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Malones Liberty Is Cash-Rich

John Malone's next vehicle -- a combined Liberty Media
Group and TCI Ventures Group -- will start off with lots of cash and comforting ties to
the old TCI Group.

Along with $5.5 billion expected from tax-free asset sales
to AT&T Corp., the enlarged Liberty will have plenty of lending capacity under the
deal that Tele-Communications Inc. chairman and CEO Malone struck with AT&T chairman
and CEO C. Michael Armstrong.

"The big question is: What will they do with that
cash?" Sanford C. Bernstein & Co. analyst Tom Wolzien asked.

Malone and Dob Bennett, Liberty's CEO, said they would
look at Internet-content businesses and extensions of existing programming investments,
which now include stakes in Discovery Communications Inc. and BET Holdings Inc. and full
ownership of Encore Media Group.

Otherwise, they said, they have plenty of time to review
their options.

"Really, we don't have any noncompetes that came
with this, so we can kind of do in Liberty anything that seems like a good place to invest
money," Malone told analysts in a conference call. "So the sky is wide

Liberty -- which will become an AT&T tracking stock,
but which will still be controlled by Malone and owned partly by other officers and public
shareholders -- will even walk away with $1.7 billion in TCI tax losses, which translates
to further spending power.

Unsurprisingly, Malone and Bennett also made sure that
Liberty's assets would continue to enjoy the benefits of umbilical ties to the
nation's second-largest cable operator.

Malone said that even though Liberty will enjoy virtual
independence from AT&T, it also will have "favored-vendor status" as a
programming supplier and developer to AT&T/TCI, the distributor.

That includes "some very specific and very attractive
commitments, with respect to already-identified opportunities, as well as new
creations," Malone said. "So we can expect a strong and favorable continuation
of the synergies between the two groups that have created so much Liberty value in the

In other words, as AT&T Consumer Services Co., with TCI
president and chief operating officer Leo J. Hindery Jr. as its COO, expands its cable
reach, Liberty's assets will grow, too.

Malone also talked about Liberty creating "a capital
company," run by current TCI Ventures CEO Gary Howard, which will be similar to
General Electric Co.'s GE Capital subsidiary, using some of Liberty's capital
for financial transactions such as "leveraged leasing and other tax-advantaged
investment opportunities."

Liberty's assets also include 85 percent of
Tele-Communications International Inc. (TINTA), 43 percent of QVC Inc., 21 percent of USA
Networks Inc. and 10 percent of Time Warner Inc.

TCI Ventures holders are to get 0.52 shares of Liberty
stock for each TCI Ventures share, under a transaction that will happen independently of
the AT&T-TCI merger. When the AT&T-TCI merger closes, Liberty holders will
exchange their shares for new AT&T tracking-stock shares.