Attachment Exhibit B

This document pretains to SAT-T/C-20100407-00066 for Transfer of Control on a Satellite Space Stations filing.

IBFS_SATTC2010040700066_809576

                                                                                         Form 312
                                                                                         Exhibit B
                                                                                        Page 1 of 8


    DESCRIPTION OF THE TRANSACTION AND PUBLIC INTEREST STATEMENT

       Dr. John Malone ("Dr. Malone") and DIRECTV respectfully submit this
consolidated application for Commission approval of the transfer of de facto control over
various space station, earth station, and terrestrial wireless authorizations held by
DIRECTV and its subsidiaries, which the Commission has attributed to Dr. Malone, from
Dr. Malone to DIRECTV. The proposed transaction will result in the termination of such
de facto control of DIRECTV, placing control of DIRECTV in the hands of all its
shareholders, a large and diverse group primarily comprised of institutional shareholders.
It will thereby result in a more independent DIRECTV, eliminate any vertical integration
with video programming providers in which Dr. Malone has an attributable interest, and
conclusively resolve the attributable links between competing multi—channel video
programming distribution ("MVPD") systems in Puerto Rico — all transaction—specific,
verifiable, and easily quantifiable benefits of the transaction.

         In addition, this transaction presents no cognizable public interest harms. Indeed,
it will resolve any concerns the Commission had with DIRECTV‘s current ownership
structure. Further, the applicants do not seek relief in this Application from the
prograrlnming safeguards established by the Commission in the Liberty Media—DIRECTVY
Order.

     I.    BACKGROUND

          The DIRECTV Group, Inc. ("DTVG") is the corporate name adopted by Hughes
Electronics Corporation ("Hughes") in March 2004 following News Corporation‘s
acquisition of de facto control of Hughes in December 2003." Thereafter, Liberty Media
Corporation ("Liberty Media®") acquired de facto control of DTVG from News
Corporation in 2008," at which time Dr. Malone became the company‘s Chairman of the
Board. Last year, Liberty Media split—off Liberty Entertainment, Inc. ("LEI"), which
held certain assets — including its interest in DTVG and three regional sports networks
("RSNs") (the "LEI Split—off"). Immediately following the LEI Split—off, each of DTVG

!    See News Corporation and The DIRECTY Group, Inc., Transferors, and Liberty Media
     Corporation, Transferee, 23 FCC Red. 3265, Appendix B (2008) ("Liberty Media—DIRECTV
     Order‘).
     General Motors Corporation and Hughes Electronics Corporation, Transferors, and the New
     Corporation Limited, Transferee, 19 FCC Red. 473 (2004) ("News Corp.—Hughes Order").
     Liberty Media—DIRECTY Order, supra. In a series of pro—forma transfers associated with a
     share repurchase process implemented by DTVG, Liberty Media‘s equity ownership interest
     in DTVG increased above 50%. See Public Notice, 23 FCC Red. 10168 (Int‘l Bur. 2008).
     Although Liberty Media held an equity interest in DTVG of approximately 57% at the time
     of the LEI Split—off, its voting interest was contractually fixed at approximately 47.9% with
     the remainder "to be voted in the same manner as, and in the same proportion to," the shares
     held by all other DTVG shareholders.


                                                                                           Form 312
                                                                                           Exhibit B
                                                                                         Page 2 of 8

and LEI became wholly—owned subsidiaries of DIRECTV as a result of merger
transactions (such transactions, together with the LEI Split—off, are referred to in this
application as the "LEI/DTV Transactions"). Because Dr. Malone was considered by the
Commission to have de facto control of the licenses now held by DIRECTV both before
and after the LEI/DTV Transactions, the Commission treated the LEI/DTV Transactions
as a pro—forma transfer of control.*

