MURDOCH SAYS ‘DUE DILIGENCE’ HAS SLOWED DIRECTV NEGOTIATIONS
News Corp Chmn. Rupert Murdoch said “due diligence” had slowed negotiations with DirecTV, which now were “moving slowly.” He admitted in Front Row Conference sponsored by Variety in N.Y.C. Tues. that deal might take longer to finalize than some earlier reports had indicated (CD Feb 8 p9). Some industry analysts had predicted deal would be completed by end of last week, but latest Murdoch comments would seem to indicate no deal was imminent. He didn’t elaborate on status of talks, but indicated both sides were making thorough inquiry into and review of individuals and records involved in transaction. Industry reports indicated Microsoft might be involved in 3-way due diligence process, which could also have complicated situation in last few days. GM also denied deal with Murdoch was close to completion.
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Microsoft reportedly is involved in talks with News Corp on investing $4 billion in DirecTV, should Murdoch be able to pull off deal to create $70 billion satellite network, including $40 billion purchase of DirecTV. Lawyer familiar with talks said Murdoch was determined to get deal done despite fact talks seemed to “be dragging” along: “Both sides are still right into due diligence. That’s the situation at the moment. I think GM is happy with it and so is News Corp.”
Industry analyst who is tracking talks said it still was too early in negotiations to worry about deal’s possibly falling through: “Due diligence takes a while. I never thought the deal would be fast and easy. The other issue is when you have a third party involved that has a sizable amount of cash to invest, things can get a little sticky.” Second analyst agreed: “You're basically negotiating 3 prices. So these negotiations over prices and valuations are going on while the parties are doing due diligence.”
Murdoch also said he saw ways DirecTV could nearly triple subscriber base if he gained control of company. DirecTV has almost 10 million subscribers and Murdoch believes company could hit 30 million mark if it controlled “churn.” He pointed to BSkyB where churn was about half of double-digit figure for DirecTV. “I would say service has got to get better,” Murdoch said. He said improvements in customer service would lure viewers from cable TV where “management varies” company to company: “There’s a big opportunity there. Satellite service is just better. With a satellite you have a national footprint and that’s a big advantage.” Murdoch said Charles Ergen, CEO of rival EchoStar, was “doing a great job and enjoying himself. Our relationship is pretty good. I'm a big fan of Charlie’s. He’s a loner and tough competitor. I respect that.”
Cable rivals are watching progress of deal closely, said members of panel at same Front Row Media conference. Viacom CEO Mel Karmazin told group he wasn’t “looking forward to the morning when I wake up and see that the News Corp.-DirecTV deal has happened. My hope is that it gets derailed.” Sony Pres. Howard Stringer said his company was trying to figure out its role in global entertainment marketplace dominated by consolidation of megamedia empires. “I can feel it happening,” he said: “It’s only a question of whether it drives me into retirement.” USA Networks CEO Barry Diller said he believed DirecTV deal could accelerate new broadcast age of set-top boxes and interactive TV. He called it “transforming transaction” that would change broadcasting forever: “The interactive set-top boxes will come more quickly, and that’s when people’s habits begin to change on how they access goods and services.”