Straight Talk from John Malone

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DirecTV has been in the spotlight recently with the loss of CEO Chase Carey, its stellar subscriber growth — 860,000 new customers in 2008, dwarfing cable, telco and satellite companies — and the plan to consolidate Liberty's 54% interest in DirecTV into a new Liberty Entertainment entity that will be later combined with DirecTV. That plan also has fueled speculation that DirecTV could be sold, perhaps to AT&T, a company that is more than familiar to DirecTV and Liberty chairman John Malone. Malone sold his cable company, Tele-Communications Inc., to AT&T in 1998 for about $48 billion, an unheard-of price at the time. After DirecTV's annual shareholder's meeting in New York last week, Malone spoke with Multichannel News senior finance editor Mike Farrell as they walked down the Avenue of the Americas.

MCN: There has been a lot of speculation that the heavy lifting is done at DirecTV and that it is time to sell. Could you do that in the near-term tax efficiently? Would you?

JM: Well, that's a very complex tax question as to whether you could or not. I think that's a function of a buyer and a seller and all the tax issues. Even if it was feasible, you're talking a couple of years out. There is not the ability to do anything quickly, if that was the intention.

Everybody always asks me the question, is it for sale? And I say there's a price at which as a public company we have to accept or discuss some offer. None's been made, none's been sought. You have to say there is always the possibility but at the present time it's certainly nothing that we're deliberately planning for.

MCN: The growth at DirecTV has been phenomenal ...

JM: Thank you Chase [Carey].

MCN: But do you think you've hit the wall? Other multichannel video companies are talking about subscriber growth …

JM: Going the other way. They're going from them to us, which is the best kind of growth. Obviously, if the country continues to not create new households, sooner or later the growth rate is going to slow down. But so far, the superior product and marketing of Direc[TV] has been talking video customers from the available growth and from their competitors.

MCN: One name that has been bandied about for months as a potential suitor for DirecTV is AT&T. Would you ever sell to them again?

JM:Again? [Laughs] It's a different company. It's obviously not the original AT&T anymore. I'm an investor; I'm a director. I never say never to anything. It's always what's good for the shareholders.

MCN: The reason I ask is that in past Liberty investor meetings you have said that the AT&T-TCI deal ...

JM: Was the dumbest deal I ever did.

MCN: And that you missed having distribution.

JM: Absolutely. The relationship between the content and distribution was very attractive, very powerful. But AT&T paid a 40% premium for TCI's U.S. operations. That was a huge premium on top of a stock price that had already run up — thank you Leo Hindery — and so in retrospect, personally and I said at the time, personally I didn't want to sell. But how could I in good faith say no to a deal that was that good for my shareholders.

MCN: Nobody ever denied the deal wasn't good for you.

JM: The deal was terrible for me. I was locked in, I couldn't sell, I was illiquid and I ended up losing 90% of the value of the position. It was a terrible deal for me but it was a good deal for the shareholders because they could turn around and sell right away. But I couldn't, I was locked in. Different strokes for different folks.

MCN: If the satellite business is going strong for you and the momentum in the satellite-TV business appears to be moving forward, what is the deal with Dish Network?

JM: What do you mean what is the deal with Dish?

MCN: Why are they moving in the opposite direction of DirecTV?

JM: You'd have to ask Charlie [Ergen].

MCN: Would they ever be an acquisition target for you?

JM: That's an antitrust issue. It would be wonderful to put the two satellite companies together, but I seriously doubt the government would permit that to happen.

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