        As a result of the LEIV/DTV Transactions, Liberty Media itself no longer holds an
equity or voting interest in DIRECTV. However, Dr. Malone, his wife and two trusts for
the benefit of his children (collectively, the "Malones") own, in the aggregate,
approximately 2.5% of the equity and have voting rights of approximately 24.3% in
DIRECTV.* The difference between these two figures is explained by the fact that the
Malones hold all of the outstanding shares of Class B common stock, which carry 15
votes per share, whereas all other DIRECTV shareholders hold shares of Class A
common stock, which carry one vote per share.° The remainder of DIRECTYV‘s equity
and voting interests are widely held, and no other party currently controls more than ten
percent of either of such interests. Dr. Malone is the Chairman of the Board of
DIRECTV, as he was for DTVG. Moreover, as was the case with DTVG, two of the
remaining ten members of the Board of Directors also hold positions with companies
which may be considered to be affiliated with Dr. Malone — Greg Maffei (CEO and
director of Liberty Media) and Paul Gould (director of Discovery Communications, Inc.
("Discovery") and Liberty Global, Inc. ("LGI")).

II.       Description of the Transaction

        Under the terms of a Share Exchange Agreement, in exchange for all shares of
high—vote Class B common stock held by the Malones, DIRECTV will issue to the
Malones a number of shares of Class A common stock equal in the aggregate to the
shares of Class B common stock held by them plus approximately 4.74 million additional
shares (the "Exchange"). After the Exchange, the Malones will beneficially own
DIRECTV Class A Common Stock representing approximately 3% of the equity and
aggregate voting power of DIRECTV.‘ Currently, there are several other shareholders


*     See Liberty Media Corp., 24 FCC Red. 12221 (Int‘l Bur. and WTB 2009).
      By agreement, Dr. Malone‘s maximum percentage voting interest in his Class B shares is
      limited to 24%. Dr. Malone has agreed to cause any Class B shares that exceed the
      maximum percentage voting interest to be voted in the same manner as, and in the same
      proportion to, the shares held by all other DIRECTV stockholders.
      With certain limited exceptions, Class A and Class B shares vote together as one class on all
      matters on which stockholders are entitled to vote, including election of the board of
      directors. The Class B common stock is not publicly traded or listed on any public exchange.
      In conjunction with the Exchange, Dr. Malone has entered into a "standstill" agreement
      restricting his purchase of additional DIRECTV shares which would result in his acquisition
      of beneficial ownership of 5% or more of the equity of DIRECTV until the earlier of the date
      upon which DIRECTV or its subsidiaries ceases to be an FCC licensee and the date upon


                                                                                          Form 312
                                                                                          Exhibit B
                                                                                        Page 3 of 8

with a larger equity and voting interest in DIRECTV than the Malones will have upon
completion of the Exchange. In addition, the Malone interests will fall well below the
minimum levels specified for attribution under relevant Commission rules and orders.®

        As a condition of the Exchange, Dr. Malone, Mr. Maffei, and Mr. Gould will each
tender their resignation from the DIRECTV Board of Directors, effective as of the
closing of the Exchange. This will eliminate any cognizable interest any of them would
otherwise have had in DIRECTV due to "positional" attribution." DIRECTV‘s
Nominating Committee, composed of independent directors, will evaluate and nominate
replacement directors to fill the three vacancies. No such nominee will have an
attributable interest in Liberty Media or LG1I, or otherwise be considered to be
attributable to Dr. Malone as determined in accordance with the Commission‘s rules.

        As a result of the transaction, DIRECTV will continue to be owned by its existing
shareholders. Shares of Class A common stock will continue to be publicly traded on the
NASDAQ Global Select Market and the vast majority of shares will remain widely held.
All that will change is that (1) no person or entity (other than institutional investors) will
hold a 5% or greater voting interest in DIRECTV, where the Malones previously did; and
(2) DIRECTV‘s Board of Directors will be entirely independent of Dr. Malone and
companies which may be considered to be under his de facto control, where three of
DIRECTV‘s 11 Directors (including its Chairman) may be considered to be currently so
affiliated.




