Liberty Deals 'Clean Up' Investment Portfolio

Stung by the poor performance of some of its more high-profile telecom sector investments, Liberty Media Group Inc. made some moves last week that could make the stock more attractive as its spin-off date draws near.

Liberty, currently a tracking stock of AT&T Corp., is expected to be spun off as a separately traded, asset-based company this summer.

The biggest of those moves was the sale of its 33.7 percent of Teligent Inc. and its 33.3 percent of ICG Communications Inc. to IDT Communications, a Newark, N.J., provider of calling cards and long-distance service.

The deals, terms of which were not disclosed, eliminate two weak links in Liberty's public-investment portfolio.

Liberty stock is up about 36 percent since January, after it lost more than 51 percent of its 2000 value. The stock closed at $16.55 May 3, about 38 percent off its 52-week high of $26.56 per share.

"I think they are trying to clean things up because they were dirty," Sanford Bernstein & Co. Inc. analyst Tom Wolzien said. "There were problems. They made some investments that were actually very, very tiny portions of the overall portfolio, but they got inordinate attention and got beaten up woefully for the mistakes."

Liberty owns public stakes in about 200 different companies, as well as interests in private entities like Discovery Communications Inc. and Starz Encore Group LLC.

Its public portfolio, which comprises the lion's share of Liberty's value, is made up mostly of large stakes in media giants like AOL Time Warner Inc. and News Corp.

Liberty has caught heat for some underperforming public investments — like Emmis Communications Corp., Primedia Inc. and Inc. — but those assets represent less than 1 percent of Liberty's value.

Liberty officials did not return calls seeking comment.

Also last week, Liberty closed a $4.7 billion stock swap that made it the largest non-voting shareholder in News Corp. by yielding holdings in Gemstar-TV Guide International Inc.

Liberty is now News Corp.'s largest individual non-voting shareholder, with 18 percent of outstanding stock. News Corp. becomes Gemstar's largest individual shareholder, with 38 percent equity.

Liberty bought into ICG in February 2000 for about $500 million, when the telco was trading at about $30 per share. ICG's stock later imploded, dropping to under $1 before filing for bankruptcy protection in November.

Teligent — headed until last week by former AT&T Corp. president and COO Alex Mandl — was a high-profile investment for Liberty, which acquired its stake in the company through its acquisition of Associated Group Inc. When Liberty bought the Teligent stake, it was valued at about $56 per share. Last week, the stock traded at 47 cents per share.

Another move that may be on the horizon is the transfer of Liberty's 56 percent stake in OnCommand Corp., a provider of in-room entertainment to hotels, into its Liberty Satellite & Technology Inc. subsidiary.

On April 27, Liberty installed two long-time satellite veterans to head up OnCommand — Liberty Satellite president and CEO Carl Vogel as vice chairman, and Liberty Satellite senior vice president Chris Sophinos, who will become OnCommand's president. Both Vogel and Sophinos will retain their roles with Liberty Satellite.

OnCommand said chairman Jerome Kern would step down as CEO, but stay as chairman.

Vogel and Sophinos are former executives at Liberty's former satellite-TV venture, PrimeStar Inc. Some observers believe installing the two men is the first step in transferring Liberty's OnCommand stake into Liberty Satellite.