BSkyB moves away from NewsCorp
LONDON SATELLITE broadcaster BSkyB sought to distance itself from the phone hacking controversy at its biggest shareholder on Wednesday after British lawmakers suggested the ties to Rupert Murdoch’s News Corp might endanger its licence.
A parliamentary report on Tuesday dropped a heavy hint to regulator Ofcom, which is investigating whether BSkyB is a “fit and proper” broadcaster, by saying in its opinion Murdoch was “not a fit person” to oversee a major international company.
Chief Executive Jeremy Darroch, who has previously said very little on the Ofcom investigation, used the publication of record financial results to stress BSkyB’s importance to the British economy. “I would emphasise that it’s important to remember that Sky and News Corporation are separate companies,” he told reporters.
“We believe that Sky’s track record as a broadcaster is the most important factor in determining our fitness to hold a licence,” he said, reporting record 9 month adjusted operating profit up 15 percent.
Darroch’s willingness to speak out on the subject highlights the growing concern at News Corp and BSkyB that Ofcom could force the former to cut its stake in the latter following its investigation, which is centred on BSkyB’s owners and officers.
The regulator said it was looking at the parliamentary report. It is not obliged to agree with its conclusions and has not given a time frame for any decision.
Any move to cut the 39 percent holding would be a major blow to Murdoch’s $50 billion (30 billion pounds) media empire, which had to pull a bid to buy the whole of BSkyB last year in response to public outrage at phone hacking at the News of the World tabloid.
Rupert’s son James Murdoch, who established his credibility in his own right as chief executive of BSkyB from 2003 to 2007, stepped down as BSkyB chairman last month to prevent the scandal from spilling over into the satellite broadcaster.
He remains on the board however, and Ofcom, which has said it will read the parliamentary report with interest, may note the line that the powerful committee found James Murdoch to be “wilfully ignorant” in his handling of the scandal.
The 39-year-old, who oversaw News Corp’s British newspaper division from 2007 until earlier this year, has apologised for the routine hacking of thousands of people’s voicemails but said he was kept in the dark by staff who covered up their actions.
The reputation of BSkyB, which is run independently from News Corp at a base in west London, has not been damaged by the scandal, but it was forced to defend the newsgathering practices of its own influential Sky News channel last month.
Sky News said it had hacked into emails on two occasions but argued that the story had been in the public interest.
Darroch said on Wednesday: “Sky employs around 19,000 people directly and the growth of our business generates a tax contribution of 1 billion pounds every year. We’re proud of our contribution, which I think is second to none.” Shares in Britain’s dominant pay-TV provider, which is in 10.5 million homes, rose 3 percent in early trading after a period in which the uncertainty surrounding the Murdochs had weighed on the stock, overshadowing the group’s solid trading during tough economic conditions.
Murdoch was quick to react to the parliamentary report, which could threaten his hold over a business which is far more valuable than his newspapers.
In an email to staff, he said he deeply regretted what had taken place but emphasised that News Corp had taken its share of responsibility and said it was time to look to the future.
Murdoch also used the opportunity to announce that an internal investigation into the Times and Sunday Times broadsheets was now over.
He has already closed the News of the World and said last week News Corp investors would like to see him sell his British papers entirely.
Crisis PR guru Richard Levick, whose clients have included the Catholic church and some Arab governments, said the attempt to move on was typical of how Murdoch had acted at every turn of the phone-hacking saga.
“This is just a variation of the ‘rogue’ strategy,” he said, referring to News Corp’s nowabandoned defence that phone-hacking had been the work of a single, “rogue” reporter.
Murdoch, who has already become estranged from the British political establishment, dismissing them as “right-wingers” and “toffs” on Twitter, is likely to care little that a group of left-wing lawmakers have declared him unfit to run his company.
However, the fact that the report even remotely threatens his stake in BSkyB is clearly a concern.