Twenty-First Century Fox 2006 Annual Report Download - page 87

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
This excessprimarily relates to the Company’s investment in DIRECTV. At June 30, 2006 the remaining excess
included in the investment in DIRECTV was $4.1 billion which represents the excess of fair value over the Company’s
proportionate share of DIRECTV’s underlying net assets as adjusted to record such net assetsat fair value, most notably
the adjustment tothecarrying value of DIRECTV’s SPACEWAY, PanAmSat, Hughes Software Systems and Hughes
Network Systems, Inc. businesses and its deferred subscriber acquisition costs. The Company’s purchase price allocation
reflected the fair value of these assets at the date of acquisition, which approximate DIRECTV’s revised carrying
amounts. As such, portions of the impacts of the preceding items were recognized by the Company through its pur-
chase price allocation. The resulting excess has been allocated to finite-lived intangibles, which are being amortized
over lives ranging from six to 20 years, and to certain indefinite-lived intangibles and goodwill, which are not subject
to amortization in accordance with SFAS No. 142.
In accordance with SFAS No. 142, the Company amortized $83 million and$74million in fiscal 2006 and 2005,
respectively, related to amounts allocated to definite-lived intangible assets. Such amortization is reflected in equity earn-
ings (losses) of affiliates.
Fiscal Year 2006 Disposals
In July 2005, the Company sold its entire cost investment in China Netcom Group Corporation (“ChinaNetcom”). The
Company’s 1% investment in ChinaNetcom was sold for total consideration of approximately $112 million. The Company
recognized a gain of approximately $52 million on this sale includedinOther, net in the consolidated statement of oper-
ations for the year ended June 30, 2006.
Fiscal Year 2005 Acquisitions and Disposals
In June2005, the Company sold its entire cost investment in The Wireless Group plc (“Wireless Group”). The Company’s
38.9 million shares of Wireless Group were sold for total consideration of approximately $60 million. The Company recog-
nized a gain of approximately $6 million on the sale,which is reflected in Other, net in the accompanying consolidated
statements of operations for the fiscal year ended June 30, 2005.
In fiscal 2005, Independent Newspapers Limited merged with Sky Network Television and formed anewcompany
which has been named Sky Network Television Limited (“Sky Network Television”). As part of the transaction, the Com-
pany received net cash consideration of approximately $60 million and increased the Company’s ownership interest in Sky
Network Television by 10%, to 44%.
During fiscal 2005, as part of the Company’s acquisition of the remaining outstanding shares of FEG it did not already
own (See Note 3 Acquisitions and Disposals ), approximately $166 million of the FEG excess purchase price was assigned to
the Company’s investments in National Geographic and DIRECTV, of which approximately $53 million was allocated to
amortizable intangibleswith an estimated weighted average useful life of 17 years.
In October 2004, the Company and its then 34% investee, DIRECTV, announced aseries of transactions with Grupo
Televisa, Globopar and Liberty Media International, Inc. that would result in the reorganization of the companies’
direct-to-home (“DTH”) satellite television platforms in Latin America. The transactions would result in DIRECTV Latin
America and Sky Latin America consolidating their two DTH platforms into asingle platform in each of the major terri-
tories served in the region. As part of these transactions, DIRECTV would acquire News Corporation’s interests in Sky Brasil,
Innova and Sky Multi-Country Partners. The Sky Multi-Country Partners transaction closed during fiscal 2005 and the
Company recognized apre-tax loss of approximately $55 million on this transaction at that time. In February 2006, the
Company completed its previously announced sale of its investment in Innova, a Mexican DTH platform, to DIRECTV for
$285 million. As a result of this transaction, the Company recognized apre-tax gain of approximately $206 million, which
is included in Other, net in the consolidatedstatement of operations for the year ended June 30, 2006. The balance of the
gain was deferred due to the Company’s investment in DIRECTV, the acquirerofInnova. Upon the closing of the Innova
transaction, the Company was released from both its Innova transponder lease guarantee and its guarantee under Innova’s
credit agreement.TheSkyBrasil transaction is expected to occur in fiscal 2007. (See Note 15 Commitments and Con-
tingencies and Note 24 Subsequent Events).
In December 2004, the Company sold its 20% investment in Rogers Sportsnet to Rogers Broadcasting Limited for $41
million. Rogers Sportsnet operates regional sports networks in Canada covering local sports events plus national program-
ming. For the fiscal year ended June 30, 2005, the Company recognized again of $39 million on this sale in Other, net in
the consolidatedstatements of operations.
In January 2005, STAR Group Limited, a direct wholly-owned subsidiary of the Company (“STAR”), completed the
acquisition of approximately 26% in Balaji Telefilms Limited, the largest television content production companyinIndia,
whose sharesarelisted for trading on The Stock Exchange, Mumbai and the National Stock Exchange of India for $34
million.
Impairment Review
During the year ended June 30, 2006, Gemstar-TV Guide’s common stock experienced significant volatility in its market
value trading between alow of $2.24 per share on November 15, 2005 to ahigh of $3.89 per share on May 30, 2006,
approximately 61% and 105% of the Company’s carrying value at June 30, 2006, respectively. As of June 30, 2006, the
Company’s carrying value in Gemstar-TV Guide exceeded its market value by approximately $32 million.
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