Another day, another graph
Has Malcolm suddenly learned “graphicity”? He invites us to consider this:
That’s the share price of ITV over the last twelve months.
Today, the Competition Committee’s wheels ground out exceeding small on the BSkyB holding in ITV:
The regulator said that BSkyB should either sell all of its shares or cut its stake to below 7.5% and promise not to take a seat on ITV’s board.
The BBC, naturally, has to be strictly neutral in its commentary. Others were not so restrained, as on Bloomberg:
“This recommendation to reduce the stake by more than 10 percent will come as a strategic blow to BSkyB,” Martin Slaney, head of spread betting at GFT Global markets in London, wrote in a note today.
And in the FT:
BSkyB reacted angrily to the news. In a robust defence of its position, it said: “We find it difficult to understand how a minority shareholder can exert material influence over a company’s policy if it has neither board representation nor enough shares to block a special resolution. This becomes even more difficult to understand when that shareholder has offered to give up all voting rights.”
It said that a “properly functioning” board would be able to withstand any attempts by a large shareholder to exert influence, adding: “It is implausible that Sky’s ‘industry knowledge and standing’ should give it special influence over a supposedly independent board or the big, sophisticated institutions which own most ITV shares.”
Malcolm particularly relishes that “properly functioning” thing. He cannot conceive why the presence of a blocking share-holding, and the ability to insert News Corp minions (studiously avoided so far, so as not to seem threatening) onto the board would greatly improve its functioning.
Let us recall that BSkyB paid 135p a share (20p over the odds), for a total of £940M for that shareholding. That share snatch:
came as NTL, its cable television rival, was finalising a £5bn-plus bid for ITV. It also interrupted talks between RTL, the pan-European broadcaster, and Kohlberg Kravis Roberts about providing private equity financing for a rival approach.
On today’s price (which is down by about 37% from that level), there would be a loss to BSkyB of £200M. Now, at the time of the grab, Murdoch
said BSkyB saw “an exciting opportunity for long-term value creation”.
So is it a total loss?
Well, first of all, there is going to be some discreet but frantic lobbying of John Hutton, the Secretary of State for business, enterprise and regulatory reform, who must respond to the Competition Commission by the last week in January. He cannot change the ruling that the holding is against the public interest, but he can shade the penalty. This could affect the holding allowed to BSkyB, or allow extended time for the disbursement.
Arm-wrestling enthusiasts should know that this is a sport at which the Murdoch Evil Empire excels. We can expect a whole volley of warning sounds, and bone-wrenching tweaks from the likes of the Sun and the Times, in the hope of persuading the Government to soft-pedal this one: though, quite frankly, anyone watching the Murdoch media over the last while must wonder what is left in the shot-locker.
And, yes, James Murdoch will not regard the last year as a total loss. He has substantially weakened his main opponent, Beardy Branson. Virgin Media (the merged identity of NTL and Blueyonder) has its position assessed in the International Herald Tribune:
Even so, BSkyB’s share grab achieved its apparent objective of blocking a takeover of ITV and leaves BSkyB in a stronger position, said Sam Hart, analyst at Charles Stanley in London.
“Virgin Media’s financial position is now weak and a revival of its previous interest in ITV is now almost inconceivable,” Hart said.
BSkyB’s possible loss on a share disposal “must be seen in the context of the much larger hit to profit that would have resulted from a successful takeover of ITV by NTL and the subsequent creation of a formidable competitor,” Hart added.
Malcolm regards the whole sordid business with a very jaundiced eye. In all of the commentary he has scanned, only the Competition Commission has commented at any length on the real loser: the general public. Throughout the Report, a curious acronym appears: “SLC”. This translates into “substantial loss of competition”. That competition is both commercial and informative: it is the continuing depletion of sources of information that should concern the consumer of news and information. Curiously, when there are now only three providers of TV news (The BBC, ITV and Sky), paragraph 27 of the Report finds:
We concluded that the acquisition was unlikely to result in an SLC arising from a loss of rivalry in the wholesale provision of national television news.
That is only credible in the context where competition is already severely degraded: for example, the existing links between ITN, Channel 4 and BSkyB. The clincher for the Commission seems to be only that:
no relevant contracts will come up for renewal before 2010.
So that’s all right, then. Two years’ breathing space.
Any reader of the Report will find this symbol liberally scattered throughout: ✂. It indicates huge swathes of information withheld
having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure).
Not surprisingly, a large number of those excisions relate to the commercial practices of News Corp and BSkyB. Which is worrying, for the rationale of the share snatch was:
Mr Murdoch described the purchase as a long-term financial investment but said there were opportunities for “fruitful relationships” between the UK’s largest pay TV operator and its largest commercial broadcaster.
“Fruitful”? For whom? Or not for whom?The answer is implied by “Figure 1” on page 18 of the Commission’s Report. This involves a whole series of arrows, all pointing downward to the bottom of “The Television Supply Chain”, reminding us who is at the top, calling the shots. Those arrows all threaten the least significant and least powerful of the participants, the poor bloody infantry at the wrong end of the heap: “Viewers/subscribers”.