Rupert Murdoch's BSkyB Deal Put on Hold Because of Phone Hacking Scandal

Rupert Murdoch's empire is on shaky ground after the phone hacking scandal.

ByABC News
July 11, 2011, 4:19 AM

July 11, 2011— -- The British government signaled today that it will delay -- and possibly halt -- Rupert Murdoch's $19 billion deal to purchase British Sky Broadcasting as a result of the outrage surrounding the growing scandal over his companies' journalistic practices.

The announcement came from Culture Secretary Jeremy Hunt after News Corp. said it would no longer spin off Sky News, a condition that the government put in place for the company to purchase the remaining 61 percent of BSkyB that it does not own.

The British Competition Commission must now investigate whether the purchase would violate the country's anti-monopoly laws. The review could take up to six months.

If the deal goes through, it would give Murdoch 100 percent control of BSkyB and 40 percent ownership of all of British commerical TV. He already owns 37 percent of newspapers in Great Britain.

BSkyB shares have lost about $3.7 billion since the scandal surrounding News of the World broke. Just last week the company's shares were trading as high as 850 pence on the London Stock Exchange. They were trading at just 716 pence per share today.

The takeover has been under extreme scrutiny following revelations of phone hacking and bribery at the now-defunct News of the World.

Rupert Murdoch Scandal Delays -- and Possibly Halts -- BSkyB Deal

The latest details to emerge about the News of the World scandal came from the BBC which reported that former royal editor Clive Goodman requested cash from the paper's editor, Andy Coulson, to purchase a directory of royal telephone numbers and those of household staff for £1,000, about $1,594. The BBC reported that "the relevant email implies that a police officer in royal protection had stolen the directory, which is known as the Green Book," and was trying to sell it.

Andy Coulson, who was editor of News of the World while reporters broke the law, was also the chief spokesman for Cameron until January of this year. He was arrested on Friday for corruption allegations and conspiring to intercept communications. He was released later on bail until October.

The BBC said other emails suggest the paper "had police contacts in a number of royal palaces, and had bought information from several of them."

The widening scandal has already resulted in three arrests and could lead to a dozen more by the end of the week, including several police officers who allegedly took regular bribes from the paper in exchange for news scoops, and Murdoch's son James Murdoch, a chairman at News International.

Ed Miliband, the leader of the opposition Labor Party, told the BBC that such a deal should not be allowed to go through in the midst of an ongoing investigation into News International's business practices.

"The idea that this organization, which engaged in these terrible practices, should be allowed to take over BSkyB, to get that 100 percent stake, without the criminal investigation having been completed ... frankly that just won't wash with the public," Miliband said.

The best-selling News of the World weekly newspaper shut down after 168 years, leaving its 270-person staff without jobs after it became embroiled in an epidemic of criminal activity in pursuit of stories -- including allegedly hacking the voicemails of murder victims, terrorist victims and their families, not to mention a number of celebrities.

A power network that includes Murdoch, British politicians and police is now accused of suppressing a full investigation, while former News of the World editor Andy Coulson and former royal editor Clive Goodman were arrested last week on charges related to the paper's hacking scandal.

This past weekend, Murdoch rushed to the east London headquarters of his News International Corp., which provides a whopping 40 percent of the newspapers sold in the U.K. As he arrived, he was reading the final edition of the News of the World -- the paper that began his overseas expansion 42 years ago and helped him entrench himself in the British media world.

In the eyes of many, the often sensational weekly tabloid was brought down by management that still refuses to acknowledge its own role in the ongoing scandal.

Rebekah Brooks is at the forefront of these allegations. A major player in the U.K. media world, Brooks is now a chief executive for News Corp., the parent company of News of the World, but she was an editor of the paper during the time of the alleged phone hackings.

And while 270 people -- many of whom had nothing to do with the phone hackings that took place years ago -- lost their jobs last week, Brooks, a close ally of Murdoch's and a friend of British Prime Minister David Cameron, remains in her current top position -- with Murdoch's full support.

Despite orders from top management against having any hidden messages mocking Brooks in the final edition of the tabloid, the recently unemployed staff hid a few final barbs in the crossword puzzle.

Clues in the puzzle included "criminal enterprise," "string of recordings" and "mix in prison." The clue for 24 across was the most overt swipe at Brooks, reading "Woman stares wildly at calamity." The answer: "Disaster."