    which Dr. Malone ceases to have an attributable interest in a United States MVPD, subject to
    certain exceptions.
    Under the Commission‘s rules, voting interests amounting to 5% or more of the outstanding
    stock of a corporation are attributable. See 47 C.F.R. § 76.501 note 2(a). The Commission‘s
    rules contain no attribution standards explicitly applicable to satellite MVPD systems.
    Nonetheless, for purposes of Condition I of Appendix B of the Liberty Media—DIRECTV
    Order (the "Puerto Rico Condition"), the Commission established Section 76.1000(b) as the
    governing rule. See 47 C.F.R. § 76.1000(b). This rule incorporates by reference the
    attribution rule applicable for purposes of cross—ownership limitations on cable systems set
    forth in Section 76.501 and extends the limitations to nonvoting equity interests of 5% or
    more, with certain exceptions not relevant here.
    The Commission‘s rules provide that "[o}fficers and directors of an entity . . . are considered
    to have a cognizable interest in the entity which they are so associated." 47 C.F.R. § 76.501
    note 2(g).


                                                                                        Form 312
                                                                                        Exhibit B
                                                                                      Page 4 of 8

III. THE PROPOSED TRANSACTION WILL SERVE THE PUBLIC INTEREST,
      CoONVENIENCE Anp NECESSITY WITH No OFFSETTING HaARMsSs

       Consistent with the public interest requirements of the Communications Act, the
proposed transaction will continue the reduction of vertical integration that the
Commission has previously found would "benefit[] the public." 0

        Further, and perhaps most importantly, this transaction will conclusively resolve
the attributable links between two competing MVPDs in Puerto Rico — DIRECTV Puerto
Rico, Ltd. ("DTVPR"), which is a subsidiary of DIRECTV, and Liberty Cablevision
Puerto Rico Ltd. ("LCPR"), which is a subsidiary of LGI. The Commission found Dr.
Malone to have de facto control over the parent companies of these two entities. Based
on these and other factors, the Commission found that the prior "transaction could reduce
competition in those portions of Puerto Rico that are served by LCPR, leading to higher
prices, lower quality service or both.""‘ Thus, as a condition of approving the Liberty
Media—DIRECTY transaction, the Commission required that all of the attributable
interests connecting DTVPR and LCPR be severed, either by divestiture or by otherwise
making the interest non—attributable.

      In an effort to comply with this condition, DIRECTV has placed its entire interest
in DTVPR into a trust intended to render that interest non—attributable under the
Commission‘s rules pending further disposition of that interest.‘" DTVPR has operated
under the control of the independent trustee since February 2009, with the ultimate goal
of divestiture. But this is an interim arrangement, and results in additional costs and
inefficiencies at DTVPR, which will be eliminated when the trust and related decision—
making and information restrictions are terminated. By finally resolving the attributable
links between DTVPR and LCPR, the proposed transaction will (1) satisfy the Puerto
Rico Condition and (2) allow DIRECTV to eliminate the costs and inefficiencies
associated with the trust and related arrangements. This will eliminate uncertainty
regarding DTVPR‘s future and make DTVPR an even stronger competitor in the Puerto
Rico MVPD market — both of which will serve the public interest.""


©   Liberty Media—DIRECTY Order, ® 150, 157 (finding that a transaction would "lead to less
    media vertical integration" and "decrease media consolidation and that this decrease benefits
    the public‘); News Corp.—Hughes Order, ® 150, 157 (same).
‘   See Liberty Media—DIRECTY Order, § 39.
    iSee id., Appendix B, Condition I.
    The Commission has recognized in previous cases that "a trust may be used to indefinitely
    avoid divestiture of a valuable investment, often in conjunction with a new transaction."
    Corporate Ownership Reporting and Disclosure by Broadcast Licensees, 97 FCC 2d 997,
    53 (1984) (footnote omitted). However, the Commission staff has advised DIRECTV that, in
    this instance, the trust cannot remain in place indefinitely.
    Since the completion of the News Corp./Liberty Media transaction in February 2008,
    DTVPR has, among other things, significantly expanded its high—definition service offering


                                                                                        Form 312
                                                                                        Exhibit B
                                                                                       Page 5 of 8


