Murdoch may have to fight ally for DirecTV

[Gregg Lengling]

City  |  Special report: Rupert Murdoch  |  Television
Murdoch may have to fight ally for DirecTV

Patrick Barrett
Wednesday February 26, 2003

 
Rupert Murdoch: control of DirectTV would place him in powerful position in US broadcast market
 
Rupert Murdoch may be facing competition for ownership of US satellite broadcaster DirecTV from News Corporation's largest shareholder, John Malone's Liberty Media.

Liberty and News Corp had been expected to table a joint bid for Hughes Electronics, part of General Motors, which owns the broadcaster.

However, News Corp now appears to have decided to bid on it own after realising it doesn't need Mr Malone, the US cable TV tycoon, to help fund the bid.

However, the decision means that Mr Murdoch and Mr Malone, normally allies, will be pitched against one another in the battle to own the US' biggest satellite broadcaster with 12m subscribers.

A separate bid by Liberty will further complicate the protracted sale of DirectTV, the acquisition of which Mr Murdoch regards as a key step towards his dream of creating a global broadcast network.

After being beaten to a deal with General Motors two years ago by rival US TV company Echostar, which was subsequently rejected by US competition  
 
 ADVERTISEMENT
 
authorities, News Corporation appeared to be poised to mount a quick takeover of DirectTV.

According to a report by the Wall Street Journal, Liberty sent its own team to look at Hughes' books last week as part of the due diligence process, following a similar assessment conducted by News Corp executives.

"Liberty has made it clear it's considering proceeding on its own, and definitely isn't working with News Corp," the paper quoted a source as saying.

Those close to the deal said the split was prompted by News Corp's decision to go it alone, believing that regulatory and tax considerations made a lone bid viable.

Taking control of DirectTV would place Mr Murdoch in a hugely powerful position in the US broadcast market, complementing his Fox TV networks.

Crucially the deal would give him another major distribution platform for content generated by Fox TV and film studios.

Mr Murdoch indicated earlier this month that he was focusing all his energy on pursuing the deal that would see News Corp buying GM's 30% stake in Hughes, which is valued by analysts at around $7bn.

"We're running a very tight ship at the moment. We're not in the business of deals at the moment. Except one. That will be the big exception," he said referring to DirectTV in an interview with Fortune magazine.

Some believe the latest moves are designed to expedite the bidding process and force Hughes executives around the negotiating table.

At its recent quarterly results, the president of News Corp, Peter Chernin, added: "We continue to believe that having such a platform would be a great advantage to us in a rapidly consolidating world.

"But let me add this one caveat: we will not be drawn into a bidding war. Having gone down this path before, we have a very clear sense of what we believe these businesses are worth."

A rival bid by Liberty would not only cloud Mr Murdoch's long-term relationship with Mr Malone, who has been his strategic partner on a number of deals, but could delay the sale of Hughes still further.

As well as News Corp and Liberty, SBC Communications a US telecoms company, has also signalled its interest in Hughes.