Twenty-First Century Fox 2007 Annual Report Download - page 85

NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
(b) The Company’s investment in several of its affiliates exceeded its equity in the underlying net assets at their acquisition by a total
of $5.9 billion and $5.7 billion as of June 30, 2007 and 2006, respectively.
This excess primarily relates to the Company’s investment in DIRECTV. At June 30, 2007 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 assets at fair value, most notably the adjustment to the carrying
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 purchase 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 $96 million and $83 million in fiscal 2007 and 2006, respectively,
related to amounts allocated to definite-lived intangible assets. Such amortization is reflected in equity earnings of affiliates.
Fiscal Year 2007 Acquisitions and Disposals
In August 2006, the Company sold a portion of its equity investment in Phoenix Satellite Television Holdings Limited (“Phoenix”),
representing a 19.9% stake, for approximately $164 million. The Company recognized a pre-tax gain of approximately $136 million
on the sale included in Other, net in the consolidated statement of operations for the fiscal year ended June 30, 2007. The Com-
pany retained a 17.6% stake in Phoenix, which is accounted for under the cost method of accounting and, accordingly, the carrying
value is adjusted to market value each reporting period as required under SFAS No. 115, “Accounting for Certain Investments in
Debt and Equity Securities.”
In July 2007, the Company and its joint venture partner sold a majority of the cable systems in Taiwan, in which the Company
maintains a minority interest ownership, to a third party. The Company will be recording a gain in proportion to its minority interest
on this transaction. The Company and its joint venture partner intend to sell the remaining cable systems in fiscal 2008.
In October 2006, the Company acquired a 7.3% share in Fairfax, an Australian newspaper publisher, for approximately $299
million. The Company sold its investment in Fairfax in May 2007. A loss of approximately $9 million on this sale was included in
Other, net in the consolidated statement of operations for the fiscal year ended June 30, 2007.
In December 2006, the Company acquired 25% stakes in each of NGC International and NGC UK joint ventures for a combined
total of approximately $154 million. These two joint ventures produce and distribute the National Geographic Channel in various
international markets. The transaction increased the Company’s interest in NGC International to 75% with National Geographic
Television holding the remaining interest. In January 2007, National Geographic Television agreed to certain governance changes
related to the operations of NGC International and NGC Latin America which gave the Company operating decision-making author-
ity and control over these entities. Accordingly, the results of NGC International and NGC Latin America have been included in the
Company’s consolidated results of operations since January 2007.
Fiscal Year 2006 Disposals
In July 2005, the Company sold its entire cost investment in China Netcom Group Corporation (“China Netcom”). The Company’s
1% investment in China Netcom was sold for total consideration of approximately $112 million. The Company recognized a gain of
approximately $52 million on this sale included in Other, net in the consolidated statement of operations for the fiscal year ended
June 30, 2006.
Fiscal Year 2005 Acquisitions and Disposals
In June 2005, 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 recognized a
gain of approximately $6 million on the sale, which is reflected in Other, net in the accompanying consolidated statements of oper-
ations for the fiscal year ended June 30, 2005.
In fiscal 2005, Independent Newspapers Limited merged with Sky Network Television and formed a new company which has
been named Sky Network Television Limited (“Sky Network Television”). As part of the transaction, the Company 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, Disposals and Other Transactions), 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 amortiz-
able intangibles with an estimated weighted average useful life of 17 years.
In October 2004, the Company and its then 34% investee, DIRECTV, announced a series 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 con-
solidating their two DTH platforms into a single platform in each of the major territories served in the region. As part of these trans-
actions, DIRECTV would acquire News Corporation’s interests in Sky Multi-Country Partners, Innova and Sky Brasil.
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