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Fox move on Sky “could take time”

January 17, 2017

There were reports in the British press this past weekend which suggested that 21st Century Fox and Sky’s lobbyists were briefing UK parliamentary members on their plans for the acquisition by Fox of the rest of Sky (61 per cent) it does not already own.

Importantly, the briefings are stressing that the future of Sky News – despite its well-known losses – will be wholly protected. The messages to parliament are, said the left-leaning Observer, also designed to avoid scrutiny by the tough all-party Culture Media and Sport sub-committee, which during the notorious phone ‘hacking’ scandal described Rupert Murdoch as “not a fit person” to control a company.

Former Labour Party leader Ed Miliband has come out strongly in favour of a complete parliamentary examination of Fox’s plans, saying the bid for Sky “must not be waved through”.

However, equity analysts at investment bank Exane/BNP-Paribas, in a detailed note on January 16th, say they expect the bid to be approved but that it could “take some time”.

The bank’s note says: “We see regulatory and political oversight as the key challenge to the completion of the bid, with shareholder approval highly likely in our view (perhaps with a small sweetener in due course). In summary, with NewsCorp/21C now separate entities and with a Conservative government in a post Brexit environment, we see the bid as likely to obtain UK government approval (potentially with remedies) despite vocal media plurality concerns among some politicians. We also expect EU approval on their competition review. However, any regulatory block brings material share price risk.”

Separately, the bank suggests that Sky Mobile, the new cellular service introduced in late-2016 could win 3 million subscribers by 2020, and generating around £1.3 billion in gross revenues, although cellular investment losses will be a drag on Sky’s net Earnings.

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