UK Opposition wants Rupert Murdoch’s new Sky bid to be probed

Murdoch’s attempt to buy Sky through his News Corp business provoked uproar among some UK politicians

LONDON: Rupert Murdoch’s new takeover approach for British pay-TV firm Sky should be investigated by the UK’s competition authorities, according to the former minister who referred the tycoon’s previous bid.

Vince Cable, who was Britain’s business secretary at the time of Murdoch’s first bid in 2010-11 told BBC radio the media tycoon’s new takeover attempt would not be in the public interest.

On Friday Murdoch’s Twenty-First Century Fox said it had struck a preliminary deal to buy the 61 percent of Sky it does not already own for around $14 billion. It came five years after a political scandal wrecked his previous bid.

That attempt to buy Sky through his News Corp business provoked uproar among some UK politicians, who said it would give the billionaire owner of The Sun and The Times newspapers too much control over the country’s media.

It collapsed in 2011 when Murdoch’s UK newspaper business was engulfed in a phone-hacking scandal. It intensified political opposition, resulted in a criminal trial, and led to the closure of his News of the World tabloid.

Cable said the issue was the same five years on.

“This is yet again a threat to media plurality, choice, just as it was six years ago when I referred this to the competition authorities and it should be investigated,” he said.

“The ownership of the media, whether you’re looking at press, radio, television is very highly concentrated and this makes it even more concen- trated.”

However, analysts said Friday’s proposal was likely to have an easier ride, partly because News Corp has now separated from Fox, which means the bidding firm no longer owns UK newspapers, and because there are little or no competition issues, with very material changes in the market for news in the UK since 2010.

They also said the British government was keen to promote investment in the wake of the Brexit vote and could present the deal as a sign of confidence in the economy.

“It’s very likely that even if there is a plurality investigation that this will go through,” Clare Enders of Enders Analysis told BBC radio.

“It is a different situation and the entities have been structured differently.”

It will be up to Karen Bradley, the culture, media and sport minister to decide whether the plurality situation has materially changed since 2010.

“Will the government really say he can’t own more than 39 percent of it? I don’t think so,” David Yelland, a former editor of Murdoch’s Sun newspaper, told Reuters.

“It takes a lot of negative energy to block a deal like this and I just don’t see it happening this time around.” In a highly-anticipated move, Rupert Murdoch’s TwentyFirst Century Fox struck a preliminary deal on Friday to buy the 61 percent of British pay-TV firm Sky Plc SKY.L it does not already own for around $14 billion.

Owning Sky would give Fox, whose cable networks include Fox News and FX, subscription revenue from a pay-TV network spanning 22 million households in Europe, a market which has not been as affected as the United States by cord-cutters who drop cable subscriptions in favor of online subscription services.

What Fox does with the technology and expertise that Sky can provide will be particularly important for the company, given it does not have its own U.S.-based direct-to consumer offering, said Tim Nollen, an analyst with Macquarie Research.

“Just like all of the U.S. networks, Fox faces questions around the longer term value of pay-TV subscribers,” he said. “Fox could use Sky to be the centerpiece of a global distribution strategy.”

Fox’s planned acquisition of Sky comes at the end of a strong year for ad sales across the industry largely due to the U.S. presidential election and the Rio Summer Olympics.

In its 2017 fiscal first quarter, the company said domestic ad revenue for its cable networks grew by six percent from the same quarter last year. But analysts predict that next year will be tougher for ad sales. While national television ad sales were up 1.7 percent this year, they are expected to drop 0.4 percent in 2017, according to Pivotal Research. Similarly, Pivotal forecasts that cable television ad sales will be down 0.8 percent in 2017, after a 1.2 percent rise this year.

If the deal for the remaining stake in Sky goes through, 36 percent of the combined company’s estimated 2017 revenue would come from cable network programming, down from 56 percent, according to a note by Stifel on Friday. Meanwhile, cable network programming would account for 56 percent of earnings before interest, tax, depreciation and amortization (EBITDA) in 2017, down from 78 percent.

The deal would help lessen Fox’s dependence on its Fox News Channel for revenue, analysts said.

Also, the sudden departure of Fox News Chief Executive Roger Ailes following widespread allegations of sexual harassment, highlighted to some investors the potential risks associated with Fox News, said Brian Wieser, an analyst with Pivotal Research. At the time, there was concern that his departure would result in a loss of key talent.

Fox News contributed $1.34 billion in EBITDA, or 20 percent of Twenty First Century Fox’s total EBITDA in fiscal 2016, according to estimates by Anthony Di Clemente, an analyst with Nomura. However its viewers, like many of its competitors, tend to be older, with a median age of 65, higher than MSNBC and CNN, according to Nielsen data. While Fox News, known for a lineup of politically conservative commentators, continued to be a ratings juggernaut, its ratings, like all cable news channels, are expected to wane in the wake of the election.

“Fox News clearly faces a cyclical weaker year ahead just coming off the election,” Nollen said. “This creates a bigger, more diversified business.”