George Kerevan: BSkyB board members are ready to fight their corners

Published on Thursday 28 July 2011 22:50

THE hacking scandal at News International has diverted attention from the success story that is BSkyB. In the same week that the UK recorded derisory growth of 0.2 per cent, the Sky TV firm posted revenues up 16 per cent to £6.6 billion, and operating profits up by 23 per cent to more than £1bn.

If you forget the Murdochs for a moment, this is a firm with everything going right for it. The Sky business model is based on customer subscriptions, not the wobbly advertising of terrestrial TV. The company is reaping the benefits of heavy investment in giving viewers what they want - entertainment and sport in HD, such as current ratings-grabber Game of Thrones. Result: subscriptions are up by 40,000.

This rosy picture is down to the gambling instincts of Murdoch pere et fils. In recent years, chairman James Murdoch's preference for investment over dividends irked City analysts and BSkyB shareholders alike. But now BSkyB has been transformed into a cash cow - which might explain the board's decision on Thursday to back chairman James.

Assuming the courts or Ofcom, the broadcasting regulator, don't give James his P45, his future lies in the hands of BSkyB's board. He has heavyweight support. Four of the 12 non-executives are News Corporation people, including Tom Mockridge (made chief executive of News International this month) and Arthur Siskind (Rupert Murdoch's senior adviser).

The man who could play Brutus is the deputy chairman, Nicholas Ferguson. He is chairman of SVG, a private equity fund, and a player in the City for the past 25 years. Ferguson's establishment credentials should make him sensitive to any anti-Murdoch mood. Alternatively, his City conservatism makes reluctant to wield the knife.

• BSkyB agrees 1bn payout to out-of-pocket shareholders

• George Kerevan: BSkyB board members are ready to fight their corners

• BBC loses half its Formula 1 races under new deal with Sky

• Head of press watchdog is next to resign over hacking

BSkyB sees itself as consumer led, which explains the presence on the board of Andrew Higginson, head of group strategy at Tesco; and Allan Leighton, deputy chairman of Selfridges and former boss of the Royal Mail. Neither are necessarily Murdoch men. Higginson, in particular, is known as a crisis management expert - which means the opposite of doing nothing.

Membership also includes the obligatory former civil servant, Lord Wilson of Dinton, a former Cabinet Secretary. Don't expect him to lead. A wild card is the sole woman, Dame Gail Rebuck. She is boss of publisher Random House, which is owned by Bertelsmann, a rival media conglomerate to Murdoch. Rebuck is also the wife of New Labour strategist, Philip Gould.

How pliant are the non-execs? Remember that the so-called "independent" board members demanded a share price of 800p to sell out to Murdoch, against his offer of 700p. That said, the firm is probably worth 900p given its new earnings potential.

So will anyone buy BSkyB? Unlikely, given the current market value of 12bn.As for News Corp, it wanted BSkyB not merely as a cash cow but as a vehicle with which to restructure with its disparate global satellite business. That remains the overall goal, suggesting Murdoch's British newspaper holdings may be for the chop.

Lloyds may be left high and dry as NAB bid fades

National Australia Bank (NAB) has decided not to buy the 632 Lloyds branches that are up for sale, saying that the price tag was too much. Lloyds has been ordered to sell the branches by EU regulators and one theory is that NAB is trying to bounce Lloyds into lowering its price. NAB has hinted it would come back to the table if the 3bn price tag dropped by a fifth.

Alternatively, NAB's reticence might reflect the strategy of its new boss, Cameron Clyne, to refocus the company on the home Australian market - and, given tougher reserve requirements, this suggests the chances of NAB buying Lloyds spare branches may be off the radar permanently.

That leaves offers from the Co-op Bank, NBNK (Lord Levene's bank acquisition vehicle) and Sun Capital, run by pizza king Hugh Osmond. But the two funds are probably more interested in acquiring the accompanying asset book than keeping the whole branch network, while the Co-op offer is reputed to be a non-starter. Any bets that Lloyds sits on a deal till the EU deadline in November 2013?