Business Week: July 17, 2000
News: Analysis & Commentary: Telecommunications
Still Cable Crazy after All These Years
After two new deals, John Malone's second empire looks familiar
If you thought that John Malone was leaving the cable business because he sold cable giant Tele-Communications Inc. to AT&T for $52 billion in 1998, think again. The man who many believe pushed the cable industry into the digital age and then cashed in has crept quietly back into the fray by doing the thing he does best: making good deals for John Malone.
Over the past year, Malone appears to have built what AT&T boasted it had set out to: a global telecommunications company that offers voice, video, and data over cable and satellite. Throughout the past year, Malone has been piecing together a stake in this and a stake in that to form a telecom conglomerate. And on June 26, he swapped stakes in several foreign cable companies and $200 million for a 38% stake in Denver-based UnitedGlobalCom Inc. That last buy gives his primary company, Liberty Media Group--with its hefty stake in Japan's biggest cable operator--a chunk of the largest cable companies throughout Europe and South America.
A DOUBLE LIFE. Though he is currently most powerful abroad, Malone has also been buying pieces of U.S. companies that eventually are expected to deliver the same services; he has even grabbed equity in a business offering long-distance calling cards. ``Malone is putting together a monster of a company that, if given the chance, could probably compete head-to-head with AT&T,'' marvels Mark R. Anderson, editor of The Strategic News Service, which follows the telecommunications industry.
There is, of course, more than a little irony to all this. Since selling TCI, Malone has been leading something of a double life. On one hand, he's AT&T's largest individual shareholder and a member of its board of directors. He also heads Liberty Media, a tracking stock loosely affiliated with AT&T. But he may also wind up a competitor, using the $7.2 billion in cash and tax-loss carryforwards that AT&T gave him in the TCI deal. With the money, he is carefully positioning himself if--and many think when--the telecom giant makes the all-too-painful decision to spin off Liberty. That is one of three divestiture choices federal regulators gave AT&T in order to grant approval for its recent acquisition of MediaOne.
AT&T isn't talking. Neither is Malone. But the former TCI chairman is known for his ability to think several steps ahead. Take, for instance, the 8% stake Liberty has in Geocast Network, which intends to transmit video and other programming to PCs, or the 32% stake in Astrolink International LLC, which will launch a pair of satellites in 2002 to provide broadband-data services to the U.S. and South America. Along with Liberty's massive foreign assets, Malone now has, for Liberty's programming, a potentially strong distribution network comprising pieces of more than three dozen cable channels, including the Discovery Channel, shopping network QVC, Barry Diller's e-commerce and entertainment company USA Networks, and Encore pay-movie services. ``You don't always know what John and [Liberty President Robert] ``Dob'' Bennett are up to, but they are always ahead of most everyone else,'' says Lee Masters, president of Liberty Digital Inc., the Liberty unit that has aggressively been hunting stakes in Internet sites.
Only Malone seems to know how all the disparate Liberty pieces will eventually work together. All that's missing, it seems, is a stake in a large U.S. distribution company--and even there Malone may have something up his sleeve. He has stealthily reactivated TCI Satellite Inc., which wasn't part of the initial AT&T deal but controls a 1% stake in satellite-TV leader DirectTV. Elsewhere in his empire, Malone also controls a 10% stake in South American satellite Sky Latin America, which, he says, he will likely fold into the new worldwide satellite company being created by Rupert Murdoch's News Corp. Of course, Malone already owns an 8% stake in Murdoch's News Corp., and the two men have reportedly discussed making a run at DirectTV. If AT&T hasn't been paying attention to Malone already, that would be one deal likely to make the company sit up and take notice.
By Ronald Grover in Los Angeles
Business Week: July 17, 2000
News: Analysis & Commentary: Telecommunications
Malone's Shopping Spree
DEC. 14, 1999
Takes 32% stake in Astrolink International LLC, which plans wireless-data system via satellites
MAR. 27, 2000
Buys 9.9% stake in IDT, which provides DSL lines, long-distance service, and calling cards
APR. 3
Increases stake to 16% in ACTV, which provides interactive TV to cable systems
APR. 19
Takes stakes in Netbeam and Prairie Inet, which provide high-speed wireless-Internet service to rural areas
JUNE 21
Takes stake in ICTV, which sells interactive data and TV shows to cable operators
JUNE 26
Swaps cable assets in Britain for 38% stake in United GlobalCommunications and access to optional 14 million cable subscribers in Europe, Latin America, and Australia
JUNE 27
Merges Japanese cable assets with Microsoft's for a 35% stake in Jupiter Telecommunications and access to 5 million Japanese homes |
