LONDON (AP) - Shares in British Sky Broadcasting dropped sharply Monday on growing doubts over News Corp.'s ability to take full control of the lucrative satellite broadcaster amid signs that the government is looking at ways to block the deal.
Those doubts have been reinforced by the news that the government minister dealing with the bid is seeking fresh advice on the fitness of News Corp. to hold a broadcasting license. News Corp. already owns 39 percent of BSkyB and has tabled a bid for the remaining shares.
News Corp. boss Rupert Murdoch has arrived in London to lead his company's response to the scandal that has engulfed his organization over the past week since damaging revelations over the scale of phone hacking at the News of the World, the Sunday tabloid which was closed after 168 years.
BSkyB shares were down 7.3 percent at 695 pence ($11.11) in early trading on the London Stock Exchange. Just a week ago, BSkyB's shares were trading as high as 850 pence.
Alex DeGroote, analyst at Panmure Gordon, said he thinks the probability of News Corp. taking over the 61 percent of BSkyB it does not already hold has drained to only 10 percent.
DeGroote also said there are concerns now that News Corp. may even be forced into selling the 39 percent in BSkyB that it already holds following the news that Culture Secretary Jeremy Hunt is planning to ask the communications regulator, OFCOM, whether News Corp. is "fit and proper" to hold a broadcasting license. If OFCOM decides it isn't, a license would be denied.
"If the 'fit and proper' test is applied rigidly by Ofcom and events elsewhere worsen, it could become a factor," DeGroote said.
Further pressure is coming from the opposition Labour Party, which is working to force a vote in the House of Commons on a motion asking the government to delay a decision on BSkyB. Liberal Democrats, the junior partner in Prime Minister David Cameron's government, have signaled that they are ready to support that motion.
Murdoch met on Sunday with Rebekah Brooks, chief executive of News Corp.'s British unit, News International.
Brooks was editor of the News of the World at the time that employees of the paper allegedly hacked the phone of 13-year-old Milly Dowler, who was missing and later found murdered - Dowler's parents are meeting with deputy Prime Minister Nick Clegg Monday to discuss the hacking. Those undertaking the hacking are said to have deleted some of Dowler's voicemail messages, raising false hope that the girl was alive and using the phone.
That revelation caused public outrage, and triggered the sharp slide in BSkyB shares as well as the shock decision to close the News of the World.