LIBERTY MEDIA BELIEVES KA-BAND WILL PROVIDE ECHOSTAR CHALLENGE
Ka-band satellites may be best way to compete with merged EchoStar-DirecTV, Liberty Media CEO John Malone told N.Y. investors conference May 22. He said Liberty was poised to compete with proposed DBS entity through new Ka-band offerings made available through pending acquisition of Astrolink and investment stake in WildBlue. “It’s doubtful that anybody will want to challenge” (EchoStar CEO Charles) Ergen after deal is completed, Malone said: “The only challenge would be through a Ka-band platform.” Major concern with Ka-band strategy “is whether there is enough enthusiasm or investment capital” for programmers and investors to challenge New EchoStar, Malone said.
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Malone is “very capable” of “pulling together” alternative to EchoStar-DirecTV network, industry official said: “He has the know-how and he can raise the money.” Liberty owns DBS companies in Latin America, cable TV businesses in Europe, entertainment production company in U.S. Malone also backed News Corp. Chmn. Rupert Murdoch in failed bid to purchase DirecTV. Satellite consultant Leslie Taylor told us Malone had “great idea” in combining WildBlue and Astrolink for Ka-band offerings. Astrolink “problems had more to do with Lockheed Martin backing away rather than a reflection or evaluation” of broadband satellite market, he said.
Taylor, who is working on Ka-band study for client, said “it’s significant” that “astute industry participant” such as Malone “is expressing confidence in Ka-band.” Overall, Ka- band broadband business has “suffered from problems of LEOs,” she said. She said Astrolink and Hughes Spaceway projects were “reasonable ways” to cover entire market: “They can cover the world with 3 or 4 satellites. You can get to the business without building a large constellation.”
Using Ka-band satellites makes most sense, particularly if HDTV and broadband data services are included, Malone said. “My engineering background says, if you can cover the world for a couple of billion dollars… there ought to be a business there.” Astrolink apparently is key to any future plans for Liberty, industry source said: “Everything is already in place. It’s almost a turnkey operation. The only stumbling block is [Astrolink] debt.” Liberty is attempting to work out logistics of sale with equity shareholders Lockheed Martin, TRW, Telespazio.
Companies announced nonbinding letter of intent May 21 to complete sale (CD May 23 p12). Letter has no deadline for agreement, Lockheed Martin spokesman said, and FCC must approve deal. Liberty and others invested $1.3 billion in project (CD Nov 1 p5). Lockheed Martin, TRW and Telespazio are owed varying amounts by Astrolink, and presumably have to be paid off before Liberty could complete transaction. Liberty wants other contractors to drop claims for contract termination and agree to restructuring that would reduce number of satellites to 2 from 4, filing said. Astrolink said first satellite being built by Lockheed and TRW was 90% completed and could be launched within 20 months.
Liberty won’t pursue Astrolink and WildBlue unless it can realize profit, COO Gary Howard told investors at conference. He said restructuring probably would precede and dictate final Liberty decision. “If we play in this space, we're going to take control of this space,” Howard said. Liberty also owns 16% of WildBlue. WildBlue satellite is being constructed by Space Systems Loral and is nearly finished. Loral is owed $49 million of contract’s $127 million. Companies are also in dispute over whether Loral met construction deadlines and are waiting until July 1 before taking legal action, Loral said in May 15 SEC filing.