Here’s a conundrum: Pay-radio operator Sirius-XM is making very useful operating profits in its US division (and minority stakes in its Canadian operation also help out). Last week, Sirius-XM paid off $681 million of debt almost a year ahead of time, such is its sound financial position.
John Malone shrewdly bailed the business out from near-bankruptcy in February 2009, with a $530 million cash injection, and in return gaining ownership of 40 per cent of the business and the clear right to take another 11 per cent if he so desired.
Which is more or less where we are today. Last Friday (August 24) Liberty formally filed a petition with the US Federal Communications Commission to take control of Sirius-XM.
Sirius-XM has its share of problems. It still operates two different satellite systems and has not – as yet – harmonised its transmission systems. While the programming itself is the same on each system, the overlap is wasteful and unnecessary. On the upside, it has 22.9 million subscribers in the US.
Back in July, John Malone made some highly critical comments of Sirius-XM’s CEO Mel Karmazin for not expanding more internationally or pursuing better technology.
And this is where it gets really interesting. There is some confusion whether John Malone owns any of Worldspace, now only a shell company, but with significant unused net operating losses that could be usefully set against profits. Also, Malone has in the past used a little known tax efficiency vehicle called a Reverse Morris Trust (he used the model when he spun off DirecTV) and is on record as saying that he would like to spin off Sirius-XM. There has also been frequent market comment that Sirius-XM is not sufficiently geared (borrowed) and is not investing enough. John Malone knows all about highly-geared enterprises.
And Malone knows all about international operations. Whether in Latin America, Europe or Asia, he has his fingers in plenty of media pies. A global pay-radio system, called Sirius, or XM, or even Worldspace might just be the object of his next move. He already has a company ready to do just this: Liberty Satellite Radio.
Worldspace’s two orbiting satellites are ready to fall out of the sky. AfriStar, originally built by Matra Marconi Space, was launched in October 1998 and with a design life of 12 years. In other words, this craft is already into overtime! The second, AsiaStar was launched in March 2000, again with a design life of 12 years.
Malone is nothing if not a shrewd thinker and planner. Malone is a well-known yachtsman and one wonders whether he has spent any of the past few months contemplating the sky above, looking at satellites and scheming of a position in global radio. It is just a thought!