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Ofcom warning casts doubt over News Corp takeover plan

BSkyB deal

Rupert and James Murdoch are prepared to give evidence on phone hacking under oath, with their takeover bid for BSkyB seemingly in peril.

The media regulator Ofcom warned that it is "extremely concerned" over developments in the phone-hacking scandal and whether it may have implications for News Corp's bid to take control of the satellite broadcaster BSkyB.

A spokeswoman for News Corp, who was asked if Rupert and James Murdoch are willing to give evidence to the judge in the new inquiry into phone hacking if they are summoned, said: "We have said we are willing to co-operate. Yes, we are willing to co-operate with all the inquiries."

The Ofcom chief executive, Ed Richards, said in a letter he has written to investigating authorities, including the Metropolitan Police, the Independent Police Complaints Commission and Parliamentary committees, asking to be "kept abreast" of their findings. In a letter to John Whittingdale MP, chairman of the Culture, Media and Sport Committee, Mr Richards said: "We are monitoring the situation closely and in particular the investigations ... into alleged unlawful activities in regard to any evidence or findings of any relevant conduct."

He said the reason for his correspondence was to "highlight our duties in relation to 'fit and proper' rules", under which Ofcom can remove broadcasting licences at any time. The letter, copied to Lord Inglewood, chairman of the House of Lords Communications Committee, was seen as a signal of intent from Ofcom that it would block the takeover if evidence showed senior figures in News Corp were deemed not fit to hold a licence.

Steven Barnett, professor of communications at the University of Westminster, said: "This is a hugely significant and very welcome development which suggests that the regulator is taking very seriously its duty to uphold standards in British broadcasting.

"It is vital that Ofcom demonstrates its willingness to stand up for and protect the public interest even when that involves confronting powerful media interests. Testing the boundaries of what constitutes 'fit and proper' under the terms of the 2003 Communications Act is unprecedented, and is likely to be a difficult process as long as police investigations are ongoing."

The BSkyB takeover, which seemed a certainty last week, has run into serious difficulties. "Probability of deal collapse much higher now," wrote Alex DeGroote, an analyst at Panmure Gordon, in a research note. Greg Dyke, former director-general of the BBC, said: "I cannot see any way how News International will be allowed to take over the whole of BSkyB."

In a statement after a seven-day consultation on Culture Secretary Jeremy Hunt's proposal to allow the bid to proceed, the Department of Culture, Media and Sport said: "The Secretary of State has always been clear that he will take as long as is needed to reach a decision. [He] will consider carefully all the responses submitted and take advice from Ofcom and the Office of Fair Trading before reaching his decision.

"Given the volume of responses, we anticipate that this will take some time. He will consider all relevant factors including whether the announcement regarding the News of the World's closure has any impact on the question of media plurality."