Really Rocket Science

Rupert’s been humbled this past year, recently at home. The report, via London South East…

Australia’s government on Monday ruled out awarding a contract to broadcast local television into Asia to a consortium including Rupert Murdoch’s part-owned Sky News, deciding the service would stay with the state broadcaster.

After two cancelled bids and a police investigation into leaks, as well as political controversy swirling over the reach of News Corp media in Australia, the government said the A$223 million ($230 million) Australia Network tender would be abandoned and Australian Broadcasting Corp would keep it permanently.

‘The government believes it is unfortunate that this process did not reach a satisfactory solution, however, in light of the circumstances it is now in the national interest to make a clear decision about the future of the service,’ Communications Minister Stephen Conroy said in a statement.

The Australia Network is Australia’s equivalent of the UK’s BBC World Service and Germany’s Deutsche Welle.

The government had already ordered a police investigation into leaks behind news reports that an independent panel set up to decide the tender had unanimously backed Sky over the incumbent ABC after the government reopened the tender and imposed a new ‘national interest’ test.

Controversy over the process coincided with the phone-hacking scandal sweeping over the Australian-born Murdoch’s News Corp empire in Britain and a row with Australia’s Labor government over alleged political bias in reporting.

Conroy has been critical of News Corp’s Australian arm, News Ltd, accusing it of biased treatment targeting the government. News Ltd, which denied the allegations, controls 70 percent of Australia’s newspaper readership market.

After a meeting with senior Cabinet colleagues on Monday, Conroy said that the leaks had compromised the tender process and prevented a fair consideration of the bids. It was unclear if Sky News Australia would challenge the decision.

Sky News Australia is a 24-hour cable and satellite news channel, with Murdoch owning a third through his stake in BSkyB, along with Australia’s Seven West Media Ltd. and the private equity-owned Nine Entertainment Co. ($1 = 0.9745 Australian dollars).

The Australia Network can found on a number of satellites.

After the blokes at NOTW got caught being stickybeaks with cell phone hacking, it seems News Corp. has a Buckley’s chance of buying the 61% of BSkyB it was after. He must have spit the dummy at the meeting.

The news is everywhere, with the most interesting being how executives must deal with an investor relations crisis, et. al. The details, via Business Insider…

The phone hacking scandal at News Corp’s UK newspaper the News of the World has now cost the company a large prize.

Yesterday it officially withdrew its offer for the remaining 61 percent of BSkyB – and the chances of it returning to bid again in the near future are remote.

Still, the pressure continues, the implications are spreading and the results not only threaten the company’s business interests, but also its IR efforts in the US.

News Corp and Murdoch wanted BSkyB because it continues to grow and, according to company financial records, throws off 12 percent of its revenue as free cash. That’s a big temptation to News Corp, which currently has long-term debt of $15.5 bn.

The pace of increased problems seems only to speed up. Calls for investigations, which eat up management time and create fires that IR personnel must put out, have grown. UK Prime Minister David Cameron said the government will investigate rumors that News Corp journalists tried to gain illegal access to phone data of some victims of the 9/11 attacks in the US.

That could help open a potentially ugly new front for the company. News Corp, which is registered in the US, might already be liable under the Foreign Corrupt Practices Act for alleged payments to police in the UK. Hacking into phones of 9/11 victims would not only add another potential criminal investigation, but one that is an emotional hot button in the States.

Senator Jay Rockefeller has called for an investigation into the allegations, and a group of institutional investors amended a suit filed against News Corp in March to include the current scandal and back allegations that ‘Murdoch has treated News Corp like a family candy jar, which he raids whenever his appetite strikes’, as a copy of the complaint states.

News Corp continues to look for ways out of the scrape, including a $5 bn stock buyback, which is $3.2 bn over and above what remains of an existing buyback plan. And there are other, larger potential changes in the works, such as the sale of its UK newspaper division – well, at least if there were a potential buyer for holdings in an economically wounded industry. But it will take something extraordinary to get ahead of the developing story at this point.

Now the AP is reported the FBI is going to give it a burl.