In a dramatic move, Rupert Murdoch on Wednesday dropped his controversial £9 billion bid for the British satellite broadcaster BSkyB hours before the Commons planned to adopt a motion opposing the bid in the light of the phone hacking scandal surrounding his newspapers.
The surprise development, hailed as a victory by his critics and welcomed by Downing Street, came as Prime Minister David Cameron announced a judicial inquiry into hacking allegations describing the events at Mr. Murdoch's media group, News International, as “disgraceful'' and urging him to set his house in order.
Mr. Murdoch, his son James who is the head of News International, and Rebekah Brooks, its chief executive, have been summoned to appear before a parliamentary committee next week to answer allegations of a cover-up.
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The inquiry, to be led by a senior judge, Lord Justice Leveson, will have powers to call media proprietors, editors and politicians to give evidence under oath. It will investigate allegations of wrongdoing in the press and the police, and also review media regulation.
In an unprecedented attack on the Murdoch papers, Mr. Cameron called for a “root-and-branch'' changes at News International, and for the first time backed calls for Ms. Brooks to quit.
She was editor of the defunct News of the World when its journalists hacked phones and used other illegal methods to get stories.
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Barely had Mr. Cameron finished speaking in the Commons and just as the House was to start a debate came the announcement that Mr. Murdoch was abandoning his BSkyB bid saying it had become too politicised and it was “difficult to progress in this climate''.
In a statement, News Corporation, the parent company of News International, 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. News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it.”
Mr. Murdoch already owns 39 per cent of the satellite broadcaster and would continue to hold that stake.
His bid to acquire the remaining 61 per cent appeared in disarray after the government referred it to the Competition Commission for an “exhaustive consideration … taking into account all recent relevant developments” referring to the hacking scandal.