<PAGE>
 
                                                                   Exhibit 10.6
                                                                   ------------

                       TCI SATELLITE ENTERTAINMENT, INC.


                    Option to Purchase Series A Common Stock


     THIS AGREEMENT ("Agreement") is made as of the 4th day of December, 1996, 
                                                    ---
by and between TCI SATELLITE ENTERTAINMENT, INC., a Delaware corporation (the
"Company"), and Gary S. Howard ("Grantee").

     Prior the date hereof the Company has been a subsidiary of Tele-
Communications, Inc., a Delaware corporation ("TCI"). The Company has adopted
the TCI Satellite Entertainment, Inc. 1996 Stock Incentive Plan (the "Plan"), a
copy of which is attached hereto as Exhibit A, for the benefit of eligible
employees of the Company and its Subsidiaries. The Plan is administered by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company (the "Board"), and is an integral part of this Agreement. 

     Pursuant to the Plan, the Committee has determined that it is in the best
interests of the Company to grant Grantee the rights and option set forth herein
in order to provide Grantee with additional remuneration for services rendered
to the Company and its predecessors, to encourage Grantee to remain in the
employ of the Company, and to provide additional incentive to Grantee by
increasing Grantee's proprietary interest in the continued success and progress
of the Company.

     Certain capitalized terms that are used herein are defined in paragraph 18
hereof.  Capitalized terms that are used but not defined herein shall have the
meaning ascribed thereto in the Plan.

     Accordingly, the Company and Grantee hereby agree as follows:

  1. Grant of Option; Option Term. The Company hereby grants to Grantee the
right and option (the "Option"), on the terms and subject to the conditions set
forth herein, to purchase the Option Shares from the Company for a price per
Option Share equal to the Option Price. Subject to paragraph 2 hereof, the
Option shall be exercisable in whole at any time and in part from time to time
during the period commencing on the date hereof and expiring at 5:00 p.m.,
Denver, Colorado time ("Close of Business") on the tenth anniversary of the
Determination Date, or such earlier date as the Option may be terminated
pursuant to paragraph 6 or paragraph 9(b) hereof (the "Option Term").

  2. Conditions of Exercise; Vesting. Except as otherwise provided in the last
sentence of this paragraph 2 or in paragraph 9(b), the Option shall not be
exercisable until the first anniversary of the Determination Date, and, from the
first anniversary of the Determination Date to the fifth anniversary of the
Determination Date, the Option shall be exercisable only to the extent the
Option Shares have become available for purchase in accordance with the
following schedule:
<PAGE>
 
        Anniversary of                       Percentage of Option Shares 
       Determination Date                      Available for Purchase
       ------------------                    ---------------------------
              1st                                        20%
              2nd                                        40%
              3rd                                        60%
              4th                                        80%
              5th                                       100%


     Notwithstanding the foregoing, all Option Shares shall become available for
purchase if during the Option Term (i) Grantee's employment with the Company and
its Subsidiaries shall terminate by reason of (x) termination by the Company or
any Subsidiary without Cause, (y) termination by Grantee for Good Reason or (z)
Disability, (ii) Grantee's employment shall terminate pursuant to provisions of
a written employment agreement, if any, between Grantee and the Company or any
Subsidiary which expressly permits Grantee to terminate such employment upon the
occurrence of specified events (other than the giving of notice and passage of
time) or (iii) Grantee dies while employed by the Company or a Subsidiary.

  3. Manner of Exercise. The Option may be exercised only by delivering to the
Company all of the following and shall be considered exercised (as to the number
of shares specified in the notice referred to in clause (a) below) on the later
of (i) the first business day on which the Company has received all of the
following deliveries and (ii) the date of exercise designated in the written
notice referred to in clause (a) below (or if such date is not a business day,
the first business day thereafter):

     (a)  written notice, in such form as the Committee may reasonably require,
  stating that Grantee is exercising the Option and setting forth the date of
  such exercise, the number of Option Shares to be purchased, the aggregate
  purchase price to be paid for such Option Shares in accordance with this
  Agreement and the manner in which such payment is being made;

     (b)  payment of the Option Price for each Option Share to be purchased upon
  such exercise, in cash or in such other form or combination of forms of
  payment contemplated by paragraph 10 hereof, together with payment of, or
  other provision acceptable to the Committee for, any and all withholding taxes
  required to be withheld by the Company upon such exercise, in accordance with
  paragraph 4 hereof; and

     (c)  any other documentation that the Committee may reasonably require
  (including, without limitation, proof satisfactory to the Committee that the
  Option is then exercisable for the number of Option Shares set forth in such
  notice).