        DIRECTV and Liberty Media currently operate under additional conditions first
adopted in the Liberty Media—DIRECTY Order."" Some of those conditions remain in
place for a set term, absent modification or early termination by the Commission,"" while
others continue to apply until the later of (1) a determination that Liberty Media no
longer holds an attributable interest in DIRECTV, or (2) the Commission‘s program
access rules no longer remain in effect."‘ Because the program access rules remain in
effect, the proposed transaction will not automatically result in termination of those
conditions. The Commission has previously concluded "that these conditions are
sufficient to ameliorate any potential vertical integration harms that might otherwise
occur" due to the combination of Liberty Media‘s and DIRECTV‘s assets under common
control."" Since Liberty Media and Dr. Malone will no longer have any attributable links
to DIRECTV after the proposed transaction is consummated, there is no public interest
basis for imposing additional conditions in connection with this application.




    and launched a pre—paid, lower priced service, resulting in greater than 25% growth in its
    subscriber base.
5   See Liberty Media—DIRECTY Order, Appendix B, Conditions II through IV.
5   See id., Conditions IV.E.2 and V..E.2.
" 1d., Condition HML.6.
"   14.153, 155.


                                                                            Form 312
                                                                            Exhibit B
                                                                         Page 6 of 8

                                 Authorizations to be Transferred

International Bureau Authorizations

                              Licensee/Registrant                   Call Sign

DIRECTV Enterprises, LLC                                            $2430
Satellite Space Stations — DBS                                      $2455
                                                                    $2632
                                                                    $2669
                                                                    $2673

DIRECTV Enterprises, LLC                                            $2242
Satellite Space Stations — 17/24 GHz BSS                            $2244
                                                                    $2243
                                                                    $2796

DIRECTV Enterprises, LLC                                            $2132
Satellite Space Stations — Ka—band                                  $2133
                                                                    $2191
                                                                    $2640
                                                                    $2641
                                                                    $2689
                                                                    $2797

DIRECTV Enterprises, LLC                                            E010129
iSatellite Earth Stations — Transmit/Receive                        EQ10130
                                                                    E020172
                                                                    E030105
                                                                    EQO30117
                                                                    E050112
                                                                    E050113
                                                                    E050121
                                                                    E050122
                                                                    E050229
                                                                    E050230
                                                                    E050255
                                                                    E050286
                                                                    E060014
                                                                    E060187
                                                                    E060188
                                                                    E060236
                                                                    E060298
                                                                    E060299
                                                                    E060441


                                                              Form 312
                                                              Exhibit B
                                                             Page 7 of 8

                                                         E930191
                                                         E930229
                                                         E930304
                                                         E930485
                                                         E950349
                                                         E980285
                                                         E990159
                                                         E020241
                                                         E020242
                                                         E070002
                                                         E070023
                                                         E070027
                                                         E070073
                                                         E070074
                                                         E070111
                                                         E070122
                                                         E070123
                                                         E080025
                                                         E080026
                                                         E080027
                                                         E080028
                                                         E080056
                                                         E080057
                                                         E090024
                                                         E090025
                                                         E090068
                                                         E090069
                                                         E090173

DIRECTV Enterprises, LLC                                 E050340
Satellite Earth Stations — Transmit Only

DIRECTV Enterprises, LLC                                 E980170
Satellite Earth Stations — Receive Only                  E980341
                                                         E040179
                                                         E040180

California Broadcast Center, LLC                         E010237
Satellite Earth Stations — California Broadcast Center   E020091

DIRECTV Enterprises, LLC                                 E040024
Satellite Earth Stations — Blanket Earth Station

Game Show Network                                        E950013
Satellite Earth Stations — Transmit/Receive


                                                       Form 312
                                                       Exhibit B
                                                      Page 8 of 8

Wireless Authorizations

                           Licensee/Registrant   Call Sign

DIRECTV, Inc.                                    WPTZ691
DIRECTV Enterprises, LLC                         WPZC401
DIRECTV INC                                      wQMH919
LABC Productions, LLC                            WQIUI46



Document Created: 2010-04-07 13:27:34
Document Modified: 2010-04-07 13:27:34

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