DIRECTV 2009 Annual Report Download - page 46

DIRECTV
business, it would be easier for unions to win elections and we could face arbitrator-imposed labor
scheduling, costs and standards. Therefore, the EFCA could impose more labor relations requirements
and union activity on our business, thereby potentially increasing our costs, and could have a material
adverse effect on our overall competitive position. Currently, neither we nor most of our outsourced
home service provider installation vendors have any unions.
We may not be able to obtain or retain certain foreign regulatory approvals.
There can be no assurance that any current regulatory approvals held by us are, or will remain,
sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be
granted on a timely basis or at all, in all jurisdictions in which we operate, or that applicable
restrictions in those jurisdictions will not be unduly burdensome. The failure to obtain the
authorizations necessary to operate satellites or provide satellite service internationally could have a
material adverse effect on our ability to generate revenue and our overall competitive position.
We may have a significant indemnity obligation to Liberty Media, which is not limited in amount or
subject to any cap, if parts of the merger transactions are treated as a taxable transaction.
Despite obtaining a private letter ruling from the IRS and an opinion of legal counsel to the effect
that parts of the merger transactions with Liberty Media qualified as a tax-free distribution for U.S.
federal income tax purposes, the continuing validity of such ruling and opinion is subject to the
accuracy of factual representations and certain assumptions. Any inaccuracy in such representations
could invalidate the ruling or failure to comply with any undertakings made in connection with such tax
opinion, could alter the conclusions reached in such opinion. Even if parts of the merger transactions
otherwise qualify for tax-free treatment, it would result in a significant U.S. federal income tax liability
to Liberty Media if one or more persons acquire a 50% or greater interest in the DIRECTV common
stock as part of a plan or series of related transactions that includes the merger transactions within a
certain time frame. The process for determining whether an acquisition is part of a plan under these
rules is complex, inherently factual and subject to interpretation of the facts and circumstances of a
particular case. Liberty Media or DIRECTV might inadvertently cause or permit a prohibited change
in the ownership of DIRECTV to occur, thereby triggering a tax liability to Liberty Media.
In addition, Liberty Media entered into a tax matters agreement with News Corporation in
connection with the News/Liberty transaction in 2008, pursuant to which Liberty Media agreed, among
other things, to indemnify News Corporation and certain related persons for taxes resulting from
actions taken by Liberty Media or its affiliates that cause the News/Liberty transaction (or related
restructuring transactions) not to qualify as tax-free transactions. Liberty Media’s indemnification
obligations to News Corporation and certain related persons are not limited in amount or subject to
any cap.
Under a Tax Sharing Agreement between Liberty Media and us, we are obligated to indemnify
Liberty Media and certain related persons for any losses and taxes resulting from the failure of the
merger transactions to be tax-free transactions in certain circumstances and from any losses resulting
from Liberty Media’s indemnity obligations to News Corporation under the tax matters agreement
between News Corporation and Liberty. If we are required to indemnify Liberty Media or certain
related persons under the circumstances set forth in the Tax Sharing Agreement, we may be subject to
substantial liabilities not limited in amount or subject to any cap, which could materially adversely
affect our financial position and short term operating results.
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