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Liberty, News Corp. close to accord

Fri, 11/17/2006 - 6:30am

Colorado could be a hub for satellite TV.

Copyright 2006 The Denver Post
All Rights Reserved
The Denver Post
November 16, 2006 Thursday
FINAL EDITION
By Kimberly S. Johnson, Denver Post Staff Writer
From Lexis Nexis

The intensifying talks between John Malone's Liberty Media Corp. and Rupert Murdoch's News Corp. over a possible stock-for-assets swap involving DirecTV could bring an end to a high-stakes gambit begun two years ago by Malone to gain a bigger piece of media and entertainment giant News Corp.

It also could bode well for Colorado - once the country's hub for cable-television companies - as an emerging satellite-TV power center. EchoStar Communications Corp., the No. 2 satellite-TV provider behind DirecTV, is based in Douglas County, the home of Liberty Media.

On Wednesday, News Corp. chairman Rupert Murdoch said his company and Liberty were close to a deal in which News Corp. could regain the 19 percent stake Liberty owns in News Corp.
 
But he wouldn't confirm that such a deal would involve a stock-for-assets swap for News Corp.'s 38 percent controlling stake in DirecTV. Liberty chief executive Greg Maffei has said DirecTV is among the News Corp. assets Liberty is interested in.

Neither Liberty nor DirecTV officials would comment on the negotiations Wednesday.

Malone has roots in the cable industry and in Denver. Liberty started as the cable-TV programming arm of Tele-Communications Inc., the cable-service provider that Malone ran in Denver for more than 25 years. TCI was founded by Robert Magness in 1968. Malone kept control of Liberty and sold TCI's assets to AT&T Broadband - now Comcast - in 1999.

"There's a certain irony to the idea that Denver would emerge as the center of satellite TV after holding the title of center of the cable universe for the last two decades," said Craig Moffett, Sanford C. Bernstein & Co. senior analyst.

But the cable industry has waned in Colorado, with the biggest providers now based elsewhere.

El Segundo, Calif.-based DirecTV has more than 15 million customers. EchoStar, which operates the Dish Network, has 12.5 million subscribers.

DirecTV already has substantial operations in Colorado, with plans to hire up to 1,000 employees at a Denver-based national operations facility next year.

The company employs 122 at a Castle Rock satellite-uplink center, one of two locations where TV signals are collected, sent up to DirecTV satellites and sent back down to customers' dishes. More than 294 DirecTV employees already work at the Denver-based operations center.

"With the Malone acquisition, satellite TV gets that much closer to a Denver-only experience," said Jimmy Schaeffler, senior multichannel TV analyst for the Carmel Group. "Denver goes from being just the cable center to being the multichannel pay-TV center for the U.S. and maybe the world. It's a very positive thing for the state of Colorado."

In November 2004, Malone bought up about $1.5 billion in News Corp. shares, doubling Liberty's stake in the company to about 19 percent. Since then, Murdoch has introduced a "poison pill" provision at News Corp. to keep Malone from gaining additional control.
 
Should Liberty and News Corp. reach a deal involving DirecTV, Colorado has enough satellite talent that Liberty might consider relocating some operations or top-level talent to the state, said one observer.

"Just as (cable company) Adelphia moved from Pennsylvania to Denver to take advantage of the talent here, it seems that satellite could do the same," said Erica Stull, a former Adelphia executive who worked in Denver's cable industry for 18 years.
 
It could also open up "a renewed sense" of competition between DirecTV and EchoStar, said Barbara Sullivan Roehrig, a pay-TV marketing consultant and former EchoStar executive.

"There may be a concerted aggressive effort (by Liberty) to get some EchoStar personnel," she said.

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