Malone: DirecTV Is (Almost) a Done Deal

The Liberty Media boss expects regulatory approval for the acquisition soon, and he's gearing up for an assault on Comcast and Time Warner

by Ronald Grover

Liberty Media's John Malone. MRB/AFP/Getty Images

Story Tools

• post a comment
• e-mail this story
• print this story
• order a reprint
• digg this
• save to del.icio.us

Cable pioneer and billionaire media investor John Malone could soon be back in the business of delivering TV signals to U.S. consumers—this time via satellite. Malone, who helped usher in the cable-TV era and now runs Liberty Media (LCAPA), is haggling with regulators to win approval for Liberty's late 2006 acquisition of a controlling stake in the biggest U.S. satellite operator, DirecTV Group (DTV).

Malone, in an exclusive interview with BusinessWeek, says he expects the Federal Communications Commission and Justice Dept. to approve the deal soon. He's crafting a vision for using DirecTV to take on the cable-TV industry, using partnerships with telecom carriers and possibly an alliance with EchoStar (SATS), the No. 2 satellite-TV provider. Once regulators sign off, DirecTV can "take on cable television as their strongest U.S. competitor," Malone says.

Power Play

The push into satellite has been a long time in the making for the 66-year-old superstar dealmaker. In late 2006, Liberty agreed to buy News Corp.'s (NWS) 38.5% stake in DirecTV. Malone swapped a 16.3% stake in News Corp. in exchange for a business that boasts nearly 17 million subscribers in the U.S. and almost 5 million in Latin America. He also got cash and three regional sports networks. But the deal has been bogged down in antitrust and other reviews by Justice and FCC officials.

Once the deal closes, Malone hopes to use alliances to put a hurt on such cable providers as Comcast (CMCSA) and Time Warner (TWX). He figures one way to keep up the assault is for DirecTV to join forces with EchoStar to cooperate on various content and other deals that would "help us share overhead." He also sees scope for taking on cable in their new services stronghold: phone and high-speed Internet access. DirecTV already works in concert with telecom carriers, combining TV services with telco phone and Web offerings. More such "bundling" is likely, be it with DSL Internet access, wireless calling, or the TV-over-fiber programming now being unveiled by Verizon Communications (VZ), Malone says. He didn't disclose a time frame.

Whatever the new partnerships look like, Liberty is unlikely to try to merge with EchoStar, Malone says: "I don't think the regulatory climate would allow the two largest satellite operators to merge right now." That could change, he adds, under the next President. "If you get an administration that gave us different leadership at the DOJ and FCC, that might present some possibilities."

A Negotiable Struggle

To now, DOJ officials have dragged their heels on clearing the DirecTV deal because Malone also controls a separate company, Liberty Global (LBTYA), which has holdings in three Puerto Rican markets where DirecTV also competes, he says. Malone overcame the concerns through a compromise, though he declines to elaborate. "My Liberty Global holdings are de minimis, and we really didn't think it was an issue, but DOJ disagreed." DOJ officials refused to comment because this is a pending issue; the FCC also declined to comment.

Trying to wrest DirecTV from News Corp. set off a yearlong struggle to negotiate a truce between two media titans. News Corp. CEO Rupert Murdoch had gotten the board to enact potential antitakeover provisions to stop Malone from taking a bigger bite of his stock.