Murdoch in asset swap talks with Liberty's Malone

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Rupert Murdoch may be willing to give away one of his most prized assets, the DirecTV satellite business in the US, in return for Liberty Media's 18 per cent stake in his News Corp empire.

Mr Murdoch plotted for 20 years to get into the satellite TV business in the US, pulling off a deal to buy a controlling interest in DirecTV in 2003.

However, Liberty, run by the rival media mogul John Malone, has built up a holding in News Corp that Mr Murdoch believes is so hostile that he has put in place a "poison pill" defence to prevent a Liberty takeover.

That poison pill mechanism must be put to News Corp shareholders and he is apparently keen to resolve the Malone issue before that event. The defence, put in place in November 2003, has already been extended once by shareholders, and it would face another vote in the meeting on 20 October.

Mr Murdoch's family has a 30 per cent interest in News Corp and the 74-year-old has always said that he wants to hand on control to one of his children, a cherished plan that is potentially threatened by Mr Malone's stake in the company.

The idea that Mr Murdoch would be willing to swap DirecTV for the Liberty stake shocked Wall Street and the media industry yesterday. Although it was known that the two media titans had been negotiating a swap on-and-off since Mr Malone acquired the News Corp interest in early 2004, it was thought that it would involved giving Liberty some television channels in return for its shares.

According to reports yesterday, those negotiations now include the much more strategically valuable DirecTV, which has 15.5 million subscribers. Pulling off a swap of assets agreement would mean that the poison pill was no longer required by News Corp.

Liberty's News Corp stake in News Corp is worth some $11bn (£5.8bn), while the News Corp interest in DirecTV, which is also listed, is worth some $9bn. Liberty apparently wants the transaction to be tax-free.

Liberty Media's businesses include the QVC shopping channel and analysts said that acquiring satellite distribution would fit well, though they noted that it fitted much better with News Corp, which owns the Fox family of channels.

For Mr Murdoch, technological and market developments have meant that satellite is not such an attractive sector now. Subscriber growth at DirecTV has slowed as a result of competition from cable groups, which are able to offer a "triple-play" service of phone, internet access and TV. Phone companies are also now entering the television market.