Article
Defining moment for Mr Murdoch
Still in pursuit of his elusive target
It's crunch time for Rupert Murdoch. News Corporation is expected to learn this weekend whether the many months spent trying to cajole General Motors into selling Hughes Electronics - which owns the largest American satellite television broadcaster DirecTV - have been in vain.
With Sky established in Britain and Star proliferating across Asia, nabbing DirecTV would give Mr Murdoch a genuinely global television operation. Failure will in effect leave him locked out of the American satellite market for good, since the rival suitor for the business, Echostar, is already number two in the states. Putting DirecTV together with its Dish Network would give Echostar about 17m homes and a stranglehold on the satellite market.
If it simply came down to money, the News Corp negotiators would already have been sent packing. Echostar has tabled $27bn in a relatively straightforward mixture of paper and cash.
News Corp, on the other hand, has come up with a typically convoluted solution in which Hughes' shareholders would get a piece of Sky Global, the company that will contain all Mr Murdoch's satellite interests. News Corp would get 26% and management control, while Microsoft and Liberty Media have also agreed to pump in cash.
Unfortunately, Mr Murdoch's plan only values the business at $22bn, which has led us directly to the deeply ironic spectacle of New Corp lobbyists rushing around Washington warning that the consolidation proposed by Echostar will be hopelessly anti-competitive - giving its American rival the type of commanding market position enjoyed by Sky over here.
On the face of it, News Corp's attempt to paint the Echostar option as an anti-trust matter has been somewhat handicapped by the overtly pro-corporate stance of the Bush administration. But then DirecTV and Dish Network together would be bigger than any cable TV operation in the US. Also, getting the American competition authorities to treat satellite as just another TV delivery platform is rather more difficult now internet mania has died down. Hence Echostar's frantic offers to guarantee price caps for rural customers who cannot switch to cable.
It would be foolhardy to write Mr Murdoch out at this stage, even if he is offering $5bn less. Yet at the end of this twisted affair, the best he appears able to offer is certainty. Having lost a chief executive and watched their share price tank while negotiations on Hughes have ground on, the board at GM may simply be unable to stomach the risk that selling to Echostar will invite a regulatory block, forcing a search for a new buyer all over again in perhaps a year's time. This TV soap could still run and run.
Credibility gap
The economy is ticking over nicely, according to yesterday's output figures. So was the CBI trying to dupe the Bank of England into cutting interest rates unnecessarily when it warned earlier this week that industry faces the bleakest outlook for decades?
GDP figures tell us what has actually happened over the last three months - not what panicked firms think the events of September 11 will do to their order books. But the contradiction between the CBI survey data and the official figures also partly reflects the widening divergence between the health of manufacturing and the rest of the economy.
The concept of the two-speed economy has become a cliché. In fact, manufacturing and the rest of the economy are going in completely different directions. Consumers appear to be unfazed by the terrorist attacks in America. Although they are more worried about the outlook for the economy as a whole, their confidence in their personal finances is bearing up. As long as this remains true, households are unlikely to trim their spending habits.
At the same time, exporters - struggling with the pound's relative strength - were fighting to hold their place in shrinking foreign markets even before September 11. The most obvious symptom of this imbalance was the trade deficit, which had ballooned to 4% of GDP in the second quarter.
So should the bank pay attention to howls of anguish from industry? Sceptics recall the CBI crying wolf two years ago, predicting that the Asian crisis would lead to a drastic fall in manufacturing output.
In the event, however, it failed to materialise, although the Bank had already responded. Arguably, had rates not been cut aggressively in the second half of 1998, the outcome might have been a lot grimmer.
The only reason for the Bank to slam the door in the face of the CBI doom-mongers is the fear of stoking inflation. But with price pressures virtually non-existent, the Bank is likely to keep cutting. Sadly for manufacturing, cheaper borrowing will not bring the pound down as long as the UK continues to outperform the rest of the G7.