Murdoch facing £4.5bn write-off

RUPERT Murdoch's News Corporation media empire faces a further huge write-down of assets. It is the second in three months since it dumped auditor Arthur Andersen, the accountants involved in the WorldCom and Enron scandals.

Wall Street analysts expect the 'abnormal losses' to top $7bn (£4.5bn), one quarter of News Corp's total market value. The Murdoch empire is cleaning up its books so they comply with more stringent accounting standards imposed by scandal-weary regulators in America and Australia.

Long-held investor concerns over News Corp's accounting methods came to a head last week in the wake of WorldCom's disclosure of a $3.8bn alleged accounting fraud. News Corp shares lost 10% of their value, taking them almost to a three-year low, as investors drew parallels between WorldCom and News Corp's method of reporting results.

One US investor said: 'Nobody is saying News Corp did anything illegal. But lately people are suspicious of anything that does not strictly conform to accepted accounting principles. Some of the company's accounting has fallen into what one would call grey areas.'

One parallel between WorldCom and News Corp is that they have routinely posted results using an accounting method championed by John Malone, Murdoch's close friend and the biggest outside shareholder in News Corp. Malone, who heads cable TV group Liberty Media, argued that the heavy cost of infrastructure unfairly skewed his company's results by wiping out profits.

News Corp dismissed Arthur Andersen and hired Ernst & Young on 17 April. Within a month, the media company disclosed it was recording 'an abnormal loss' of $4.2bn, most of it connected with its 42% investment in Gemstar-TV Guide International.

But shares in Gemstar, which owns 200 patents to onscreen TV guides, have plunged further due to a US ruling in a key patent dispute. The value of a $7.5bn investment in Gemstar by News Corp in July 2000 had shrunk to roughly $850m by last week, a plunge that will force an even larger write-down, say analysts. The company could also face writedowns on assets in Asia and Europe.