  4. Withholding for Taxes. It shall be a condition precedent to any exercise of
the Option that Grantee make provision acceptable to the Company for the payment
or withholding of

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<PAGE>
 
any and all federal, state and local taxes required to be withheld by the
Company to satisfy the tax liability associated with such exercise, as
determined by the Board.

  5. Delivery by the Company. As soon as practicable after receipt of all the
items required by paragraph 3 hereof with respect to any exercise of the Option,
and subject to the withholding referred to in paragraph 4 hereof, the Company
shall deliver or cause to be delivered to Grantee certificates issued in
Grantee's name for the number of whole Option Shares purchased upon such
exercise. If delivery is by mail, delivery of Option Shares shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to Grantee, and
any cash payment (for fractional shares or otherwise) shall be deemed effected
when a Company check, payable to Grantee and in an amount equal to the amount of
the cash payment, shall have been deposited in the United States mail, addressed
to Grantee, in each case in accordance with Section 12.

  6. Early Termination of Option. Unless otherwise determined by the Committee
in its sole discretion, the Option shall terminate, prior to the expiration of
the ten-year period provided for in paragraph 1 hereof, as follows:

     (a)  If Grantee's employment with the Company and its Subsidiaries
  terminates other than (i) by Grantee with Good Reason, (ii) by reason of
  Grantee's death or Disability, (iii) with the written consent of the Company
  or the applicable Subsidiary, (iv) without such consent if such termination is
  pursuant to provisions of a written employment agreement, if any, between
  Grantee and the Company or the applicable Subsidiary which expressly permits
  Grantee to terminate such employment upon the occurrence of specified events
  (other than the giving of notice and passage of time), or (v) by the Company
  with or without Cause, then the Option shall terminate at the Close of
  Business on the first business day following the expiration of the 90-day
  period beginning on the date of termination of Grantee's employment;

     (b)  If Grantee dies while employed by the Company or one of its
  Subsidiaries, or prior to the expiration of a relevant period of time during
  which the Option remains exercisable as provided in this paragraph 6, the
  Option shall terminate at the Close of Business on the first business day
  following the expiration of the one-year period beginning on the date of
  death;

     (c)  If Grantee's employment with the Company and its Subsidiaries
  terminates by reason of Disability, then the Option shall terminate at the
  Close of Business on the first business day following the expiration of the
  one-year period beginning on the date of termination of Grantee's employment;

     (d)  If Grantee's employment with the Company and its Subsidiaries is
  terminated by the Company or any Subsidiary for Cause, then the Option shall
  terminate immediately upon such termination of Grantee's employment; and

                                       3
<PAGE>
 
         (e)  If Grantee terminates his employment with the Company and its
     Subsidiaries (i) with Good Reason,  (ii) with the written consent of the
     Company or the applicable Subsidiary or (iii) pursuant to provisions of a
     written employment agreement, if any, between Grantee and the Company or
     the applicable Subsidiary which expressly permits Grantee to terminate such
     employment upon the occurrence of specified events (other than the giving
     of notice and passage of time), or if the Company terminates Grantee's
     employment with the Company and its Subsidiaries without Cause, then the
     Option Term shall not terminate prior to the end of the ten-year period
     provided for in paragraph 1 hereof, except as otherwise provided for in
     paragraph 6(b) or 9(b).

