Murdoch moves step nearer BSkyB takeover

(GETTY IMAGES)

Rupert Murdoch's controversial bid to take full control of BSkyB was boosted today when the Government backed proposals to spin off Sky News as part of any deal.

The Culture Secretary Jeremy Hunt said he was minded to wave through the takeover by News Corporation after the media giant offered to make the channel into a separate independent company and subsidise it for a decade.

But opponents branded the undertakings a "whitewash", while Labour accused the coalition of a "cavalier" approach to the issues.

News Corp is seeking to avoid a full-blown inquiry into its plans to buy the 61% of BSkyB it does not already own after Mr Hunt said last month he planned to refer the deal to the Competition Commission.

The new conditions are subject to a 15-day public consultation period, but an alliance of other media organisations has already indicated it is ready to take legal action to block the arrangement.

News Corp has yet to agree a takeover price with BSkyB after its initial 700p-a-share bid, which valued the business at £12.3 billion, was rejected for being too low.

The two sides agreed to postpone setting a price until the regulatory hurdles have been overcome, but reports suggest the price Mr Murdoch is willing to pay is likely to be much lower than the 900p a share many BSkyB investors are expecting.

Mr Hunt, who took his decision following advice from regulators, said he was "very aware" of the controversy surrounding the deal but the remedies would address concerns about media plurality, should the takeover go ahead.

"Because I am very, very conscious that people are suspicious of the motives of politicians on a decision like this, I sought independent advice at every step of the way," he told MPs.

"Ofcom assure me that the undertakings that are being made do address the concerns that they had over plurality. After careful consideration I have decided to accept their independent advice.

"I think News Corporation have moved a very long way. They are relinquishing significant control over the operation of Sky News.

"If (News Corp's) James Murdoch wanted to have greater control of the output of news in this country he would not have done this deal because he is having to relinquish significant control over the operation of Sky News.

"This is a move that will protect plurality of news provision in the UK, something that is incredibly important."

However, shadow culture secretary Ivan Lewis pointed out the decision came just days after former Tory chairman Lord Patten had been selected as the Government's preferred candidate to be chairman of the BBC Trust.

"Imagine what they would have said if we had made this decision in this way in the same week as we had put a former Labour Party chairman in charge of the BBC," Mr Lewis said.

"This process has exposed an arrogant Government, cavalier about its responsibility to be impartial and contemptuous of the importance of transparency in circumstances where there is already a high level of public cynicism."

Labour backbencher John McDonnell urged Mr Hunt to go ahead with referring the deal to the Competition Commission because "nobody believes these undertakings agreed to by Murdoch will be adhered to in the long term".

"Many people will think we have reached a new low in British politics when the Conservative Party is backed by Rupert Murdoch before the election and then delivers this deal within months of being elected," he said.

An Ofcom spokesman said it was pleased News Corp had agreed to "place editorial independence and integrity at the heart" of the spun-off Sky News and "underpin this with arrangements that secure full independent governance".

News Corp, which also owns papers including The Sun and The Times, is offering to hive off Sky News into a company controlled by independent directors and with an independent editorial board.

It would fund the news channel for 10 years and agree a seven-year licensing agreement for it to use the Sky News name.

Existing BSkyB shareholders will be given an equivalent stake in the new company, but News Corp would not be allowed to increase its 39.1% shareholding for 10 years without permission from the culture secretary.

The announcement was slammed by an alliance of media groups, which includes BT, Guardian Media Group, Associated Newspapers, Trinity Mirror, Northcliffe Media and Telegraph Media Group.

A spokesman for the alliance said: "Smoke and mirrors will not protect media plurality in the UK from the overweening influence of News Corporation."

"In addition, the undertaking does nothing to address the profound concerns that the takeover would give News Corporation greater power to restrict or distort competition through cross-promotion, bundling, banning rivals' advertisements and distorting the advertising market with cross-platform deals.

"We shall be vigorously contesting this whitewash of a proposal during the consultation period, as well as examining all legal options."