The outrage of a caged media mogul

Isolated by regulation proposals, Rupert Murdoch may turn his back on Britain, says William Kay

IT HAS not been one of Rupert Murdoch's better weeks. Last Sunday he admitted that his relations with British ministers were not very good. Then as the Italian television regulators were preparing to repel Mr Murdoch, he snubbed that country's leading media magnate, Silvio Berlusconi, saying: "I don't want him to keep even a single share in anything I buy."

And on Friday UK cable companies complained to the Office of Fair Trading and European competition authorities about Mr Murdoch's control of the British pay-TV market. A formal complaint has been lodged with the European Commission, arguing that agreements signed between British Sky Broadcasting, the satellite and cable company 40 per cent owned by Mr Murdoch's News Corporation, and two UK cable firms be overturned on the grounds that they restrain trade.

But what really got up Mr Murdoch's nose was Tuesday's publication of the Government's proposals on media ownership.

Although there are no clear winners from the latest plans for radio, television and newspapers, Mr Murdoch's company appears the one obvious loser. A key recommendation is that any group with more than a 20 per cent share of the national newspaper market should not be allowed to control land-based radio or TV stations.

News International's British titles have 37 per cent of the national newspaper market through the Times, Sunday Times, Sun, News of the World and Today. The group also owns 40 per cent of BSkyB.

Just how stung Mr Murdoch was by the proposed new UK media rules was revealed in an angry telephone call to Sir David English, chairman of Associated Newspapers, and a face-to-face confrontation with Stephen Dorrell, the Secretary of State for National Heritage and the author of the Government's discussion paper.

Mr Dorrell explained: "He believes that this is about a new regulatory burden. I told him to his face that I didn't see it that way. He said that he understood the need for control of significant players in the media industry. But he was concerned about constraints on the natural growth of businesses he already owned."

That followed one of the most ill-tempered press releases issued by any public company in Britain for several years. In it Mr Murdoch said bitterly: "We hope for a constructive dialogue with this supposedly free-enterprise, pro-competition government." The inference Mr Murdoch drew from the proposals was that he should stop investing in expansion and raise prices to hold back circulations, which would help bring News International's market share nearer to the now-magic 20 per cent limit.

After dismissing Associated Newspapers, Pearson and Carlton Communications as "the old vested and often unsuccessful interests", Mr Murdoch made barely veiled threats to close or sell its loss-making newspapers - the Times and Today - and to cut off BSkyB's supply of programming to the 800,000 people who receive cable television.

As a media analyst pointed out, that later threat spoke volumes about the status of the outside shareholders in BSkyB, which own 60 per cent of the company. Not satisfied with menaces, Mr Murdoch then fired both barrels at Prime Minister John Major, in the shape of editorials on successive days from the Times and the Sun - both couched in curiously similar language. Both accused the Government of muddle, and both ended by suggesting that Tony Blair, the Labour leader, might understand competition and the free market better.

Mr Murdoch's ire was understandable: the proposed rules were couched as if their main aim had been to prevent him from expanding any further beyond News International's current interests. Mr Dorrell denied this, arguing that it was going to be impossible to please everyone in the media industry.

Mr Murdoch's violent reaction to his setback contrasted with his emollient behaviour on BBC2's Money Programme last Sunday. Asked then why his consortium had bid only pounds 2m for the Channel 5 franchise, he claimed even that was a compromise with his partners, for he did not want to bid at all. "I may be totally wrong about this," he humbly admitted, "but I think it's going to be very, very hard for Channel 5 to be commercially successful."

However, Mr Murdoch went on to admit that his relations with Margaret Thatcher had never been very good, and he "just didn't happen to know" the current crop of ministers. His howling anguish when the new media proposals were published at 8am on Tuesday indicated that he was more out of touch than he had realised.

Increasingly Mr Murdoch, a lifelong buccaneer who pushes rules to the limit, is being seen by the rest of the UK media industry as an isolated figure, the last of a quickly vanishing era when media moguls such as the late Robert Maxwell and the first Lord Beaverbrook tilted at one

another up and down London's Fleet Street.

But the newspaper industry has long since left Fleet Street, and the mood now is one of forging cross-media alliances - 10 per cent to 20 per cent stakes held by newspaper and television groups in one another, sharing costs and output.

Mr Murdoch has been excluded from these alliances, for a good reason. As one industry figure put it: when you get into bed with Rupert, only one person gets screwed.

However, as the Italian negotiations showed, Mr Murdoch regards Britain as just a small piece in a global jigsaw in which his interests already spread from his native Australia to his adopted US, and deep into Asia. If he is unable to persuade Mr Dorrell or the Prime Minister to give him a better deal under the forthcoming regulatory regime, there is a real prospect that he will gradually turn his back on this country.

A leading media industry analyst said of Mr Murdoch: "He doesn't like competition or interference. However, he still controls much of the UK media industry's pricing, and he will keep the pressure on. Nevertheless, if he is going to move further into the UK media market, he has a tough task."

By contrast, it is clear that both Carlton and Associated Newspapers have been lobbying the Heritage Department and Downing Street with the passion of religious zealots.

Mr Dorrell said: "I was being asked to develop a regulatory regime for an industry that I didn't know. In my view, direct contact with the key players is the only way to get to know it, and I expect the rate of contact to increase. I actively seek a close relationship with the audio-visual industry. It is a big economic opportunity for Britain to develop in a wider field."

Although it is too early to pick the clear winners under the new regulatory regime, Associated - owner of the Daily Mail, Mail on Sunday and London Evening Standard and itself part of Viscount Rothermere's Daily Mail and General Trust - and Carlton, the Midlands and London weekday television franchisee, are the early front-runners.

Nigel Walmsley, chairman of Carlton Television, said: "It's a reasonably well-thought approach to a difficult issue. The proposals will allow UK- based media companies like ourselves to have some opportunity for expansion into satellite or cable television. Beyond that, there is an awful lot of consultation to take place."

He dismissed criticisms of the proposals as either special pleading or simply premature, pointing out that neither the exact type of regulator nor the method of measuring market size were definitely determined.

Sir David English and others have been pushing hard for the market to be defined in terms of size of audience rather than by revenue. If revenue is taken as the yardstick, Associated Newspapers could become the second- largest behind News International, instead of fourth by size of audience.

Mr Dorrell added: "This whole area of media regulation is an important and complex subject, and I don't feel defensive about taking nine months to produce the proposals, since I took over as Heritage Secretary last July."

Although the bigger players have been put on hold while the necessary legislation goes through Parliament, there is more immediate freedom for the smaller fry.

On Friday GWR Group, the West Country radio station operation, launched a hostile pounds 21m bid for Chiltern Radio, in what could be the start of a wave of consolidation.

GWR, with 20 licences, has already bought 12 licences in the Midlands and East Anglia since last year.

Chiltern, with nine licences, was the target of an unsuccessful takeover bid last year by CLT UK, a subsidiary of the Luxembourg broadcaster.

Other radio shares rose in sympathy on Friday. Metro Radio went up 10p to 478p and Capital 7p to 466p as investors placed their bets for a possible round of takeovers.