Officers of media giant Telecommunications Inc. outlined plans to spin off $405 million in cable television assets Jan. 23 amid uncertainty over whether the move will quiet critics in Congress.
CEO John Malone said the company will transfer $298 million worth of cable systems and $307 million of mostly minority interests in programming services into TCI’s new Liberty Media subsidiary.
The spinoff, first announced more than a year ago, was designed to quiet fears about TCI exerting excessive control over the cable industry. However, Malone said the deal may not silence calls to limit cable operators’ size and involvement in both system ownership and programming interests. The issues were addressed in a new cable bill introduced earlier this month in the Senate.
Liberty Media will be created via a complicated exchange: TCI will transfer 12% of its assets to Liberty which, in turn, will issue four classes of preferred stock of the same value (roughly $605 million) to TCI.
Malone said creating Liberty Media was preferable to being forced to divest some programming assets into an uncertain market. But the exchange offer has been met with confusion on the part of investors who were intimidated by terms outlined in a 500-page prospectus.
Malone acknowledged it will be difficult to shape the hodge-podge of cable and programming assets into an operating entity. He noted that while Liberty will see subscriber growth in its cable systems, it may “need a hammer and saw” to make the programming properties mesh.
“This was a potpourri of assets TCI acquired to enhance its cable assets, not to form a new company,” Malone said.
The deal, which TCI calls a “simultaneous incorporation,” will create a holding company for a collection of non-managed assets. The $298 million of cable systems include interests in 14 cable franchises with 1.6 million subscribers, per v.p. Bob Bennett.
The other assets include minority interests in 11 regional sports networks and eight national programming networks, including a 50% stake in American Movie Classics and a 16% stake in the Family Channel.