Murdoch pulls BSkyB bid amid UK hacking scandal (AFP)

LONDON (AFP) – Rupert Murdoch dramatically dropped his bid for control of pay-TV giant BSkyB on Wednesday, bowing to pressure from the British government over the phone-hacking firestorm at his newspaper empire.

Hours before Britain's three main parties were set to back an extraordinary parliamentary vote calling for the withdrawal of the bid, Murdoch's US-based News Corp. said it was now "too difficult to progress in this climate".

Prime Minister David Cameron welcomed the news, saying the Australian-born tycoon should focus on cleaning up his business after the scandal which forced the closure of the News of the World tabloid on Sunday.

After decades as Britain's political kingmaker, Murdoch has seen his empire threatened by a wave of public outrage over the hacking of voicemails belonging to people including a murdered girl and the families of dead troops.

"We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate," said News Corp. deputy chairman Chase Carey.

Carey said News Corp., which wanted to purchase the 61 percent of shares in BSkyB it did not own for ￡7.8 billion (8.6 billion euros, $12.5 billion), would remain a "committed long-term shareholder" in BSkyB.

The 80-year-old Murdoch had pushed for the bid as the broadcaster's portfolio includes live English Premier League football and blockbuster films, and this year reached its target of 10 million household subscribers.

Only a few months ago it looked like a sure thing, but the tide of scandal engulfing the News of the World the government put it on ice for at least six months on Monday by referring it to a competition watchdog.

Ed Miliband, the leader of the main opposition Labour party who had proposed the parliamentary motion urging Murdoch to drop the bid, said it was a "victory for the people".

"People thought it was beyond belief that Mr Murdoch could continue with his takeover after these revelations," he said.

A statement from Cameron's Downing Street office said: "We welcome the news. As the prime minister has said, the business should focus on clearing up the mess and getting its own house in order."

The scandal has spread out from Murdoch's newspapers to include the police, members of which allegedly received payments from the News of the World, to politicians accused of being too cosy with Murdoch.

The British premier has himself felt the heat as his media chief from 2007-2010 was former News of the World editor Andy Coulson, who was arrested on Thursday over allegations of voice hacking and paying off policemen.

Cameron told parliament earlier Wednesday he would support the non-binding motion, and announced the details of a full public inquiry into phone hacking, which he said would also include links between politicians and the press.

"There is a firestorm that is engulfing parts of the media, parts of the police and indeed parts of the political system," said Cameron.

He said the inquiry would have the power to summon newspaper proprietors, and warned that executives found guilty of wrongdoing could be barred from future roles in British media.

Murdoch, his son James -- the chairman of BSkyB and an executive at News Corp. -- and Rebekah Brooks, chief executive of News International, News Corp's British newspaper arm, have been called to give evidence to lawmakers next week.

It was reported separately Wednesday that Tom Crone, News International's legal manager, had left the company after 26 years.

In the United States, Senate Commerce Committee Chairman Jay Rockefeller called for an investigation to see if the phone-hacking scandal had spread to Murdoch's US operations, saying there could be "severe" consequences.

News Corp's shares have plummeted in the past week, and the Murdoch-owned Wall Street Journal reported that the media tycoon was considering selling off his remaining British newspapers, The Times, The Sunday Times and The Sun.

Shares in BSkyB were trading down 1.0 percent at 685 pence in late London deals after the announcement, but News Corp. shares gained 1.8 percent on the US Nasdaq index.

The Australian arm of News Corp. separately announced a review of its editorial expenditure over the last three years in a bid to reassure the public that illegal phone-hacking practices in Britain had not taken place there too.

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Murdoch, savaged in parliament, pulls BSkyB bid (Reuters)

LONDON (Reuters) – Rupert Murdoch withdrew his bid for British broadcaster BSkyB on Wednesday in the face of cross-party hostility in parliament following allegations of widespread criminality at one of his tabloid newspapers.

The move pre-empted by a couple of hours a planned vote in parliament that had all-party support for a non-binding motion urging the Australian-born media magnate to drop a buyout offer which was a major part of his global expansion in television

"News Corp announces that it no longer intends to make an offer for the entire issued and to be issued share capital of ... BSkyB not already owned by it," the U.S.-listed parent of the global media empire said.

News Corp owns 39 percent of BSkyB, which owns Sky News and a range of profitable pay-TV channels.

"It has become clear that it is too difficult to progress in this climate," deputy chairman Chase Carey said in a statement, adding that News Corp would remain "a committed long-term shareholder."

Prime Minister David Cameron, who has faced awkward questions about his own relations with Murdoch, welcomed the news: "The business should focus on clearing up the mess and getting its own house in order," he said through a spokesman.

Opposition Labour leader Ed Miliband said it was a victory for those who had opposed the extension of Murdoch's power.

Earlier, Cameron told parliament Murdoch should drop the bid while police investigated allegations that the News of the World hacked the voicemails of thousands of people looking for stories and also bribed police officers for information.

