Communications Satellite Corp. said yesterday it had reached preliminary agreement to join with Prudential Insurance Co. of America and the principal owners of United Press International in a satellite television broadcasting venture.
Under the terms of the agreement, which is subject to final approval, United Satellite Communications Inc., a direct-satellite-broadcast company primarily owned by Prudential, would be folded into Comsat's Satellite Television Corp., a direct-broadcast subsidiary. The two companies had long been rivals.
Comsat will initially own about half of the partnership. UPI and Prudential will split the majority remaining share, while shareholders of United Satellite other than Prudential also would hold a minority interest. Comsat is still seeking additional partners for the venture.
The New York-based United Satellite Communications Inc. was the first of the so-called direct-broadcast companies to beam programs into homes equipped with special satellite antennae. The company was known to be having financial difficulties and Prudential did not want to continue funding it.
At the same time, Comsat said earlier this year it would not continue to support Satellite Television Corp., its subsidiary formed in 1980, without additional partners. CBS Inc., after six months of discussions, declined to pursue a joint venture with Comsat in STC.
While direct-satellite broadcasting has been seen as a way to provide television service to both urban and remote areas not normally reached by cable television signals, many companies have recently dropped plans to enter the market because of problems with servicing the equipment and uncertain market potential. Satellite Television Corp., for example, has yet to beam programming into homes.
United Press International majority owners Douglas F. Ruhe and William E. Geissler view their entry into direct satellite broadcasting as a way to diversify UPI, which has been trying to resolve severe financial difficulties. Ruhe said the new venture is not connected with UPI itself, but added, "It is our hope that the benefits of direct-broadcast satellites can help provide UPI access to a low-cost, high-volume data delivery system to reach businesses and other potential new customers."
The satellite television broadcasting technology also can be used to broadcast data to firms following various industries or topics.
"The traditional newspaper and broadcast markets historically have not provided enough margin to make UPI profitable, but this kind of venture could provide a means for UPI to reach new subscribers in new markets," Ruhe said.
Ruhe said he and Geissler intend to set aside 6.5 percent of their interest in the new satellite venture for UPI employes. UPI recently allocated 6.5 percent of its stock to employes in exchange for a temporary salary reduction and elimination of 200 jobs in a bid to save the financially struggling wire service.
At the same time, Comsat said Satellite Television Corp. will benefit from the merger. "We're delighted that we will now be able to work with USCI, which has had unique operating experience and a base of strong talent that will benefit the partnership, assuming that the agreements are finalized," said a Comsat spokesman. United Satellite will bring a servicing contract with Radio Shack, a customer base, and programming to STC.
Comsat had long been a critic of USCI's business plan in which the company leased space on lower-powered satellites and sold larger satellite antennae than Comsat had proposed. Comsat had thought smaller, easier-to-install antennae would be more readily accepted in a suburban market.