Satellite broadcaster British Sky Broadcasting PLC saw its share price plunge by nearly 8 percent Friday after British Prime Minister David Cameron indicated that the government was not going to wave through News Corp.'s bid for the company any time soon.
In a hastily arranged press conference, Cameron said the government was doing everything by the book but that a final decision on News Corp.'s bid would take "some time" given recent events.
His comments were later echoed by Culture Secretary Jeremy Hunt, who is assessing News Corp.'s attempt to bid for the 61 percent of shares in BSkyB that it doesn't already own. Hunt remains under pressure from opposition politicians to refer the bid to the Competition Commission for a full-scale monopoly review which could delay a decision even further.
With the decision pushed further out into the future, investors extended a slide in BSkyB's share price that began on Tuesday as public fury mounted over phone hacking by the Sunday tabloid News of the World, which is part of Rupert Murdoch's British press holdings.
BSkyB's share price closed down 7.6 percent at 750 pence ($12). That means the company's market value lost over one billion pounds ($1.6 billion) over the day.
Its woes infected the shares of Nasdaq-listed News Corp. too. The owner of 39 percent of BSkyB saw its share price fall 3.9 percent at $16.75 around midday in New York.
The declines suggest that Thursday's gambit by James Murdoch, his father's heir-apparent, to close down the News of the World after this Sunday's edition has failed to assuage investor concerns about the future of the BSkyB bid. Many observers saw the dramatic announcement to close the scandal-ridden tabloid as a ruse to save the BSkyB bid.
Alex DeGroote, analyst at Panmure Gordon, called the closure "a cynical attempt to improve the prospects of regulatory approval for the News Corp. deal with BSkyB" which is unlikely to work.
DeGroote said it was now more likely that OFCOM, the communications regulator, will have to review its position that News Corp. executives are "fit and proper" persons to hold a broadcasting license.
"Leaving the legalities to one side, we cannot believe it makes political sense for a fragile coalition (government) to let this pass without thorough and fresh scrutiny," he said.
OFCOM, the British media regulator, released a letter on Friday which served to signal that it is watching News Corp. and BSkyB very closely to be sure that directors and controlling shareholders are "fit and proper" persons to hold a broadcasting license.
It informed John Whittingdale, chairman of the House of Commons media committee, that it would not prejudge the outcome of the current investigations. OFCOM, which had earlier given its OK to the News Corp. bid, has the power to deny or revoke a license.
In a sign of further trouble, French car company said on its Twitter feed that it would not be investing in any of News International's titles "pending the formal investigations." News International is the U.K. subsidiary of News Corp., which also owns a wide variety of media assets around the world, including Fox News, The Wall Street Journal, and The Australian newspaper.
In addition to the one more edition of News of the World, News International, publishes The Sun, The Times and The Sunday Times.
The closure of the News of the World was having repercussions all across the British media sector.
Shares in Trinity Mirror PLC closed up around 4 percent as investors conclude that its Sunday publications will be able to pick up readers from the axed News of the World, which was the most read British newspaper.