Arena-Sale Woes Could Crush Liberty Deal

Liberty Media Group's deal to purchase pay-per-view
service provider Ascent Entertainment Group Inc. could be in jeopardy due to problems
surrounding the proposed sale of the Pepsi Center sports arena to a Denver-area

Liberty agreed late last month to buy Ascent, which
provides PPV services to the hospitality industry, in a stock swap valued at $514 million.

Liberty would buy Ascent's On Command Corp., which
owns SpectraVision, another big hotel-PPV brand. On Command reaches about 1 million hotel
rooms across the country, including those in major chains such as Marriott International
and Four Seasons.

Ascent also provides satellite service and maintenance to
the NBC television network in connection with its distribution of the network's
national television feed to its local affiliates.

The sale was contingent on Ascent completing a side deal to
sell its sports teams -- the National Hockey League's Colorado Avalanche and the
National Basketball Association's Denver Nuggets -- and the Pepsi Center, where both
teams play, to Denver billionaire Donald Sturm for $461 million.

The deal appeared headed to meet a Nov. 10 closing
deadline, but it missed after Sturm hedged on a commitment to the city to keep the teams
in Denver for at least 25 years. That stipulation stemmed from a tax break the city agreed
to give Ascent when it began building the arena in 1997. The Pepsi Center opened in

Because Sturm is an individual and not a corporation, the
city wanted some guarantee that the 67-year-old businessman's heirs would agree to
that stipulation in the event of his death. So far, Sturm has refused to do that.

Sturm had sent a letter to the city requesting that the
negotiations restart, imposing a 10 a.m. Nov. 18 deadline for a response. However, as of
press time, that deadline had passed with no resolution.

"It looks like there is not going to be a deal,"
said Andrew Hudson, a spokesman for Denver Mayor Wellington Webb.

And without a stadium deal, it appears that the Liberty
deal is off, too. Although it is possible that Liberty could step in and buy the teams and
the stadium, it is highly unlikely.

"Clearly, Liberty was looking at this as a stake in On
Command," Janco Partners senior research analyst Ted Henderson said. "They went
after Ascent after the sports deal was announced. I don't think Liberty is interested
in taking Ascent, disposing of the sports teams themselves and taking on the On Command
assets. This creates an impediment to the deal."

Liberty spokeswoman Vivian Carr said the On Command deal is
still up in the air, adding that Liberty has agreed to continue negotiations with Ascent
through Nov. 30.

Ascent spokesman Charles Russell said the Liberty deal is
linked to the sale of the sports teams and the arena, but so far, neither deal has been

"There is a technical contract linkage," Russell
said. "Liberty's contract with Ascent assumes that Ascent has sold its sports
assets. There is no cancellation of the Liberty deal. We will have to wait and see."

Russell added that the Sturm deal is currently in limbo.
"[The Sturm deal] is neither on nor off," Russell said. "The deadline has
expired and, technically, Sturm is out of contract. Both parties have the right to
terminate. Neither party has exercised that right at this time."

Sturm had extended his 10 a.m. deadline to 4 p.m. that same
day. However, the city has been reluctant to negotiate because it has not received any
guarantees that Sturm still has a contract with Ascent, and because it took offense at
Sturm's ultimatum.

According to published reports, although the city and Sturm
are technically still in negotiations, the city is leaning toward another group of
investors, The Borgen Group, which previously lost a bid for the sports assets.

The Borgen Group -- which included former Denver Broncos
quarterback John Elway -- is still interested in the teams and the arena, but it does not
want to get involved in the Sturm dispute, according to an article in the Nov. 21 issue of
TheDenver Post.

Sturm, a billionaire Denver banker and telecommunications
investor, won the bidding for the teams in April, following an earlier bid of $400 million
by Bill and Nancy Laurie, which was scrapped after Ascent shareholders sued because they
thought the offer was too low.

Bill Laurie is a well-known horse breeder whose 200-acre
Crown Center Farms in Columbia, Mo., produces national and world champions. His wife is
the daughter of Wal-Mart Stores Inc. cofounder James Walton and the niece of retailing
icon Sam Walton.

And though the city claimed that it is just trying to
assure that the sports teams don't leave the area, Sturm's attorney said in an
article in TheDenver Post that it would make no sense for Sturm to sell the
teams to an outsider if he owns the arena.

Despite the uncertainty surrounding the Ascent deal,
Liberty turned in another record quarter for the period ended Sept. 30, with cash flow up
13 percent to $90 million on revenue of $789 million (up 19 percent).

Liberty's results reflected the performance of its
nonpublic assets, including Encore Media Group LLC, Discovery Communications Inc.,
shopping channel QVC Inc. and Liberty International.

Liberty's operating loss for the third quarter ended
Sept. 30 was $217 million, compared with a profit of $1.3 billion last year. However,
third-quarter-1998 earnings included a $2.3 billion gain on an asset sale.

Sales at shopping channel QVC, of which Liberty owns 42.6
percent, were $667 million in the quarter, up 16 percent from $574 million a year earlier.
Liberty said the increase was primarily due to the rise in the average number of homes
receiving the shopping network in the United States, the United Kingdom and Germany.

At DCI, of which Liberty owns a 49.3 percent stake, revenue
climbed to $314 million from $246 million a year ago. DCI's cash-flow deficit was up
slightly to $10 million from $8 million in 1998.

At Encore, revenue was up 16 percent to $161 million from
$139 million in the year-ago period. Cash flow at the premium service was $40 million, up
33 percent from $30 million a year ago.