Malone Speaks of AT & T and More

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New York-Liberty Media Group chairman John Malone said last week his company wouldn't be badly hurt were it to separate from AT & T Corp.

However, he told a Liberty investor conference here, Liberty was in no rush to leave the AT & T fold.

AT & T-which created the Liberty tracking stock after buying former Liberty parent Tele-Communications Inc. in March 1999-might have to divest the programming-holding company to appease regulators who are overseeing AT & T's pending acquisition of MediaOne Group Inc., analysts believe.

AT & T's huge financial strength gives Liberty access to massive amounts of capital at investment-grade rates. But Malone said a split actually "would probably enhance the availability of capital because right now, it's kind of hard for us to issue things like derivatives of our own securities."

One potential downside: Profitable AT & T repays Liberty in cash for any tax write-offs it provides to AT & T.

After the meeting, Malone downplayed a possible split. "We're having too much fun-we wouldn't think of leaving the nest," he said.

He also dismissed speculation that Liberty would combine its satellite assets with those of Rupert Murdoch's News Corp., in which Liberty is a major investor.

Malone said he was high on Liberty's 9 percent stake in Time Warner Inc. and its 8 percent stake in News Corp.

AOL Time Warner Inc., he added, "will be a dynamite company across many platforms with a very strong content ownership and a very strong subscription base. They will have the market power, the positioning, the content and the economics to virtually do anything they want."

News Corp., meanwhile, is "very well positioned in content. We'd like to be a bigger investor, which may happen," he said.

Malone also predicted that AT & T would likely have to shed its inherited stake in the Road Runner high-speed-data service after its merger with MediaOne closes. MediaOne owns 38 percent of Road Runner.

Lately, Liberty has been buying into Internet-protocol telephony providers, taking stakes in Net2Phone Inc. and IDT Corp. Malone said he sees IP telephony as the key to cable's being able to attractively bundle services. But he stressed that satellite and DSL providers were also racing to provide similar bundled services, and cable operators have to roll out services quickly.

"In order to win this race, they have to very aggressively deploy," Malone said. "Once someone captures a high-speed-data customer, in my opinion, there is going to be a lot of glue."

With about 2 million cable high-speed-data customers, compared with about 200,000 residential DSL subscribers, cable has a leg up on the competition, he added, saying, "The race is on. [Cable] just has to develop the overlay of IP into the set-top box."

Liberty officials also spoke forms with a very strong content ownership and a very strong subscription base. They will have the market power, the positioning, the content and the economics to virtually do anything they want."

News Corp., meanwhile, is "very well positioned in content. We'd like to be a bigger investor, which may happen," he said.

Malone also predicted that AT & T would likely have to shed its inherited stake in the Road Runner high-speed-data service after its merger with MediaOne closes. MediaOne owns 38 percent of Road Runner.

Lately, Liberty has been buying into Internet-protocol telephony providers, taking stakes in Net2Phone Inc. and IDT Corp. Malone said he sees IP telephony as the key to cable's being able to attractively bundle services. But he stressed that satellite and DSL providers were also racing to provide similar bundled services, and cable operators have to roll out services quickly.

"In order to win this race, they have to very aggressively deploy," Malone said. "Once someone captures a high-speed-data customer, in my opinion, there is going to be a lot of glue."

With about 2 million cable high-speed-data customers, compared with about 200,000 residential DSL subscribers, cable has a leg up on the competition, he added, saying, "The race is on. [Cable] just has to develop the overlay of IP into the set-top box."

Liberty officials also spoke highly of interactive television, the Liberty Digital subsidiary's purview.

Liberty Digital president Lee Masters said those investments have weathered the recent tech-stock downturn well. As of April 12, the company's $104 million investment in ACTV Inc. was worth $256.8 million and its $12.5 million investment in OpenTV Inc. was worth $129.5 million, he added.

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