In a move that had largely been expected but for specific timing, it was reported that Rupert Murdoch will likely step down as CEO and hand the position to James Murdoch. As part of the transition, Chase Carey, is expected to step down as co-COO, but will presumably stay on as Vice Chairman for one year. Rupert Murdoch will likely retain his role as Chairman of the Board, but will be joined by his son, Lachlan, who will reportedly assume the title co-executive Chairman. While the timing of the transition remains unclear, we expect the details to be discussed at the company's next board meeting, likely in the next few weeks, after which a timeframe will be established for the transition. We expect the handover to take place by the end of 2015 or the beginning of 2016. Given James' increased involvement in FOXA business operations, we do not expect the transition to result in a change in approach/ strategy at the company.

* Chase Carey to assume position of Vice Chairman. While Mr. Carey is expected to step down as co-COO, he is likely to remain at FOXA as Vice Chairman. We are not surprised by Mr. Carey stepping aside, given the controlling stake held by the Murdoch family and the opt-out clause in the two-year contract he signed last year. Although he has an option to leave in December, he is expected to stay during the transition. Over the last few years, James Murdoch worked closely alongside Mr. Carey, who was central to the robust growth in FOXA's cable networks. We expect the Street to welcome the news that he is likely to remain at FOXA as Vice Chairman.

*James Murdoch takes the reins. Throughout his tenure as Co-COO, we believe James Murdoch has matured as a leader who understands the necessary changes in the digital age, including the importance of targeted and interactive ads as evidenced by the company's TrueX acquisition. Given his increased involvement in budgeting and long-term strategy, along with his growing relationships with the investment community, we believe shareholders will largely approve his appointment as CEO. We do not expect any major near-term changes to strategy, particularly as Rupert Murdoch will continue to oversee some of the day-to-day operating activities.

*What to do with the stock? While we are cautious on broader advertising trends, soft television ratings and the potential for downward earnings revisions if 2016E EBITDA guidance is reset, we remain optimistic and view FOXA as an attractive stock, especially at this entry point. Further, we are positive on FOXA given its attractive runway of high-margin retransmission consent fees, peer-leading exposure to high-growth international markets, and the considerable financial flexibility gained through the sale of its DBS assets, that could result in higher-than-expected capital returns.

Prepared by Nomura Securities International, Inc. For complete details of the research together with the associated important disclosures, analyst certification, valuation methodology and discussion of risks, please see Nomura Group manages conflicts with respect to the production of research through its compliance policies and procedures (including, but not limited to, Conflicts of Interest, Chinese Wall and Confidentiality policies) as well as through the maintenance of Chinese walls and employee training.

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