Murdoch TV trade likely

September 16, 2006|By Sallie Hofmeister | Sallie Hofmeister,Los Angeles Times

Rupert Murdoch spent more than a decade trying to gain control of DirecTV Group Inc., the United States' leading satellite TV operator. But the chairman of News Corp. appears willing to give that up for something he values even more: bulletproof control of his own company.

Murdoch is currently negotiating to swap his 38 percent stake in El Segundo, Calif.-based DirecTV to cable pioneer John Malone for the 19 percent voting stake in News Corp. owned by Malone's Liberty Media Corp., according to two people familiar with the negotiations.

The trade would free Murdoch from fears that Liberty's chunk could fall into unfriendly hands and threaten his family's grip on News Corp. In the last year and a half, Liberty has become the second-largest shareholder in News Corp. after the Murdoch family, which controls nearly 30 percent.

If accomplished, a deal also would allow Murdoch to opt out of a crushing battle in the pay television business, as telephone companies enter the market. Already, DirecTV's growth has slowed as cable rivals such as Comcast Corp. have provided high-speed Internet access and phone service over the same wire into the home that they use to deliver TV.

At the same time, the swap would return Malone to media's big leagues. Liberty's assets include the nation's largest home-shopping network, QVC, the Starz movie channels and large stakes in Discovery Communications and Barry Diller's IAC/InterActiveCorp., but Malone's status as a media mogul waned in 1999, when he sold the nation's leading cable television provider, Tele-Communications Inc., to AT&T Corp.

If he gains control of DirecTV, Malone eventually would pursue a merger with its sole rival, EchoStar Communications Corp., according to sources at News Corp., who asked not to be identified because the negotiations are private.

Executives at Liberty Media could not be reached for comment.

Federal regulators rejected a proposed combination of the nation's two satellite TV providers in 2002 as anti-competitive. However, Murdoch, 75, has said publicly that the new competition in the pay-television business from telephone companies could make Washington more amenable to such a deal today.

This summer, Murdoch and Malone tentatively agreed to a widely publicized trade involving 10 News Corp. TV stations. But in mid-July, when the pair were at the Allen & Co. media conference in Sun Valley, Idaho, they discussed the DirecTV transaction, News Corp. insiders say.

DirecTV is among several options on the table, people close to the discussions said. Malone has also expressed interest in Murdoch's regional sports channels. The talks could still break down, as they have several times in the last year, the sources said.

Murdoch purchased his DirecTV holdings from General Motors Corp. in late 2003 to fill a void in a satellite apparatus that reached every corner of the globe. Among News Corp.'s satellite services are BSkyB in Britain and StarTV in Asia.

However, his enthusiasm for DirecTV has diminished in the last year because of satellite TV's technical limitations and its slowing growth, News Corp. insiders say.

Malone's holdings in News Corp. date to 1999, when Liberty Media swapped an interest in the Fox/Liberty Networks sports venture for News Corp. stock.

Sallie Hofmeister writes for the Los Angeles Times.

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