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Liberty Media Posts Q4 Results, Wraps DirecTV Deal with News Corp.

Company Details Plan to Reclassify Tracking Stocks 2/28/2008 09:50:00 AM Eastern

Liberty Media reported fourth-quarter results for the companies represented in its tracking stocks -- Liberty Interactive Group and Liberty Capital Group -- and completed a long-expected $12 billion deal with News Corp. that gave it control over satellite-TV service DirecTV.

The closure of the News Corp. deal allowed the company to complete the previously announced reclassification of its Liberty Capital tracking stock, which currently includes Starz Entertainment.

Revenue at Starz Entertainment increased 3% in the fourth quarter to $265 million. Operating income at the unit fell to $30 million from $46 million in the year-earlier quarter.

The Liberty Entertainment Group tracking stock will comprise Liberty's interests in DirecTV, three regional sports networks, Starz Entertainment, Fun Technologies, GSN, WildBlue Communications, about $1 billion in cash and $551 million of Liberty Media's publicly traded exchangeable debt. The businesses, assets and debt not attributed to Liberty Entertainment Group will continue to be attributed to Liberty Capital Group, which will retain its name and listing symbols.

The company expects to reclassify Liberty Capital March 3, and the new Liberty Entertainment tracking stock and the reclassified Liberty Capital tracking stock will begin trading Tuesday, March 4.

Revenue at Liberty Interactive Group rose 7% to $2.33 billion from $2.24 billion in the prior-year quarter, driven mainly by QVC. Operating income at Liberty Interactive fell 3% to $396 million from $419 million a year earlier.

In the DirecTV deal, Liberty, the holding company of John Malone, exchanged its 16.3% stake in Rupert Murdoch’s News Corp. for a 41% controlling stake in DirecTV. Liberty also gets $625 million in cash for ceding its stake, as well as two RSNs.

The deal closed after Liberty won regulatory approval from the Federal Communications Commission for its purchase. News Corp. agreed to sell the controlling stake in DirecTV in 2006, three years after it took control of the company.

Its completion put something of an official end to a spat between Murdoch and Malone, which prompted Murdoch to take action in 2004 to stop Malone from boosting his News Corp. stake.

Satellite-TV services DirecTV and Dish Network have both experienced slumps in subscriber growth in the face of continued competition from cable and telephone companies; satellite can’t offer high-speed-Internet or phone services as the others can.

But DirecTV, the country’s leading satellite provider, is still adding subscribers as some cable companies are even losing them to telco competitors. And the satellite company plans a new video-on-demand service in the coming months that would allow it to better compete with cable operators in offering that function.

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