SBC’s exit gives Rupe Direct route

News Corp. offering about $4.5 bil for 20% stake

NEW YORK — Talks between News Corp. and DirecTV parents Hughes Electronics and GM are well under way after telco SBC Communications withdrew from bidding for the satcaster Tuesday.

The move leaves the field clear, or nearly so, for Rupert Murdoch’s company, which has been trying for the better part of three years to buy the satcaster from General Motors. Wall Streeters are mostly dismissive of the wildcard proposal that New York’s Cablevision apparently is trying to cobble together.

An SBC spokesman wouldn’t confirm or deny reports that it was bowing out. But the telco last week sent a strong signal that it wasn’t preparing for any major acquisitions when it approved a $3.9 billion dividend payout to shareholders — 4.5% more than it paid out last year.

Liberty Media bowed out of the bidding for DirecTV last week. Now the U.S. satellite market is News Corp.’s game to lose. Conglom is seen offering about $4.5 billion for a 20% stake in Hughes that will give it ownership control, although not control of the board of directors. The pricetag values Hughes at about $14 a share — a modest premium to its current $11 stock price.

Some on Wall Street think it’s logical Murdoch may squeeze Hughes a bit on price if his is the only offer on the table. News Corp. could make an offer as early as today, But, again, a privileged position as sole bidder might embolden him to dally.

SBC initially wanted to buy all of Hughes, racheting up the stakes for News Corp., which preferred to spend much less and buy only GM’s stake.

Looking to bid up price

GM has tried in vain to find rival bidders for Hughes in an effort to get a better price for the assets — possibly to avoid having to sell them to Murdoch. While the companies insist that business is business, Murdoch’s first run at DirecTV caused some ill will on both sides. GM’s execs are tough negotiators and they ditched Murdoch at the last minute in favor of a bid from rival satellite provider EchoStar. That deal was nixed by federal regulators last fall.

The rumor mill has Cablevision in bed with a host of potential backers, including General Electric and Quadrangle Partners (a financial firm with a minority stake in Cablevision), to mount an offer. Cablevision’s own balance sheet and resources would not seem sufficient to mount a solo offer.

Cablevision declined to comment on the speculation, but seems to like the fact that its name is in the picture. If Cablevision and financial investors somehow pull a rabbit out of their hat, however, Cablevision might be compelled to divest of its cable systems to get regulatory approval — hardly a good climate for such a move.

SG Cowen analyst Tom Watts believes News Corp. and Liberty, which last week agreed to invest $500 million in News Corp., will consider a joint bid for more than 20%. However, with SBC out of the running, News can afford a solo offer.

Sat future delayed

Meanwhile, Cablevision is still wringing its hands over how to handle its own satellite future. In its 10K filing with the SEC this week, Cablevision revealed it has secured a second extension to delay the launch of its planned Rainbow DBS satellite until Aug. 31.

The FCC requires Cablevision to launch a service to fulfill its license obligations not later than Dec. 29. The company said it continues to evaluate its strategic and financial alternatives with respect to its DBS investment, for which it has budgeted only the bare minimum $80 million to launch the bird this year. Actually running a satcasting service could cost the cabler as much as $2 billion.

“Funding for such further investment could come from pending or future asset sales, issuance of new debt or equity securities, or strategic or financial partners,” the company said.

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