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Cable, Satellite Drive News Growth

4/28/2006 8:00 PM Eastern

UBS cable and satellite debt and equity analyst Aryeh Bourkoff expects News Corp. to return to double-digit growth after it announces its fiscal third-quarter results next week, fueled mainly by its core cable and satellite businesses.

In a research report, Bourkoff wrote he expects the media giant to report 6% revenue growth to $6.4 billion, operating income growth of 14.5% to $1.02 billion and earnings per share to rise 69% to 22 cents from 13 cents in the prior year.

Driving future cable network growth will be the potential for a big rise in affiliate fees for its flagship Fox News Channel. According to a report last week in Multichannel News, Fox News is asking cable operators for $1 per month per subscriber for the channel, an increase over the 25 cents the channel has been receiving. Its affiliate deals begin to expire in September.

The potential of increased affiliate fees prompted Bourkoff to raise his valuation of the cable networks segment from $3.87 per share to $4.55 per share, a 17.6% increase.

Bourkoff also heaped praise on News Corp.’s Fox Interactive Media unit, which houses social networking Web site MySpace.com, among others.

Bourkoff wrote that while MySpace is not expected to turn cash flow positive until 2007, he estimated that revenue from the unit would be $300 million in fiscal 2006, growing to $350 million to $400 million in fiscal 2007.

September