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When Rupert Murdoch touched down in London on July 10, his over-riding imperative was to shore up his bid to take control of the lucrative satellite broadcaster BSkyB and contain the political and legal firestorm that was threatening to engulf the British arm of his media empire in the wake of the phone hacking scandal. Four days later, that strategy was in tatters, despite such radical moves such as shutting down his hugely successful News of the World tabloid and conceding that BSkyB bid would be open to investigation by industry regulators. Indeed, the future of the Murdoch empire now looks hugely uncertain.

First came signs the hacking scandal was about to cross the Atlantic to lap at the shores of his U.S. operations, then it emerged he was almost certain to be summoned before a judicial inquiry in Britain to answer for his journalists' alleged crimes and finally, moments before the British parliament was set to approve an opposition party motion demanding he abandon the BSkyB bid — the centerpiece of his European media strategy and a long-cherished ambition — Murdoch executed a humiliating about face and withdrew the bid.

To make matters even more dire, Ofcom, the British communications industry regulator, is considering whether Murdoch is a "fit and proper" person to continue owning his existing 39% share of BSkyB. If it decides he is not, it would be another massive blow.

Murdoch's stunning withdrawal of the BSkyB bid was immediately welcomed by the British government and opposition parties. But had global media mogul not caved in to the mounting pressure and persisted with the bid in the face of united opposition from all political parties — not to mention the public and substantial sections of the financial sector — he would have risked inflicting potentially fatal damage to his personal and professional standing, already being battered on a daily basis over the continuing hacking scandal.

What makes the about-face so extraordinary is that only a few weeks ago it appeared the BSkyB bid was set to go ahead without any interference from the government. Ministers had insisted they had no legal right to interfere in the bidding process which was likely to be approved without referral to the regulators. In December, the minister originally in charge of overseeing the bid, Vince Cable, was stripped of that responsibility after he was secretly recorded by journalists saying he was against it and had "declared war on Rupert Murdoch."

But as the scandal took a fresh twist amid revelations the mobile phone of a 13-year-old murder victim, Milly Dowler, had been hacked and messages deleted while she was still missing, public and political sentiment against Murdoch hardened. Opposition Labour Party leader Ed Miliband, whose previously lackluster leadership had been called into question by his own colleagues, stepped up to the plate and appeared to speak for the public, demanding an inquiry into the whole scandal and for the BSkyB bid to be blocked. Murdoch attempted to head-off further moves by re-wording his bid to ensure it would automatically be referred to the Competition Commission, but the tactic failed and it never got that far.

The political pressure intensified as Prime Minister David Cameron, who had originally hesitated, finally moved on Wednesday to back the Opposition move against the bid and to announce details of an inquiry into the hacking scandal and the wider issue of media regulation and media relations with politicians and the police. And he confirmed that the judge in charge of the inquiry will have the power to call any relevant individual to give evidence under oath, whether or not they are U.K. citizens. The Australian-born Murdoch, a naturalized U.S. citizen, is expected to top the list of witnesses invited to attend. Cameron also declared that anyone involved "whether they were directly responsible for the wrongdoing, sanctioned it, or covered it up, however high or low they go must not only be brought to justice they must also have no future role in the running of a media company in our country."

Cameron and his coalition government had been forced into the defensive over the affair amid opposition party claims the Prime Minister had held back from demanding the BSkyB bid should be abandoned. The opposition also accused Cameron of having made a "catastrophic error of judgement" in employing former News of the World editor Andy Coulson as his Downing Street press chief and had also hesitated over joining the calls for the resignation of News International chief executive, Rebekah Brooks, a Cameron friend, who had been editor of the newspaper at the time of much of the alleged wrongdoing.

But the bad news for Murdoch and his empire was not confined to the U.K. and, for the first time, spread to the U.S. with Senator Jay Rockefeller, chairman of the Senate Committee on Commerce, Science and Transportation, calling for an investigation into claims 9/11 victims may have been targeted for hacking by Murdoch's other tabloid, the News of the World. The claims were carried in the News of the World's major tabloid rival, the Mirror, and were raised in parliament by Labour member Tom Watson, who has been leading the political campaign to reveal the full extent of the hacking scandal.

Things were dangerous enough for Rupert Murdoch when the scandal was threatening his British operations. They now appear to have taken a significant turn for the worse and few can predict how this affair may now play out in the U.S. and what that might mean for the bigger Murdoch empire.

• Nick Assinder / London