Phonegate Fallout: Murdoch’s BSkyB Deal Delayed

Published on July 7, 2011
by Peter Kafka

The renewed uproar over News Corp.’s hackergate scandal looks likely to slow down the company’s $12 billion deal for BSkyB.

If that’s the only fallout, Rupert Murdoch will have dodged a bullet. [Update: It isn’t the only fallout. News Corp. just announced it is shutting down News of the World.)

Earlier this month the transaction, which would see News Corp. acquire the 61 percent of the British satellite TV company it doesn’t already own, looked like a done deal.

Now, as a string of new allegations in the three-year-old voice mail hacking affair at the company’s News of the World tabloid have surfaced, the BSkyB deal is going to take much longer to close. And there’s some speculation that the whole thing may be in jeopardy. (News Corp. also owns this Web site).

The Financial Times (registration required) says the deal won’t be approved until September at the earliest, citing an influx of public comments on the proposal. The British government, in response, says there isn’t an official timetable, but that’s more of a “definition of the word ‘is'” response than a denial.

In any case, hackergate is definitely going to cause more problems for Murdoch than the run-of-the-mill scandals that News Corp. is used to dealing with.

The New York Times has a concise synopsis of the new problems at the tabloid: Allegations “that its executives had paid police officers, lied to Parliament, hired investigators to intercept voice mail messages left on the cellphones of murdered children and terrorism victims, and, in one instance, tampered with a murder investigation in which the suspects were linked to The News of the World.”

So far most of the pressure from the scandal has been directed at Rebekah Brooks, who runs the News International group that oversees News of the World. Murdoch, in a statement, has backed Brooks. But it won’t be surprising to see her go, regardless. The big question is whether the scandal bubbles up to engulf Murdoch or his son James, his likely successor.

Yesterday investors weighed in and drove down News Corp. stock as much as 5 percent; this morning it’s ticking back up.

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