U.K. Telecom Policy Head Vincent Cable Replaced

U.K. Business Secretary Vincent Cable was removed from his role as overseer of media and telecom policy after he was caught by reporters saying he had declared war on News Corp. CEO Rupert Murdoch. Cable recently initiated Ofcom’s review of the company’s proposed purchase of the rest of British Sky Broadcasting it doesn’t already own. Jeremy Hunt, a conservative secretary of state for Culture, Media and Sport, will take over for Cable in handling media and telecom policy, though Prime Minister David Cameron will keep Cable on as business secretary. Also Tuesday, the European Commission gave its blessing to News Corp.-BSkyB, saying it wouldn’t harm competition.

The Daily Telegraph secretly recorded Cable telling a reporter “I have declared war on Mr. Murdoch and I think we are going to win.” Cable went on to speak about the deal’s review, saying “I have blocked it using the powers that I have got and they are legal powers that I have got,” according to media reports. News Corp. quickly said the reported statements “raise serious questions about fairness and due process.” The Ofcom review is focused on how the deal would affect media plurality in the U.K. Ofcom didn’t respond to a request for comment.

Hunt’s new role slightly improves the chance of regulatory approval of the deal, said Thomas Eagan, an analyst at Collins Stewart. Hunt, rather than Cable, will now have the choice to refer the deal to the Competition Commission, based on Ofcom’s review. “We think it reduces the likelihood nominally that the acquisition gets forwarded to the Completion Commission,” said Eagan. The decision on whether to refer the merger is expected in January, he said.

Meanwhile, News Corp. passed the first regulatory hurdle in its efforts to take over BSkyB on Tuesday. The European Commission gave the deal its OK. The deal still needs approval from Ofcom. BSkyB previously turned down News Corp.’s $12.1 billion offer for the 60.9 percent that News Corp. doesn’t own, though the companies agreed to move forward on gaining regulatory approval. “I am confident that this merger will not weaken competition in the U.K.,” said European Commission Commissioner for Competition Joaquin Alumunia. “The effects on media plurality are a matter for the U.K authorities."

Competitive concerns are low because News Corp. and BSkyB are active in different markets and “compete with each other only to a limited extent,” the commission said. It also found few competitive concerns arising from “vertically linked or neighboring activities” in other sectors, it said. News Corp. “lacks sufficient market power” in the movie market to prevent BSkyB’s competitors from accessing content and several alternatives exist, it said. Anticompetitive actions are also unlikely to occur in the pay-TV, newspaper and ad sectors as result of the deal, the commission said.