MCI, News Corp. Announce Joint Venture
May. 10, 1995
WASHINGTON (AP) _ MCI Communications Corp. will invest up to $2 billion in Rupert Murdoch's News Corp. as part of broad deal to provide two-way information and entertainment services, first through computers and later TV.
The nation's second-biggest long distance company and the huge media-entertainment concern will also each invest $200 million in a joint venture to begin operation before the end of the year, the companies said Wednesday.
MCI will invest $1 billion in News Corp. initially with another $1 billion possible over five years. That would make it the largest outside shareholder with a 13.5 percent voting stake. Murdoch's family controls about 31 percent of News Corp. stock.
In value and name recognition, the deal is one of the largest marriages of a telecommunications company and media firm. Like others, however, its immediate potential is limited.
But many executives and investors say that as communications networks advance, more money will be made by providers of the content that is distributed through them. That prospect has caused several telecom and companies to take a stake in media firms, Hollywood studios and the like.
The largest such deal to date has been U S West Inc.'s $2.5 billion purchase of a 25.5 percent stake in Time Warner Inc.'s entertainment business which includes movies and TV shows, pay TV services like Home Box Office and cable TV systems.
In a telephone news conference, the leaders of MCI and News Corp. set their sights broadly for the future.
``Together, we can produce television, movies and publications (and) provide broadband network and direct broadcast capabilities virtually anywhere,'' MCI Chairman Bert C. Roberts said.
``Imagine being able to retrieve computerized information stored in the MCI network whereever you are, whenever you want, without limitation. That's the power of this relationship,'' said Murdoch, chairman of News Corp.
More immediately, however, they said they will likely focus on computer on-line services.
Among News Corp.'s properties is Delphi Internet Services Corp., which has struggled against larger on-line systems like Prodigy and CompuServe but is getting substantial capital to redesign its systems and launch a marketing push later this year.
MCI, for years a key provider of the lines on which the Internet operates, just recently started selling access to the network and software, a product package dubbed ``internetMCI.''
``There's obvious synergy between what MCI is trying to accomplish on the Internet and what Delphi is doing,'' said Berge Ayvazian, analyst at the Yankee Group in Boston. ``Behind both of them now is a firehose of content coming out of News Corp.'s properties.''
News Corp.'s holdings include Twentieth Century Fox, Fox Broadcasting Co., TV Guide, HarperCollins Publishers, The New York Post and 129 other newspapers.
John Malone, chief executive of Tele-Communications Inc., the nation's largest cable company, also noted the on-line connection.
``Rupert clearly wants to be in interactive. He wants to be in news worldwide,'' Malone said at the National Cable Television Association in Dallas, where the Internet has been discussed as a growth opportunity for cable companies.
``Clearly being in news and local information as an information provider to an MCI Internet would be very consistent with much of the other announcements we've been seeing in the last few weeks,'' Malone said.
Compared to the other three broadcast network chiefs, Murdoch has been more bullish about the prospects of interactive services.
His company is positioning itself for the day when broadcasters can deliver digital television into people's homes. By converting to a digital signal, broadcasters would be able to provide multiple channels over just one slice of the airwaves, something they can't do with their existing TV signal.
Murdoch said the deal would not require approval from the Federal Communications Commission, which last week reached a compromise in an inquiry over the foreign ownership composition of Fox's TV stations.
``We don't see any FCC implications in this at all,'' he said.
The new company will report to a management team that will include Roberts and Murdoch. Roberts will be named to the News Corp. board of directors.
News Corp., based in Australia, had assets of $20.9 billion and annual revenues of more than $9 billion as of March 31.
Washington-based MCI had revenue of $13 billion last year.