Speculation over Murdoch sale helps drive shares

Shares in Rupert Murdoch's News Corporation and BSkyB rose on Tuesday as experts warned he may have to sever all ties with the satellite broadcasting business he founded.

News Corp could be forced to sell off its entire 39% stake in BSkyB, or watch the £12 billion pay-to-view company lose its valuable licence to air television.

In London, BSkyB shares rose 13 to close at 691p, buoyed by expectations of a sale and ahead of its third-quarter results today. In New York, News Corp shares went up 32 to $19.93 in morning trading.

The share price increases came as Ofcom, the UK media regulator which has the power to revoke BSkyB's broadcasting licence if it decides that any director or controlling shareholder is not "fit and proper", signalled it would take into account a damning report by MPs.

The Culture, Media and Sport Select Committee claimed Murdoch was "not a fit person to exercise stewardship of any international company", and that News Corp was "corporately" responsible for "wilful blindness" over the News of the World phone-hacking scandal.

Chris Hutchings, a partner specialising in media law at Hamlins, said it was likely that News Corp would now be forced to get rid of "any share in BSkyB" if it, or Mr Murdoch, fell foul of the "fit and proper" test. "The most likely impact would be that News Corp would have to sell its stake entirely," he said.

The move would be a serious blow to Murdoch, who has for a long time planned to gain full control of the broadcaster, a business which made more than pounds 1bn profits in its last financial year.

Last summer, Murdoch was on the brink of merging BSkyB with the rest of his empire, through News Corp's bid to buy the 61% stake of the satellite broadcaster it did not already own. He eventually pulled the bid under political pressure but has made no secret of his intention to renew it at some point.

Meanwhile, across the Atlantic, shareholder groups and corporate governance experts said the ferocity of the select Committee report would turn up the heat on News Corp's US interests.

Julie Tanner, a director at Christian Brothers Investment Services, said the report highlighted the "far-reaching impact of News Corp's corporate governance failures", and renewed its calls for Rupert Murdoch to be replaced with an independent chairman.

News Corp insisted last night that it had already instituted "sweeping changes" to improve corporate governance. BSkyB declined to comment.