Liberty, Microsoft Go Global

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Liberty Media Group's agreement last week to invest
$493 million in UnitedGlobalCom pairs a heavyweight programmer with a respected
distribution player, and it should provide a number of opportunities to play off those
respective strengths, the companies and analysts said.

Liberty's direct and indirect programming investments
in 50 or so networks worldwide range from stakes in Discovery Communications Inc. to
channel groups in Europe, Japan and Latin America.

Now, it could have wider access to UnitedGlobalCom's
worldwide distribution network, which, including pending transactions, reaches 13.3
million homes in more than 20 countries.

At the same time, the deal gives UnitedGlobalCom greater
potential access to content that it will need to increase per-subscriber revenue at its
operations.

"Content is becoming increasingly important with
UnitedGlobalCom," Janco Partners Inc. analyst Ted Henderson said.

While United Pan Europe Communications N.V. (UPC),
UnitedGlobalCom's European arm, has won praise from analysts and investors for its
advanced network -- which now passes 8.6 million homes -- some of its systems are fetching
monthly fees only in the $10 to $15 range.

Henderson also said Liberty is getting a good deal.
European network group Multithematiques -- of which Liberty Media International and
France's Canal Plus S.A. each own one-third -- "is a great content play with
good access to Canal Plus' satellite base, but with no hardwire access," he
added.

Under last week's agreement, Liberty will form part of
a joint venture that will own 14.5 percent of UnitedGlobalCom. Liberty -- which is paying
$100 per share for 4.93 million UnitedGlobalCom class-B shares -- will assign one-half of
its interest to Microsoft Corp., which owns 7.8 percent of UPC.

Of the 4.93 million shares earmarked for Microsoft, 4.26
million will be bought from Apollo Cable Partners L.P., which wanted to sell after owning
that stake for more than six years.

UPC will hold 50 percent of the partnership. Liberty
chairman John Malone and Microsoft chief financial officer Gregory Maffei will join
UnitedGlobalCom's board of directors.

"We have a very large pipeline," UnitedGlobalCom
finance director Stan DiCicco said. "With this transaction, we have a huge
opportunity to put things through that pipeline."

The agreement could also advance interactive and Internet
businesses. Microsoft has made a number of investments in international cable properties
this year as it seeks a wider market for its applications, while in the United States,
Liberty has made some investments on the interactive-services front.

UPC owns its own high-speed Internet platform, Chello
Broadband N.V, which UnitedGlobalCom aims to introduce in Australia and possibly Latin
America.

"With the seats on the board, [Liberty and Microsoft]
may be able to massage [UnitedGlobalCom's] strategy on the Net side, ranging from
modems to WebTV [Networks] types of products," said Aryeh Bourkoff, who follows cable
and telecommunications high-yield debt for CIBC Oppenheimer Corp.

The agreement could also see the partners expand on the
systems front. UPC has long had its eye on pieces of Deutsche Telekom A.G.'s cable
network, which are in the process of being auctioned off.

"UPC is a bidder for Deutsche Telekom, and maybe we
get to take a look at that if we want to play that one," Liberty Media International
president Miranda Curtis said. Still, she cautioned that it was "too early to talk
about specific plans and joint ventures."

Liberty Media International also has a large systems
portfolio that includes operations in Argentina, Chile, Japan, Ireland and the United
Kingdom.

Curtis said Liberty and UnitedGlobalCom have no plans to
combine any assets. DiCicco noted, "There are no deals identified or required at this
point."

With Microsoft and UPC agreeing to acquire stakes in the
joint venture, Liberty's own cash outlay will total a bit more than $100 million. The
UnitedGlobalCom class-B shares hold disproportionate voting power, estimated by Henderson
at 37 percent.

Still, the investment is part of an increased spate of
international activity at Liberty.

Last month, British MSO Telewest Communications plc, which
is 22 percent-owned by Liberty International, agreed to buy the half of operator Cable
London that it didn't already own for $685 million. Curtis pointed out that Microsoft
will help to underwrite a Telewest rights offer that will finance the purchase.

Two weeks ago, Liberty agreed to buy 62,000-subscriber
Irish operator Cable Management Ireland for an undisclosed price.

Both of those deals came after British MSO NTL Inc. outbid
Telewest in July for the consumer cable and telephony assets of Cable & Wireless
Communications plc, another U.K. operator.

That deal fueled speculation that Telewest -- of which
Microsoft has agreed to buy 29.99 percent -- could either be acquired by or merge with
NTL, in which Microsoft also holds a small stake.

There has also been some speculation over how committed
AT&T Corp., Liberty's parent, is to the U.K. cable market.

With NTL's increased strength in the U.K. market, the
Liberty-Microsoft-UnitedGlobalCom agreement raises the possibility, however slight, that
UPC could invest in Telewest.

Curtis and DiCicco said there haven't been any plans
or discussions about such an investment, but Curtis added, "I wouldn't rule
anything out."

Liberty, meanwhile, appears to be holding its ground in
other regions. Early last week, sources speculated that it was negotiating to unload its
Latin American properties, but by last Friday, the rumored deal was a no-go.

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