John Malone – 'Darth Vader' prepares to resume battle with Rupert Murdoch

http://www.guardian.co.uk/media/2013/feb/06/john-malone-rupert-murdoch-liberty-global

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US billionaire John Malone's penchant for stitching together multi-billion pound deals in the byzantine world of the US cable industry led former US vice president Al Gore to nickname him "Darth Vader". Wall Street traders impressed with his cut-throat tactics prefer the moniker "swamp alligator".

Rupert Murdoch may have a few choice words of his own to add, after Malone on Wednesday reignited a rivalry – sometimes fierce, at other times frenemy-like – to dominate the US and UK pay-TV market stretching back decades, by creating the world's largest cable TV company with Liberty Global's $23.3bn (£15bn) acquisition of Virgin Media.

The 71-year-old last crossed swords with Murdoch in the middle of the last decade and is one of the few media moguls who can claim to have got the better of the wily octogenarian and News Corporation founder.

Malone built up a stake of about 18% in News Corp, becoming its second largest shareholder and threatening the Murdoch family's cast-iron grip on the global media giant. After a two-year stand-off, in 2007 Malone used this stake as leverage in an asset swap that won him Murdoch's controlling stake in DirecTV, the largest satellite business in the US.

He had a chance to strike again in 2011 when a weakened Murdoch was forced to pull his $8bn offer to take full control of BSkyB as the phone-hacking scandal engulfed News Corp.

However, Malone passed up the opportunity, saying that in previous deals Murdoch had acted with the "greatest integrity" and he did not want to give him a "hard time".

Challenge to BSkyB<br />

Nevertheless, Malone has wanted to become a major player in the UK pay-TV market for more than a decade. He was thwarted in his attempt to parlay a 25% shareholding in Telewest into the UK's biggest cable company by snapping up NTL. A merger of the two eventually formed Virgin Media in 2006 and Malone attempted to hide his true ambitions when it came up for auction a year later.

"The bottom line issue is can anything flourish under the Death Star?," he said at the time, using the Star Wars analogy to question BSkyB's market dominance.

Over the past few years, while he waited for his chance to re-enter the UK market, Malone has astutely used Liberty Global to build a cable empire in 13 countries, clearly targeting western Europe with sell-offs in other countries, including Japan and Australia, a strategy that would always lead to a showdown with Murdoch in the UK.

"We have a long history of co-operative relations with News Corp in its various configurations," Malone told City analysts, sensing media mogul blood on Wednesday after the Virgin Media deal was confirmed, in a bid to downplay the expectation of a battle of the pay-TV titans.

Malone is a deal junkie who has built up a fearsome reputation building, dismantling and selling several business empires in a 40-year career.

His eclectic range of current investments include bookseller Barnes & Noble, the world's largest live event company Live Nation, US digital radio giant Sirius, the Atlanta Braves baseball team, TripAdvisor, and shopping channel QVC.

"He is a prolific dealmaker, known for taking advantage of tax structures and making very complex arrangements often where he negotiates voting control well in excess of his equity investment," said one industry insider. "He is a deal junkie with roots as the 'King of Cable'."

Malone was born in 1941 in the New England town of Milford, Connecticut, attended Yale University and took a Phd from Johns Hopkins University in 1967 in operations research.

Early beginnings

After starting out at Bell Telephone Laboratories/AT&T, he went on to McKinsey. But it was his gamble in 1972, uprooting his family and moving to Denver to run a small cable company called TCI, that marked the start of the career of the "Cable Cowboy", the title of a 2002 biography charting his domination of the industry.

Over the next two and a half decades, Malone knitted together cable networks across the US – and bought and sold UK assets including a stake in Flextech, at the time owner of channels including UK Gold – on the way to building America's largest operator. He was chief executive of TCI for 24 years until 1996, with the company eventually sold to AT&T for $48bn near the height of the tech and telecom boom in 1999.

He has used part of his estimated $5.6bn fortune to become a "conservation activist" and is the largest private landowner in the US. His 2.2m acres puts him just ahead of old friend and business partner Ted Turner, the founder of CNN.

He likes to keep a close eye on his cable and pay-TV rivals, and occasional partners, with minority investments in Time Warner, MTV-owner Viacom and Discovery, which was spun off from Malone's Liberty Media in 2005.

Malone is an intensely private man whose supposed aversion to flying means his holiday of choice is said to be a family vacation alongside long-time friends in a super-sized Winnebago.

However, holidays are likely to be in short supply if Malone is serious about taking on Murdoch in the UK, particularly if he sets out to make further British acquisitions.

City investors are already salivating at the possibility that Malone might look to acquire ITV, revisiting NTL's ill-fated attempt to acquire the UK's largest advertiser-funded broadcaster to bolster its position in the market in 2006.

It was James Murdoch, then chief executive of BSkyB, who thwarted the bid with an audacious move to take a 17.9% blocking stake in ITV, preventing its then biggest pay-TV rival from making a flanking manoeuvre into free-to-air TV. BSkyB was eventually forced to sell down its ITV stake, but still retains a stake of 7.5%.

"What Murdoch has done in satellite [Malone] has done in cable," said one City source. "If anyone can give Murdoch a run for his money in the pay-TV market, it is Malone, the battle will be priceless."