Liberty Moves to Lock Up TINTA

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Liberty Media Group -- the programming arm of
Tele-Communications Inc. that plans to merge with sister unit TCI Ventures Group -- wants
to buy the 17 percent of Tele-Communications International Inc. (TINTA) Series A shares
that TCI Ventures doesn't already own.

Liberty -- the stock of which would become a tracking stock
of AT&T Corp. after the AT&T-TCI merger closes, but that would still be controlled
by TCI chairman and CEO John C. Malone -- offered TINTA's public shareholders 0.58
Liberty shares for each TINTA share that they own, TINTA said last Monday. Liberty's
merger with TCI Ventures calls for TCI Ventures holders to get 0.52 shares of Liberty for
each TCI Ventures share.

In addition to 83 percent of TINTA's Class A shares,
TCI Ventures also owns all of TINTA's Class B shares, collectively controlling 92
percent voting power in TINTA. That would go to Liberty once their merger closes.

As of July 10, TINTA shares traded at $21.88 each, and
Liberty's share price was $41.56, so the offer represented a 10 percent premium for
TINTA. TINTA's share price quickly traded up by that amount, to $24.10, ending last
Wednesday at $25.13, while Liberty started the week at $41.56 and ended last Wednesday at
$42.75.

TINTA said it won't comment further until there is a
definitive merger agreement or merger talks terminate.

Malone and other Liberty executives have been saying that
they want TINTA to primarily be a programming player, with stakes in distribution systems
as needed to support the programming. Returns on equity are better in programming than in
capital-intensive cable systems, Malone has said.

TINTA has focused its distribution stakes mainly on three
regions: the United Kingdom, where it owns 26 percent of Telewest Communications; Japan,
where it owns 40 percent of Jupiter Telecommunications Co. Ltd.; and Argentina, where it
owns 26 percent of Cablevisión S.A.

On the programming side, TINTA's assets include 36
percent of Flextech plc in the United Kingdom; 33 percent of MultiThematiques in France;
50 percent of Jupiter Programming Co. in Japan; and 25 percent of Fox Sports
International. It also owns 40 percent of Torneos y Competencias, the dominant sports
programmer in Argentina.

Ted Henderson, a cable analyst at Janco Partners Inc. in
Englewood, Colo., said a roll-up of TINTA into Liberty is probably the first step toward
moving some distribution assets over to AT&T, which has said that it wants to be a
facilities-based telecommunications player on a global scale.

During a conference call with analysts on the day that the
AT&T merger was announced, Malone said Liberty's international distribution
assets "might be of substantial interest to [AT&T]." He added that his
"guess would be that we will be exploring alignments there."

While it makes sense for Liberty to keep the Flextech
stake, for example, it might make more sense for distribution assets, including the
Telewest stake, to shift to the new AT&T Consumer Services Co., Henderson said.

"My sense is that this is great for TINTA," which
has underperformed, Henderson said, adding that he thought that the minority shareholders
"will kick and scream that the price is too cheap."

Of course, if Liberty's share price rises sharply, the
price will look a lot better. But another analyst pointed to what happened when Liberty
and Robert Johnson made an offer for the public's share of BET Holdings Inc. An
independent director weighed the bid and rejected it as too low, and Johnson and Liberty
raised it to $63 per share from $48.

Goldman Sachs & Co. raised its TINTA price target to
$26 per share from $20.50 last week, saying among other things that TINTA shares
haven't fully captured the Telewest run-up since January, and that its slow-growing
Japanese assets are being overlooked.

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