Liberty Media Executive Insights: FCC App and Sirius XM Options

On Tuesday, Liberty Media Corporation (NASDAQ:LMCA) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

FCC Application

Benjamin Swinburne – Morgan Stanley: So, on the SIRI (NASDAQ:SIRI) transaction that you announced, I guess I’ll just ask sort of a little bit of a dumb question, but why did you guys decide to move to 45% or sort of move towards that number; why not higher, what’s the benefit to Liberty? And then, the FCC application, sort of the same question, what is de facto control per the FCC due for Liberty? I don’t believe it changes sort of the governance of SIRI, and sort of trying to understand the sort of tangible benefits of that application as well, and I’m guessing – or just another question is, does going to 45% then change your application to the FCC? You mentioned you have 30 days to file sort of a reconsideration. And while I’m guessing that new number now, sort of changes the game a little bit there?

A Closer Look: Sirius XM Earnings Cheat Sheet>>

Gregory B. Maffei – President and CEO: So, I will try and answer those – I don’t think they are dumb questions because I think they are (indiscernible). I think we constructed this forward on incremental shares both because we thought it was attractive financially and because we thought it increased some of our options around all the ultimate relationship with SiriusXM (NASDAQ:SIRI) is. As far as de facto control my layman understanding would be we have a certain series of rights under by contract with SiriusXM (NASDAQ:SIRI) to be able to fully exercise those rights freely. We need to have de facto control approved by the FCC and we have a – that’s why we went in effect to (indiscernible) some of that. As far as changing our application, I think, there are host of things – actions we might take including this action we have taken which will have bearing on our application and we will weigh those as we said over the next 30 days and decide how to amend.

SIRI Options

Doug Mitchelson – Deutsche Bank: So, I wanted to keep going along those lines not surprisingly. You mentioned that this would increase the additional shares increase as the options with SIRI (NASDAQ:SIRI). Could you provide more detail behind how it increases the options that you have with SIRI (NASDAQ:SIRI)?

Gregory B. Maffei – President and CEO: Well, I think in the past no new news, we have talked about several things we might ultimately do with SiriusXM (NASDAQ:SIRI). I said, probably not on the list was a sale of our shares for cash that incurred a corporate level tax but on the list might include either spinning our shares away with some of the active trader business into a separate holding company the way we did at one point with our Liberty Media International series and I’ll (claim) Liberty Global. It might include a spinning our shares in a more constructed transaction like a Reverse Morris Trust as we did with DIRECTV (NASDAQ:DTV), which had the ultimate impact of putting our shares of DIRECTV (NASDAQ:DTV), and in this case our shares of SiriusXM (NASDAQ:SIRI) directly into the hands of our shareholders. And lastly, we might go into control, and you could define that as either corporate level control of 51% or you can define it as the FCC levels of control, the fact that we’re (the jury) and all those options remain on the table and I think all those options are probably enhanced in our judgment by this incremental forward.

Doug Mitchelson – Deutsche Bank: Then, if I could ask a couple of questions about the forward contract, is the $2.15 price indicated in the press release, is that price point locked-in or does it vary based on execution with your counterparty?

Gregory B. Maffei – President and CEO: No, that price is locked.

Doug Mitchelson – Deutsche Bank: I don’t know if you want to share, but do you believe that the stock has already been purchased in the open market or is this just hedged or is the bank making a bet on the stock price going forward?

Gregory B. Maffei – President and CEO: I think that’s the job of the financial counterparty to make those calls and I don’t know exactly what their actions on the either side are.

Doug Mitchelson – Deutsche Bank: And any chance you care to share who the counterparty is?

Gregory B. Maffei – President and CEO: I don’t believe it’s a German bank. I’ll leave it at that.

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