Updated: Odds Of News Corp. Winning BSkyB Dim In Face Of Furious Opposition

This time last week Rupert Murdoch and nearly everyone else involved had good reason to expect that News Corp (NSDQ: NWS). was well on its way to owning all of satellite operator BSkyB (NYSE: BSY). Then the Guardian‘s report of News of the World‘s hacking into and manipulation of a murder victim’s voice mail hit the newsstand — and nerves. The series of devastating revelations that followed and the rising public and political furor derailed any chance of a decision this summer, and, if Ed Miliband is successful with a new effort in Parliament, it will be postponed far longer.

According to the Guardian, Miliband, who appears to be seizing this scandal as a new opportunity to play the role of strong leader, will launch a motion in Parliament today to stop the process until the criminal investigation into the News of the World is completed. That could take years.

Some are calling for Prime Minister David Cameron, and Culture Secretary Jeremy Hunt, who has been in charge of the process til now, to tell Murdoch to withdraw the bid. Hunt said last week that he was delaying the decision til September because of the unusually heavy volume of comments on the bid, not the events that were unfolding.

The vote would be Wednesday following a debate that could be brutal as everyone tries to score points off suddenly vulnerable Rupert Murdoch, James Murdoch, News Corp. — and Cameron. (The drinking game potential is off the charts.)

Miliband’s push puts more pressure on Cameron, who is still trying to recover from hiring former NotW editor Andy Coulson as his director of communications; Coulson resigned after more revelations about his role in the phone hacking and was arrested Friday. Cameron also has the baggage of being friends with Rebekah Brooks, the chief executive of News Int. who was editor of News of the World during the time when much of the phone hacking took place, and being supported politically by Murdoch and News Corp. Brooks, the Telegraph reports, is being called in for questioning by Metropolitan Police.

The Guardian in its editorial and news pages has been open and vocal all along against allowing News Corp. to further consolidate its power by acquiring all of BSkyB. (To say there is no love lost between Guardian and News International or News Corp. is to put it mildly.) The owners of the Daily Telegraph and the Daily Mail – both supporters of the Conservatives – united with the owners of the Guardian (Our parent ContentNext Media is also owned by Guardian News and Media), and the Labour-backing Daily Mirror last fall to urge blocking the deal.

In a strong editorial in its Sunday paper, The Observer, which credited the “sterling and stoic persistence of the Guardian, some diligent lawyers and a handful of MPs” with bringing the “shameful saga” to light, once again stressed: “In the spirit of media plurality, it is essential that Murdoch’s control of BSkyB is rejected, as we have argued consistently in these pages.”

But the Guardian is not alone in raising the question of whether News Corp. meets Ofcom’s test of “fit and proper” for ownership. Under the Broadcasting Acts, the agency explained last week, Ofcom has a continuing responsibility “to be satisfied that any person (which will include controlling directors and shareholders) holding a broadcasting licence remains fit and proper to hold those licences. In considering whether any licensee remains a ‘fit and proper person’ to hold broadcasting licences Ofcom will consider any relevant conduct of those who manage and control such a licence.”

News Corp. could win the deal and if senior executives are proven guilty in a criminal investigation later, lose the licence.

Some appear to be pinning their hopes for that on James Murdoch, who helped BSkyB advance as CEO from 2003 through 2007; he recently was promoted to deputy chief operating officer of News Corp. while remaining chairman of News Int. He’s on the News Corp. board and executive committee — and he is still chairman and non-executive director of BSkyB.

He signed off on large payments to some phone hacking victims in 2009, which he said last week that he regrets, and likely will be called in for questioning in this new wave of investigations. If he were to be charged with anything — a big if — and if he were to be found guilty — again a big if — and he were still BSkyB chairman or if News Corp. controlled BSkyB and he was still a top exec, well, you get the picture.

BSkyB’s value: Much has been made of BSkyB shedding $1 billion in market value by Friday’s close. Absolutely true and stunning. But it’s worth remembering that the company’s value has been inflated for the past year by News Corp.’s agreement on June 15, 2010, to pay 700p per share. It is still nearly 200p higher than it was on June 1, 2010 — 750p at Friday’s close compared with 570.50p. One reason the shares are dropping is because the deal is on such rocky grounds. Without News Corp. as a likely buyer, the prices will slide even further. So a price pumped up by a buyer is deflating as the timeline gets longer and the likelihood of the acquisition fades.

Update: Miliband launched the attack Sunday as expected but not the motion. Lots of scurrying behind the scenes — and chatter in front — about trying to get the government to stop the process without a vote. Government officials continue to express concern that they don’t have grounds at present to reject the deal. Ditto for Ofcom, as there have not been any criminal proceedings much less convictions of anyone with a controlling interest or executive position in BSkyB. What Miliband and other deal opponents want is a preemptive strike.

Guardian gets into the politics.

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