     In any event in which the Option remains exercisable for a period of time
following the date of termination of Grantee's employment as provided above, the
Option may be exercised during such period of time only to the extent it was
exercisable as provided in paragraph 2 or paragraph 9(b) on such date of
termination of Grantee's employment.  A change of employment is not a
termination of employment within the meaning of this paragraph 6, provided that,
                                                                  --------      
after giving effect to such change, Grantee continues to be an employee of the
Company or any Subsidiary.  Anything contained herein to the contrary
notwithstanding, the Option shall in any event terminate upon the expiration of
the ten-year period provided for in paragraph 1 hereof, if not theretofore
terminated.

     7.  Nontransferability of Option.  During Grantee's lifetime, the Option is
not and shall not be transferable (voluntarily or involuntarily) other than
pursuant to a Domestic Relations Order and, except as otherwise required
pursuant to a Domestic Relations Order, is exercisable only by Grantee or
Grantee's court appointed legal representative.  Grantee may designate a
beneficiary or beneficiaries to whom the Option shall pass upon Grantee's death
and may change such designation from time to time by filing a written
designation of beneficiary or beneficiaries with the Company on the form annexed
hereto as Exhibit B or such other form as may be prescribed by the Committee,
provided that no such designation shall be effective unless so filed prior to
the death of Grantee.  If no such designation is made or if the designated
beneficiary does not survive Grantee's death, the Option shall pass by will or
the laws of descent and distribution.  Following Grantee's death, the Option, if
otherwise exercisable, may be exercised by the person to whom the Option passes
according to the foregoing, and such person shall be deemed to be Grantee for
purposes of any applicable provisions of this Agreement.

     8.  No Shareholder Rights; No Guarantee of Employment.  (a)  Grantee shall
not be deemed for any purpose to be, or to have any of the rights of, a
stockholder of the Company with respect to any Option Shares unless and until
such Option Shares have been issued to Grantee by the Company.  The existence of
this Agreement or the Option shall not affect in any way the right or power of
the Company or its stockholders to accomplish any corporate act, including,
without limitation, the acts referred to in Section 11.17 of the Plan.

         (b) Nothing contained in this Agreement, and no action by the Company
or the Committee with respect hereto, shall confer or be construed to confer on
Grantee any right to continue in the employ of the Company or any Subsidiary or
interfere in any way with the right of

                                       4
<PAGE>
 
the Company or any employing Subsidiary to terminate Grantee's employment at any
time, with or without Cause, except as otherwise expressly provided in any
written employment agreement between the Company or any Subsidiary and Grantee.

     9.  Adjustments.  (a) The Option shall be subject to adjustment (including,
without limitation, as to the number of Option Shares and the Option Price per
share) in the sole discretion of the Committee and in such manner as the
Committee may deem equitable and appropriate in connection with the occurrence
of any of the events described in Section 4.2 of the Plan following the
Determination Date; provided, however, that adjustments shall be made to the
                    --------  ------- 
Option if, and in the same manner that, adjustments are being made in connection
with the occurrence of any such event to any other option granted under the
Plan. Adjustments to the Option Price shall be made on a per share basis so that
the aggregate remaining Option Price is unchanged.

     (b) In the event of any Approved Transaction, Board Change or Control
Purchase, the Option shall become exercisable in full without regard to
paragraph 2; provided, however, that to the extent not theretofore exercised the
             --------  -------                                                  
Option shall terminate upon the first to occur of the consummation of the
Approved Transaction or the expiration or early termination of the Option Term.
Notwithstanding the foregoing, the Committee may, in its discretion, determine
that the Option will not become exercisable on an accelerated basis in
connection with an Approved Transaction and/or will not terminate if not
exercised prior to consummation of the Approved Transaction, if the Board or the
surviving or acquiring corporation, as the case may be, shall have taken or made
effective provision for the taking of such action as in the opinion of the
Committee is equitable and appropriate to substitute a new Award for the Award
evidenced by this Agreement or to assume this Agreement and the Award evidenced
hereby and in order to make such new or assumed Award, as nearly as may be
practicable, equivalent to the Award evidenced by this Agreement as then in
effect (but before giving effect to any acceleration of the exercisability
hereof unless otherwise determined by the Committee), taking into account, to
the extent applicable, the kind and amount of securities, cash or other assets
into or for which the Company Series A Common Stock may be changed, converted or
exchanged in connection with the Approved Transaction.

