Future of BSkyB in the Spotlight Amid News Corp. Split Talk

BSkyB Satellite - Sign - 2010
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The conglomerate could make a decision on the split at a Wednesday board meeting and formally announce its plans on Thursday.

LONDON - The fate of U.K. pay TV giant BSkyB would be a key focus for management and Wall Street alike if News Corp. goes ahead with a split into an entertainment- and a publishing-centric company, according to analysts.

Last year, News Corp. scrapped a $12 billion offer to buy full control of the satellite TV firm amid the re-erupted phone hacking scandal at the conglomerate's News International U.K. newspaper unit.

As reported earlier, Morningstar Equity Research analyst Michael Corty said Tuesday: "A split would make it easier for the entertainment business [of a split-up News Corp.] to eventually buy the 61 percent of BSkyB that it does not already own."

He and others argued that U.K. regulators could view a split as a concession of sorts that could reduce concerns about the currently united Murdoch empire's market power.

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Credit Suisse analyst Spencer Wang later in the day highlighted that a split-off of News Corp.'s newspaper, book and education businesses would leave its 39.1 percent BSkyB stake grouped with its film and TV networks operations. That would operationally separate BSkyB from the U.K. newspapers that are still struggling with the fallout from the phone hacking issue.

That is important, because amid the hacking scandal, U.K. media regulator Ofcom has been reviewing the links between BSkyB and News Corp. and looking at whether the TV firm is fit to hold a broadcast license. Observers have said that if it fails this regulatory test, News Corp. could be forced to reduce its stake in BSkyB or sell it outright.

"We believe the current scandal in the U.K. increases the probability of a split as it may be a solution for Ofcom's "fit and proper" test and allow News Corp. to retain/increase its stake in BSkyB," Wang said.

Others suggested though that U.K. regulators may not be swayed much by a News Corp. split, which the Wall Street Journal late Tuesday said could be decided at a board meeting on Wednesday and announced Thursday.

BSkyB's stock on Tuesday only rose 1.2 percent amid news of the possible split.

Either way, as one observer put it: BSkyB will be one of the News Corp. assets in the spotlight after a potential split.