Narrative description

0010-EX-TU-2008 Text Documents

DIRECTV Enterprises, LLC

2008-05-21ELS_90376

                                                                                                     Form 703
                                                                                                      Exhibit 1
                                                                                                     May 2008
                                                                                                    Page 1 of 3



                  Description of the Transaction and Public Interest Statement


       On February 25, 2008, the FCC approved Liberty Media Corporation’s (“Liberty
Media”) acquisition of de facto control of the FCC licenses and authorizations held by The
DIRECTV Group, Inc. and its subsidiaries (collectively, “DIRECTV”). See In the Matter of
News Corporation and The DIRECTV Group, Inc., Transferors, and Liberty Media Corporation,
Transferee, 23 FCC Rcd. 3265 (2008) (“Liberty Media-DIRECTV Approval Order”). This
application seeks the FCC’s consent to the pro forma transfer of control of the experimental
authorization listed in this application that may result from the implementation of DIRECTV’s
Share Repurchase Program as described below.

I.      Liberty Media’s De Facto Controlling Interest in DIRECTV
        and The DIRECTV Share Repurchase Program

       The Liberty Media-DIRECTV Approval Order noted that, upon completion of the
DIRECTV transaction, Liberty Media would “have a 40.36 percent interest in DIRECTV,
making it the largest stockholder” in DIRECTV “by far.” See Liberty Media-DIRECTV
Approval Order at ¶2. The Liberty Media - DIRECTV transaction was completed on February
27, 2008. On April 3, 2008, Liberty Media announced the purchase of an additional 78.3 million
DIRECTV common shares, thereby increasing Liberty Media’s ownership in DIRECTV to
approximately 48 percent.

        On May 7, 2008, DIRECTV announced that it had increased its program to repurchase its
common stock (the “DIRECTV Share Repurchase Program”) to three billion dollars. See
DIRECTV Form 8-K, filed May 7, 2008 (“DIRECTV 8-K”), at 2. DIRECTV has stated that its
repurchase of its common stock through the DIRECTV Share Repurchase Program may result in
Liberty Media “having Beneficial Ownership in the aggregate of 50% or more” of DIRECTV’s
issued and outstanding shares.1


1
          See Letter Agreement Dated May 6, 2008 Among The DIRECTV Group, Inc., Liberty Media Corporation,
Greenlady Corporation and Greenlady II, LLC, DIRECTV 8-K, Exhibit 10.1, § 1(e) (“Letter Agreement”). The
Letter Agreement sets forth certain agreements between DIRECTV and Liberty Media regarding the DIRECTV
Share Repurchase Program. Among other things, the Letter Agreement provides that Liberty Media will cause the
shares that exceed Liberty Media’s percentage ownership of DIRECTV’s issued and outstanding stock at the time of
the Letter Agreement (47.888%) “to be voted in the same manner as, and in the same proportion to,” the shares held
by all other DIRECTV stockholders. See Letter Agreement, §3(a)(i). Thus, although Liberty Media’s equity
interest in DIRECTV may increase to 50 percent or higher as a result of DIRECTV’s Share Repurchase Program,
Liberty Media’s percentage voting interest that exceeds the 47.888% interest in DIRECTV will be voted in
accordance with the Letter Agreement.


                                                                                      Form 703
                                                                                       Exhibit 1
                                                                                      May 2008
                                                                                     Page 2 of 3

II.    DIRECTV’s Share Repurchase Program Will Likely Result in
       Liberty Media Owning More Than 50 Percent of DIRECTV

        Implementation of DIRECTV’s Share Repurchase Program is expected to reduce the
number of outstanding shares of common stock such that the shares of DIRECTV common stock
currently beneficially owned by Liberty Media will constitute 50 percent or more of DIRECTV’s
issued and outstanding shares of common stock. Such an increase in Liberty Media’s ownership
percentage of DIRECTV’s common stock would result in a pro forma transfer of control of
DIRECTV.

        “Through long administrative interpretation,” the FCC has developed the following test
for determining whether a transaction constitutes a substantial or pro forma transfer of control:
(1) is 50 percent or more of the stock being transferred; and (2) will 50 percent or more of the
outstanding stock be held by a person or persons whose qualifications have not been approved or
“passed upon” by the FCC in previous application(s). See, e.g., Barnes Enterprises, Inc. 55 FCC
2d 721 (1975), at ¶8. “[W]here a ‘passed upon’ individual is going from de facto control to de
jure control, the use of a short form is appropriate because such transactions do not involve a
substantial change of control.” Metromedia, Inc.; For Consent to the Transfer of Corporate
Control from John W. Kluge (De Facto Control) to John W. Kluge (De Jure Control), 98 FCC 2d
300 (1984), at ¶9, recon. denied, 56 RR 2d 1198 (1984).

        Here, DIRECTV’s implementation of the DIRECTV Share Repurchase Program is likely
to cause Liberty Media, which is currently considered to have de facto control of DIRECTV, to
increase its beneficial ownership of DIRECTV common shares to 50 percent or more of
DIRECTV’s issued and outstanding stock. The FCC already has approved, or “passed upon,”
Liberty Media’s acquisition of de facto control of DIRECTV. Thus, even if Liberty Media is
treated as “acquiring” de jure control of DIRECTV as a result of DIRECTV’s Share Repurchase
Program, the transaction would be deemed a pro forma transfer.


                                                                                       Form 703
                                                                                        Exhibit 1
                                                                                       May 2008
                                                                                      Page 3 of 3

III.      The Pro Forma Transfer of Control of DIRECTV is Consistent with the
          Public Interest, Convenience and Necessity

        The FCC already has determined that Liberty Media’s acquisition of de facto control of
DIRECTV is consistent with the public interest, convenience and necessity. See Liberty Media -
DIRECTV Approval Order at ¶157. The increase in Liberty Media’s ownership percentage in
DIRECTV’s common stock, which is expected to occur through the implementation of the
DIRECTV Share Repurchase Program, will not affect the primary public interest benefit of the
Liberty Media-DIRECTV transaction recognized by the FCC. Further, the implementation of
the DIRECTV Share Repurchase Program will not affect the operations associated with the
experimental authorization listed in this application. Liberty Media respectfully submits that any
pro forma transfer of DIRECTV that may result from the DIRECTV Share Repurchase Program
is consistent with the public interest, convenience and necessity.



~Doc# 34824.1~



Document Created: 2008-05-21 10:01:27
Document Modified: 2008-05-21 10:01:27

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