Satellite-TV Deal Faces Hurdle

After almost eight months of investigation, the Justice Department is preparing to challenge a plan by Rupert Murdoch’s News Corp. and MCI Communications Corp. to merge their U.S. satellite-TV operations with Primestar Partners, the nation’s second-largest satellite-TV company, sources familiar with the inquiry say. The department’s telecommunications staff will recommend soon that the merger be blocked outright or substantially modified, according to the sources.

Although such a recommendation doesn’t guarantee that the government will sue to stop Murdoch-MCI and Primestar, it reflects deep-seated concerns by staff experts about the pending $1.1-billion deal.

As Primestar is partly owned by four large cable TV companies, Justice officials are worried that Primestar will use the powerful Murdoch-MCI satellite operations to harm competing satellite-TV companies and preserve the cable industry’s market dominance.

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The long-rumored downsizing of Capitol EMI Properties, a free-standing catalog division opened two years ago by the EMI Group, could be announced as early as this morning, sources said. The division is likely to be folded into EMI’s Capitol and Virgin sectors over the next six months, which is expected to result in some staff cuts, sources said.--CHUCK PHILIPS