View from City Road: Murdoch will find another way

So what will Rupert Murdoch do now? Employ some very clever merchant bankers, most probably. It would be rash to think that merely because he has withdrawn his cheeky plan for a two-tier share structure for News Corp that he will now abandon his objective of raising fresh finance with a minimum loss of control.

Mr Murdoch has to raise new money if he is to pursue his dreams of global digital highways in the sky. His recent talk has been full of capital-intensive projects like interactive services, digital television, and a big expansion of Asian programming to satisfy the burgeoning Eastern markets StarTV has brought. News Corp will find it hard to satisfy that appetite for expansion out of its current Adollars 650m- a-year cash flow. In a few years' time Mr Murdoch will also have to think again about refinancing its debts. The day of reckoning has merely been postponed.

Yet most non-core assets have now been sold - only Ansett, the Australian freight business, remains and it is only worth a relatively modest Adollars 500m. Gearing remains high - around Adollars 10bn of debt compared with about Adollars 12.5bn of assets, much of which consists of print and film titles, which are notoriously difficult to value accurately.

Unless he is prepared to throw in his lot with a cash-intensive business (and joint ventures, possibly with some of his new friends from Hong Kong, certainly look more probable now) he has no alternative but to raise additional finance via the equity markets.

He can, though, point to the increasingly buoyant BSkyB, in which News has a 50 per cent holding, as evidence of the acumen of his vision. While Sky is unlikely ever to prove a great investment if its historical debt position is taken into account, it does seem to be turning round nicely as far as its current profits are concerned.

Certainly its other shareholders (Granada - 13.5 per cent, Pearson - 17.5 per cent, Chargeurs - 17.5 per cent) are growing increasingly bullish about the value it might attract - up to pounds 2bn for the equity, or so it is hoped.