeStar to challenge DirecTV, the leading US satellite broadcaster which is owned
by Hughes Electronics, part of General Motors.
Yesterday's transactions will further darken the prospects for EchoStar, the
fourth-largest US direct satellite broadcaster. It is now looking for financial backing
and a new strategic partner to replace News Corp.
EchoStar's proposed link with the Murdoch empire shook the US television industry
with its ambitious plan to beam up to 500 channels providing entertainment, data and
business services across the US. The project quickly became known as "death star"
because of its implications for cable providers, which offer an average of 40 channels.
Subject to regulatory approval, the disposal and restructuring of PrimeStar are
expected to be completed in the fourth quarter of this year.
TCI, the country's biggest cable operator, will hold a 38 per cent voting stake in the
new quoted company.
News Corp
PrimeStar
News Corp
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