Will Murdoch’s double dealing pay?

Channel 5 bid, Super League, and two more deals this week – what will Murdoch think of next?

Rupert Murdoch never loses his ability to surprise. Hot on the heels of his plans to launch a 75m rugby Super League came the Channel 5 bid which confounded all expectations by coming in lowest, at a mere 34m less than top bidder CanWest. Then last week came the double whammy: a 2bn offer for 51 per cent of Italian media mogul Silvio Berlusconi’s three TV stations and Publitalia, the advertising arm of Berlusconi’s Fininvest group, and a 1.3bn deal with BT’s US telecoms partner, MCI.

The Berlusconi offer is judged by observers to be both a logical step – Murdoch has no Italian presence – and a potentially risky one given the volatile and, for want of a better word, “unique” nature of the Italian business and political scene. The MCI deal, which will result in the long-distance telephone company taking a 13.5 per cent stake in News Corp for 1.3bn, stunned the City.

The deal creates an alliance which promises to bring interactive TV to millions of homes around the world. Indirectly it will plug into News Corp and BSkyB (in which News Corp holds a 40 per cent stake), Fox Television, Twentieth Century Fox, publisher Harper Collins, The Times, The Sun and the News of the World. And it gives Murdoch access to millions of homes to supply “software” – in all shapes and forms – to cash in on the “information superhighway”. According to one City analyst: “Of all the dream teams recently put together in telecommunications, this is the most powerful.”

Murdoch has also moved a step nearer to clearing News Corp’s debts. One report suggests the company has reduced its indebtedness to 3bn in long-term loans, with more than 600m in hand. Recent years have seen Murdoch sell off selected assets following a run-in with bankers three years ago which threatened his entire media empire. As important is the MCI deal’s small print. Although MCI is allowed to increase its stake in News Corp up to 20 per cent, it must always vote with the majority – in other words, the Murdoch family. Only if subsequent Murdoch generations decided to sell would MCI be given a crack at the rest.

Closer to home, however, a number of problems still remain. Last week’s leaked details of the National Heritage department’s cross-media ownership plans suggest a new 15 per cent market share cap will restrict any single player. This would allow other newspaper groups the chance to expand into other media, but prevent Murdoch from growing his own empire much further. Needless to say, this proposal will be a controversial one – the Government is also believed to be suggesting a points system to decide just how much a single media owner can control.

A similar strategy has already caused much dissent in the commercial radio sector. Murdoch, understandably enough, will have something to say about that.