     (c) If the Distribution does not occur prior to the time that the Option
becomes exercisable, the Option Price and Option Shares shall be appropriately
adjusted so that the Option shall be exercisable, in the aggregate, for 1% of
the issued and outstanding common equity of the Company (after giving effect to
the transactions contemplated by the Reorganization Agreement other than the
Distribution), for an aggregate purchase price equal to 1% of TCI's Net
Investment as of the date the Option first becomes exercisable, but excluding
any portion of TCI's Net Investment that as of such date is represented by a
promissory note or other evidence of indebtedness from the Company (or any of
its subsidiaries) to TCI (or any subsidiary of TCI).

    10.  Manner of Payment.  The method or methods of payment of the Option
Price for the shares of Company Series A Common Stock to be purchased upon
exercise of the Option and any amounts required by paragraph 4 shall consist of
(i) cash, (ii) check, (iii) promissory note in such form as shall be acceptable
to the Committee (except that this method of payment will not be

                                       5
<PAGE>
 
available for amounts required by paragraph 4), (iv) whole shares of Company
Series A Common Stock and/or Company Series B Common Stock already owned by
Grantee, (v) the withholding of shares of Company Series A Common Stock issuable
upon exercise of the Option, (vi) the delivery, together with a properly
executed exercise notice, of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds required to pay the
purchase price, or (vii) any combination of the foregoing methods of payment, as
Grantee may elect and shall designate in the exercise notice provided for in
paragraph 3 hereof, subject, however, to any restrictions or limitations of
applicable law or of any agreement evidencing indebtedness of the Company for
borrowed money. Any shares of capital stock delivered or withheld in payment of
any amount due hereunder shall be valued for such purposes at the Fair Market
Value of such shares on the applicable date of exercise of the Option.

    11.  Restrictions Imposed by Law.  Grantee acknowledges that neither the
Option nor any of the Option Shares has been registered under the Securities Act
of 1933 and that the Option Shares may not be transferred in the absence of such
registration or the availability of an exemption therefrom under such Act or the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.  Neither the Company nor any other person shall have any obligation
to register any Option Shares, or any transfer of Option Shares, under the
Securities Act of 1933, the Securities Exchange Act of 1934 or any other state
or federal securities law.  Certificates representing Option Shares purchased by
Grantee hereunder may bear such restrictive and other legends as counsel for the
Company shall require in order to insure compliance with any such law or any
rule or regulation promulgated thereunder.  Without limiting the generality of
Section 11.9 of the Plan, Grantee agrees that Grantee will not exercise the
Option (and that the Company shall not be obligated to deliver any Option Shares
upon any exercise of the Option) if counsel for the Company determines that such
exercise or delivery would violate any applicable law or any rule or regulation
of any governmental authority, or any rule or regulation of, or agreement of the
Company with, any securities exchange or association upon which the Company
Series A Common Stock is listed or quoted.  The Company shall in no event be
obligated to take any affirmative action in order to cause the exercise of the
Option or the resulting delivery of the shares of Company Series A Common Stock
to comply with any such law, rule, regulation or agreement.

    12.  Notice.  Unless the Company notifies Grantee in writing of a change of
address, any notice or other communication to the Company with respect to this
Agreement shall be in writing and shall be delivered personally or sent by first
class mail, postage prepaid and addressed as follows

                       TCI Satellite Entertainment, Inc.
                       8085 South Chester, Suite 300
                       Englewood, Colorado 80112
                       Attention: General Counsel

                                       6
<PAGE>
 
Any notice or other communication by the Company to Grantee with respect to this
Agreement shall be in writing and shall be delivered personally, or shall be
sent by first class mail, postage prepaid, to Grantee's address as listed in the
records of the Company on the Determination Date, unless the Company has
received written notification from Grantee of a change of address. Except as
otherwise provided in paragraph 5, all notices and other communications
hereunder, including without limitation any notice of exercise, shall be
effective when actually received.

