Liberty eyes cable TV fold

Apr 8, 2002  •  Post A Comment

The diverse media concern that John Malone built hinted last week that it could return to the domestic cable TV fold if its pan-European cable ambitions are foiled, even as it moves to strengthen its position in AOL Time Warner.
Strategic positioning
Liberty officials declined comment on speculation the company may come to the aid of the Rigas family, whose Adelphia Communications is at risk because of reporting and accounting discrepancies recently disclosed by the controlling shareholders. Adelphia, whose stock price is down more than 60 percent the past week, has become a takeover target for other cable operators, including AOL Time Warner and Cox Communications. Adelphia has hired Salomon Smith Barney and Bank of America to weigh options for system sales.
The company disclosed in an earnings call with analysts and investors it has sold a matching portion of its hedged stake in AOL for $484 million, reducing its hedged position in the company to 13 percent from 34 percent. That’s in sync with its recent filing with the Federal Trade Commission, requesting that its passive 4 percent stake in AOL Time Warner be converted into conventional voting shares.
Like other of its stakes in major blue chip media companies, Liberty views its position in AOL Time Warner as strategic, given its strong core private assets, which include Discovery, Starz! Encore and QVC. Analysts speculated that Liberty and its chairman, Mr. Malone, will seek a board seat, and perhaps a more influential deal-making status at AOL Time Warner.
At the same time, Liberty disclosed a new accounting rule adjustment in its programming services, particularly Discovery, that will reduce the service’s earnings by $132 million this year due to reporting differences dictated by new rules.
Financial health
Analysts said they forecast 15 percent operating cash flow growth for Liberty in 2002 to $1.6 billion.
The company took $6.2 billion in write-downs, or $2.40 a share, compared with $1.49 billion in net earnings, or 57 cents a share, in 2000, primarily due to lost value on its public media investments. More than $4 billion in write-downs included $2.1 billion from AOL and $900 million from News Corp.
Liberty CEO Dobb Bennett said the company has $3.8 billion in net debt and $2.7 billion in cash but has enough unrestricted public assets and cash available to cover eight times its debt, underscoring the company’s “strong credit position and liquidity” despite its numerous investments.
“We are among the very few companies that can pick up the phone and pay off all our debt,” he said.