01 Dec 2000

The most recent James Bond film was called The World Is Not Enough and featured the usual cast of characters planning to hold the planet to ransom. Well, a certain Mr Rupert Murdoch has revived the title for his next move in the media business, but his script is running into re-write trouble.

The last but one Bond film, Tomorrow Never Dies, featured a villainous media mogul intent on world domination and poor old Murdoch is, as usual, being cast as the bad guy in the current scenario - domineering, pushy and ruthless. Of course, these are also the characteristics of many a visionary.

His diabolical plan is to consolidate his global satellite interests into a single company - Sky Global Networks - that intends to provide the first global broadband satellite delivery platform. Sounds simple, but clearly it isn't because nobody has ever done this before.

If not simple, then it's definitely tempting, particularly to a company like Microsoft that has its own ambition to secure a place in the home entertainment business throughout the planet's many living rooms. Bill Gates is trying to replicate the success he had with Windows software on PC, but this time on TV. The idea is that Gates would sink about $1bn into Murdoch's global satellite spin-off in return for about a 3.5% shareholding.

Bill has already poured many millions of dollars into buying stakes in cable TV systems, thereby hoping to influence their software decisions.

He's bought into NTL, Telewest and UPC and is also present in several countries including Taiwan and Portugal.

So far, Microsoft has had a difficult time making its set-top box software work properly and has given away early advantage to rivals like Open TV and Liberate.

If Bill becomes a Murdoch ally, he'll be in good company. John Malone, the chairman of Liberty Media Group, is already an investor, trading his Gemstar TV Guide International business for a near 5% in Sky Global.

Next among the potential cast of characters is Prince Al Waleed bin Talal, the Saudi media investor with significant parts of AOL, Priceline.com and Yahoo! among others. Another long-time Murdoch fan, the prince already owns a stake in News Corp, and is also a partner with Murdoch in Kirch Media in Germany.

What's the prince's role in this script? Murdoch needs credibility and money, but what he needs first is a private market valuation on Sky Global's business from a core believer in the scheme. This will allow the public offering to go out at the highest price possible.

Sky Global is either a clever piece of financial engineering or, as Murdoch would have it, 'the dream beam' which will revolutionise the delivery of all kinds of content anywhere, anytime, using satellites.

From the finance side, Sky Global allows Murdoch to pool his existing satellite businesses, both strong and weak. Once complete, the new company will give him a chance to raise new cash, as well as have a new share currency for growth.

The creation of Sky Global could also boost the value of News Corp shares because loss-making businesses like Star TV would be one stage removed.

News Corp shares have been under pressure lately because prospects for TV advertising are set to be below target and the analyst at Morgan Stanley Dean Witter recently downgraded News Corp, expressing concern that Murdoch may not able to "unlock the value of the unconsolidated assets", which means in layman's terms that the IPO of Sky Global may be delayed due to poor market conditions.

Murdoch claims that the 'dream beam' direct-to-home businesses in Japan, the UK, Germany, Italy and Latin America are worth about $40bn. The value could go higher if Murdoch is successful in striking a deal to include US DBS satellite company DirecTV, which would give him his first platform in the all-important US market.

However, DirecTV, controlled by General Motors, won't come cheap. Rival satellite company chief Charlie Ergen at EchoStar thinks that DirecTV is worth a cool $50-60m.

Murdoch was in London recently for the latest financial results of BSkyB - certainly the jewel in the crown of the Sky Global portfolio. Accompanied by his new wife, Wendi, Murdoch was upbeat that the Sky Global IPO would go ahead early next year at the latest.

Non-cynics say that Mr Murdoch's ultimate ambition has always been to crown himself king of the media world. But if Murdoch is the monarch-in-waiting, then a certain Frenchman thinks he may be next in line to the throne.

Jean-Marie Messier, head of Vivendi, has crossed swords with Murdoch over a 23% shareholding that the French group holds in BSkyB. Vivendi, which is in the process of merging with Seagram, the Canadian drinks, music and film company, had originally considered turning its BSkyB stake into a smaller stake in the more powerful Sky Global Networks.

However, to get its Seagram purchase completed, Messier has had to relinquish this ambition in order to satisfy monopoly concerns of the European Union.

So Murdoch's cast won't include Messier, but the naturalised American won't mind too much. Yes, he needs to replace Vivendi in the Sky Global package and yes, he needs a real financial measure of its worth, but 007 villains never panicked and it's unlikely Murdoch will either.