David Prosser: News Corp and Sky: a deal delayed but far from abandoned

Outlook Be careful what you wish for. The Takeover Panel's rules are crystal clear: having just walked away from its bid for BSkyB yesterday, News Corporation will be free to return to the fray in six months' time (or before in the unlikely event someone else bids first). By then, the context of such a deal may be completely different.

Indeed, try this thought for size: it is not impossible that in two years' time, the Murdochs will have full control of Sky, but no longer own any UK newspapers at all. Instead, say, one might be able to see the name of Richard Desmond above the door at The Sun or The Times, or even both.

How would such a turnaround come to pass? Well, in a more straightforward fashion than you might think.

Start with the newspapers. Already, in recent days, we have seen speculation that News Corp has been considering a sale of News International, including a lengthy piece in yesterday's Wall Street Journal (proprietor, one Rupert Murdoch).

And why not? After all, the News of the World has already been closed. The Times titles are losing money while The Sun is already being dragged into the hacking morass. The papers have launched an expensive gamble on an internet paywall, which shows little sign of paying off, and, sad to say, the print newspaper market as a whole continues to decline.

Would Rupert Murdoch really be prepared to sell these assets? Well, if he wasn't previously, the disastrous events of the past 10 days will surely have made him reconsider, particularly as James Murdoch, the de facto number two at News Corp, this scandal notwithstanding, has never shared his father's passion for print. There have been suggestions it might be difficult to find a buyer for the titles. But that seems unlikely. Mr Desmond, for example, is on record as saying he would love to buy The Sun.

Having made a tilt at The Daily Telegraph a couple of years back, only to lose out to the Barclay Brothers, The Times might even be a target too. If not Mr Desmond – who would be a colourful replacement for the Murdochs, to put it politely – there would surely be other bidders, not least from private equity. Even in a shrinking market, market leaders have value.

With its newspapers sold, News Corp would be in a far stronger position to renew its quest for Sky. There would be no plurality questions to worry about for one thing (and thus no need to come up with elaborate solutions for Sky News). And the fit and proper person test applied by Ofcom would be easily surmountable, particularly if the company could show that it had spent the intervening period putting its house in order.

There's no doubt that part of the appeal of Sky to News Corp is the potential it offers in combination with the newspapers. But even without that ingredient, the deal remains compelling for News Corp. Sky's success, built on the vision of its backers – for which both Rupert and James Murdoch are entitled to take great credit by the way – has made it hugely cash generative and the opportunities for growth across television, telecoms and internet continue, both domestically and in the international market.

News Corp knows that, which is why News International, sooner or later, will be jettisoned for the pursuit of Sky.

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