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Technology Stocks : Primestar/TCI Satellite (TSATA)
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To: EPS who wrote (123)10/23/1998 2:11:00 PM
From: JDCFA  Read Replies (1) of 442
 
Fear of legal and most importantly political backlash will prohibit Cable owners from walking away.

Valuation parameters:
Value of Sub. at dish and gmh = $2000.00
minus conversion cost of $350.00
equals $1,650.00
50% lost subscriber allowance
equals Primestar value
$825.00/sub.
less debt per sub $522.00
equals $303.00 per sub for equity holders
= approx. $3.33/sh.

Obviously, a lower loss allowance will significantly raise the price.

Primestar and Murdoch parted ways in order to evaluate other possibilities. Formally ending their deal was the only way to accomplish this.

1- ASkyB has 3 options. going back to Primestar, selling to Dish or selling to Directv. Primary issues in a deal will be cash vs. control. Murdoch prefers as much control as possible, but he doesn't want to pony up any $$.

2-Primestar has Dish and Directv as well as consumer product companies like Sony, Networks such as NBC, Future generation tv players like MSFT etc. In the end cable will only sell at a good price. Why sell a potentially valuable asset to your competition at bargain basement? Cable started this company as a technology hedge. That benefit still remains, despite digital cable. Remember the cost to upgrade to digital. It's huge, and in a recessionary env., satellite could help them enter new markets at a lower cost.

Once again, stay tuned. An I banker close to the company tells me BIG media players are buying down here. See Value!!
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