British parliament to vote against Murdoch deal

LONDON (Reuters) - Summoning a degree of national unity rarely seen outside times of war, Britain's parliament will tell Rupert Murdoch on Wednesday to drop an expansion plan for his media empire while police probe possible crimes by his journalists.

In a watershed moment for British politics, a barrier of fear of the Murdoch press that affected all parties has collapsed under the weight of public outrage. It has triggered a stampede among politicians who were last month courting his favor to outbid each other in condemning the U.S.-based mogul.

A vote, called by the opposition Labour party but also endorsed by Prime Minister David Cameron's Conservatives and their coalition partners, will pass in parliament after 4 p.m. (1300 GMT). Though non-binding, it could well force Murdoch to withdraw News Corp's $14-billion bid to buy out the 61 percent of broadcaster BSkyB it does not already own.

While some analysts said it was too early to declare that the business was in serious retreat in Britain, many said that the sweeping political influence Murdoch had enjoyed over both left and right in politics seemed most suddenly curtailed.

"This is a vote of seismic significance," said politics professor Jonathan Tonge of Liverpool University. "It could spell the beginning of the end for the Murdoch empire.

"For decades now, successive prime ministers have cozied up to Murdoch. 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 at the moment."

Others, however, were cautious.

"I'm in two minds," said Steven Fielding, politics professor at Nottingham University.

"My first instinct is to think ... in the medium to longer term, the natural order will reassert itself ... People will forget what the News of the World did ... and that people's desire for tittle tattle, regardless of how it is found, will remain ... Ultimately there's a reason why politicians sucked up to Rupert Murdoch and to others.

"They inherently need to get on well with the press."

U.S. QUESTIONS

The company has not commented as its share price has fallen and investors have renewed calls for the Australian-born billionaire and his family to cut emotional ties to struggling newspapers on which their empire was built in order to focus on expansion in television and other media.

The fallout from the scandal threatens to spread to the United States, where Murdoch owns The Wall Street Journal, the New York Post and Fox television. John Rockefeller, chairman of Senate's commerce committee, called for an investigation to determine if News Corp had broken any U.S. laws.

Rockefeller said he was concerned by allegations that the hacking of cellphone voicemails, acknowledged in London by News Corp, "may have extended to 9/11 victims or other Americans," in which case he said "the consequences will be severe."

British police are also investigating whether News of the World journalists bribed policemen. Police chiefs defended their honesty in parliament on Tuesday but faced questions over whether their relations with Murdoch managers had meant that previous inquiries into phone hacking were limited.

The buyout of Sky, Britain's dominant pay-TV network and highly profitable, has been a key part of a global strategy.

Murdoch, 80, has sacrificed the 168-year-old News of the World, a top-selling Sunday tabloid which he bought in 1969, closing it down after a long-running scandal over phone hacking by journalists blew up last week with allegations that not only celebrities but vulnerable victims of crime had been targeted.

Yet that has failed to draw the sting of popular anger and Cameron, who has been embarrassed by his own ties to former News of the World editors, has been forced to rescind the provisional blessing the government gave to the Sky takeover.

Cameron has ordered a full public inquiry into the affair and promised new regulation of the British media. Before the debate on Murdoch, he will face his weekly grilling in the chamber by Labour leader Ed Miliband and others at noon.

BID "POLITICALLY DEAD"

The Independent newspaper, which has been critical of Murdoch since the scandal broke, quoted ministers as saying privately that the takeover would be "politically dead" after the vote on the opposition motion in parliament.

It said the only way News Corp could complete the takeover of BSkyB would be to sell off his three remaining British newspapers -- The Sun, The Times and The Sunday Times -- grouped in the British subsidiary News International.

The Sun hit back on its front page on Wednesday at a charge by former Labour prime minister Gordon Brown that it may have hacked medical records to break a story in 2006 that his newborn son was suffering from cystic fibrosis.

The Sun said it had a legitimate source. The Sunday Times also defended its actions in probing Brown's personal finances as pursuing a story that was in the public interest. It denied Brown's accusation that it hired "criminals" to do so.

Many politicians believe that journalistic misdeeds have not been restricted to News International. Allegations surfaced this week of possible phone hacking by other tabloids and police raided the offices of the Daily Star last week.

That has increased pressure for formal regulation of the British press which, while restricted by draconian defamation laws, is otherwise subject to a voluntary code of conduct.

The potential costs to News Corp of the scandal have been growing as police have said thousands may have been targeted by the News of the World -- at least according to notes kept by a private investigator who, with the paper's royal correspondent, was jailed in 2007 for hacking the phones of aides at court.

Police say they have not even contacted more than a few dozen of those whose names or numbers were found in the notes.

The News of the World has already made payments worth tens of thousands of dollars to some celebrities who complained their phones were hacked. Lawyers said compensation to, for example, the families of soldiers killed in Afghanistan or of children murdered in notorious cases could be even greater.

A lawyer for England soccer star Wayne Rooney said on Wednesday he was seeking damages from the newspaper for hacking his voicemails to break stories that he had hired prostitutes.

Whatever the cost of such action, and the billions in value that has been wiped off its shares, the greater damage to News Corp may come from crimping its expansion strategy as a result of damage to its reputation among politicians and regulators.

News Corp shares on Tuesday lost gains they had made on news of a $5 billion share buy-back that took advantage of a 14-percent slide in the company's stock price since Thursday. BSkyB has lost a fifth of its value over the past.

"SEA CHANGE"

Murdoch, his son James and Rebekah Brooks, the former News of the World editor who is now chief executive at News International have been summoned to answer questions by a legislative parliamentary committee next week.

As a U.S. citizen, Murdoch need not attend.

"This is a potential sea change, clearly in the short and medium term, he is damaged and severely limited," said Ivor Gaber, professor of political journalism at City University.

"Where as before he would have walked through the back door of Downing Street, now he might not walk through at all.

But you should never underestimate Murdoch.

"We're three or four years off an election and people can afford to be quite brave. Whilst he still controls a significant amount of British newspaper circulation and its TV and radio news he's bound to continue to have influence.

Labour has sought to capitalize on Cameron's friendship with Brooks, 43, and his hiring of her successor as News of the World editor to be his spokesman just months after the paper's royal correspondent was jailed for phone hacking in 2007.

Andy Coulson quit as spokesman in January and was arrested on Friday on suspicion of conspiring to intercept communications and to corrupt officials.

(Additional reporting by Georgina Prodhan, Mohammed Abbas, Brenda Goh, Karolina Tagaris, Paul Sandle, Michael Holden and Timothy Heritage; Writing by Alastair Macdonald)

Photo credit: World Economic Forum

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