UK curbs on foreign control of media put Telegraph deal in doubt

Rishi Sunak’s government plans to ban foreign states from controlling or influencing UK newspapers and news magazines, a move that appears to rule out a UAE-linked takeover of the Telegraph newspaper.

Speaking in the House of Lords, Culture minister Stephen Parkinson confirmed reports the government would tighten competition legislation currently passing through Parliament. The proposal would be subject to a vote in the upper House and House of Commons before it came into UK law.

‘We will amend the media merger regime explicitly to rule out newspaper and periodical news magazine mergers involving ownership, influence or control by foreign states,’ Parkinson said on Wednesday. He said the target is explicitly ‘foreign state ownership’ and therefore would not rule out foreign companies, such as Rupert Murdoch’s News Corp., from continuing to own UK papers.

The move comes amid growing disquiet in Parliament about the takeover of the nearly 170-year-old Daily Telegraph newspaper and the Spectator magazine by investment vehicle RedBird IMI, backed by UAE Deputy Prime Minister Sheikh Mansour. A slew of peers criticized the Redbird move in the chamber.

‘This bird cannot fly,’ said Conservative peer Micheal Forsyth, who was a Cabinet minister under ex-premier John Major.

Parkinson said he couldn’t comment on a Telegraph takeover, which is currently being considered by the government, but indicated it would not be approved under the planned rule change. He also said the ban on foreign state ownership would not apply to broadcasters or digital media, fueling the sense that the government’s intervention is driven by the furor over the Telegraph.

After the rule change, regulators would be obliged to probe whether a takeover involved foreign states acquiring a controlling stake in British media companies, he said. If they found that was the case, the Culture Secretary would be required to issue an order blocking or unwinding the deal.

Still, Parkinson said the government wanted to ensure the proposal does not have ‘undesired effects’ on wider business investment in UK media, including passive investment made by funds including sovereign wealth funds. Ministers will set out secondary legislation to give more details on ‘very low threshold up to which they may be permitted to invest.’

The potential for a foreign government to gain control over the Telegraph and The Spectator has caused an uproar in Westminster. The titles have historically been seen as supportive of the governing Conservative Party, and in the House of Lords, Forsyth accused RedBird of pursuing an ‘influence strategy.’

‘Money talks and ownership matters,’ he said. ‘The very idea of an autocratic state with a poor record on human rights owning or holding any influence in a major British daily newspaper to me is just utterly surreal.’

The Telegraph Media Group and RedBird declined to comment when reports first started to appear about the announcement.

Currently, takeovers can be blocked by the Secretary of State if they raise concerns around competition, media plurality or national security. On Monday, Culture Secretary Lucy Frazer was handed reports from the Competition and Markets Authority and media regulator Ofcom, after she referred the RedBird deal for an initial investigation.

She is expected to make a decision on whether to refer the deal for an in-depth investigation next week.

The government’s proposal comes in response to move by Conservative peer Tina Stowell to try to change the bill to ban a ‘foreign power’ from acquiring a media or news organization ‘in any form.’ Directly referencing the Telegraph bid, she the House of Lords that ‘allowing foreign governments to own such a critical and sensitive part of our nation would damage public confidence in all of us yet further, if it was allowed to happen.’

After Parkinson’s statement, Stowell agreed to withdraw her proposal.

Bloomberg previously reported RedBird held discussions with Murdoch’s News Corp. and Daily Mail publisher Daily Mail & General Trust Plc on constructing a separate bid which would reduce its ownership stake in the Telegraph.