Liberty Media's Maffei: Small cable operators need a 'big brother'

Smaller cable operators that aren't aligned with a bigger media or cable company are at a disadvantage in the marketplace, Liberty Media President and CEO Greg Maffei told investors and analysts on the company's second-quarter earnings call.

The comments aren't surprising from a company that owns a large stake in Charter Communications (NASDAQ: CHTR) and is therefore an interested party in the planned spinoff of millions of subscribers from Charter and Comcast prior to the closing of Comcast's proposed merger with Time Warner Cable (NYSE: TWC). The combination of Comcast and TWC is currently dubbed "SpinCo" and it is to be led by Michael Willner.

Maffei felt that despite ongoing consolidation among major players, acquisition opportunities still exist for Liberty Media.

"I think there are other transactions out there," Maffei said in response to an analyst question about consolidation in the cable industry. "If you're a nonaligned--meaning non-Comcast, non-Charter--cable company you are at somewhat of  a competitive disadvantage in the video space if you do not have a big brother who is helping lower your cost of content."

Liberty CFO Chris Sheen agreed with Maffei's assessment, calling the relative value of acquiring small cable operators "extremely accretive."

Overall, Liberty Media increased its revenues to $1.16 billion in the second quarter of 2014, a $15 million improvement over the first quarter and in line with analyst estimates. The company's revenue boost was a bright spot amid mixed results for the media and entertainment company, which owns significant stakes in Charter and TWC.

Liberty is moving forward with its own spinoff of those stakes plus other assets into Liberty Broadband, a move that was announced in May and which will take place by the end of this year, the company said in its earnings announcement.

Earlier, the company said the spinoff will be accomplished through a stock dividend to its shareholders. The dividend will be worth up to $4.8 billion and owner John Malone will retain a voting interest of 47.3 percent.

On the plus side, Liberty's operating profits grew from $226 million to $231 million year over year, and its stake in Charter is now worth $4.04 billion, compared to $3.31 billion in Q1 2014.

Charter also grew its subscriber numbers overall, with one-third of its customer base now subscribing to triple-play service, Maffei said on the call. He added that Liberty expects Charter's network to be fully digital by year-end.

Liberty Media's year-over-year net earnings attributable to stockholders fell to $50 million compared to $93 million in the same period last year.

The company's shares on the Nasdaq dropped following Liberty Media's results, but recovered in late morning trading to within a few cents of today's opening price of $46.70.

For more:
- see the release (PDF)
- listen to the webcast
Marketwatch has this story
Hollywood Reporter has this story
- see this Reuters coverage on the spinoff

Related articles:
Liberty Media spinning cable businesses into new Liberty Broadband unit
Charter Q2: Video subscriber losses slow to 29K
Malone: Liberty Broadband tracker will support Charter Communications expansion
Willner tapped as CEO of new Comcast-Charter SpinCo venture