The press baron, who for decades has been both feared and courted by British politicians of all parties, shut down the 168-year-old Sunday tabloid last week in an effort to stem the scandal and save the BSkyB bid. But there was no stopping the flow of allegations and it had looked politically untenable.

Summoning a degree of national unity rarely seen outside times of war, all parties were due to endorse a motion later on Wednesday in parliament that was to urge Murdoch to drop it. It was unclear if that formal vote would now go ahead, after hours of debate in which hostility to Murdoch was unanimous.

GOVERNMENT OPPOSITION

The four-sentence statement, highlighting News Corp's commitment to BSkyB, leaves the door open to a new offer to buy out the other shareholders at some point in the future, although many months of police investigation and a public inquiry will keep the scandal alive for a good time yet.

Chris Marangi, portfolio manager at Gabelli Multimedia Funds, which holds shares in News Corp, said: "This is not surprising, it doesn't mean the desire's not there.

"It's politically savvy, and he needs to buy his time and let this blow over ... At the time, it's circle the wagons and protect existing operations."

Several former employees of Murdoch's British newspaper unit News International have been arrested this year after police reopened inquiries which they had dropped in 2007 following the conviction of the News of the World's royal correspondent.

Those under suspicion of phone hacking and of bribing police include former editor Andy Coulson, whom Cameron hired as his spokesman in 2007 after the hacking scandal first broke. Coulson left the prime minister's office in January and, like other News of the World staff, denies knowing of any wrongdoing.

In the most senior departure from the organization since Coulson, the legal manager of News International, Tom Crone, has left the company, a source familiar with the matter told Reuters. He has been closely involved in the company's defense.

That for years consisted of blaming the "rogue reporter" jailed in 2007 but has shifted to accept possibly wider problems since police renewed their investigation under public pressure.

Cameron told a stormy weekly questions session in parliament that Murdoch should drop the bid: "What has happened at the company is disgraceful. It's got to be addressed at every level and they should stop thinking about mergers when they've got to sort out the mess they've created."

Facing new questions about why he hired Coulson, Cameron repeated that he had believed his assurances of innocence. But he warned that his former aide, if found to have lied to him, "should like others face the full force of the law."

Giving details of a formal public inquiry into the affair, to be chaired by a senior judge, Brian Leveson, Cameron said that senior executives, however high in the Murdoch organization, should be barred for life from the British media if found to have taken part in any wrongdoing.

Cameron has previously said Rebekah Brooks, Coulson's predecessor at the News of the World and now Murdoch's close aide as chief executive of News International, should quit. Brooks has been a frequent guest at Cameron's country home.

MURDOCH POWER

While some analysts said it was too early to declare that his business was in serious retreat in Britain, many said that the sweeping political influence Murdoch had enjoyed over both left and right in politics seemed most suddenly curtailed.

Support for a motion put forward by the Labour opposition was solid across the normally bitter divides of the House of Commons, including from Cameron's Conservatives who had, previously, given their blessing to the BSkyB takeover.

"For decades now, successive prime ministers have cozied up to Murdoch," said politics professor Jonathan Tonge of Liverpool University. "Now it's a new era.

"Political leaders will be falling over themselves to avoid close contact with media conglomerates. This is a turning of the tide -- it's parliament versus Murdoch at the moment."

Others, however, were cautious.

"In the medium to longer term, the natural order will reassert itself," said Steven Fielding, politics professor at Nottingham University. "People will forget what the News of the World did ... and that people's desire for tittle tattle, regardless of how it is found, will remain.

"Ultimately there's a reason why politicians sucked up to Rupert Murdoch and to others ... They inherently need to get on well with the press."

News Corp's share price has fallen sharply, and the company has extended a share buyback scheme. Some investors have renewed calls for the Murdoch family to cut emotional ties to struggling newspapers on which their empire was built in order to focus on expansion in television and other media.

News Corp shares rallied some 1.7 percent after the $12-billion bid was pulled. BSkyB shares, which have lost a fifth of their value in a week, edged another 0.4 percent lower.

INTERNATIONAL FALLOUT

The fallout from the scandal threatens to spread to the United States, where Murdoch owns The Wall Street Journal, the New York Post and Fox television. John Rockefeller, chairman of Senate's commerce committee, called for an investigation to determine if News Corp had broken any U.S. laws.

Rockefeller said he was concerned by allegations that the hacking of cellphone voicemails, acknowledged in London by News Corp, "may have extended to 9/11 victims or other Americans," in which case he said "the consequences will be severe."

In Australia, birthplace of the Murdoch business, the head of the local unit News Limited said it was launching an internal inquiry but insisted he had "absolutely no reason to suspect any wrongdoing" of the kind seen in Britain.

Cameron on Wednesday met the parents of Milly Dowler, a 13-year-old girl abducted and murdered in 2002, whose cellphone is alleged to have been hacked by the News of the World.

It was that revelation in a rival newspaper last week which shocked the nation and drove events forward amid a whirlwind of further allegations. These included that the phones of parents of soldiers killed in combat and those of the victims of the July 2005 London suicide bombings were also targeted.