    13.  Governing Law.  This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware.

    14.  Construction. References in this Agreement to "this Agreement" and the
words "herein," "hereof," "hereunder" and similar terms refer to this Agreement,
including all Exhibits, as a whole, unless the context otherwise requires. The
headings of the paragraphs of this Agreement have been included for convenience
of reference only, are not to be considered a part hereof and shall not modify
or restrict any of the terms or provisions hereof. This Agreement shall be
construed in accordance with the Plan and the administrative interpretations
adopted by the Committee thereunder. All decisions of the Committee upon
questions regarding the Plan or this Agreement shall be conclusive.

    15.  Duplicate Originals.  The Company and Grantee may sign any number of
copies of this Agreement.  Each signed copy shall be an original, but all of
them together represent the same agreement.

    16.  Entire Agreement.  This Agreement is in satisfaction of and in lieu of
all prior discussions and agreements, oral or written, between or among TCI, the
Company and Grantee, or any of them, with respect to the subject matter hereof.
Each of the Company and Grantee hereby declares and represents that no promise
or agreement not herein expressed has been made and that this Agreement
(including the Plan, which is an integral part hereof) contains the entire
agreement between and among the parties hereto with respect to the Option and
supersedes and makes null and void any prior agreements between or among TCI,
the Company and Grantee, or any of them, regarding the Option.

    17.  Amendment.  This Agreement may be amended, modified or supplemented by
the Company, without the consent of the Grantee, (i) to cure any ambiguity or to
correct or supplement any provision herein which may be defective or
inconsistent with any other provision herein or (ii) to make such other changes
as the Company, upon advice of counsel, determines are necessary or advisable
because of the adoption or promulgation of, or change in or of the
interpretation of, any law or governmental rule or regulation, including,
without limitation, any applicable federal or state securities laws.  Except as
provided above, this Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.

    18.  Definitions.  As used in this Agreement, the following terms have the
corresponding meanings:

                                       7
<PAGE>
 
     "Aggregate Option Price" means an amount equal to one percent (1%) of TCI's
Net Investment as of the first to occur of the date of the Distribution and the
date on which the Option first becomes exercisable, but excluding any portion of
TCI's Net Investment that as of such date is represented by a promissory note or
other evidence of indebtedness from the Company (or any of its subsidiaries) to
TCI (or any subsidiary of TCI).

     "Cause" has the meaning ascribed thereto in any employment agreement
between Grantee and the Company or any of its Subsidiaries, and in the absence
of any such employment agreement means insubordination, dishonesty,
incompetence, moral turpitude, other misconduct of any kind, or refusal to
perform one's duties and responsibilities for any reason other than illness or
incapacity, or negligence in the performance of any of one's material duties or
responsibilities that continues after written notice from the Company, as
determined conclusively by the Committee.

     "Company Series A Common Stock" means the Series A Common Stock, $1.00 par
value per share, of the Company.

     "Company Series B Common Stock" means the Series B Common Stock, $1.00 par
value per share, of the Company.

     "Determination Date" means February 1, 1996.

     "Distribution" means the proposed distribution by TCI, in a transaction
intended to be a tax-free spin-off, of all the issued and outstanding shares of
capital stock of the Company to the holders of shares of Tele-Communications,
Inc. Series A TCI Group Common Stock and Tele-Communications, Inc. Series B TCI
Group Common Stock.

     "Good Reason" means the occurrence of any of the following prior to any
termination of employment by Grantee:

      (i)   any reduction in Grantee's annual rate of salary;

     (ii)   a failure by the Company to continue in effect any employee benefit
            plan in which Grantee was participating, or the taking of any action
            by the Company that would adversely affect Grantee's participation
            in, or materially reduce Grantee's benefits under, any such employee
            benefit plan, unless such failure or such taking of any action
            adversely affects the senior members of the corporate management of
            the Company generally; or

    (iii)   the assignment to Grantee of duties and responsibilities that are
            materially more oppressive or onerous than those attendant to
            Grantee's position on the Determination Date.

