Satellite TV world awaits Malone's next move
Denver Business Journal - by Bob Mook Denver Business Journal
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Once known as the "cable TV capital of the world," Denver could become regarded as the "satellite TV capital of the world" if media mogul John Malone purchases News Corp.'s 38 percent stake in The DirecTV Group Inc. through his Englewood-based holding company, Liberty Media Corp.
News Corp.'s Rupert Murdoch reportedly has offered Liberty Media controlling interest in DirecTV, the nation's No. 1 satellite TV provider, in exchange for Liberty's 17 percent in News Corp. Liberty Media CEO Greg Maffei said the company is studying the possibility.
If Malone accepts Murdoch's purported offer, the Denver area would be home to the top two satellite TV providers. Englewood-based EchoStar Communications Corp. operates the DISH Network, which boosts 12 million subscribers.
Some national and local observers say such a deal would bring more jobs to the area and give economic developers much-needed bragging rights.
"It could strengthen our position in the satellite industry by giving us a larger space presence," said Dick Hinson, vice president of the Aurora Economic Development Corp., alluding to Lockheed Martin Corp.'s suburban Denver headquarters and the cluster of aerospace companies in Colorado Springs.
Hinson said the claim enables companies to draw workers who are concerned about keeping their options open.
"It would reinforce our image and make it easier to market the area," he said.
But others say the acquisition would make little difference to the local economy -- and actually could result in job cuts if Liberty Media bought EchoStar.
Talks of EchoStar's merger with DirecTV have floated around Wall Street since mid-summer.
EchoStar CEO Charlie Ergen said this summer the combination of the two satellite TV providers could save $3 billion a year in expenses. Most of the cost savings probably would come from eliminating positions.
DirecTV this summer opened a national operations center in Englewood in the 257,000-square-foot building at 161 Inverness Drive West -- a site once occupied by ICG Communications Inc. -- with the goal of hiring 1,000 people by year-end.
As the sole occupant, DirecTV easily could accommodate more workers; ICG once staffed nearly 2,600 people in the building. In addition to the Greenwood Village site, DirecTV's uplink center is located in Castle Rock, where about 110 employees work.
EchoStar employs 21,000 full-time workers, including 5,000 in Colorado.
Tom Clark, head of the Metro Denver Economic Development Corp., said EchoStar is among the companies he worries about being acquired.
"When we can count Fortune 1,000 companies in our midst, it helps," he said.
But many observers wonder if such a merger would win approval. EchoStar's attempt to buy DirecTV three years ago was thwarted by federal regulators concerned about antitrust laws.
Regardless of Malone's intentions for EchoStar, Murdoch's proposition makes sense for Liberty, said Robert Routh, an analyst for New York-based investment banking firm Jefferies & Company.
"It's a tax-efficient way for Liberty to monetize its News Corp. stock," Routh said. Buying DirecTV gives Liberty Media a "tremendous distribution platform" for the company's other holdings, including the home shopping network QVC Inc. and Denver-based television programming subsidiary, Starz Entertainment Group.
The deal -- combined with Liberty's nonstrategic assets, such as holdings in Sprint and Time Warner -- would give Liberty the ability to control distribution and transform its shares into "a real, common stock," Routh said.
Selling Denver-based cable mainstay TCI Corp. to AT&T in 1996 was one of Malone's "least intelligent decisions in terms of increasing the value of Liberty," Routh said. But Malone's long-term strategy might not be much different than his approach with TCI, he added.
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