11 July 2011 Last updated at 15:32 GMT
Q&A: News Corp's bid for BSkyB
Pressure is mounting on Rebekah Brooks, chief executive of News International, to resign.
The phone hacking and corruption scandal at the News of World has thrown News Corp's planned bid for satellite broadcaster BSkyB into doubt. And now the Culture Secretary Jeremy Hunt has referred the bid to the Competition Commission. But there are growing calls for the bid to be blocked altogether.
Why does News Corporation want to take over BSkyB?
Rupert Murdoch's News Corp already owns 39% of the satellite broadcaster, and wants to buy the remainder of the company, having indicated it would pay 700p a share - although analysts expected the final price would be much higher.
BSkyB is about to become a cash cow. Having done most of its infrastructure investment and secured a large slice of the pay-TV market, the money should start rolling in.
Also, News Corp sees huge opportunities to offer BSkyB customers more bundled and cross-promotional deals with the media empire's other assets, such as The Timesnewspaper. It would create a powerful group able to deliver media across many platforms in this new digital age.
But now News Corp has ensured that the bid goes before the Competition Commission?
Yes, in a surprise move, News Corp announced that it was withdrawing an undertaking to spin off its Sky News operation into separate company. Putting Sky News at arm's length was part of the deal to clear the BSkyB. Withdrawal of the undertaking means Culture Secretary Jeremy Hunt has now referred the bid to the Commission. News Corp's announcement is being seen as a tactical move to keep its bid alive for the next few months, despite the furore and calls for it to be blocked.
But only a few days ago, it looked like a done deal?
It certainly seemed like it. The European Commission had already cleared the takeover on competition grounds, and Mr Hunt had said previously that he was "minded" to approve the takeover.
There was already opposition, however, notably from rival media groups and MPs. Last year Business Secretary Vince Cable was secretly recorded saying he had "declared war" on Mr Murdoch. As a result, he lost the right to arbitrate on the deal, a role which transferred to Culture Secretary Jeremy Hunt.
So what's changed?
It seems evident that the New of the World's involvement in phone hacking and in paying police officers for information was more widespread than first admitted. Revelations that murdered schoolgirl Milly Dowler's phone was hacked, and concerns about the police's relationship with the NoW has caused widespread anger and condemnation.
The NoW editor at the time of Milly Dowler's phone hacking was Rebekah Brooks, now chief executive of the UK division that runs News Corp's newspapers. She denies knowing about the hacking.
All outrageous stuff, but why should it affect a BSkyB deal?
Because any company - or its directors - which hold a broadcasting licence must be 'fit and proper' to do so. There are worries that the NoW was out of control and that some executives and journalists tried to cover up the mess.
Furthermore, critics say the NoW scandal shows that the undertaking to spin-off Sky News to maintain its independence is not worth the paper it's printed on.
So has the government now changed its mind?
Mr Hunt had already asked the media regulator Ofcom and the competition regulator, the Office of Fair Trading, for more information.
This followed News Corp's decision to close the NoW. News Corp's decision to drop its Sky News undertaking changes the bid terms further. Mr Hunt's view is that, since the facts have changed, the relevant authorities must reconsider the changes.
The NoW's closure changes the plurality of the UK media landscape, in that it reduces News Corp's dominance. But there are still "fit and proper" issues to be reviewed.
It's been said that all this just kicks the issue into the long grass.
Events have moved so fast that some people argue that a delay is for the best, given the frenzied atmosphere. Others argue that Mr Hunt has no legal basis for reconsidering the deal and he is just looking for a political way out.
The coalition's deputy leader, Nick Clegg, has called on News Corp to reconsider its bid, while Labour leader Ed Miliband has said it should be blocked. Another view is that News Corp itself is happy to see the deal delayed.
Given the level of public opprobrium against the company and some executives, News Corp may feel this is not the time to be striking multi-billion-pound deals.
What's the verdict of the financial markets?
Always a good barometer of the success of any takeover, the financial markets are telling News Corp that the chances of this deal succeeding are slim.
On Monday, BSkyB's share price fell below 700p a share, having reached 850p after News Corp's takeover interest was disclosed. News Corp had first indicated it would bid 700p a share, though analysts had said it might eventually have to pay up to £11.
Alex DeGroote, analyst at Panmure Gordon, reflected the mood in the City. "Probability of deal now reduced to 10% only. Clearly a political hot potato," he said.