     "Option Price" means an amount per Option Share equal to the quotient of
(i) the Aggregate Option Price divided by (ii) the total number of Option Shares
on the date of the Distribution, immediately after giving effect thereto, as
such amount per Option Share may be 

                                       8
<PAGE>
 
adjusted from time to time after the Distribution pursuant to paragraph 9
hereof. Within five business days after the date of the Distribution, the
Committee shall give Grantee written notice of the Option Price as of the date
of the Distribution, which notice shall be conclusive absent manifest error.

     "Option Shares" means an aggregate number of shares of Company Series A
Common Stock equal to one percent (1%) of the total number of shares of Company
Series A Common Stock and Company Series B Common Stock issued and outstanding
on the date of the Distribution, immediately after giving effect thereto.
Within five business days after the date of the Distribution, the Committee
shall give Grantee written notice of the aggregate number of the Option Shares
as of the date of the Distribution, which notice shall be conclusive absent
manifest error.

     "Other Options" means the options to purchase shares of Company Series A
Common Stock granted pursuant to those other Option Agreements dated as of the
date hereof between the Company and the grantees named therein, respectively.

     "Reorganization Agreement" means the Reorganization Agreement to be entered
into by TCI, TCIC, the Company and certain other subsidiaries of TCI in
connection with the Distribution to provide for, among other things, the
principal corporate transactions required to effect the Distribution, the
conditions thereto and certain provisions governing the relationship between the
Company and TCI with respect to and resulting from the Distribution.

     "TCIC" means TCI Communications, Inc., a Delaware corporation.

     "TCI's Net Investment"  means, as of any relevant date, the cumulative
amount invested by TCI and its predecessor (including their respective
subsidiaries other than the Company and its subsidiaries) in the Company, its
subsidiaries and the respective predecessors of the Company and its subsidiaries
prior to and including such date, less the aggregate amount of all dividends and
distributions made by the Company, its subsidiaries and the respective
predecessors of the Company and its subsidiaries to TCI and its predecessor
(including their respective subsidiaries other than the Company and its
subsidiaries) prior to and including such date.

    19.  Rules by Committee.   The rights of Grantee and obligations of the
Company hereunder shall be subject to such reasonable rules and regulations as
the Committee may adopt from time to time hereafter.

                                       9
<PAGE>
 
     IN WITNESS WHEREOF, the Company and Grantee have caused this Agreement to
be duly executed and delivered as of the date first written above.



                             TCI SATELLITE ENTERTAINMENT, INC.



                             By: /s/ Kenneth G. Carroll 
                                ---------------------------------
                                Name: Kenneth G. Carroll
                                Title: Senior Vice President and
                                       Chief Financial Officer


                                 /s/ Gary S. Howard
                                ---------------------------------
                                     Gary S. Howard

                                       10
<PAGE>
 
                                                          Exhibit B to Agreement
                                                    dated as of December __,1996



                       TCI SATELLITE ENTERTAINMENT, INC.

                        Option to Purchase Common Stock


                           Designation of Beneficiary


     I, ___________________________________________ (the "Grantee"), hereby

declare that upon my death __________________________________________ (the
                              Name
"Beneficiary") of

_____________________________________________________________________________,
  Street Address                     City               State     Zip Code

who is my _________________________________________________, shall be entitled
            Relationship to Grantee  
to the Option and all other rights accorded Grantee by the above-referenced
grant agreement (the "Agreement").

     It is understood that this Designation of Beneficiary is made pursuant to
the Agreement and is subject to the conditions stated herein, including the
Beneficiary's survival of Grantee's death.  If any such condition is not
satisfied, such rights shall devolve according to Grantee's will or the laws of
descent and distribution.

     All prior designations of beneficiary under the Agreement are hereby
revoked.  This Designation of Beneficiary may only be revoked in writing, signed
by Grantee, and filed with Tele-Communications, Inc. and TCI Satellite
Entertainment, Inc., prior to Grantee's death.



_____________________________     _________________________________________
          Date                        Grantee