LONDON (Reuters) ? Rupert Murdoch withdrew his bid for broadcaster BSkyB on Wednesday, as outrage over alleged crimes at his newspapers galvanized a rare united front in parliament against a man long used to being courted by Britain's political elite.
The Australian-born billionaire's U.S.-based News Corp, thwarted in a key move to expand its media empire in television, said it would keep its 39 percent of the highly profitable pay-TV network, but left investors guessing over whether it might try again to buy up the rest, or even sell up.
The withdrawal removes the most pressing political conflict the company faced. But a police probe and new public inquiries into the scandal and into media regulation as a whole may keep an unflattering spotlight on it and weaken the influence the 80-year-old media magnate has enjoyed in Britain for decades.
"Successive prime ministers have cosied up to Murdoch," said politics professor Jonathan Tonge of Liverpool University.
"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 the tide. It's parliament versus Murdoch."
While there was no clear legal obstacle to letting the bid proceed via a regulatory review, having won informal government blessing some time ago, even Murdoch's dramatic closure of the scandal-hit News of the World tabloid had failed to stem public anger, leaving the $12 billion buyout politically untenable.
"With such universal political disapproval it would have been foolhardy to carry on," said stock analyst Steve Malcolm at Evolution Securities. "It would be a futile pursuit."
Conservative Prime Minister David Cameron, under fire over his own ties to former News of the World journalists, threw his government's weight behind an opposition motion on Wednesday that denounced Murdoch's bid to extend his media power while police were investigating whether his journalists hacked into the voicemails of thousands of people in search of stories.
"It has become clear that it is too difficult to progress in this climate," News Corp deputy chairman Chase Carey said, adding that the group, whose top executives have gathered in London, remained "a committed long-term shareholder" in BSkyB.
SHARES BOLSTERED
Shares in News Corp, also owner of Fox television and the Wall Street Journal in the United States, had shed 15 percent in a week on fears of widening damage to its brands and a loss of opportunity in television. They ended the day up 3.8 percent as investors welcomed relief from poisonous publicity.
BSkyB closed up around 2 percent.
Shareholders had been concerned by talk from politicians in the United States and Australia about mounting investigations. In Washington, three senators said on Wednesday that the Justice Department and securities regulator should investigate whether News Corp broke laws in the United States over phone hacking.
There have been reports that families of victims of the 9/11 attacks may have been targets of would-be phone hackers.
A Justice Department spokeswoman said they would review the letters sent by the senators as part of standard practice, but that did not mean an investigation would be initiated.
For a week, Britain has been in uproar since a major turn in the long-running saga of phone-hacking by the News of the World. Rival newspapers published allegations that, far from being limited to spying on the rich or powerful, the practice extended to victims of crimes, including child murders and the 2005 London bombings, as well as to parents of Britain's war dead.
Cameron has been embarrassed by the arrest of his former spokesman -- a former News of the World editor -- and has had little choice but to follow the popular mood against Murdoch and News International, News Corp's powerful British newspaper arm which also owns the best-selling Sun tabloid and London's Times.
"This is the right decision," Cameron said of the withdrawal of the BSkyB bid. "This company clearly needs to sort out the problems there are at News International, at the News of the World. That must be the priority, not takeovers."
A person familiar with News Corp's dealings said Murdoch is now turning his attention to dealing with the political, legal and regulatory fallout from the hacking scandal. Having closed News of the the World and abandoned the BSkyB deal, he has resolved immediate business issues. Any further review of business assets, including possible sale of its UK newspapers, would be considered at a later date, the source said.
The Wall Street Journal reported that News Corp was assembling its legal team of big-name lawyers to lead the damage control efforts, and it includes a former head of U.K. prosecution and a prominent Washington D.C. law firm, Williams and Connolly LLP.
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