Shares in Pegasus Communications jumped more than $9 Tuesday to $106.63 after news the company will buy Golden Sky Holdings, the second largest independent provider of DirecTV in territories operated by the National Rural Telecommunications Cooperative (NRTC). Pegasus, already the NRTC's Big Kahuna and one of its original affiliates, signed a purchase agreement for approximately $1 billion. Pegasus will issue 6.5 million shares of its Class A common stock, roughly valued at $632 million, to Golden Sky shareholders and assume approximately $373 million of Golden Sky's debt and liabilities. Pegasus said that as of Dec. 31 it had 702,081 subscribers. Golden Sky serves 345,200 subscribers and has exclusive rights to approximately 1.86 million households. The purchase deal will make Pegasus the third largest DBS provider in the United States and the 8th largest multichannel provider, including satellite and cable. The NRTC declined to comment on this "business decision" between its two biggest affiliates. The organization's major involvement, said NRTC spokesman Harry Thibedeau, will entail negotiating the transfer of DBS distribution contracts from Golden Sky to Pegasus. News of the Golden Sky sale caused satellite industry analyst William Kidd with C.E. Unterberg Towbin to upgrade Pegasus' stock to Buy from Neutral and establish a year-end 2000 price target of $130. "The acquisition of Golden Sky is a positive because Pegasus' consolidation of the NRTC makes it easier for Hughes to ultimately bid for Pegasus," he said. "Hughes would surely rather deal with one major entity, such as Pegasus, than a loose confederation of NRTC affiliates." Before that happens, however, a bigger, more powerful Pegasus will have substantial leveraging power in the DBS business. That could impact an ongoing legal dispute between DirecTV and the NRTC regarding distribution rights of premium movie channels previously owned by U.S. Satellite Broadcasting, which was bought by DirecTV. Moreover, Pegasus and Golden Sky have filed a new class action lawsuit against DirecTV and parent company Hughes Communications. Pegasus President and CEO Marshall Pagon said, "This suit was filed because DirecTV is in violation of a number of aspects of its obligations to the NRTC, and by extension, Pegasus." In a final, related deal announced Tuesday, Pegasus plans to sell its cable television asset in Puerto Rico to New Jersey-based Centennial Cellular for $170 million. Centennial already operates wireless PC, Internet and telephone services on the island.

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Pegasus Adds a Piece of PMC

In a little noticed, but nonetheless important, piece of its acquisitions/sale-annoucement frenzy Tuesday, Pegasus Communications revealed it has obtained an exclusive license from Personalized Media Communications, LLC. The license covers patented PMC technologies relating to DBS transmission and receipt. While the patent news may seem a footnote to the Bala Cynwyd, Pa.,-based company's acquisition of Golden Sky, the exclusive license could considerably strengthen the company's position in its current battle against DBS major domo, DirecTV. For those who have missed a page or two in this saga: PMC holds patents dating back to the 1980s for several key areas of DBS operation. In a series of court actions, PMC has alleged that technology used by DirecTV and several of its manufacturers infringes on PMC patents. While the lawsuits petered out in more or less of a draw, they could be revived – and the exclusive license now held by Pegasus leaves that company in a position to challenge some of the systems at the heart of DirecTV's technology. Why does this matter? Because Pegasus, along with soon-to-be-acquired Golden Sky, has filed a class action lawsuit against DirecTV and Hughes Communications Galaxy. The suit alleges "intentional interference in with contractural relations" and "interference with prospective economic advantage." What does this have to do with patents? Absolutely nothing. Unless, of course, you consider the threat of another patent lawsuit as a potential weapon in the continuing skirmishes. For the record: The Pegasus/PMC transaction calls for Pegasus to make an investment in PMC consisting of $14.25 million in cash, 200,000 shares of Class A common stocks, and warrants to purchase one million additional shares of Class A common stock. The investment gives Pegasus a Class B ownership interest in PMC, which is controlled by well known satellite mavens, John Harvey and Kazie Metzger.

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Hughes Sat Division Up For Sale?

Hughes Electronics may announce today that it plans to sell its satellite manufacturing business to Boeing, Bloomberg reported late Tuesday night. No price was attached to the sale. The El Segundo, Calif.,-based division is forecasted by analysts to have 1999 sales of almost $2.3 billion. Spokespersons for Boeing and Hughes declined comment to Bloomberg. Any move to sell the satellite manufacturing arm may help Hughes with the service side of its business, including its quickly-growing DirecTV unit.

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Sirius Satellite Launch On Horizon

The launch of Sirius Satellite's first bird could occur before the close of the first quarter. The cause of launch failures with Russia's Proton rocket, the vehicle slated to lift the first Sirius satellite into orbit, was discovered recently by engineers. A review board is expected to "rubber stamp" the Proton back into service shortly. Launches should resume in February. If Sirius Satellite's bird doesn't go up in late February, the flight could take place in early March, sources said. The launch of two other birds could take place in late March and May. Sirius' first satellite also is being prepared for shipment to the Proton launch site this week. The original launch date for the first satellite was Jan. 17. That date was postponed due to the problems with the Proton rocket program. However, the delay doesn't jeopardize Sirius' projected year-end commercial service start, analysts said. Meanwhile, Sirius' ticker symbol will make the switch from "CDRD," lettering tied to the company's former CD Radio name, to "SIRI" today. The SIRI stock trades on NASDAQ.

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DirecTV Scores Deal With LodgeNet

LodgeNet Entertainment entered into a multi-year agreement with DirecTV that will bring programming to more than 3,700 hotels and 400,000 rooms currently subscribing to LodgeNet's video service. LodgeNet was supplying its hotel clients with PrimeStar. DirecTV purchased the medium-power service last year. DirecTV has a similar deal with On Command Entertainment, another provider of hotel TV programming and entertainment. "Further increasing our presence in the lodging industry is extremely important to DirecTV's ultimate goal of becoming America's premium television entertainment service," Helen Latimer, vice president of special markets for DirecTV, said. "LodgeNet provides the ideal vehicle for expanding our distribution into this important market segment."

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COMP WATCH: Cable Group Contacts FCC