News Corp.'s Murdoch to testify before UK Parliament
The media empire's CEO will answer questions about accusations of phone hacking. The CEO of the company's UK newspaper unit resigns.
By TheStreet Staff
News Corp. (NWSA) CEO Rupert Murdoch, whose British newspapers have been battling accusations of phone hacking for the past week, will appear before members of the British Parliament next week to answer questions about the scandal, according to The Wall Street Journal.
Earlier on Friday, Rebekah Brooks resigned as CEO of News International, News Corp.'s U.K. newspaper unit. She will be replaced by Tom Mockridge, the CEO of News Corp.'s Sky Italia operations. Brooks and James Murdoch, who heads international operations for the giant media group, will also testify before the parliamentary committee, according to the Journal, which News Corp. owns.
James Murdoch said Friday that the newspaper group will apologize to Britain for the phone hacking. The company also plans to set up an independent committee to investigate claims of improper conduct. While News Corp.'s stock has dropped 11% during the past week, its shares were up 0.9% at $15.57 Friday.
Brooks' resignation follows Thursday's reports that the Federal Bureau of Investigation is looking into claims that News Corp. might have tried to hack into phones belonging to victims of the Sept. 11 terrorist attacks.
These are the latest developments in a phone hacking scandal that began last week, when the News of the World tabloid was accused of accessing the voicemail accounts of celebrities, politicians and a slain schoolgirl. The newspaper was shuttered, but the move failed to contain the damage.
The U.K.'s Daily Mirror reported Monday that a former New York police officer said he was contacted by News of the World reporters who were seeking phone records of people who died in the 2001 terrorist attacks.
There are also reports that police officers allegedly sold details about Britain's royal family and hacked medical records of former Prime Minister Gordon Brown's son, who has cystic fibrosis.
News Corp. had tried to stanch the scandal and its influence on its shareholders with some procedural moves in the U.K. and a major stock buyback on Monday. News Corp. has said it is increasing its current share-buyback program to $5 billion from $1.8 billion, beginning in August.
News Corp.'s A shares have been trailing those of its competitors for the past year, gaining 18% compared to the 30% advance of the S&P 500 Media Index. The stock has lost 2.8% a year annually during the past five years, compared to a 5.2% average return for the industry. The uncertainty about the FBI action is likely to put further pressure on the shares.
Still, analysts remain bullish about the stock, with 14 of the 22 analysts who follow it rating it buy and eight rating it hold. While 14 of the analysts have updated their price targets since the scandal broke, according to Bloomberg data, no one has recommended selling the stock. On average, analysts expect the stock to jump as much as 33% during the next year to $20.75.
The shares are also cheaper than those of its rivals, with a price-to-earnings ratio of 13 compared with the 16 multiple of the S&P 500 Media Index. While revenue from its global newspaper operations have shrunk by 1.2% on average for the past two years, its larger film and cable TV businesses have increased by 8.6% and 19%, respectively.
On Wednesday, the company halted its plan to acquire the 60% stake of U.K. satellite broadcaster British Sky Broadcasting (BSYBY) it doesn’t already own because of the hacking scandal. The TV network was seen as a potential revenue-grower.
The FBI decision to investigate was made after U.S. Rep. Peter King, R-N.Y., and several other members of Congress wrote FBI Director Robert Mueller demanding an investigation, according to a law enforcement office who spoke with The Associated Press on condition of anonymity.
In an interview with The Wall Street Journal, which News Corp. owns, Murdoch defended his handling of the tabloid newspaper scandal and said any speculation that he may sell off the rest of the company's British newspapers is "pure rubbish." Murdoch made the comments in a story published on the Journal's website Thursday. The 80-year-old executive said he and other top executives had handled the crisis "extremely well in every way possible" with just a few "minor mistakes." He said the company's lawyers underestimated the scope of the problem.
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