Murdoch's Sienna Miller Hack Attack May `Poison' News Corp.'s BSkyB Deal

Sienna Miller’s phone-hacking claims against Rupert Murdoch’s News of the World tabloid threaten to tarnish News Corp.’s reputation just as it seeks government approval for the purchase of British Sky Broadcasting Group Plc.

At least seven pending lawsuits from celebrities allege their phone voicemails were hacked into by News of the World. The cases add to pressure on News Corp. as it offers remedies to avoid a lengthy antitrust review of its 7.8 billion-pound ($12.4 billion) bid for full control of BSkyB.

“It’s poisonous and it seems to show that the Murdochs aren’t in charge of their empire,” said Charlie Beckett, director of the media institute Polis at the London School of Economics. The claims are damaging “when you’re trying to give undertakings that people are supposed to trust you on.”

The Metropolitan Police last week pledged a “robust” investigation into the phone-hacking allegations after News Corp.’s U.K. unit handed over new details. Murdoch, who was scheduled to speak at a panel discussion with Google Inc. Chief Executive Officer Eric Schmidt at the World Economic Forum in Davos, Switzerland, last week canceled his appearance.

“The mess bursting around his business in Britain will undoubtedly impact on his international ambitions,” said David Banks, a former editor of the Daily Mirror who also worked for News Corp. newspapers the New York Post and The Sun.

Photographer: Andrew Harrer/Bloomberg

News Corp. Chairman and Chief Executive Officer Rupert Murdoch attending a meeting of the Wall Street Journal CEO Council in Washington. Close

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Photographer: Andrew Harrer/Bloomberg

News Corp. Chairman and Chief Executive Officer Rupert Murdoch attending a meeting of the Wall Street Journal CEO Council in Washington.

A spokeswoman for News Corp. declined to comment on whether the hacking allegations would have an effect on the company’s bid for BSkyB, the U.K.’s biggest television operator.

‘Newspaper Man’

Murdoch has a strong attachment to newspapers, building News Corp. from a single newspaper his father left him in Adelaide, Australia. News Corp. isn’t willing to offer concessions to win BSkyB beyond splitting off the 24-hour Sky News channel, a person familiar with the matter said last week.

“He’s a newspaper man,” said Douglas McCabe, an analyst at Enders Analysis. “It’s where his career started, and it’s still I think, in his blood. His U.K. portfolio is very important to him; he doesn’t want to see its reputation tarnished.”

The News of the World fired an assistant editor after allegations the tabloid hired an investigator to hack into celebrities’ voicemails for stories. U.K. police started a third probe last week into the claims after receiving “significant new information” from its U.K. parent, News International Ltd.

Coulson Quits

The Sunday tabloid’s former editor, Andy Coulson, resigned as Prime Minister David Cameron’s press adviser over claims that phone hacking occurred while he was at the paper. Coulson has denied any knowledge of illegal activity and said coverage of events made it difficult for him to do his job.

The London union for tube workers today asked police to investigate whether Bob Crow, the union’s general secretary, had his phone hacked.

The union “has had suspicions that journalists may have had access to private information as to my movements and my union’s activities that date back to the year 2000,” Crow said in an e- mailed statement. “Our lawyers are now asking for the police, as part of their renewed investigation, to disclose to us any evidence or information that they may have uncovered in respect of the News of the World.”

Other Papers

News International isn’t the only company that could face legal cases. A 2006 report by the Information Commissioner’s Office said 305 journalists had been identified as using private detectives to try to obtain information using illegal methods. The newspapers involved included Associated Newspapers Ltd’s Daily Mail and Mail on Sunday, and Trinity Mirror Plc’s Daily and Sunday Mirror and Sunday People.

Further tainting News Corp.’s reputation in the U.K., one Sky Sports presenter was fired and one resigned after making sexist remarks about a female assistant referee at a broadcaster after a soccer game.

With full control of BSkyB, News Corp. would extend its reach to 51 percent from 31 percent of regular news consumers in the U.K., regulator Ofcom said in a submission to the U.K. government earlier this month.

A review by antitrust regulators at the Competition Commission could delay the proposed BSkyB deal by at least six months, making the transaction more expensive as BSkyB’s profit rises. News Corp. offered 700 pence a share for BSkyB in June. The stock closed at 760p on Friday, 8.6 percent more than the bid and valuing the company at 13.3 billion pounds.

Full Control

Full control of BSkyB may help Murdoch make News Corp.’s newspaper business more profitable by allowing him to bundle newspaper and pay-TV subscriptions and spread content over several media platforms.

Murdoch is already leading the effort to get readers to pay for online content amid losses at the U.K. newspapers. He’s introduced online paywalls at the Times and News of The World and removed all news content from search engine Google Inc. He also plans to introduce a paid-for iPad news publication called The Daily in tandem with Apple Inc.

“Murdoch is in the process of trying to transition the news business,” said Adrian Drury, a media analyst at Ovum Plc. “He’s exploiting what he hopes will be profitable digital platforms.”

News International reported a full-year loss of 78.3 million pounds in the year ended June 27 after a profit of 31.7 million pounds a year earlier, according to accounts filed at Companies House.

The financial losses to News International from any phone hacking claims won’t be significant, as they will probably be settled for relatively small amounts of money, according to Duncan Lamont, a media lawyer with Charles Russell LLP.

“People have got a right to say it’s disgraceful and it is disgraceful,” Lamont said. “But it’s not a million pounds disgraceful. It’s a thousand pounds disgraceful.”

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net. Kristen Schweizer in London at kschweizer1@bloomberg.net.

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net.

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