Cameron said he wanted to pledge to the Dowlers that all the political parties would act to close this "ugly chapter."

Many politicians believe that journalistic misdeeds have not been restricted to News International. Allegations surfaced this week of possible phone hacking by other tabloids and police raided the offices of the Daily Star last week.

That has increased pressure for formal regulation of the British press which, while restricted by draconian defamation laws, is otherwise subject to a voluntary code of conduct.

Murdoch, his son James and Rebekah Brooks, the former News of the World editor who is now chief executive at News International have been summoned to answer questions by a legislative parliamentary committee next week.

As a U.S. citizen, Murdoch need not attend.

(Additional reporting by Keith Weir, Mohammed Abbas, Michael Holden and Jodie Ginsberg; Writing by Alastair Macdonald; Editing by Jon Hemming)

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UK government turns against Murdoch BSkyB bid (AP)

By DANICA KIRKA and ROBERT BARR, Associated Press Danica Kirka And Robert Barr, Associated Press – 1?hr?19?mins?ago

LONDON – The British government on Tuesday joined in calls for Rupert Murdoch to shelve his ambition of taking full control of British Sky Broadcasting as a widening investigation of phone hacking and bribery at his newspapers fed the backlash against the powerful media mogul.

The decision followed a dramatic accusation by former Prime Minister Gordon Brown that Murdoch's U.K. newspapers employed criminals to obtain confidential information about his family and ordinary people, and as police officers came under sharp criticism for failing to turn up evidence of some of the most serious spying allegations.

Prime Minister David Cameron's office said the government would vote with the opposition Labour Party on Wednesday to support a motion calling on Murdoch and his News Corp. to withdraw the $12 billion bid for highly profitable satellite broadcaster BSkyB.

Labour leader Ed Miliband said the motion, which is not legally binding but is a powerful expression of sentiment, would be the simplest way to ensure that the bid isn't considered until the criminal investigations are complete.

"Ultimately, that is a decision for News Corp. but we would always expect people to take seriously what Parliament has said," said Cameron's official spokesman, Steve Field.

Cameron's decision marked a sharp breach in relations with News International, the U.K. branch of News Corp., which published the Sunday tabloid News of the World, the focus of two criminal investigations.

Since public outrage exploded last week when it was claimed that News of the World employees hacked the phone of Milly Dowler, a 13-year-old murder victim, Cameron has said he would have accepted the resignation of his friend Rebekah Brooks, the chief executive of News International. On Monday, he said Murdoch should focus on the hacking and bribery issues, not the takeover.

Cameron has been embarrassed by the arrest of former News of the World editor Andy Coulson, who from 2007 until January was the prime minister's communications director.

On Monday, Culture Secretary Jeremy Hunt reportedly was prepared to tell the House of Commons that the government could veto a bid only on grounds that the takeover would give New Corp. too large a share of the news market. But, that position collapsed when News Corp. withdrew promises to spin off Sky News as a separate company, and the government responded by ordering the Competition Commission to undertake a review expected to last the rest of the year or longer.

Brown's furious denunciation of the politically powerful News International papers came a day after it was revealed The Sun newspaper obtained confidential information in 2006 that Brown's infant son Fraser had cystic fibrosis — and that he was among those whose privacy was breached by Murdoch's papers.

They "really exploited people — I'm not talking so much about me here now, I'm talking about people who were at rock bottom," Brown told the BBC. Brown said he knew of no legitimate way The Sun could have found out about his son's illness, though the newspaper said it used legitimate means.

News International defended the story, issuing a statement which said that it was "able to assure the Brown family that we did not access the medical records of their son, nor did we commission anyone to do so."

The widening allegations of illegal eavesdropping of politicians, royalty and hundreds of ordinary people at Murdoch-owned newspapers also renewed anger at London's Metropolitan Police for dropping an earlier investigation into company practices.

At a tense House of Commons parliamentary committee hearing, one current and two former senior officials of London's Metropolitan Police said they regretted that an investigation of the News of the World in 2006 had not uncovered the extent of the alleged phone hacking.

They blamed the News of the World and News International for not cooperating and pleaded that the force was preoccupied with terrorism investigations.

Resources were stretched and there were not enough officers to fully staff 70 terrorist investigations running at the time, said Peter Clarke, former commander of the anti-terrorist branch.

The hacking case yielded convictions and prison sentences for a reporter and a private detective working for News of the World, but recent allegations suggest the practices were much more widespread at Murdoch's papers.

Documents gathered in the first investigation yielded 3,870 names, 5,000 landline numbers and 4,000 mobile numbers that may potentially have been hacked, Deputy Assistant Commissioner Sue Akers told the committee. So far, she said, police had contacted 170 potential targets of hacking.

The scandal has broadened, with among others accusations, the allegation that Murdoch reporters paid bodyguards of Queen Elizabeth II for sensitive phone numbers and travel plans.

BSkyB shares fell for the sixth straight day, closing down 3.3 percent at 692 pence ($11.03) on the London Stock Exchange. At the start of last week, they were at 850 pence.

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