News shares rally after BSkyB retreat
SHARES in Rupert Murdoch's News Corporation rallied yesterday after the company announced it was abandoning its bid for British broadcaster BSkyB because of the phone-hacking scandal that has engulfed the company.
SHARES in Rupert Murdoch's News Corporation rallied yesterday after the company announced it was abandoning its bid for British broadcaster BSkyB because of the phone-hacking scandal that has engulfed the company.News Corp voting shares rose rose 46?, or 3.1 per cent, a rare positive performance in a media sector caught up in gloom over the outlook for retail advertising.The decision to abandon the bid for complete control of BSkyB, made hours before a humiliating unanimous vote against the deal in Britain's House of Commons, also frees up $US12 billion ($A11.2 billion) in cash.But with the threat of US regulatory action looming, yesterday's gains could not make up for dramatic falls since the phone-hacking scandal gripped Britain.Former prime minister Gordon Brown, who was targeted by News Corp's British papers, also called on regulator Ofcom to investigate whether the company was "fit and proper" to retain its existing 39 per cent stake in BSkyB.And the pay TV broadcaster is also under pressure from institutional investors to sack Mr Murdoch's son, James, as chairman and clean up its "questionable governance practices"."BSkyB has been run as an arm of News Corp," said one major investor. "This was tolerable with the bid situation. It's not any more. Change needs to happen and from the top."News Corp's rise came as other media stocks fell after retailer David Jones issued a shock profit downgrade on Tuesday night.Shares in The Age owner Fairfax Media, which is heavily dependent on retail advertising, fell for a third day running, shedding 2?, or 4.2 per cent, to 91?. TV groups Seven and Ten also fell, as did radio network Austereo.Despite yesterday's surge, at the close of Australian trade News Corp voting stock was still languishing $1.84, or 10.7 per cent, below its level on Monday last week, when The Guardian reported that the News of the World had hacked into the phone messages of a murdered schoolgirl. The fall in News Corp's share price has cost Mr Murdoch and his family, who own about 38 per cent of the voting stock, about $US750 million in paper losses, the Financial Times reported.Mr Murdoch's decision to abandon his dream of taking full control of BSkyB came before a historic House of Commons vote in which all sides of British politics called for him to abandon the bid.