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Aug 15, 2004  •  Post A Comment

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will probably launch four new cable networks over the next two years but isn’t likely to increase its stake in DirecTV Group or buy any more shares in Fox Entertainment Group, Chairman and CEO Rupert Murdoch said last week.

Mr. Murdoch, speaking to analysts during a conference call to discuss the company’s fiscal 2004 results, said the media giant would launch two more cable networks in the next 12 months and another pair of networks within 12 months after that. However, he declined to provide any details of the new channel launches, other than to describe some of the channels as “big ones” and others as “smaller ones.”

He also said that it is unlikely the company will increase its stake in Fox Entertainment Group or DirecTV Group anytime soon. controls more than 82 percent of FEG and owns a controlling 34 percent stake in DirecTV.

Through at least the end of the year, Mr. Murdoch said, is contractually barred from boosting its stake in DirecTV because of huge tax consequences for former controlling parent General Motors. He also advised against assuming would consider such a move after the tax threat goes away.

The comments came as FEG reported a 31 percent surge in fiscal 2004 profit, buoyed by an improved advertising market, strong film results and substantial growth at the company’s cable networks.

For the 12 months ended June 30, FEG reported a profit of $1.35 billion versus a year-earlier profit of slightly more than $1 billion. For the fiscal fourth quarter, FEG generated a profit of $323 million versus $258 million a year ago. Revenue climbed 14 percent to $3.2 billion for the fiscal fourth quarter, while it rose 11 percent to $12.2 billion for the year.

Overall, reported a 57 percent increase in fiscal 2004 profit to $1.65 billion. Revenue rose 20 percent to $21 billion. One growth area was FEG’s cable networks, which surged 63 percent in operating income to $488 million, driven by a run-up in advertising at Fox News Channel. Revenue for the overall cable group climbed 12 percent to $2.4 billion.

Advertising growth at the regional sports networks, FX and Speed Channel, increased operating income 32 percent.

Higher advertising revenue helped Fox Broadcasting cut its fiscal-year loss to $80 million from a year-earlier red ink of $100 million, while revenue at the broadcast network rose 6.5 percent to $2.4 billion.

President and Chief Operating Officer Peter Chernin defended FBC’s decison to program year-round, saying that the company feels “very good about our summer launch.” He said of the seven shows that premiered this summer, three-“Trading Spouses,” “The Simple Life 2” and “Quintuplets”-are “real successes,” while “Method & Red” and “North Shore” “are on the bubble.”

At the company’s TV stations, a boost in market share, a reduction in expenses and strong prime-time advertising paid off with a 6 percent increase in operating profit to $977 million.

A week earlier, DirecTV reported that it added 944,000 new subscribers in the quarter, leading to a 21 percent rise in revenue for the three-month period ending June 30 to $2.6 billion. However, in gaining those customers, the company ran up huge costs that led to the company’s booking a $13 million loss, compared with a year-earlier profit of $22 million.

Separately, DirecTV Group last Thursday agreed to reduce by $200 million the price for which it would sell its PanAmSat Corp. division to an investment team led by private-equity firm Kohlberg Kravis Roberts & Co., following the Aug. 3 failure of the propulsion system in a key satellite in PanAmSat’s fleet. The new agreement has the KKR-led team paying DirecTV $2.6 billion for its 81 percent stake in PanAmSat.