‘Project Apple’ makes a forced sale of some or all of News Corp's shares in British Sky Broadcasting look a little less remote. This is the task force specifically set up by UK media watchdog Ofcom to scrutinise whether BSkyB still meets its ‘fit and proper’ test for broadcasters. A selloff would be a drastic and unprecedented outcome. But the heightened scrutiny suggests it's not impossible, in a scandal that's already taken plenty of unpredictable turns.
The risk has been apparent since July. It arises because Ofcom's test is applied to a broadcaster's directors and substantial shareholders. Here that would include News Corp, which is BSkyB’s biggest shareholder, and BSkyB Chairman James Murdoch, who until recently chaired the parent company's UK newspaper business, which is at the centre of a worsening British media storm.
If Ofcom decided Murdoch himself posed a problem, his departure from the BSkyB chairmanship would presumably smooth things over. But if Ofcom were to give News Corp itself the thumbs down, a forced sale could follow. However, that would be an extraordinary verdict against one of the world’s biggest media groups. Ofcom’s previous actions — such as banning a small, serially rule-breaking adult-TV firm — are scarcely a precedent.
Any decision is some way off. Ofcom says it doesn't want to pre-empt police, public and parliamentary inquiries. But since the fit and proper test carries a lower burden of proof than a criminal conviction, it wouldn't necessarily have to wait for long-running court cases to conclude. Still, talks about licence revocation could take months more, and would face legal challenges. It’s also not clear if a penalised News Corp would need to shift its entire stake - worth more than £4.6 billion at current prices - or whether selling down below the conventional 30 per cent threshold for control would be sufficient.
The phone-hacking scandal already forced News Corp Chairman Rupert Murdoch, James's father, to abandon his bid for full control of the hugely cash-generative BSkyB. Ofcom could worsen the pain. For BSkyB's outside shareholders, applying even ballpark probabilities to the possible outcomes is a huge challenge. It's uncharted legal territory that’s suffused with politics. But if anything, the uncertainty surrounding the future of News Corp’s holding in BSkyB has increased.
Valuations stretched as current price factors in 8% volume growth in FY15-16, which is unlikely to play out
The verdict on deemed licences has the Street question whether Sesa Sterlite owns any mines in Goa