LLC To Install DigiCipher II/MPEG-2 System
General Instrument Corporation announced recently that South Florida Transponder Services, LLC, a joint venture between GEMS International Television and Hero Productions, both headquartered in South Florida, has purchased GI's DigiCipher II/MPEG-2 digital television system.

GI will deliver a six channel MPEG-2 based video compression system to the joint ventures' "compression condominium" which allows programmers to cost-effectively utilize space segment with multiple channels by sharing a single encoder. As part of the system, GI will also provide its Network Control System that will allow individual programmers to control their affiliate base.

According to W. Gary McBride, President and CEO of GEMS International Television, "The GI DigiCipher II / MPEG-2 digital television system allows us to add a new dimension to program delivery. This new technology will result in our being able to offer programmers a cost effective and immediate way to expand into the US Hispanic market."

President and CEO of Hero Productions, Robert Behar, agrees. Behar added, "The Hispanic market in the USA offers programmers significant opportunity to extend the reach of their programming content. Two major programmers have already committed to using our compression condominium. Htv, a new 24-hr. Latin dance music channel, and GEMS are offering variety programming targeted to today's contemporary Hispanic woman and her family."

Another Warrant Deemed Invalid

According to recent reports, charges against Bill Mitton, a Moncton, New Brunswick, business owner and president of Satellite Services and Programming, have been dropped. He was charged with violations of Section 9 of the RadioCommunications Act back in June when the Royal Canadian Mounted Police (RCMP) raided his business and seized equipment and records. In October, a judge deemed the warrants invalid and ordered the RCMP to return items seized in the raid. This is the second time in recent months that a judge has dismissed charges due to illegal search and seizure procedures by the RCMP. Ron King of King TV and Satellite Inc. in Sussex, was the first to have a judge declare the search warrants illegal. Both claim that they cannot be found guilty of breaking a law that is not in effect, referring to the total absence of any Canadian DTH licensed service.

One source told us that Mr. Mitton is scheduled to go to court on Feb. 22 to face charges of selling to an undercover agent. If convicted he could face approximately $2,000 in fines.

Mexican/U.S. Agreement Awaiting Finalization

According to reports, The U.S. Department of Justice is requesting the Mexican DTH operators pass the so-called Eco-Sat test, a test which Mexico's communications ministry wants dropped. Mexican satellite operators would need to prove that Mexico is open to satellite competition from the U.S. This, among other issues, have caused a delay in finalizing agreement between the two countries.

World's Smallest Antenna

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A New Niche To PPV Boxing Events?

During the recent Nov. 9 Tyson-Holyfield fight, one company, Cablevision Systems Corp., offered its customers a deal they couldn't refuse. $9.95 per round! Cablevision has received different views on their strategy, some praise Cablevision for their attempt to boost their PPV subscriber base due to the last Tyson fight that lasted only minutes into the first round. Some are concerned over the effect it may cause on future PPV boxing events. By offering a main event on a per round basis, it marks the undercard fights as worthless. Granted, most big fights recently had poor undercard fights scheduled with them, but the Tyson-Holyfield had two heavyweight fights as well as the female boxer fight with Christie Martin. According to reports, plans are being worked out to avoid this price structure from happening again.

GI Announces New VP of Sales

On Oct. 29 General Instruments Corporation announced the appointment of D. Douglas Means as Vice President of Consumer Satellite Sales for the GI Communications Division, Western Operations.

In his new position, Means will be responsible for the sales and distribution of GI consumer satellite products, including GI's new 4DTV Digital C-band receivers, as well as DTH satellite receivers. He will be responsible for developing a new sales force and distribution channels, a well as the operators of GI's C-band services business which includes the Satellite Video Center, a reseller of PPV movies and special events.

GI's Third Quarter Report

General Instruments released their Quarterly report for the third quarter recently. According to the report (dollars in millions), Net sales for the third quarter, which ended 9/30/96, were $662, an increase of $99 or 18% over the same period last year. The nine month period, which ended at the same time, indicated an increase of $169, or 10% over last year during the same nine month period. The increase in net sales relate to higher sales in the Broadband Communications segment.

Gross sales (net sales less cost of sales)increased $13 or 7% in the Third Quarter 1996 from $179 in 1995. Gross profit decreased $14 or 3% to $551. The decrease in gross profit margin resulted from a shift in product mix from higher margin VideoCipher RS (tm) analog satellite receiver consumer modules to the Company's new advanced analog and digital television system products.

Working capital, at the end of the quarter was $504 compared to $362 in 1995. The working capital increase of $142 was due primarily to inventory build-up to support business growth and the introduction of new products. Based on current levels of order input and backlog, as well as significant sales agreements not yet reflected in order and backlog level, the company believes that working capital levels are appropriate to support future operations. There can be no assurance, however, that future industry specific developments or general economic trends will not alter the working capital requirements.

Borrowings of $337 under its revolving credit facilities, and available credit of $310 under these facilities were reported in this third quarter. In Aug. 1996, the company amended and restated the senior bank credit agreement of GI Delaware to lower its interest costs and commitment feeds, increase available credit commitments and obtain greater operating flexibility with less restrictive financial and operating covenants. The Credit Agreement provides for a $650 unsecured Revolving Credit Facility and matures on Dec. 31, 2001. As of Sept. 30, 1996, company was in compliance with all financial and operating covenants.

At Sept. 30, 1996, the Company had $43 of cash and cash equivalents on hand compared to $36 at Dec. 31, 1995. At Sept. 30, 1996, long-term debt, including current maturities, was $629 compared to $743 at Dec. 31, 995. In 1996, the company strengthened its balance sheet and enhanced its financial flexibility through the conversion of $260 million of its 5% Convertible Junior Subordinated Notes into Common Stock.

The Company's principal sources of liquidity are cash flow provided by operations and borrowings under its revolving credit facilities. The Company believes that, based upon its analysis of its consolidated financial position, its cash flow during the past 12 months and the expected results of operations in the future, operating cashflow and available funding under its revolving credit facilities will be adequate.