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BOSTON (TheStreet) -- In a stunning turnabout, Rupert Murdoch's News Corp. (NWS) - Get News Corporation Class B Report dropped its bid for U.K. satellite broadcaster British Sky Broadcasting (BSYBY) amid an evolving phone-hacking scandal that has turned into a national political issue.

Coming from the publisher of

The Wall Street Journal

, this turns the stock prospects for News Corp. and BSkyB on their heads.

Rupert Murdoch's News Corp Shares are Battered In Scandal

News Corp. said today it is dropping its bid to acquire the 60% of BSkyB that it doesn't already own. The TV network, already 40% owned by News Corp., is seen as a revenue-grower for an organization that is print-heavy with media.

If you are investing in these companies, and thinking of adding to your position, perhaps you should hold off and wait and see what happens in the rapidly evolving political situation in the U.K. as Australian media baron Murdoch faces the challenge of his fabled business career.

In a press release issued Wednesday, Chase Carey, News Corp.'s president and chief operating officer, said "we believed that the proposed acquisition of BSkyB by News Corp. would benefit both companies but it has become clear that it is too difficult to progress in this climate.

"News Corp. remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it," he said.

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News Corp. had tried to stanch the scandal and its influence on its shareholders with some procedural moves in the U.K. and a major stock buyback on Monday, but apparently they haven't worked. BSkyB is the only satellite television operator and largest pay television provider in the U.K.

News Corp. has said it is increasing its current share-buyback program to $5 billion from $1.8 billion, beginning in August. But shares of both classes of News Corp. stock have gotten thumped over the past week. The A shares are down 2% today and have lost 13% over the past week, while the B shares have lost about 1% today and 15% over the past week.

Shares of BSkyB have also fared poorly, losing 19% in the past week, even though the company has a solid franchise.

News Corp.'s

News of the World

stands accused of hacking into the voicemail accounts of celebrities, politicians and a murdered schoolgirl. There are also reports that police officers allegedly sold details about the Royal family and also hacked the medical records of the prime minister's son, who has cystic fibrosis.

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