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Liberty Media to Add to Sirius XM Stake as Starz Passes 20 Million Sub Mark

John Malone
Matthew Staver/Bloomberg via Getty Images

UPDATED: John Malone's Liberty has struck a $650 million deal to raise its stake in the satellite radio firm to 45.2 percent.

John Malone's Liberty Media on Tuesday reported improved financials for its Starz premium TV arm and home shopping network QVC.

The company also said it has entered into a $650 million agreement to buy shares of satellite radio firm Sirius XM Radio that will increase its stake in the company to 45.2 percent. Analysts said in first reactions that the deal, scheduled to close in the third quarter, increases the likelihood that Liberty could take full control of Sirius.

The FCC last week rejected a claim from Liberty that it has de facto control of Sirius XM.

Liberty CEO Greg Maffei said on a conference call that the stock deal was "attractive financially" and would increase "all of our options."

He signaled that this would lead to an updated SEC application. Among Liberty's Sirius options that he mentioned were a move to control 51 percent or win control however the FCC may want to define it. A spin-off of Liberty's shares away with another active business or a spin-merge combination in a so-called Reverse Morris Trust are also options.

"All those options remain on the table…and are enhanced" through the Sirius stock deal, Maffei said.

Revenue at Starz, led by CEO Chris Albrecht, rose 4 percent over the year-ago period to $405 million in the first quarter. Adjusted operating income before depreciation and amortization (OIBDA) dropped 3 percent to $127 million though amid higher marketing costs for original programming.

Subscribers grew by 7 percent and 2 percent for the Starz and Encore channels, respectively, during the latest period when compared with the year-ago quarter. Starz ended March with 20.1 million subscribers, up from 19.6 million at the end of 2011. It marked the first time that Starz has crossed the 20 million subscriber mark. Encore subscription units amounted to 33.6 million at the end of March, up from 33.2 million at the end of 2011.

Starz on Tuesday also mentioned in the earnings release a carriage deal renewal with Cox Communications.

"Starz again posted impressive subscriber gains and accelerated its slate of Starz original content with the debut of its new series, Magic City," said Liberty CEO Greg Maffei.

Albrecht highlighted that Starz ended March with 53.7 million total subscribers, saying that was a high in the premium TV category. He also said that Starz remains on track to launch its own branded TV Everywhere platform by the end of the year.

And he emphasized that Starz expects to reach by 2014 its goal of having about 50 hours of original programming per year.

Meanwhile, Liberty Interactive reported a 5 percent revenue gain to $1.9 billion for QVC. Adjusted OIBDA advanced 7 percent to $390 million.
 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai