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U.K. regulator probes Murdochs' BSkyB control

Britain's broadcast regulator is investigating whether the News Corp. and Murdochs' stake in satellite TV service BSkyB adheres to the 'fit and proper' requirement for a broadcast licence.

David Moir/Reuters/David Moir/Reuters

Rupert Murdoch is facing a fresh challenge to his U.K. media business as it emerged that Britain's communications regulator has escalated its probe into whether British Sky Broadcasting is a "fit and proper" owner of a broadcasting licence.

Following preliminary investigations last year, Ofcom set up a dedicated team in January – dubbed "Project Apple" – to scrutinize material emerging from the Leveson inquiry and the police investigations into phone hacking and corrupting of public officials, according to minutes released under a Freedom of Information Act request from the Financial Times.

The decision to set up a team dedicated to assessing whether BSkyB should still hold a broadcasting licence in light of the phone hacking scandal is a setback to James Murdoch, who has remained chairman of BSkyB, despite stepping down as executive chairman of News International last month.

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The probe is considering the status of both James Murdoch and News Corp., which holds a 39.1-per-cent stake in BSkyB, as "fit and proper" to own the BSkyB licence.

Should Ofcom rule against either of them, it could threaten James Murdoch's position as chairman of BSkyB or start a process that would force News Corp., chaired by Rupert Murdoch, to cut its stake in BSkyB to a level where it was no longer deemed to control the company.

Project Apple was discussed at a board meeting Jan. 24, according to the minutes released under the FOI request. The regulator also discussed the issue at a board meeting in late February, the minutes of which have not been released.

BSkyB's status to hold a broadcasting licence was also discussed in September and December, but only as part of the chief executive officer's report. The decision to escalate the matter came at the beginning of the year on the back of dialogue between the regulator, politicians and the police.

The regulator last July reassured politicians that it would continue to monitor whether BSkyB was "fit and proper" to maintain its licence in light of concerns over News Corp.'s subsidiaries' involvement in phone hacking in the U.K.

At the time, the regulator made clear it did not have to wait for the end of the criminal investigation, nor was it necessary for any individual to be convicted, for it to reach its conclusion. However, a decision on the "fit and proper" test is not expected until the Leveson inquiry and Metropolitan Police investigations are more advanced.

Ofcom said on Thursday: "New evidence is still emerging from the various enquiries in relation to the hacking and corruption allegations. Ofcom is continuing to assess the evidence that may assist it in discharging its duties."

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BSkyB declined to comment.

Last summer Rupert Murdoch bowed to intense political pressure and withdrew News Corp.'s planned bid to take full control of BSkyB after the company admitted public condemnation of phone hacking at his U.K. newspapers made the climate "too difficult."

The decision to abandon the 13-month pursuit of the U.K. satellite broadcaster, which would have cost £8.3-billion ($13-billion) or more, means the hacking scandal forced Rupert Murdoch not only to close his most widely read newspaper, News of the World, but also curtailed his ambitions to consolidate his pay-television empire in Europe.

News Corp. has maintained its holding in the broadcaster, giving it the option of taking over BSkyB in the future.

Copyright The Financial Times Ltd. All rights reserved.

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