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BSkyB insists it's 'fit and proper' to broadcast

by Laura Board in London | Published May 2, 2012 at 9:19 AM

The U.K.'s British Sky Broadcasting Group plc insisted Wednesday, May 2, it was "fit and proper" to hold a broadcasting license and said it was engaging with Ofcom as the regulator examines what the phone-hacking and bribery scandal that has engulfed News Corp. and its senior management means for its pay-TV affiliate.

The comments by the Isleworth, England, broadcaster came as it published record nine-month earnings a day after a committee of U.K. lawmakers published an excoriating report on phone-hacking at News Corp.'s now-defunct News of the World and how the New York parent company responded to the escalating allegations. The report concluded that News Corp. founder, chairman and CEO Rupert Murdoch was not "fit" to lead a global media empire. The damning verdict appears to increase the likelihood Ofcom, though an independent regulator, will make News Corp. cut part of its 39% stake in BSkyB. It also raises the probability that News Corp. may look to sell its U.K. newspaper arm, though the lack of obvious buyers for its Sun tabloid, and The Times and The Sunday Times presents an immediate obstacle.

Ofcom confirmed Tuesday it will analyze the lawmakers' report, while last week it said it had asked for evidence from civil cases brought against News Corp. for phone-hacking as part of its BSkyB probe.

BSkyB said Wednesday that "its positive contribution to U.K. audiences, employment and the broader economy, as well as its strong record of regulatory compliance and high standards of governance," demonstrated it was a "fit and proper" license holder.

It said it had conducted its own, unsolicited review of editorial practices at its Sky News channel, with the help of law firm Herbert Smith LLP, and had "found no evidence of impropriety or cause for concern." It also said incidents which emerged last month in which a Sky News journalist hacked into the email accounts of two individuals suspected of committing crimes were "justified in the public interest and subject to proper editorial oversight." Ofcom is also investigating the matter.

BSkyB said nine-month revenue had risen 5% to £5.08 billion ($8.2 billion) and Ebitda jumped 20% to £1.19 billion. Almost 10.6 million customers subscribe for BSkyB's pay-TV services, with 3.2 million also taking telecom and Internet services.

Analysts at Peel Hunt LLP noted that BSkyB's third-quarter trading performance was strong.

"However, we expect that this positive trading news will be overshadowed by the spectre of a possible sale of the News Corp stake in the company following yesterday's DCMS Select Committee report on Rupert Murdoch's probity as a media owner," they wrote.

BSkyB shares were up 14 pence at 705 pence by early afternoon in London, giving the company a market value of just under £12 billion.

BSkyB is led by CEO Jeremy Darroch, who Wednesday stressed that his group and News Corp. were separate companies. BSkyB has been buying back shares to appease investors after News Corp.'s £7.8 billion bid for the outstanding 61% stake collapsed last July following rapidly escalating allegations of phone-hacking and other malpractices centered on News of the World. A month ago James Murdoch, News Corp.'s deputy chief operating officer and the former chairman of its U.K. print arm, resigned as chairman of BSkyB. He remains a director.

Culture Secretary Jeremy Hunt remains under fire after evidence last week at a judge-led inquiry established by the government in response to the phone-hacking allegations suggested his department gave privileged information to News Corp. about the progress of Hunt's inquiry into whether its BSkyB bid should be cleared. Prime Minister David Cameron has so far resisted calls for an investigation into whether Hunt breached the code of conduct for government ministers. (Cameron was also embarrassed when James Murdoch last week admitted before the Leveson media ethics inquiry to a previously undisclosed "side conversation" about the bid with the prime minister at a social gathering). Hunt has denied wrongdoing. Last week his special adviser Adam Smith, who exchanged a string of texts and emails about the BSkyB with a News Corp. lobbyist, resigned.

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