Like Claude Rains in "Casablanca" -- "I am shocked, shocked, to find that gambling is going on in here!" -- News Corp. (NASDAQ:NWS) proclaimed itself "shocked" by the report that U.K. Business Secretary Vince Cable had boasted to undercover reporters for The Daily Telegraph that he had "declared war" on Rupert Murdoch.
Murdoch's media giant has been waging a controversial campaign to buy out pay-TV affiliate British Sky Broadcasting Group plc for £7.8 billion-plus ($12.1 billion), and Cable's outburst greatly increased its chances of success. In short, Murdoch and his fellow News Corp. executives must have been delighted by the gaffe, first revealed on Tuesday.
Within hours, Prime Minister David Cameron stripped Cable of all media oversight. Responsibility for the proposed buyout now falls to Culture Secretary Jeremy Hunt, who has in the past expressed ease about New Corp.'s increasing stranglehold on U.K. media.
Hunt and Cameron's Conservative Party has for many years enjoyed support from Murdoch's newspapers.
With European Commission approval granted earlier in the week, the deal's passage looks far smoother than it did a few weeks ago, when the planned takeover even drew criticism from a Church of England bishop.
The worst-case scenario for Murdoch: communications regulator Ofcom finds the buyout will damage media plurality, recommends that Hunt ask the Competition Commission to conduct an in-depth study, Hunt complies, the second regulator agrees with Ofcom, and Hunt opts to block the merger. Given Hunt's natural sympathies and the Conservatives' inevitable desire to placate a key supporter after Tuesday's firestorm, that sequence of events looks highly unlikely. Even if that scenario does unfold, however, Cable's apparent admission of bias would make it easier for the New York media giant to mount a legal challenge.
This is all good news for Murdoch and for the army of advisers who have been working on the case for more than six months.
What about The Daily Telegraph? It got plenty of buzz, but its editorial credibility has been damaged. That's because its original account of Cable's remarks made no mention of BSkyB or any declaration of war against Murdoch. It fell to the British Broadcasting Corp. to reveal Cable's most explosive remarks. Some suspected that The Telegraph's owners wanted to keep the Cable quotes under wraps because they knew that once they were revealed they would make it more likely that News Corp. -- The Telegraph's archrival in the newspaper business -- would prevail in its BSkyB buyout.
So the coalition survives; Cable keeps his job, for the moment at least; but the newspaper group loses one of its key allies in its fight to limit Murdoch's U.K. ambitions.
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