News Corp. Hacking of Murdered Girl's Voicemail Condemned as 'Dreadful'

 Ben Gurr - WPA Pool/ Getty Images

LONDON - It should have been a triumphant Rupert Murdoch at Sun Valley this year - flanked for the first time by his son James and daughter Elisabeth - now a News Corp. director - and poised to celebrate one the biggest deals of his life: being cleared to take full control of British pay TV powerhouse BSkyB.

But however sunny the weather at the elite gathering in Idaho, the 80-year-old mogul's mind will be firmly focused on events thousands of miles away in London - where months of painstaking planning, negotiation and behind-the-scenes lobbying could be about to unravel.

Growing public outrage over the conduct of News International journalists at The News of The World could be about to force British politicians to look again at the deal - which was expected to have been cleared later this month.

While the hacking story was limited to celebrities, models and TV stars - which News Corp. has been busily paying off following a series of abandoned legal cases - public disquiet over the illegal phone accessing had proved manageable.

But the most recent allegations have proved more devastating. News International executives are shortly to meet with police to discuss how the paper illegally hacked the phone of murdered school girl Milly Dowler, listening to her messages even before the teenager's body was found.

The news has provoked a storm of outrage even from Murdoch's friends. Prime Minister David Cameron - a regular dining companion of the Murdoch clan - has condemned the hacking, branding it "a truly dreadful act" which he urged the British police to pursue "in the most vigorous way."

At the same time Twitter has been abuzz with ways that users can contact major brands and urge them to pull their advertising from The News of The World.

But potentially the most damaging development has come from former minister John Prescott, whose own phone was hacked by newspapers.

Prescott Tuesday wrote to media regulator Ofcom, asking it to reopen its investigation into the deal - but this time on public interest grounds. To date the deal has only faced queries on news plurality and commercial grounds.

"In the light of recent allegations ... I ask you as a matter of urgency to review this bid," Lord Prescott asked. "Since the Secretary of State has said he can only stop a takeover on the issue of plurality and competition, will you use your legal duties to assess whether Rupert Murdoch is a fit and proper person to have outright ownership of BskyB."

If Ofcom does re-examine the deal on fitness grounds, an entire new front to the inquiry could be opened, with a far less predictable outcome and a new timeline only adding to the price of the deal.

It has been over a year since Rupert Murdoch announced the deal that would cement his position as the most powerful force in British media.

BSkyB's rock-solid cashflow would add some much-needed ballast to NewsCorp.'s balance sheet, too often buffeted by the vagaries of the box office and fluctuating TV Market.

A combination of painstaking and savvy regulatory lobbying, long-nurtured connections with the current political establishment and the ability to finance a deal that could cost him more than $12 billion have meant that full sign-off should be just weeks away.

It remains to be seen whether the widespread sleazy conduct of his newspaper employees eventually scuppers the deal.

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