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News Corp., Cablevision swap net stakes

NEW YORK — Rupert Murdoch’s News Corp. has engineered a deal with its partner, Chuck Dolan’s Cablevision, that will boost Murdoch’s ownership of two valuable sports regionals, Fox Sports Net Florida and FSN Ohio, from 40% to 100%.

While Dolan hands over his 60% of the two units to News Corp., Murdoch will pony up his 40% stake in three other sports regionals in the partnership — the Madison Square Garden Network, FSN New York and FSN Chicago — to Cablevision, which takes 100% control of them.

These three are not, however, as desirable as those in Florida or Ohio, according to Richard Greenfield, cable analyst with the Fulcrum Group.

As Greenfield reports, FSN Chicago has lost all of its professional sports teams to a new Comcast-owned network in the Windy City, and both MSG and FSN New York will lose their rights to the games of the New York Mets beginning with the 2006 season. The team will set up its own regional network, having created a partnership with Time Warner Cable and Comcast. (MSG lost the New York Yankees games three years ago to the Yankees’ own network, YES.)

In other details of the swap, Murdoch will relinquish his 40% control of four of the partnership’s local assets — Radio City Music Hall, the New York Knicks basketball team, the Rangers hockey team and the Liberty women’s pro hoops team — to Cablevision, whose stake balloons from the current 60% to 100%.

This part of the deal reinforces Dolan’s Gothamcentric strategy: Cablevision doesn’t own any major assets outside of the New York, New Jersey and Connecticut region.

The ownership of one of the sports regionals, FSN Bay Area, will remain the same at 60% for Cablevision, 40% for News Corp. But at FSN New England, co-owned by Comcast (50%), Cablevision (30%) and News Corp. (20%), Cablevision will increase its stake to 50% by absorbing News Corp.’s stake.

Greenfield said Cablevision wanted to keep its interest in Bay Area and New England to juice up the bidding if Dolan decides to sell his cable systems, which reach 2.9 million subscribers in the greater New York area.

Time Warner is the logical buyer of these systems because it also has a number of cable systems in the area and is dominant in Manhattan. But Comcast, another cable op player in the Mid-Atlantic states, would also be gung ho about taking control of FSN Bay Area and FSN New England; Comcast already owns a number of existing sports regionals, including its home-based Comcast SportsNet in Philadelphia and the Maryland-based Comcast SportsNet Mid-Atlantic.

In the final piece of the restructuring, News Corp. will swallow up Dolan’s 50% interest in National Advertising Partners, which places advertising spots on the regionals.

Despite all of the maneuvering by News Corp. and Cablevision, Kathy Styponias, media analyst for the Prudential Equity Group, said she doesn’t expect noticeable financial impact overall. As she put it in her report, the deal “does not move the needle much in either direction in terms of valuation.”

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