Competition Fears Led to DirecTV Deal

COMPETITION FEARS LED TO DIRECTV DEAL
[SOURCE: Multichannel News, AUTHOR: Mike Farrell]
Faced with growing competition, there's two possible responses from the modern executive -- buy or sell. News Corp.’s decision to include its controlling interest in DirecTV in its pending deal with Liberty Media was spurred in part by concerns that the direct-broadcast satellite giant would not be able to compete effectively against satellite and telephone companies. The biggest obstacle appeared to be the satellite giant’s inability to develop a broadband product. News Corp. acquired the controlling interest in DirecTV from Hughes Electronics in 2003 for about $6.6 billion -- a deal that struck fear into the hearts of cable operators worrying that News Corp. would use its satellite distribution arm to crush the competition. But less than three years after making the sale -- and as DirecTV’s subscriber growth started to decline and cable’s triple-play package of voice, video and data began to gain steam -- News Corp. had a change of heart. According to the proxy filing, News Corp. management began to explore strategic alternatives for the satellite giant in early 2006, “in light of company management’s belief that the DirecTV business faced several strategic, competitive and technological challenges.”
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