First USSB, now PrimeStar

Late last week, Hughes Electronics announced that it had reached an agreement with PrimeStar to acquire the 2.3-million-subscriber PrimeStar direct broadcast satellite (DBS) medium-power business and Tempo high-power satellite asset in two transactions valued at approximately $1.82 billion. The combination of DirecTV and PrimeStar---along with United States Satellite Broadcasting (USSB), the multichannel movie service that agreed to merge with Hughes last month ($1.3 billion in cash and stock)---makes DirecTV one of the top three television subscriber services in the US.

On completion of these transactions, DirecTV will have more than 7 million US subscribers, over 370 entertainment channels delivered via five high-power DBS spacecraft, and high-power DBS frequencies at each of the three orbital slots that provide full coverage of the continental US. Echostar Communications, with around 2 million customers, is now DirecTV's only DBS competitor.

According to Michael T. Smith, chairman and chief executive officer of Hughes Electronics, "We were the first to introduce high-power DBS service nearly five years ago, and our pending transactions with USSB, and now PrimeStar, will extend DirecTV's market leadership. With the addition of the Tempo high-power satellite assets, DirecTV is well positioned to capitalize on such emerging consumer services as high-definition television, data-enhanced broadcasting, and other interactive services."

PrimeStar currently operates a 160-channel medium-power service using leased satellite capacity. DirecTV says it will operate the medium-power PrimeStar business for a period of approximately two years, during which time it will transfer PrimeStar subscribers to the high-power DirecTV service. According to Hughes, PrimeStar's distribution network will continue servicing PrimeStar subscribers during this transition period, and it will begin to offer the DirecTV system to new subscribers.