Liberty Media Monitoring 700 MHz Activity
Liberty Media, poised to take a large stake in DirecTV, is scrutinizing FCC steps toward open access in the 700 MHz auction rules, Chairman John Malone told investors during an earnings teleconference Wednesday. “The architecture of these new licenses could be open,” he said. “That could change the ball game quite substantially in terms of bundling” broadband service with pay TV, he said. Satellite pay-TV offerings by DirecTV and Echostar have been seen as having a disadvantage to cable and telco services in that they lack broadband connections to residences. “Clearly, more technology in broadband is good for our potential investment in DirecTV because it reduces the leverage of bundling that cable currently has versus satellite,” Malone said.
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Liberty is most interested in mobile broadband’s prospects, CEO Greg Maffei said. Cable operators’ gains in broadband seem to be slowing, signaling faster saturation of the broadband market than expected, he said.
“Coming with something that is ‘me too’ would not be of value to our customers and ultimately not of value to DirecTV or Liberty,” Maffei said. “Mobile broadband, particularly where it provides the potential for mobile TV and mobile video, is something we look at very closely,” he said.
Liberty’s 8 percent stake in Sprint Nextel may offer Liberty and DirecTV a way into mobile video and broadband, Maffei said. That’s especially true now that Sprint has left SpectrumCo, a joint venture with several cable operators that bid on AWS spectrum and was active in 700 MHz lobbying. Time Warner Cable executives disclosed this month that Sprint wanted out of the venture. “The breaking of that partnership with the cable companies is perhaps a good first step in letting us evaluate that more closely,” Maffei said.
Liberty also announced plans for another stock restructuring to accommodate its DirecTV holdings. It will create a Liberty Entertainment tracking stock to follow the performance of its roughly 38 percent stake in DirecTV, along with its Starz Entertainment Group, Starz Media, FUN technologies, GSN and WildBlue Communication, assuming shareholders approve and its transaction with News Corp. closes.
Taking control of News Corp.’s DirecTV stake may help sales at Liberty’s QVC by helping the shopping channel get a better spot in the satellite service’s lineup, Maffei said. QVC recently negotiated better channel placement on Echostar’s Dish Network, a move expected to help sales. Better DirecTV channel placement won’t mean as big a boost, since QVC’s spot there beats its Echostar perch, QVC CEO Mike George said. Any move to relocate QVC in DirecTV’s lineup has to make financial sense for DirecTV, which answers to its own shareholders, Maffei said. Moreover, the performance of the company’s DirecTV and QVC holdings will be reflected in separate tracking stocks, he said. “While all things could be done friendly, they would have to be justified and make sense for DirecTV as well,” he said.
Shaky credit markets won’t keep Liberty Media from buying back more stock, but lack of access to capital even for companies with strong balance sheets is making it tough to finance strategic acquisitions, Maffei said. The cash drought so unsettles would-be sellers that they are pulling assets off the market, he said, citing Virgin Media’s decision to delay its auction (CD Aug 8 p12). “A situation where you can borrow but you can’t leverage to the degree where private equity [had been] leveraged is a good position for us,” Maffei said. But “it’s moved past helping us to the point where nothing is getting done.”