July 2011

As the metastasizing phone-hacking scandal engulfs the senior-most reaches of News Corp., the Murdoch family, and the British government, a winner may yet emerge from the corporate wreckage: Roger Ailes.

Ailes's Fox News fiefdom has avoided any connection to the hacking uproar. Depending on how the ultimate chapter unfolds for Rupert Murdoch, Ailes, more than anyone inside News Corp., stands to gain significantly. James Murdoch's entanglement in the hacking crisis means he could very well lose his grip on succession, taking a significant threat to Ailes's dominion over Fox News off the table. Ailes's relationship with the Murdoch children and their designs on succession — not to mention their distaste for his brand of hardnosed conservative politics — has long been a subject of intense speculation. Ailes famously clashed with James's older brother Lachlan over management issues and was responsible in part for Lachlan's decision to walk away from the company. By all accounts, James and Ailes have a distant, if cordial, relationship. At a recent budget meeting with senior News Corp. executives, James praised Ailes for Fox's monster profits, according to a person briefed on the meeting. But James's recent elevation to deputy COO makes avoiding conflict with Ailes much more difficult. The inevitability of a Roger-James clash was something that both men had to be aware of. Now Ailes may not have to worry about James after all. If James winds up mortally compromised by the hacking scandal — he is in charge of News International, the News Corp. division at the heart of the hacking spree, and personally approved out-of-court settlements to hacking victims that now could be seen as hush money — Ailes will have one less potential future boss to worry about. Beyond the palace intrigue over succession, the scandal also makes Ailes all the more central to News Corp.'s business.

In the wake of controversy that led to the resignation of former Gay & Lesbian Alliance Against Defamation (GLAAD) President Jarrett Barrios, the gay rights organization has formally backed away from its support of AT&T’s bid to acquire T-Mobile and reemphasized its commitment to network neutrality.

In a letter filed with the Federal Communications Commission, GLAAD withdrew its support for the pending AT&T deal with T-Mobile and returns the “organization to a neutral position with respect to the deal.” The same letter, written by Mike Thompson, GLAAD acting president, also included a strong statement of support for the tenets of net neutrality. “A rigorous review process considered GLAAD’s unique mission and concluded that while AT&T has a strong record of support for the LGBT community, the explanation used to support this particular merger was not sufficiently consistent with GLAAD’s work to advocate for positive and culture-changing LGBT stories and images in the media,” Thompson said.

The New York Times Company has notified Inmobiliaria Carso, S.A. de C.V. and Banco Inbursa S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa of its election to prepay in full, on August 15, 2011, the $250 million 14.053% notes due January 15, 2015. The Company had earlier announced its intention to repay the notes at the earliest practicable date after January 15, 2012. The estimated prepayment will total approximately $279 million, which includes the principal amount of the notes, all accrued and unpaid interest, and a make-whole premium due in connection with the prepayment. While the Company will incur a $46 million loss on the prepayment in the third quarter, interest expense savings will exceed $39 million annually through January 15, 2015.

"Over the past two years we have significantly strengthened the Times Company's cash position and our considerable and focused efforts have allowed us to prepay the notes far ahead of schedule," said Janet L. Robinson, president and chief executive officer. "Inmobiliaria Carso and Banco Inbursa instinctively understood the strength of the Times Company and provided financing during a volatile time in the U.S. economy and in our industry."

Carlos Slim Helú and members of his family are the principal shareholders of Grupo Financiero Inbursa, S.A.B. de C.V., a Mexican financial services company that is the parent company of Banco Inbursa, and are the owners of Inmobiliaria Carso, which currently holds 6.9% of the Times Company's Class A shares (exclusive of outstanding warrants). Inmobiliaria Carso and Banco Inbursa continue to hold warrants to purchase 15,900,000 shares of the Company's Class A common stock, par value $.10 per share, at a price of $6.3572 per share, that were issued concurrently with the notes. The warrants expire January 15, 2015.

Senate Commerce Committee Chairman John D. (Jay) Rockefeller IV revealed the findings of a yearlong Committee staff investigation into a nationwide epidemic involving mystery fees being placed on consumers’ landline telephone bills without their knowledge or consent. The investigation shows that this practice could be costing Americans $2 billion a year, that the nation’s largest telephone companies are profiting from it, and that third-party landline telephone billing has largely failed as a legitimate method of payment.

“This report is a stark picture of a billing system that is hurting consumers and making profits for phone companies,” Chairman Rockefeller said. “Despite industry promises to end this fraudulent practice years ago, hundreds of third-party billing companies have continued to place unauthorized mystery charges on consumers’ phone bills for services they do not want or use. In exchange, they reap tens of millions of dollars a year in profit. This fraud against millions of American consumers, businesses and even government agencies is utterly reprehensible. It’s time for us to take a new look at this problem and find a way to solve it once and for all.”

Key findings:

• Third-party billing is a billion dollar industry. On a yearly basis, telephone companies place approximately 300 million third-party charges on their customers’ bills, which amount to more than $2 billion worth of third-party charges on telephone bills every year. Over the past five years, telephone companies have placed more than $10 billion worth of third-party charges on their customers’ landline telephone bills.
• Most third-party charges appear to be unauthorized. The evidence obtained through the investigation overwhelmingly suggests that a large percentage of these charges are unauthorized cramming charges.
• Telephone companies profit from cramming. Over the past decade, telephone companies have generated well over $1 billion dollars in revenue by placing third-party charges on their customers’ telephone bills. Over the past five years, AT&T, Qwest and Verizon have earned more than $650 million through third-party billing. Verizon explained that it “receives a flat fee between $1 and $2 per charge for placing third-party charges” on its customers’ bills. Because telephone companies generate revenue by placing third-party charges on their customers’ bills, telephone companies profit from cramming.
• Cramming affects every segment of the landline telephone customer base. Unauthorized third-party charges harm residences, small businesses, nonprofits, corporations, government agencies, and educational institutions. The Committee has accumulated thousands of examples of cramming on nonresidential telephone bills.
• Many third-party vendors are illegitimate and created solely to exploit third-party billing. Committee investigators have found third-party vendors operating out of post office boxes, fake offices, and apartments, with “presidents” that know nothing about their “companies.”
• Telephone companies are aware that cramming is a major problem on their third-party billing systems. Over the past five years, more than 500,000 customers have contacted Qwest, Verizon and AT&T and to complain about cramming.
• Telephone customers often reported negative experiences when seeking assistance from their telephone companies. Consumers and businesses frequently reported that the telephone companies’ sales representatives provided little to no assistance when they called about unauthorized third-party charges.
• The telephone companies’ anti-cramming safeguards have largely failed. Telephone companies have inaccurately used low complaint statistics to show cramming is not a problem and to prove that their customers appreciate the convenience of third-party billing.