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.
Frequently Asked Questions about this Article…
Why did News Corporation abandon its bid for BSkyB?
News Corporation announced it was abandoning its bid for complete control of British broadcaster BSkyB because the phone‑hacking scandal engulfing the company made the takeover untenable, a decision that came hours before a unanimous House of Commons vote against the deal.
How did News Corp shares react after it pulled the BSkyB bid?
News Corp voting shares rose about 3.1% after the company abandoned the bid — a rare positive move in the media sector — but the stock still remained well below earlier levels, reflecting the broader market impact of the scandal.
How much cash did News Corp free up by walking away from the BSkyB deal?
By abandoning the attempt to take full control of BSkyB, News Corp freed up roughly US$12 billion (about A$11.2 billion) in cash, according to the article.
What regulatory and political pressure did News Corp face over the phone‑hacking scandal?
The company faced calls for investigation and scrutiny: former prime minister Gordon Brown urged regulator Ofcom to look into whether News Corp was 'fit and proper' to retain its 39% stake in BSkyB, and the article notes a looming threat of US regulatory action.
What pressure was there on BSkyB's management following the scandal?
Institutional investors pressured BSkyB to sack James Murdoch as chairman and to address what they called 'questionable governance practices,' saying the broadcaster had been run as an arm of News Corp and needed change from the top.
How did the phone‑hacking fallout affect other media and retail‑linked stocks?
Other media stocks fell after a retailer shock: David Jones issued a surprise profit downgrade, Fairfax Media shares (owner of The Age) fell about 4.2%, and TV groups Seven and Ten and radio network Austereo also saw declines.
How much market value did the Murdoch family lose in the share price slide?
The fall in News Corp's share price cost Rupert Murdoch and his family about US$750 million in paper losses, according to the Financial Times report cited in the article.
What specific incident triggered the sharp market reaction against News Corp?
The sharp reaction followed reporting by The Guardian that the News of the World had hacked into the phone messages of a murdered schoolgirl, an allegation that intensified the phone‑hacking scandal and led to dramatic share price falls.
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