Liberty May Merge DirecTV Stake, Content Unit: DirecTV CFO Says 

But Media Giant Has Legal, Tax Issues To Resolve First

By Linda Moss -- Multichannel News, 6/10/2008 4:32:00 PM

Liberty Media may seek to “streamline” its holdings by spinning out its entertainment group and merging it with DirecTV, the satellite provider’s chief financial officer said Tuesday.

Pat Doyle, DirecTV’s chief financial officer, made the remarks regarding his company’s relationship with its 48% shareholder Liberty Media at the Deutsche Bank Media & Telecommunications Conference in New York.

During the confab, Doyle was asked about DirecTV’s possible plans to somehow consolidate its stake in the satellite provider with Liberty Entertainment. That Liberty Media tracking stock includes Liberty’s shares in DirecTV, as well as its stakes or sole ownership in Starz Entertainment, GSN, three regional sports channels and WildBlue Communications.

“Certainly one of the scenarios that has been discussed is that Liberty Entertainment would spin out and merge with DirecTV, or a combination of things,” Doyle told conference attendees.

“The rationalization of the two holdings makes sense,” he said. “The Liberty guys—you’ve heard (Liberty Media chairman) John (Malone) or (Liberty president) Greg Maffei talk about it publicly—I think they’ve got a desire to try to streamline that structure. Certainly, from our perspective, we think it would be a good thing to get that straightened out so we don’t have a 40 to 50% owner or more sitting there. So I think there’s certainly an opportunity.”

But Doyle said Liberty Media has some issues to iron out before it can take any action on its DirecTV stake.

“Liberty has talked about (how) they’re working through some legal and tax issues, and I’m sure once they have accomplished that, I’m sure that we’ll be talking,” Doyle said.

DirecTV still has plenty of steam—and a competitive edge to gain subscribers—because of its extensive HDTV lineup, according to Doyle.

“I clearly think that HD is providing us with a lot of lift,” he said.

DirecTV’s ongoing HDTV channel expansion and “a very good marketing campaign has really created an aura about our business, that if you want HD and if you want the breadth and depth of the HD experience, DirecTV is the place to go,” Doyle said.

“So I think we still have some nice tailwind on HD going into this year,” he said. “We expect that to continue for quite awhile.”

A new satellite, DirecTV 11, will become operational in the third quarter, enabling the satellite provider to add even more national and local HDTV networks, according to Doyle. And the HDTV expansion will continue next year, with the launch of the satellite DirecTV 12, he said.

At the conference Doyle also said the dismal economy seems to be having little impact on DirecTV’s subscribers, and that programming costs seem to have come in line this year.

“I’m sure the economy is having some effect on us, but it’s not something that’s easily identifiable,” he said.

Doyle added, “We’re coming out a cycle where we saw some pretty significant increases in programming costs and that’s trended down over the last few years to a level now that we’re pretty comfortable with.”