Rupert Murdoch's News Corporation has dropped its plan to take full control of British broadcaster BSkyB amid a widening scandal over phone hacking that continues to drag the news empire into legal and political turmoil.
In what reports have described as a "stunning retreat", Murdoch on Wednesday backed away from what could have been his news conglomerate's most lucrative acquisition after Britain's main political parties united to denounce the takeover bid.
The withdrawal of the BSkyB bid came shortly before parliament was due to debate a motion put forward by opposition leader Ed Miliband urging Murdoch's company to withdraw the offer because of illegal phone hacking at his News of the World tabloid.
A day earlier, Britain's three main political parties announced they had agreed to join forces in urging Murdoch to stop pursuing control of BSkyB.
"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 Chase Carey, News Corporation chairman, in a statement.
A spokesman for Prime Minister David Cameron said the government welcomed the move, adding that Murdoch's company should now "focus on clearing up the mess and getting its own house in order".
Al Jazeera's Andrew Simmons, reporting from London, said parliament's planned debate over the phone hacking scandal had gone ahead on Wednesday, despite the withdrawn bid, so that politicians could "get things off their chest" in regards to Murdoch and his alleged influence in British politics.
Simmons stressed that this week's show of political unity against the News Corporation was "unprecedented" and could forever alter the relationship between politicians and the media in the UK.
|Murdoch's decision to withdraw the bid follows claims of phone hacking by his News International company [Reuters]
"What we've had here is an explosive situation. We've got all parties together, the entire leadership of the UK, all pointing the finger at Rupert Murdoch.
"They're all coming down on him and it's changing the whole nations' approach to this in terms of politics ...", Simmons said.
News Corporation had hoped to acquire the remaining 60.1 per cent of BSkyB that it did not already own in a $12.5bn deal.
Public outcry against Murdoch and News International, the British arm of his media company, had grown since
a report last week that the News of the World tabloid hacked into the phone of teenage murder victim Milly Dowler in 2002 and may have impeded a police investigation into her disappearance.
That was followed by strong accusations from former Prime Minister Gordon Brown that private information about his family and business affairs had been illegally obtained by Murdoch reporters.
Hours before Murdoch withdrew his offer, Cameron announced he was putting a senior judge in charge of an inquiry into phone hacking and alleged police bribery by News of the World journalists.
Murdoch, his son James, and News International CEO Rebekah Brooks were on Tuesday summoned before a parliamentary committee to answer questions about the scandal.
"There is a firestorm, if you like, that is engulfing parts of the media, parts of the police, and indeed our political system's ability to respond,'' Cameron said on Wednesday in the UK parliament.
It is a bitter irony for Murdoch that the News of the World, his first British acquisition in 1969, sabotaged his ambitions to control BSkyB, the nation's most profitable broadcaster.
The media baron shut down the 168-year-old tabloid on Sunday and had flown to London in a desperate scramble to keep the BSkyB bid alive.
In recent days the scandal has taken on a political dimension, with Miliband repeatedly citing Cameron's links to Murdoch's associates.
Cameron's ex-communications director Andy Coulson, is a former editor of News of the World.
Miliband is one of many British politicians who have stressed the potential importance of this week's turn of events.
"This is a victory for people up and down this country who have been appalled by the revelations of the phone hacking scandal and the failure of News International to take responsibility," Miliband said
"People thought it was beyond belief that Mr Murdoch could continue with his takeover after these revelations. It is these people who won this victory. They told Mr Murdoch: 'This far and no further.'
"Nobody should exercise power in this country without responsibility."