Murdoch pulls out of bid to control BSkyB after phone hacking scandal

As all parties in the UK parliament united behind a motion calling on him to pull out of the bid, Rupert Murdoch dramatically abandoned his attempt to take full control of Britain's biggest satellite broadcaster yesterday.

LONDON // Rupert Murdoch dramatically abandoned his bid to take full control of Britain's biggest satellite broadcaster yesterday amid the continuing furore over the phone-hacking scandal.

The move came as all parties in the UK parliament united behind a motion calling on him to pull out and just hours after Mr Murdoch was bluntly told by the prime minister, David Cameron, to forget about takeovers and "clear up the mess" at News International, his British newspaper company.

After simmering for five years, in little more than a week the phone-hacking scandal involving journalists at the News of the World has so engulfed Mr Murdoch's media empire that he felt the only course open to him yesterday was to give up his cherished prize of buying the 61 per cent of BSkyB that he does not already own.

Chase Corey, the president and deputy chairman of News Corp, Mr Murdoch's US-based parent company, said: "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."

A spokesman for Mr Cameron said he welcomed the move. Ed Miliband, the leader of the opposition Labour Party, which tabled yesterday's parliamentary motion, described it as "a victory for people up and down this country who have been appalled by the revelations of the phone-hacking scandal and the failure of News International to take responsibility".

The announcement came as a powerful US senator called for a formal investigation into any phone hacking by Murdoch journalists in America.

Robert Peston, the BBC's business editor whose revelations of the extent of the cover-up at News International have fuelled the controversy, said the withdrawal of the £7.8 billion (Dh46.1bn) takeover bid was "a huge humiliation" for Mr Murdoch, who flew into London on Sunday to assume control of managing the crisis.

"This was News Corp's biggest investment plan of the moment. It was one of the biggest investments they've ever wanted to make," Peston said. "It is an extraordinary reversal of corporate fortune and questions will now be asked whether this is the full extent of the damage to the empire."

Only two weeks ago, Mr Cameron's Conservative-led coalition government looked set to approve the News Corp takeover.

But revelations last week that the News of the World tabloid, which Mr Murdoch closed on Sunday, had been hacking the phones not just of celebrities but of a child murder victim brought about a dramatic swing in the public mood.

Yesterday, Mr Cameron - who, like most Conservative and Labour politicians has assiduously courted the Murdoch press over the years - turned on the media mogul's empire as he tried to catch up with the public outrage.

Mr Cameron, speaking before yesterday's parliamentary vote, said a firestorm was engulfing parts of the media, and police, who have been accused of taking bribes from News of the World journalists.

The prime minister said the offer to resign by Rebekah Brooks, a personal friend of his and a former News of the World editor who is now the chief executive of News International, should have been accepted. "There needs to be root and branch change at this entire organisation," Mr Cameron said. "What has happened at this company is disgraceful - it's got to be addressed at every level."

The House of Commons's all-party culture and media committee was hoping to hear what Mr Murdoch, his son James who runs News Corp's business interests in Europe and Asia, and Mrs Brooks were doing to address the problems at a special hearing in parliament next week.

But it remained unclear yesterday as to whether any of the three would attend the session. A spokesman for News International would say only that the company would co-operate with the committee.

Mr Cameron, answering questions before attending parliament yesterday, was clear about what he felt Mr Murdoch should do. "If I were running this company, BSkyB and News Corporation, I would be focused on clearing up the mess that there is in News International, with all the problems that are still coming out," he said.

"Deal with that before you move on to working out which merger and which takeover and how many shares and all the rest of it."

In the US, Jay Rockefeller, the chairman of the Senate commerce committee, became the most senior politician to demand an investigation into whether any US citizens had been targeted by News Corp phone hacking.

Mr Rockefeller said that while he had no hard evidence, he was concerned that hacking by the company's journalists could have been directed at Americans, including relatives of victims of the September 11 attacks.

Fox News, The Wall Street Journal and the New York Post are among News Corp's interests in the US.

In Australia, Mr Murdoch's country of birth and the springboard for the creation of his empire, his media companies have begun an investigation of all payments made to contributors since 2008.

A two-part judicial inquiry - the first part into the phone hacking and payments to police; the other into journalistic ethics and practices - has already been ordered in Britain by Mr Cameron.

Yesterday he named Lord Justice Leveson, one of the country's most senior judges, to oversee the inquiry.

The inquiry will have the power to summon media proprietors including Mr Murdoch, politicians, police officers and editors to give evidence in public and under oath.