Liberty Move Might Be Towering

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Liberty Media Corp. could be in the running for some additional acquisitions, according to an analyst report last week, but in an arena that appears to be a big departure from its core media business — telecommunications towers.

According to a report by Citigroup Smith Barney cable and satellite analyst Niraj Gupta, Liberty is saddled with about 96 million shares of Sprint Corp., and could be subject to a major tax hit if the company cashes out that stake. But it could monetize that stake by swapping the shares with Sprint in return for Sprint’s tower assets.

At first blush, a swap would appear to be a good move for Liberty — by exchanging the shares for assets it lessens the tax blow considerably. And it would turn a non-strategic investment for Liberty into a cash-flowing asset.

Although Liberty’s operating assets have performed relatively well, its stock has not reflected that. According to Gupta, Liberty stock is trading at a 30% discount to its 2004 estimated asset value.

Investors have been turned off by Liberty’s complicated structure. Aside from private assets QVC Inc., Starz Encore Group and a 50% stake in Discovery Communications Inc., a substantial percentage of Liberty’s asset value is derived from publicly traded assets (mainly stock in media and technology companies).

Acquiring the Sprint towers would shift Liberty’s asset mix from 55% private assets and 45% public assets to more than 60% private assets, Gupta wrote.

Sprint spokesman Scott Stoffel declined to comment on the telco’s tower plans.

“We continue to evaluate strategic alternatives related to the towers,” Stoffel said.

Liberty Media spokesman Mike Erickson also declined to comment on the Sprint stake.

Gupta valued Liberty’s Sprint shares at about $2 billion — and based on its cost basis of practically zero, it would have to pay a major tax bill if it cashed out of that stake. Gupta valued Sprint’s tower assets at between $1.2 billion and $1.5 billion.

Sprint has said it was interested in selling the towers – as part of an overall plan to reduce its $13.4 billion in debt — as early as July. At the Goldman Sachs Communacopia conference in New York earlier this month, Sprint chairman Gary Forsee said that a decision on whether to sell the towers could be made by the end of the year or early in the first quarter of 2005.

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