King of cable TV takes on emperor of satellite

Liberty chairman Dr John Malone is a thorn in the side of Rupert Murdoch, writes Emmet Oliver

With a personal fortune estimated conservatively at $1.6 billion (€1.25 billion), an 80-foot yacht named Liberty, land holdings of more than 100,000 acres, major shareholdings in media conglomerates like Time Warner and News Corporation and one of the largest education foundations in America, Dr John Malone leads what could be modestly described as a "full life'.

Listed among Fortune's 500 world's richest people, Malone's colossal wealth and disparate interests are the envy of many other executives in corporate America. Malone's power and influence are such that even a media mogul like Rupert Murdoch has to tip-toe around him.

For all this influence and financial might, Malone is a personable, quiet-spoken interviewee and lacks any brash edges. He is reported to stay at truck stops when travelling around the US in a luxury camper van.

In the early 1970s, Malone was unknown in the cable television industry in the US. In his early period running his cable group Tele-Communications Inc (TCI, he and then partner Bob Magness had to make sure their office always had a back door to evade overzealous creditors.

Nicknamed the "king of cable" by his fans and "Darth Vader" by his detractors including Al Gore, Malone has become one of the most powerful men in US media and by extension world media since he sold his cable business TCI to AT&T for $54 billion in 1998.

In Ireland for a board meeting of the company he chairs, Liberty Global, (and to collect an award from Trinity College and the

Irish Management Institute), Malone is surprisingly knowledgable about the Irish economy. Then again this week he was able to get a one-on-one briefing from the Taoiseach himself on the current economic picture.

While Ireland rarely makes it to the top of his in-tray, Malone has significant interests here. His company Liberty Global owns NTL and Chorus, which have 590,000 Irish cable subscribers.

This makes it the largest pay TV company in the country. In second position is BSkyB, where the largest shareholder is Rupert Murdoch. In other words Ireland, despite its tiny market size, is one of those markets where Malone and Murdoch lock horns.

Malone is realistic about what has been happening in Ireland over recent years, in terms of our telecommunications sector, cable included. "Here in Ireland you had two under-capitalised companies, under-invested in the new technologies and a third company, the telephone company, and the situation was tread water for the last few years." He says as NTL and Chorus are brought together, this will change.

The battle for hearts, minds and wallets in Ireland is unlikely however to cause too many sleepless nights in either the Malone or Murdoch households.

Both men instead are focused on the future of News Corporation, the ultimate owner of a range of newspapers (the Sun, the Times, the Sunday Times, News of the World) and Fox, the US television network. Malone has about an 18 per cent stake in News Corp and crucially, his shares carry voting rights. This has led to UK media commentators describing him as a "thorn in the side" of Murdoch.

With Murdoch now in his mid- 70s, people have started to wonder about Malone's intentions. But he says they are benign.

It may be possible for the two men to strike a deal where Malone gets half a dozen of News Corp's 35 US television stations and agrees to sell his shares back to the company.

This would remove any threat to Murdoch family control of the company. Peace feelers have been put out, but Murdoch has issued a warning to Malone: "I will not be a hostage to his fortune," he recently commented.

He has also put a poison pill defence in place in case Malone makes a full bid for the company.

Malone says there is no animus between the two moguls. Asked about their relationship, he says: "We're in contact all the time. We're good friends. We've been in business together, one way or the other for 20 years."

When asked about the quote above mentioning his fortune, Malone laughs and says, "neither will I".

"I'm not the one that put in the poison pill. Right now he has manned the bulwarks and called his troops into the castle and we're sorta running around outside. But no, we're good friends and we have good communication. Fundamentally I think he is interested in making sure that his family have long-term control of the empire he has built up."

Last week, Murdoch told the media in the US that his family members - if they proved as strong as he hoped - would play an important role in the future of the company. Malone is aware of these comments and is sanguine about them. He says the issue will only arise if Murdoch is hit by the "proverbial limousine" and News Corp is a "well run company".

However, he says Rupert's son James is a too young to run News Corp. "Probably if he did everyone else would leave and then he really would have a management problem. Rupert is unique among these kind of fellas in the sense that he has a work ethic and a scope of personal knowledge that allows him to get synergies out of a widespread operation, that other people would have a hard time generating."

Malone says Ireland is a "very interesting case", because it is one of the few spots where the two men compete directly. "Other than that, we try to stay out of each other's way."

So is there a deal on the cards between the two men. "We'd rather have an operating business or cash than our News Corp stock at this stage.

"I think the conditions for a successful transaction are on the table, so it's a question of whether we can come up with a solution. There are proposals flying back and forth."

"In the interim we think News Corporation is probably the best of the large vertically integrated media companies. It has had the best equity performance, the best run. So we are not uncomfortable being a large supporting shareholder," he adds.

Understandably, Malone is not in any rush, his stake is currently worth about $10 billion. "We can sit there for a long while," he says. "I think at this point, the pressure to change the situation is more Rupert and Rupert's age and his family dynamic. We're happy to see if we can work something out."

Similar talks are believed to be happening at Time Warner, where Malone has a 4 per cent stake. In that case, Malone could end up getting his hands on the Atlanta Braves baseball team.

As for Europe, Malone has far-reaching ambitions too. He has major shares in cable companies all over Europe and similar interests in Japan, Australia and Chile.

Many years ago, Rupert Murdoch, then a relatively unknown Australian, plunged into the US market, while utilising his financial resources built up in Britain.

Now Malone seems to be moving in the other direction.

"If we're patient we'll end up with plenty of opportunities to grow," he says confidently.

As for the future of the media sector itself, alone has no problem describing himself as "conservative" when it comes to the companies he invests in.

While his sparring partner Murdoch was prepared to pay $580 million on social networking website Myspace.com in 2005, Malone is not so sure about these businesses. "I think it was enormously ballsy of Rupert at his age to take his company, even though its a relatively small exposure, into that space". He says he is unlikely to be following.

"We regard it as very fickle... it's like the queen bee moves from this hive to that hive and all the bees follow. "I'm not sure I'm comfortable with the absence of stability."

Factfile

Name: Dr John Malone

Age: 65

Title: Chairman of Liberty Global, one of the largest cable companies in the world. It is the ultimate owner of NTL and Chorus in Ireland.

Hobbies: Sailor, golfing, farming and equestrian horses.

Family: Married with two children.

Career: Has worked in the cable TV business for most of his career, first with Tele-Communications Inc (TCI) and in more recent years as head of Liberty Global.

Why he is in the news: This week he received the Seán Lemass award for business leadership from Trinity College Dublin and the IMI. He has an 18 per cent stake in News Corporation, Rupert Murdoch's media group.