All roads lead to Dr Malone, the king of cable TV

The Liberty Media chief shuns the spotlight, so an appearance at a Cambridge conference is eagerly awaited
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The Independent Online

He is one of the top media moguls in the US and the second biggest shareholder in Rupert Murdoch's News Corp, but mention John Malone, chairman of Liberty Media, over here and blank looks are the most likely response.

That relative anonymity is set to change. Next month, Mr Malone and Mr Murdoch will share prime billing at the Royal Television Society's bi-annual Cambridge conference, making it one of the year's most eagerly awaited media industry events.

Meanwhile Mr Malone, aged 60, is busy buying cable network assets across Europe, adding to the 25 per cent stake Liberty has in Telewest, Britain's number two operator. Recently he took effective control of United Global Communications, a Netherlands-based operator with far flung assets, and next week is expected to seal a $5.5bn (£3.8bn) deal to buy network systems from Deutsche Telekom, a move that will make Liberty the largest operator in Europe's biggest country.

With Mr Malone's global reach and fast-growing power in Europe neither employees nor partners, past or present, are prepared to discuss him with attribution. But some basic features do stand out.

For one thing, no one questions his intelligence. One media executive who has seen the man in action says: "He's not just smart in the way billionaires are, he's also a scientist and engineer. He can scan pages and pages of numbers and figures and can make sense of them instantly."

In the US he is often referred to as Dr Malone, in recognition of his Phd in operations research. But unlike Mr Murdoch, to whom he is especially close, Mr Malone abjures publicity. "He's very quiet and not at all flamboyant, but can be very witty. John certainly doesn't like the spotlight," says one Liberty watcher.

That makes Mr Malone far removed in temperament from his Australian-American friend and rival. Not for him a loft in Lower Manhattan. Rather, Mr Malone is still based in Englewood, Colorado, a Denver suburb, where for more than 30 years he developed a cable company called Tele-Communications Inc, or TCI, in the argot of media professionals.

Starting from scratch, Mr Malone built TCI into the largest cable firm in America, serving more than 10 million households before it was bought by AT&T in 1998 for $48bn. That coincided with the market peak for cable stocks. But rather than cash out and slow down, Mr Malone moved to AT&T and continued to run the Liberty Media business, which had its own tracking stock, as a separate fiefdom of the phone giant.

Liberty began in the early 1980s when Mr Malone saw the growth of cable would give rise to an explosion of channels to rival the traditional networks. He was an early backer of Discovery, now a group of dozens of factual television channels that span the world and work closely with the BBC.

In Britain during the early 1990s Liberty backed Roger Luard, an accountant who founded Flextech, which became the second largest producer of cable and satellite channels after BSkyB. Those channels, such as Bravo, Trouble, UK Play and the popular UK Gold are marketed in basic cable, satellite and digital terrestrial packages to around 10 million households, some of them in partnership with the BBC. As though no investment could be too obscure, Liberty has wagered on radio here with a stake in The Wireless Group, former Sun editor Kelvin Mackenzie's fledgling national radio network.

With fingers in so many pies, Mr Malone remains at arm's length from day-to-day operations. His secret, some say, isn't in taking majority ownership, but rather in combining a variety of interests that serve to reinforce each other, giving him de facto control.

One former executive of a major Liberty subsidiary says: "He makes investments and finds ways of patching them together to gain control of something much bigger. What I most respect is his ability to gain maximum control with minimum investment. On the surface he may only have 25 per cent of a company, but dig a little deeper and you'll find he has a lot more control than that would suggest."

Oddly, Mr Malone's companies rarely earn a profit. He decided decades ago that profits were a waste of capital since corporate taxes would siphon off a portion of the earnings. Far better, he believed, to build shareholder value through long-term investment.

That recycling of capital from TCI to subsidiaries, rather than, in part, to the US federal tax authorities resulted in the company being a bonanza for shareholders. A $1,000 investment in TCI three decades ago would now be worth over $1m.

But if early investors have been rewarded those who have come on board in recent years have less reason to celebrate. Telewest, floated in 1994 at 182.5p, soared to 563p during the telecoms boom last year, but despite attracting Microsoft as a 25-per-cent shareholder at 263p per share, is now languishing. Telewest shares closed yesterday at 60.5p. Earlier this month, Liberty reported a loss of $2.1bn, hit by a $1.4bn provision for writing down the value of its stake in the UK cable company.

In the US, Liberty Media stock has also been crushed, having lost 40 per cent of its value in the past 12 months. And like many other media executives, Mr Malone has thrown money into some losers. Teligent, a fixed radio network operator, and 360 Networks, a fibre optics player of which he was a director, are both in Chapter 11 court protection from creditors.

No one, however, is writing off Mr Malone or Liberty, of which he owns 44 per cent. The company's 18-per-cent interest in News Corp is worth $7.2bn, while a stake in AOL Time/Warner, the world's biggest media concern, is valued at $7bn. Other holdings are worth billions more.

With the bond markets largely closed to European cable companies and their equity at historically depressed prices, deals to survive are the order of the day. With most roads leading to the cable king, Mr Malone's profile in European media and in the City will be rising.