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Malone Sounds Bull Horn on Cable

New York— Cable-industry pioneer and Liberty Media Corp. chairman John Malone sold off his U.S. cable operations years ago, but last week he offered up an endorsement of the business.

Briefly holding court with analysts and reporters after Liberty’s annual investor meeting here last week, Malone said “the cable business has an awfully strong hand in the U.S.”

“If the public turns out, as we’ve always believed, to want random access, satellite is not in a great position to offer that,” he said. “That, plus the bundling capability that cable has.”

Buoyed by positive operating results at the biggest MSOs, U.S. cable stocks are up 5.7% since the beginning of the year after tumbling 10% in value in 2005.

Addressing cable’s other big competitive threat, Malone said he doubted that Verizon Communications Inc. and AT&T Inc. (the company that bought his former company, Tele-Communications Inc.) have the stomach to last long term in the multichannel video business they’re currently entering.

“My experience is overbuilds have never done very well for the overbuilder,” Malone said. “I know the telcos are big companies with big balance sheets, but historically they’ve chickened out when the full [profit and loss] impact of trying to overbuild a cable operator hits them.”

The meeting came a day after Liberty’s two tracking stocks began trading on NASDAQ.

Liberty Interactive (including QVC Inc., Provide Commerce and its interest in InterActiveCorp and Expedia Inc.) and Liberty Capital (which includes Starz Entertainment Group, On Command Corp. True Point; WildBlue Communications Inc.; stock holdings in several media companies, including News Corp. and cable network GSN) began trading May 10, with the more stable Liberty Capital outpacing its higher-growth cousin.

Liberty Interactive, trading under the symbol LINTA, opened at $20.25 per share but dipped as low as $19 before closing at $19.45, down 80 cents. Liberty Capital, which trades under the symbol LCAPA, opened at $73.50 per share and rose as high as $80.45 before closing at $79, up $5.50 each or 7.5%.

Liberty Interactive fell back slightly on May 11, closing at $18.88 (down 57 cents or 2.9%) while Liberty Capital continued to gain ground, closing at $81.97 (up $2.17 or 3.8%).