Media deal promises dual benefit

Rupert Murdoch is weighing a complicated stock-swap deal with John Malone, an ally and widely respected war-horse of the US cable television industry.

If successful, the agreement will catapult Mr Malone into the inner circle of power inside Mr Murdoch's global media empire, News Corporation.

The Wall Street Journal reports that the negotiations would involve each man investing in the other's companies. Most importantly, Mr Malone could emerge with a 20 per cent stake in News Corp as well as a seat on the board. The Murdoch family hold 30 per cent of News Corp.

Mr Malone is chairman of Liberty Media, which was formed after the merger of his old company, TCI, a cable-TV giant, with AT&T.

In exchange for his new shares in News Corp, Mr Malone would trade stock in Gemstar TV Guide, itself 20 per cent owned by Liberty.

Such a deal would rekindle speculation about the eventual succession at News Corp in the event of Mr Murdoch retiring. While Mr Murdoch's sons, Lachlan and James, both have important positions in the company, neither is considered capable of taking the rudder just yet. Most eyes have been on Peter Chernin, one of Mr Murdoch's most trusted lieutenants and the current president.

Taking a stake in Gemstar would help Mr Murdoch enhance the value of his nascent Sky Global Networks, which he hopes to take public this year. It may also boost his ability to buy DirecTV, a satellite TV distribution network in the US, owned by the Hughes Electronics division of General Motors.

Mr Murdoch is believed to be anxiously coveting DirecTV. Its acquisition would allow him finally to take control of a satellite television operation in the US and thus fill in a gaping hole in his global assets.

It would complement his other satellite television systems around the world, including British Sky Broadcasting.

GM signalled several months ago that it was interested in spinning off Hughes Electronics. It is thought that Mr Malone, who already has a 7 per cent stake in News Corp, would also receive shares in Sky Global.

Under the deal, the stake of News Corp in Gemstar TV Guide would rise to 40 per cent.

- INDEPENDENT