Rupert Murdoch is about to learn whether the government has cleared his latest bid to buy Sky or whether concerns about competition could yet derail the deal.

The culture secretary, Karen Bradley, will this week deliver her verdict on whether to greenlight 21st Century Fox’s proposed £11.7bn takeover of the satellite broadcaster, or refer the deal to the competition authorities for further scrutiny.



Bradley is deliberating on the findings of Ofcom’s investigation into the deal, which include whether the deal will give Murdoch too much control of UK news and whether the media mogul is a “fit and proper” owner.



The media regulator is also considering whether Fox, which owns the rightwing Fox News channel, will adhere to existing standards of accuracy and impartiality once it takes full control of broadcasting assets including Sky News.



Bradley has been weighing Ofcom’s findings since last Tuesday and has promised to announce the decision she is “minded to” take by Thursday.

The culture secretary will then give Fox and other parties an opportunity to have their say over her findings before making a final decision. She can decide to wave the deal through, discuss various options with Fox to address any issues raised by Ofcom, or refer the takeover to the Competition Markets Authority for a lengthy investigation.

A number of analysts and observers believe that Ofcom’s reports will have raised concerns and issues about the takeover. But they also expect that the Murdochs will probably be able to gain clearance for the deal, six years after withdrawing an earlier bid at the height of the phone-hacking scandal.



When the proposed takeover was announced last December James Murdoch, the chief executive of Fox and chair of Sky, bullishly said the company would not have to make any “meaningful concessions” to complete the takeover.



However, since then the Murdochs have come under pressure as allegations of sexual harassment have blown up at Fox News in the US – which have so far claimed the jobs of the late chief executive Roger Ailes, co-president Bill Shine and top presenter Bill O’Reilly.

They also face the spectre of the phone-hacking scandal, as the Sun faces a new trial later this year.

During its investigation after Murdoch’s previous attempt to take over Sky, Ofcom found it remained a fit and proper owner of a broadcast licence. However, the regulator published a scathing assessment of James Murdoch, the then chief executive of his father’s newspaper group and chair of Sky, finding that his conduct had repeatedly fallen short of the standards expected. The political fallout saw him stand down as chairman of Sky and decamp for the US to run Fox, the film and TV operation, and rehabilitate his tarnished corporate image.



A number of observers believe that Ofcom’s report will raise concerns about the issues facing the Murdoch empire, but because there is more distance between James Murdoch and those directly running facing Fox News and the Sun than last time round, ultimately they will pass the “fit and proper” test.



In recent years the only business to have its licence revoked by Ofcom was adult TV company Bang Media, which runs channels including Tease Me, in 2010.



Ofcom has also had a chance to air any “fit and proper” concerns about James Murdoch and investigate his role since January, when news broke that he would be returning as Sky chairman and, significantly, following the highly publicised revolt at Sky’s annual meeting when more than 50% of independent shareholders voted against his reappointment.

Fox currently owns a 39% stake in Sky, and is trying to buy the outstanding 61% of shares. Campaigning groups worry about a potential so-called “Foxification” of Sky News if Rupert Murdoch takes full control.

In the past decade Fox has notched up 22 breaches of its licence and Ofcom’s codes and rules. Of those, seven were against Fox News, with four last year including against a programme which featured a guest who said that Birmingham was a city “where non-Muslims just simply don’t go”.

Fox News was taken off air between 5am and 11pm on election day to avoid any issues with Ofcom.



The company has never had a more serious sanction handed down by Ofcom, unlike UK broadcasters including ITV and the BBC which have both been fined for serious breaches.



Fox also argues that since the aborted bid in 2010 News Corporation has split into two different companies. Its newspaper assets are in one, News Corp, while its TV and film assets are in the other, with independent boards.



The company argues that this move neutralises media plurality concerns. During Rupert Murdoch’s previous bid Jeremy Hunt, the then culture secretary, accepted an offer to spin-off Sky News to allay media plurality issues raised by Ofcom.



Critics of the Murdochs argue that the family will still be the ultimate owner of assets including the Sun, Times and Wall Street Journal as well as Fox News and Sky News that will give them too much control over UK news media.



Fox also argues that over the past seven years media plurality has exploded with the rise of digital rivals such as Google and Facebook and news distributors and new outlets such as Vice, Buzzfeed and Huffington Post while traditional newspaper sales decline.



Critics say that plurality issues remain because of the media power Murdoch maintains. In February, it emerged that senior executives from Rupert Murdoch-owned companies met the prime minister or chancellor 10 times in a year – more than any other media organisation.



And in September, Theresa May had a private meeting with Rupert Murdoch during a flying visit to New York.



Ofcom’s task to ensure plurality is defined as “preventing any one media owner, or voice, having too much influence over public opinion and the political agenda” and “preventing too much influence over the political process being exercised by any one media owner”.

Many observers believe that Ofcom’s media plurality report will raise concerns, and that Fox will have to offer up Sky News again.



However, if Fox does so this time, the company is likely only to offer a legal separation of the business with a separate board and editorial independence guarantees – not a full-scale spinoff. Analysts say that Fox would point to Ofcom accepting BT’s plan to legally separate its subsidiary Openreach to put it at arms’ length as enough of a remedy to address competitors’ concerns over control.

“In terms of potential remedies, should the issues arise we continue to think Fox could revisit a spinoff of Sky News, as it did with the original bid for Sky in 2010-11,” said Polo Tang, an analyst at UBS, in a recent note to investors. “Separately, James Murdoch could step down as chairman of Sky, but remain chief executive of Fox.”

The worst case scenario for Fox would be if Bradley says she believes there are plurality or broadcasting standards issues but refuses any remedy offered to push the deal through, instead calling in the Competition Markets Authority.

The CMA would then have 24 weeks to launch an in-depth investigation that could trigger Fox having to pay a special dividend of about £172m for failing to get the deal done this year. If the deal were to fall through Fox has also guaranteed to pay a break fee of £200m.

With a weakened Tory government failing to win a parliamentary majority there is also a view that Bradley may go for the safe option of calling in the CMA for full scrutiny.

“The risk is that the DCMS refers the deal to the CMA as it could be politically expedient to do so,” said Wilton Fry, an analyst at RBC Capital Markets.

The key questions

Are the Murdochs “fit and proper” owners of a broadcasting licence for Sky?



Ofcom is responsible for monitoring all broadcasters to make sure they remain “fit and proper” to hold a broadcasting licence in the UK. Critics argue that phone hacking and scandal at Fox News in the US means that they should fail the test and not be allowed to take full control of Sky.



Would the deal give the Murdochs too much control of UK news media?

The Murdochs say the Sun and Times are in a different, independent company, News Corp, to where Sky News would be run at Fox. They add that the rise of media outlets such as BuzzFeed and Huffington Post, against a backdrop of declining newspaper sales, means there is plenty of plurality. Critics argue that the Murdochs effectively still control both companies and that they maintain a huge media influence.

If the Murdochs take full control of Sky and Sky News, will they adhere to existing standards of accuracy and impartiality?



There is overlap here with the subject matter of the “fit and proper” test, except in this case it will be up to Bradley, not Ofcom, to decide what action to take on the outcome of the media regulator’s report. In the past decade Fox News has notched up seven breaches of the Ofcom code, a low number with no serious breaches involving fines recorded.

