In Retreat, Murdoch Drops TV Takeover

The New York Times
By JOHN F. BURNS, DON VAN NATTA Jr. and ALAN COWELL
Published: July 13, 2011

LONDON — In a stunning reversal after days of building scandal surrounding its British newspaper operations, Rupert Murdoch’s News Corporation announced on Wednesday that it was withdrawing a $12 billion bid to take over the shares it does not already own in Britain’s main satellite television broadcaster.

The withdrawal from the bid for complete control of British Sky Broadcasting, also known as BSkyB, represented the most severe damage inflicted so far on Mr. Murdoch’s ambitions by a crisis which erupted only 10 days ago with reports that The News of the World tabloid ordered the hacking of the voice mail of a 13-year-old girl abducted and murdered in 2002.

Since then, virtually every day brought dizzying new disclosure and developments, culminating in News Corporation’s announcement on Wednesday.

A company statement quoted Chase Carey, News Corporation’s Deputy Chairman, President and Chief Operating Officer, as saying “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.”

“News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it,” the statement said.

The development also seemed to end what, for years, had been a close, cozy and influential relationship with the British establishment.

Only hours before the announcement, Prime Minister David Cameron had sought to distance himself from Mr. Murdoch and had urged him to drop the bid for BSkyB. The announcement came just before Parliament was set to approve a cross-party call for Mr. Murdoch to abandon his long-cherished desire to take full control of the lucrative satellite broadcaster.

The scandal has also convulsed the British politicians, press and police, forcing them to contemplate unheard-of scrutiny of their ties with each other.

On Wednesday, Mr. Cameron offered details for the first time of a broad inquiry into those relationships to be led by a senior judge, Lord Justice Leveson. Mr. Cameron told Parliament that it would have the power to summon witnesses to testify under oath. The announcement came as Mr. Cameron fought to recover the initiative in a scandal that has turned into potentially the most damaging crisis of his time in office.

He said the inquiry would examine the ethics and culture of the British media as well as the accusations of phone hacking at The News of the World underlying the scandal. It would also investigate why an initial police inquiry failed to uncover the extent of the scandal and allegations that journalists paid corrupt police officers.

He said he wanted the inquiry to be “as robust as possible, one that can get to the truth fastest and get to work the quickest, and one that commands the full confidence of the public.”

Mr. Cameron said it should complete a report on the future regulation of the press within a year, but he acknowledged that inquiries into allegations of criminal wrongdoing — which the police are also investigating — would take longer.

Mr. Cameron’s Conservative Party took power in May 2010, supported by some of the newspapers in Mr. Murdoch’s British stable, and his critics said that he, like some of his predecessors in 10 Downing Street, sought to maintain that support even as the phone hacking scandal smoldered before erupting into a crisis

Only a week ago, Mr. Cameron said it was not for politicians to interfere in the workings of private companies. But on Wednesday, he urged Mr. Murdoch to abandon his $12 billion bid for more than 60 percent of the shares in British Sky Broadcasting which he does not already own, saying Murdoch executives should “stop the business of mergers and get on with cleaning the stables.”

Later Mr. Cameron met the parents of Milly Dowler, a 13-year-old girl abducted and murdered in 2002. The phone hacking scandal exploded last week with reports that The News of the World had tried to hack into her voice mail after she went missing. Up until then the phone hacking had seemed to be restricted to the voice mails of prominent people.