Rupe clan cans NTL bid for ITV
LONDON — The first round in the battle between the Murdoch clan and maverick British businessman Richard Branson for control of Blighty’s digital TV and telephone market appears to have gone to the Murdochs.
At around 6 p.m. Nov. 17, James Murdoch, CEO of Europe’s leading paybox, BSkyB, stunned the British media industry by announcing he had just spent about £1 billion ($1.9 billion) on a 17.9% stake in ITV, the troubled U.K. terrestrial broadcaster.
The acquisition came a week after cable combo NTL revealed that it wanted to buy ITV and create a U.K. media giant to take on BSkyB. Branson is NTL’s major shareholder and the cabler will rebrand under the Virgin Media name next year.
Murdoch was quick to soothe the still jittery ITV board by stressing the investment was for the long-term and “supportive.”
He added: “It reflects our belief that ITV’s decline has been overstated. … We realize that ITV has been going through tough times, but with careful stewardship it can return to form.”
This bolt from the blue was all the more amazing since it came on the day media watchers were predicting that RTL, the pan-European operator and owner of Blighty’s terrestrial web Five, would bid for ITV.
Instead, not for the first time, the decisive action came from the Murdoch family.
Days earlier News Corp. chairman Rupert Murdoch had dismissed a tie-up between NTL and ITV, telling reporters: “None of the things NTL is missing is in ITV and none of the things ITV is missing is in NTL. This doesn’t seem to be a set of solutions for either side.”
Privately, however, father and son were worried a combined NTL and ITV would provide serious competition for BSkyB, and so a deal was hatched to spoil any marriage plans in the Branson camp, which under the Virgin banner runs a string of businesses including airline Virgin Atlantic.
So what was the precise objective of the Murdoch share swoop?
“This is Murdoch saying he wants a seat at the table in any future bid battle for ITV,” says an analyst. “But at the same time it is a defensive move, because it shows he is scared of the potential commercial clout that a combination of ITV and NTL could represent.”
“It was a brilliant and audacious move,” opines Theresa Wise, global director of digital/Internet for Accenture Marketing Sciences. “ITV is still in play, but there is more upside in the stock price.”
But given NTL’s level of debt — some $7.8 billion — most analysts agree the cable group is no longer a serious bidder for ITV.
“We were always lukewarm on the NTL approach to ITV, because the synergies weren’t all that obvious and because of NTL’s high level of debt,” says media analyst Paul Richards at Numis Securities. “Now that BSkyB has emerged as a significant investor in ITV, there is little chance of the merger succeeding.”
Branson is threatening to take the deal to government regulators, as BSkyB parent News Corp. already owns a significant chunk of the U.K. media, including four national newspapers, aside from Europe’s most successful satcaster. But most experts agree he has little chance of success.
Under the terms of the U.K.’s 2003 Communications Act, BSkyB is allowed to own up to 19.9% of ITV.
“I’d be astonished if any complaint succeeded,” reckons Richards. “The Communications Act was only put in place three years ago. It is not some dusty piece of legislation that needs looking at.
“Politically, you could see that pressure could be brought, but I’d be very surprised if BSkyB was forced to sell its ITV stake.”
Where, then, does all this leave ITV, minus a CEO since October — topper Charles Allen was ousted in August as ratings reached a 50-year low — and BSkyB, proud owners of almost a fifth of their chief terrestrial rival?
“It allows ITV some breathing space to find a new CEO and for whoever that person is to formulate a new strategy,” says Richards. “Meanwhile it gives BSkyB a nice window of opportunity to roll out broadband … and relaunch as Virgin Media.
“James Murdoch has made a very astute strategic move. There are bound to be mutual benefits in BSkyB, Europe’s biggest subscription TV business, owning a significant stake in what remains the U.K.’s largest commercial free-to-air broadcaster.”
As for James Murdoch’s point about ITV needing “careful stewardship,” the smart money is on Dawn Airey, the BSkyB topper who began her career at ITV, as a favorite to succeed Allen as CEO.