Quarterly report pursuant to Section 13 or 15(d)

Investments In Affiliates Accounted For Using The Equity Method

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Investments In Affiliates Accounted For Using The Equity Method
 9 Months Ended
Sep. 30, 2013
Investments In Affiliates Accounted For Using The Equity Method  
Investments In Affiliates Accounted For Using The Equity Method
Investments in Affiliates Accounted for Using the Equity Method
Liberty has various investments accounted for using the equity method. The following table includes the Company's carrying amount and percentage ownership of the more significant investments in affiliates at September 30, 2013 and the carrying amount at December 31, 2012:
 
September 30, 2013
 
December 31, 2012
 
Percentage
ownership
 
Fair Value (Level 1)
 
Carrying
amount
 
Carrying
amount
 
 
 
dollar amounts in millions
Charter Communications (a) (d)
26
%
 
$
3,619

 
2,440

 
NA

SIRIUS XM (b)
NA

 
NA

 
NA

 
2,766

Live Nation (c) (d)
26
%
 
966

 
431

 
406

 SIRIUS XM Canada (b)
38
%
 
385

 
274

 
NA

 Other
various

 
N/A

 
218

 
169

 
 

 
 

 
$
3,363

 
3,341


The following table presents the Company's share of earnings (losses) of affiliates:
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
amounts in millions
Charter Communications, Inc. (a)
$
(37
)
 
—

 
(74
)
 
—

SIRIUS XM (b)
—

 
(5
)
 
8

 
1,304

Live Nation
13

 
14

 
5

 
(2
)
SIRIUS XM Canada (b)
2

 
—

 
3

 
—

Other
14

 
5

 
46

 
5

 
$
(8
)
 
14

 
(12
)
 
1,307


(a)
As discussed below, Liberty acquired its interest in Charter Communications, Inc. during the three months ended June 30, 2013 for approximately $2.6 billion.

(b)
On January 18, 2013, as discussed in note 2, Liberty acquired an additional 50 million common shares and acquired a controlling interest in SIRIUS XM and as a result consolidates SIRIUS XM as of such date. SIRIUS XM has an investment in SIRIUS XM Canada that was recorded at fair value in purchase accounting. See discussion below of SIRIUS XM Canada.

(c)
During the first quarter of 2013, Liberty acquired an additional 1.7 million shares of Live Nation for approximately $19 million.

(d)
See note 10 for details regarding the number and fair value of shares pledged as collateral pursuant to certain margin loan agreements as of September 30, 2013.

SIRIUS XM Canada

In the acquisition of SIRIUS XM, Liberty acquired an interest in SIRIUS XM Canada which SIRIUS XM accounts for as an equity method affiliate. Liberty recognized the investment at fair value, based on the market price per share (level 1), on the date of acquisition.

In 2005, SIRIUS XM entered into agreements to provide SIRIUS XM Canada with the right to offer SIRIUS XM satellite radio service in Canada. The agreements have an initial ten year term and Sirius XM Canada has the unilateral option to extend the agreements for an additional five year term. SIRIUS XM receives a 15% royalty for all subscriber fees earned by SIRIUS XM Canada each month for its basic service and an activation fee for each gross activation of a SIRIUS XM Canada subscriber on the satellite radio system. SIRIUS XM Canada is obligated to pay SIRIUS XM a total of $70 million for the rights to broadcast and market National Hockey League (“NHL”) games for a ten year term. SIRIUS XM recognizes these payments on a gross basis as a principal obligor. The estimated fair value of deferred revenue from SIRIUS XM Canada as of the acquisition date was approximately $21 million, which is amortized on a straight-line basis through 2020, the end of the expected term of the agreements. SIRIUS XM provides chip sets as well other services and SIRIUS XM Canada reimburses SIRIUS XM for such costs. At September 30, 2013, SIRIUS XM has approximately $40 million and $21 million in related party assets and liabilities, respectively, related to these agreements described above with SIRIUS XM Canada which are recorded in other assets and other liabilities, respectively, in the condensed consolidated balance sheet. Additionally, SIRIUS XM recorded approximately $34 million in revenue, for the period from acquisition to September 30, 2013, associated with these various agreements in the other revenue line in the condensed consolidated statements of operations.

Charter Communications, Inc.

In May 2013, Liberty Media completed a transaction with investment funds managed by, or affiliated with, Apollo Management, Oaktree Capital Management and Crestview Partners to acquire approximately 26.9 million shares of common stock and approximately 1.1 million warrants in Charter Communications, Inc. ("Charter") for approximately $2.6 billion, which represented an approximate 27% beneficial ownership in Charter at the time of purchase and a price per share of $95.50. Liberty accounts for the investment in Charter as an equity method affiliate based on the ownership interest obtained and the board seats held by Liberty appointed individuals. Liberty funded the purchase with a combination of cash of approximately $1.2 billion on hand and new margin loan arrangements on approximately 20.3 million Charter common shares, approximately 720 million SIRIUS XM common shares, approximately 8.1 million Live Nation common shares and a portion of Liberty's available for sale securities. Liberty allocated the purchase price between the shares of common stock and the warrants acquired in the transaction by determining the fair value of the publicly traded warrants and allocating the remaining balance to the shares acquired, which resulted in an excess basis in the investment of $2.5 billion. The excess basis was primarily allocated to franchise fees, customer relationships, debt and goodwill based on a preliminary valuation of Charter's assets and liabilities.