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CMA Stall 21st Century Fox Takeover of Sky as NOT in the Public Interest

Tuesday, January 23rd, 2018 (11:47 am) - Score 712

The UK Competition and Markets Authority has today “provisionally” ruled that 21st Century Fox’s £11.7bn bid to takeover Sky (Sky Broadband) by acquiring a 61% stake in the company (Fox already owns 39%) is “not in the public interest,” due to concerns over media plurality.

As a quick recap, Rupert Murdoch’s Fox has previously tried to gobble Sky once before (8 years ago), although that bid was derailed by a combination of factors, not least a strong supply of political objections, media / news related competition concerns and a rather significant scandal over phone hacking. Today the scandal over phone hacking has long since passed and Fox no longer has any UK newspapers on its books.

However last year saw the former Secretary of State for Digital, Culture, Media and Sport (DCMS), Karen Bradley MP, refer the proposed deal (originally estimated to value Sky at around £18.5bn) to the competition watchdog. The move came after Ofcom warned that the bid might raise public interest concerns because of the prospect of the Murdoch family having increased influence over the British media.

As a result the CMA today agreed that such a deal would enable Fox to have “too much control over news providers in the UK across all media platforms (TV, Radio, Online and Newspapers), and therefore too much influence over public opinion and the political agenda. The Murdoch family already has significant influence over public opinion [via News Corp] and full ownership of Sky by Fox would strengthen this even further.”

Anne Lambert, Chair of the Independent Investigation Group, said:

“Media plurality goes to the heart of our democratic process. It is very important that no group or individual should have too much control of our news media or too much power to affect the political agenda.

We have provisionally found that if the Fox/Sky merger went ahead as proposed, it would be against the public interest. It would result in the Murdoch family having too much control over news providers in the UK, and too much influence over public opinion and the political agenda.

Our in-depth investigation also considered whether the deal would be against the public interest regarding broadcasting standards. Due to their existing track record in the UK, and the range of policies and procedures the companies involved have in place to ensure broadcasting standards are met, we did not find public interest concerns in this regard.”

The CMA will now conduct a 3 week consultation on the findings and has set out three possible remedies that could be adopted by Fox in order to address the concerns. Further details can be found here.

Possible Remedies

We have identified three remedy approaches that we think have the potential to be effective and proportionate in addressing the media plurality concerns that we have provisionally identified:

(a) prohibition of the Transaction;

(b) other structural remedies – spin-off or divestiture of Sky News;

(c) behavioural remedies – to insulate Sky News from the MFT’s influence.

We discuss each of these approaches and various configurations and combinations of them in the context of our guidance, undertakings in lieu offered by News Corporation in 2011 and Fox in 2017 and the anticipated acquisition of Fox by Disney.

The situation has also become somewhat more complicated since Fox announced in December 2017 that it had agreed the sale to Disney of certain assets, including its interests in Sky. Since then Fox has confirmed that they still wish to complete the purchase of Sky, although the Disney deal has yet to complete (it won’t do so for awhile) and might raise its own regulatory concerns.

Due to all this the CMA said, “It is therefore uncertain whether, when or how that transaction will be completed. As such, the CMA’s analysis of the Fox/Sky transaction cannot take it into account in its assessment of the transaction but implications of the Disney transaction in relation to remedies is considered in the notice of possible remedies.”

Any future decision to approve the merger would also make us wonder about the future of Sky’s broadband business in the UK. Until recently Sky Broadband was one of the most positively disruptive influences in the sector and as a result they’re currently the UK’s second biggest ISP after BT, but that may not last.

Sky’s financial results have stopped including any solid figures for their broadband base, which some believe may be because their subscriber growth has suffered a sharp slowdown (other ISPs have also experienced this). On top of that there have also been suggestions that Fox might lack a forward thinking strategy to invest in broadband, which could in turn signal a desire to divest the broadband business.

However giving up on broadband would be a risky strategy because the old models of TV distribution (via aerials and Satellites) are rapidly being replaced by newer broadband based methods (OTT), so it makes sense to hold both sides of the coin in your hands. On top of that Sky is still in the perfect position to capitalise on convergence, better than most, but they need an owner who understands the market in order to benefit.

In 2016 Sky’s CEO threw another spanner into the works after he announced that the operator would not build its own national fibre optic network to compete with Openreach (here). We expected that outcome but completely closing the door to alternatives sent a bad signal at a time when many others are pushing for FTTH/P.

We also do not yet know Sky’s approach to G.fast but they are in the process of a big capacity upgrade, which would enable them to support those services (assuming this is their direction).

Leave a Comment
2 Responses
  1. Avatar apolloa says:

    Murdoch just needs to pay more money into MP’s back pockets, just like BT and EE did… I mean after all the government and Ofcom has no problem with one manopoly buying another manopoly, leading to the biggest mobile company that also owns and maintains pretty much the entire countries communications infrastructure all other mobile companies HAVE to use… oh and two carrier networks..

    I hate Murdoch and don’t think much of Sky, but you can’t be blindly hypocritical like Ofcom and the U.K. government are??

  2. It really does not affect much more to the public.All we need is the productivity,I think sky is eligible for that.

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