Hacking report threatens Murdoch's grip on BSkyB

Fri Apr 13, 2012 5:58am EDT
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By Kate Holton and Georgina Prodhan

LONDON (Reuters) - A British parliamentary report into a phone hacking scandal may lead eventually to News Corp being forced into cutting or selling its stake in the highly profitable pay-TV firm BSkyB, having already dropped its bid to buy it outright last year.

Parliament's culture committee is widely expected to criticize News Corp in its long-awaited report, raising the possibility that the British broadcast watchdog Ofcom will take action against Rupert Murdoch's media conglomerate.

News Corp lies at the centre of a long-running scandal over phone and computer hacking, in which journalists intercepted the voicemails of celebrities and crime victims, and now faces allegations that police officers were also paid for information that was used in newspaper reports.

Ofcom, which has to ensure that directors of TV companies are "fit and proper" to hold a broadcast license, is already conducting its own investigation into News Corp and BSkyB's directors, including Murdoch's youngest son James, who resigned as BSkyB chairman last week but remains on the board.

Meanwhile, Murdoch's influential British newspapers, which were subdued for a time at the height of the scandal, have gone on the offensive against Conservative Prime Minister David Cameron and his coalition government.

"From a political standpoint, Rupert Murdoch's attacks could have really burned his bridges with the government," said Ian Whittaker, a media analyst at London investment bank Liberum Capital, who follows BSkyB.

"From the point of view of News Corp's opponents, if you wanted to lance this whole boil once and for all with News Corp and its stake in Sky, this would be a very good opportunity to do that," he said.

"The more this investigation goes on, and the more that is disclosed, the greater the risks for News Corp that it could be forced to sell its stake," he said. "It's not probable at the moment but increasingly possible."   Continued...

The News Corporation building is seen in New York, July 13, 2011. REUTERS/Brendan McDermid