Callahan: Why Malone Failed in Germany

Author:
Publish date:
Updated on

New Orleans -- Liberty Media Corp. chairman John Malone's fatal flaw in his
quest to acquire cable systems in the German market was not a matter of pricing
or business strategy.

It boiled down to a failure to go through the proper channels, Callahan
Associates International LLC president and founder Richard Callahan opined in a
conference here Sunday.

Callahan, speaking at the Multichannel News International Summit at
the National Show, said Malone's decision to meet with German Chancellor Gerhard
Schroeder to make his case, rather than going through the German Cartel
Authority, proved to be his undoing.

'The problem is, the German antitrust authority is independent -- nobody
tells them what to do,' Callahan said, after accepting MNI's 'Grand Prix'
award. 'John didn't realize that when he came in through the top -- Schroeder --
he was intimidating the guy who runs the cartel office.'

Liberty had planned to buy about 3 million cable subscribers in six German
states from German telephone giant Deutsche Telekom AG for $4 billion.

After several months of regulatory review, the German Cartel Office rejected
the Liberty bid, mainly due to Liberty's refusal to provide switched-circuit
telephony service in competition with DT.

Liberty had planned to offer digital and high-speed-data service in Germany,
but the company wanted to wait until lower-cost Internet-protocol technology was
available before providing phone service.

That refusal backed the German regulators against the wall, Callahan
said.

'The head of the cartel office, his world is full of lawyers dealing with
antitrust issues,' he added. 'How is he going to explain that he is facilitating
the sale of a telephone company's properties to the one guy who doesn't want to
offer telephone service?'

Callahan knows whereof he speaks: He founded U S West's cellular and
cable-communications businesses.

As president of U S West International, he created cable and
telecommunications companies that provided services to 3 million customers in 18
countries.

He was also a co-founder of Telewest Communications plc, the second-largest
cable operator in the United Kingdom.

He formed Callahan Associates in 1996, and the company currently has 8.1
million cable subscribers in Spain, Belgium and Germany.

Callahan called the secret to his success a simple one. 'Ever since I
graduated from grade school, I've been a team guy.'

Related