Skip to main content

NRTC Settlement Hammers Pegasus

In an action that ended up pummeling Pegasus Communications Corp. shares
Monday, DirecTV Inc. and the National Rural Telecommunications Cooperative
dismissed claims against each other in a federal court in California.

They agreed to settle without paying each other monetary damages, and the
NRTC’s agreement to distribute DirecTV programming ends when the DBS-1 satellite
ends its useful life, or June 2008, whichever is later.

The NRTC and member companies that join the settlement will be guaranteed a
successor agreement through June 30, 2011. After that, customers revert to
DirecTV, which agreed to pay current service providers $150 for each customer
transitioned.

This doesn’t resolve related litigation between DirecTV and Pegasus, which
resells DirecTV service in NRTC territories.

After watching its stock plunge Monday, Pegasus said in a statement that it
would "evaluate the proposed settlement and all other alternatives."

The terms -- particularly the $150-per-subscriber price tag -- prompted
analyst downgrades of Pegasus, and in 4 p.m. EST trading on the NASDAQ exchange,
the company lost 37% off its share price, falling to $23.10, down $13.80.

DirecTV would retain the right to sell premium services in NRTC territories.
The NRTC would bill and collect for these services and collect a share of
10%-15% of the revenue through June 2011.

The settlement won’t be final until after the U.S. District Court for the
Central District of California reviews it for fairness within the next 45-60
days.