Public ire forces Murdoch to withdraw BSkyB bid

In what is seen as the first humiliation suffered by Rupert Murdoch, the media mogul on Wednesday dramatically withdrew the bid to takeover broadcaster BSkyB in the face of public revulsion about illegal news-gathering practices of titles owned by his company in Britain.

The anger sparked by the phone-hacking of victims of crime and terrorism, and kin of soldiers killed in Iraq and Afghanistan was reflected by Prime Minister David Cameron in a packed House of Commons on Wednesday.

Murdoch's withdrawal of the bid was described by ministers and MPs as a "huge victory of the British people", who forced parliament and politicians to take a strong stand on the issue.

Outraged by the scandal, Cameron said the phone-hacking scandal was a 'massive firestorm', and announced the setting up the judge-led inquiry to go into the scandal and make recommendations about the relationships between the press, politicians and the police.

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"In my view, this business should not be focused on mergers and takeovers, but on clearing up the mess and getting their house in order," Cameron said on the scandal involving newspapers owned by the 80-year-old Australian.

He said the inquiry, led by Lord Justice Brian Leveson, would have the authority to summon "newspaper reporters, management, proprietors, policemen and politicians of all parties to give evidence under oath and in public."

The inquiry would report in one year, he said. In a sign that the government may go further than disallowing the takeover bid, Cameron said a company that adopted illegal practices should not be allowed to run any media company in Britain.

"The people involved, whether they were directly responsible for the wrongdoing, sanctioned it, or covered it up, however high or low they go, must not only be brought to justice, they must also have no future role in the running of a media company in our country," he said.

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Murdoch currently owns 39 per cent of the broadcaster BSkyB, and he wanted to own the remaining shares to give his company total control of what will become Britain's biggest media company, bigger than even the BBC.

"What has happened at this company is disgraceful - it's got to be addressed at every level," the British prime minister said.

A Labour-sponsored motion asking Murdoch to withdraw the takeover bid for BSkyB was scheduled to be put to motion later on Wednesday, but may not be taken up in view of the announcement that the BSkyB takeover bid had now been withdrawn.

A significant agreement reached between Cameron and Ed Miliband, leader of the Opposition, is that henceforth all meetings with newspaper editors and senior executives of newspaper organisations will be put on record, and published quarterly.

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Cameron admitted that so far politicians did not do enough to take up unethical practices in news organisations because of the 'too cosy' relationship.

"Your bins are gone through by some media organisations but you hold back from dealing with it because you want good relations with the media," he 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," said News Corp chairman Chase Carey in a statement.

"News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and out contribution to it."