Mediaboss Marketing

By Amy Thomson and Jonathan Browning - 2012-06-26T16:58:09Z

News Corp. (NWSA)s potential breakup into two divisions may lessen concerns by U.K. regulator Ofcom about the companys control of the British media market, according to a person familiar with the matter.

News Corp., whose Sun, Times and Sunday Times newspapers account for a third of the U.K. market by circulation, said today its considering splitting into two publicly held units. The New York-based company has been under investor pressure to carve out its media business from entertainment holdings.

A separation, depending on how its structured, could be a way to address concerns over media plurality, said the person, asking not to be identified as no decision has been made. News Corp. last year dropped a 7.8 billion-pound ($12 billion) bid to buy the outstanding 61 percent of British Sky Broadcasting Group Plc (BSY) after legislators objected to the deal following phone- hacking and bribery scandals at News Corp.s tabloids.

At the time of the BSkyB bid, Ofcom was asked to advise lawmakers on plurality issues. A current investigation by the watchdog into whether News Corp. should keep its 39 percent stake in BSkyB, the largest U.K. pay-TV operator, probably wouldnt be affected by a News Corp. split, the person said.

Rupert Murdoch, chairman and chief executive officer of News Corp., is overseeing internal discussions on whether to break up the company, said two people with knowledge of the matter, who asked not to be identified because a decision isnt final. In a statement today, News Corp. didnt specify how the company would be divided.

A U.K. committee, after probing whether News Corp. misled Parliament in the scandal, where journalists hacked into the phones of politicians and celebrities for exclusive stories, concluded last month that Murdoch, 81, is not a fit person to exercise the stewardship of a major international company. The vote among lawmakers wasnt unanimous and the report split lawmakers along party lines.

Ofcom has the power to force News Corp. to sell or cut its stake in BSkyB, with a market value of 4.4 billion pounds. The regulator, which has said News Corp. has material influence over BSkyB, is probing whether News Corp. and its directors are fit to hold a broadcasting license. Ofcom, which monitors control over broadcasters, would still take News Corp.s holding into account in any separate company, the person said.

Ofcom last week said the U.K. government shouldnt prevent news organizations from gaining high levels of market share, saying that a review of media plurality every four to five years would be sufficient. An official at the regulator declined to comment today.

In the long term, a split may still help News Corp. distance itself from the hacking scandal and could even lead to a new bid for all of BSkyB, depending on the structure of a separation, said Claudio Aspesi, an analyst at Sanford C. Bernstein & Co. in London.

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News Corp. Split Said to Lessen Media Plurality Concerns