One.Tel collapse angers magnates

Founder Bradley Keeling with Lachlan Murdoch, James Packer and joint MD, Jodee Rich

The sons of Australia's two main media magnates, Kerry Packer and Rupert Murdoch, are having to pick up the pieces following the collapse of the Australian telecom company, One.Tel.

The company has been placed into administration after its major shareholders, Mr Packer's Publishing & Broadcasting Ltd (PBL) and Mr Murdoch's News Corp declared it insolvent.

They claim they were misled over the company's true financial position.

The collapse of One.Tel is particularly embarrassing for the two heirs to Australia's biggest media empires - James Packer, chairman of PBL, and Lachlan Murdoch, deputy chief operating officer of News Corp.

Red faces

"Like all shareholders we are angry," said James Packer and Lachlan Murdoch in a joint statement.

"We have been profoundly misled as to the true financial position of the company. We intend to explore all remedies available to us."

James Packer and Lachlan Murdoch invested more than $520m into the fledgling telecommunications company.

It does seem as though the directors and the shareholders were mislead about the exact cash position of the company

The BBC's Dominic Hughes

News Corp owns 23% of One.Tel, while the Packers have 11% through ConsPress and 17% through PBL.

Earlier this month the two founders of the company - one of whom had been to school with James Packer - were forced to resign after One.Tel revealed its cash position was worse than forecast.

An auditor's report subsequently discovered that a $68m rights issue would not keep the company afloat.

As the two main shareholders, PBL and News Corporation decided to place the company into administration.

The recriminations have already begun.

James Packer and Lachlan Murdoch have threatened to explore all remedies available to them.

The mending of fences

The joint investment by the Packer and Murdoch families in One.Tel was seen as an important deal in Australia, where it signified the mending of fences between the two media empires.

Relations had become soured following a damaging row over the rights to Rugby League in Australia.

The senior Mr Packer had certainly said in public that he was sort of cautious about One.Tel's prospects and so the collapse of the company is indeed very embarrassing

The BBC's Dominic Hughes

The collapse is all the more embarrassing for James Packer and Lachlan Murdoch because the two sons were believed to have pressed for the investment despite a lack of enthusiasm from their fathers.

Meanwhile Australia's corporate watchdog, the Securities and Investment Commission, has started an investigation into One.Tel after a referral from the Sydney stock exchange.