British Parliament Aims to Kill News Corp.'s Sky Bid

Published July 13, 2011

| Reuters

Summoning a degree of national unity rarely seen outside times of war, Britain's parliament will tell Rupert Murdoch on Wednesday to drop an expansion plan for his media empire while police probe possible crimes by his journalists.

In a watershed moment for British politics, a barrier of fear of the Murdoch press that affected all parties has collapsed under the weight of public outrage. It has triggered a stampede among politicians, who were last month courting his favour, to outbid each other in condemning the U.S.-based mogul.

A vote, called by the opposition Labour party but also endorsed by Prime Minister David Cameron's Conservatives and their coalition partners, will pass in parliament after 4 p.m. (1500 GMT). Though non-binding, it could well force Murdoch to withdraw News Corp's (NWSA) $12-billion bid to buy out the 61 percent of broadcaster BSkyB it does not already own.

Setting the tone, 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."

Cameron faced new questions about why he hired as his spokesman a former editor who has been arrested on suspicion of involvement in hacking voicemails and bribing police. Cameron has repeatedly said he had believed assurances of innocence, but warned 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 warned that senior executives, however high in the Murdoch organisation, should be barred for life from the British media if found to have taken part in any wrongdoing.

While some analysts said it was too early to declare that the 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.

"This is a vote of seismic significance,"said politics professor Jonathan Tonge of Liverpool University. "It could spell the beginning of the end for the Murdoch empire.

"For decades now, successive prime ministers have cosied up to Murdoch. 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 thetide -- 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."

U.S. QUESTIONS

The company has not commented on the parliamentary vote. The legal manager of News International has left the company, a source familiar with Murdoch's British newspaper unit said.

It was not clear what prompted the departure of Tom Crone, who has been closely involved in the company's defence. That for years consisted of blaming one "rogue reporter," jailed in 2007, but has shifted to accept possibly wider problems since police renewed their investigations in January this year.

News Corp's share price has fallen sharply and investors have renewed calls for the Australian-born billionaire and his 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. 

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.

British police are also investigating whether News of the World journalists bribed policemen. Police chiefs defended their honesty in parliament on Tuesday but faced questions over whether their relations with Murdoch managers had meant that previous inquiries into phone hacking were limited.

The buyout of Sky, Britain's dominant pay-TV network and highly profitable, has been a key part of a global strategy.

Murdoch, 80, has sacrificed the 168-year-old News of the World, a top-selling Sunday tabloid which he bought in 1969, closing it down after a long-running scandal over phone hacking by journalists blew up last week with allegations that not only celebrities but vulnerable victims of crime had been targeted.

Yet that has failed to draw the sting of popular anger and Cameron, who has been embarrassed by his own ties to former News of the World editors, has been forced to rescind the provisional blessing the government gave to the Sky takeover.

He was due on Wednesday to meet 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.

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

BID "POLITICALLY DEAD"

The Independent newspaper, which has been critical of Murdoch since the scandal broke, quoted ministers as saying privately that the takeover would be "politically dead" after the vote on the opposition motion in parliament.

It said the only way News Corp could complete the takeover of BSkyB would be to sell off his three remaining British newspapers -- The Sun, The Times and The Sunday Times -- grouped in the British subsidiary News International.

The Sun hit back on its front page on Wednesday at a charge by former Labour Prime Minister Gordon Brown that it may have hacked medical records to break a story in 2006 that his newborn son was suffering from cystic fibrosis.

The Sun said it had a legitimate source. The Sunday Times also defended its actions in probing Brown's personal finances as pursuing a story that was in the public interest. It denied Brown's accusation that it hired "criminals" to do so.

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.

The potential costs to News Corp of the scandal have been growing as police have said thousands may have been targeted by the News of the World -- at least according to notes kept by a private investigator who, with the paper's royal correspondent, was jailed in 2007 for hacking the phones of aides at court.

Police say they have contacted fewer than 200 of those whose names or numbers were found in the notes.

The News of the World has already made payments worth tens of thousands of dollars to some celebrities who complained their phones were hacked. Lawyers said compensation to, for example, the families of soldiers killed in Afghanistan or of children murdered in notorious cases could be even greater.

A lawyer for England soccer star Wayne Rooney said on Wednesday he was seeking damages from the newspaper for hacking his voicemails to break stories that he had hired prostitutes.

Whatever the cost of such action, and the billions in value that has been wiped off its shares, the greater damage to News Corp may come from crimping its expansion strategy as a result of damage to its reputation among politicians and regulators.

News Corp shares on Tuesday lost gains they had made on news of a $5 billion share buy-back that took advantage of a 14-percent slide in the company's stock price since Thursday. BSkyB has lost a fifth of its value over the past week.

"SEA CHANGE"

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.

"This is a potential sea change, clearly in the short and medium term, he is damaged and severely limited," said Ivor Gaber, professor of political journalism at City University.

"Where as before he would have walked through the back door of Downing Street, now he might not walk through at all.

But you should never underestimate Murdoch.

"We're three or four years off an election and people can afford to be quite brave. Whilst he still controls a significant amount of British newspaper circulation and its TV and radio news he's bound to continue to have influence."

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