The EU yesterday cleared News Corp's £8bn bid to buy the 61% of pay-TV company BSkyB it does not already own, thus making a good day for the company even better. The media conglomerate, run by Rupert Murdoch, seized on the ruling, claiming it would increase the pressure on the British government to do the same.
A few hours later, Vince Cable, who had the power to decide whether to block the deal on public interest grounds publicly, if unwittingly, declared his opposition to the deal. His boast to two undercover reporters that he had "declared war on Mr Murdoch" fatally undermined the business secretary's independence and made it impossible for him to rule on the Sky bid.
That task will now fall to the culture secretary, Jeremy Hunt, a man who has previously expressed admiration for BSkyB. "BSkyB revolutionised the way we watch TV," he told an audience of media executives in August.
In June, soon after News Corp's bid to take full control of BSkyB had been made public, Hunt said: "It does seem to me that News Corp do control Sky already, so it isn't clear to me that in terms of media plurality there is a substantive change, but I don't want to second-guess what regulators might decide."
News Corp said it was "shocked and dismayed" by Cable's boast, but sources close to the company privately acknowledged the chances of its bid for BSkyB proceeding had increased dramatically as a result. The stock market echoed that sentiment. Shares in BSkyB initially fell by 2% as the City absorbed the fact that Cable, the only man who had the power to block the £8bn offer, had indicated he would do so.
They subsequently rallied, however, as the realisation grew it would now be impossible for the business secretary to rule on the bid, and that Cable might even have to resign. the event Cable survived, but a major barrier to the Sky deal may have been removed. Cable was under pressure from leading Liberal Democrats to use his legal powers to signal an end to a period of expansion at News Corp that has made it by far the largest media interest in the country.
However, Hunt faces no such demands from inside his own party. The culture secretary's decision will be guided by the media regulator, Ofcom, which was asked by Cable in November to advise him on whether the deal threatens "media plurality".
Sources close to News Corp said Cable's comments proved beyond doubt he is biased against them. That could give them grounds to appeal against the minister's original decision to ask Ofcom to review the deal as News Corp has said repeatedly that its bid must be judged by the same criteria as any other financial transaction. Now the company could launch a judicial review if the bid is blocked.
The Murdoch-controlled group is thought to be particularly incensed by Cable's claim he had "blocked" the bid, which it argues implied a decision had already been taken to prevent it. Meanwhile, Ofcom is due to report back by the end of the year, with a decision to follow once parliament returns in January. It is highly unusual for a government minister to ignore Ofcom's advice.
It could say there is no case to answer, in which case Hunt will be expected to wave the deal though. If it says the combined market power of News Corp and BSkyB represents a threat to plurality, he will come under pressure to refer to the deal to the Competition Commission for further investigation, whatever his private views. That could take a further six months to complete, at which point Hunt will make a final decision.
But Cable's gaffe could make it easier for News Corp to mount a legal challenge, whatever the culture secretary decides. Cable used his powers as business secretary to issue a formal intervention notice in November and refer the bid to Ofcom, kick-starting the current regulatory process. If he hadn't done so, the deal would effectively have been approved following the EU's decision to clear it on competition grounds.
News Corp's bid to buy the 61% of Sky it does not already own has united Murdoch's commercial opponents like never before. An alliance of UK media groups, including Guardian Media Group, which publishes the Guardian, the owners of the Daily Telegraph, Daily Mail & General Trust and Daily Mirror owner Trinity Mirror, had called on Cable to block the proposed takeover on plurality grounds.
Yesterday the momentum built up over three months by the powerful group of companies calling on Cable to block it evaporated in almost as many hours.
The Guardian
