Rupert Murdoch's dream of controlling a major European television service has evaporated as his News Corporation withdrew its bid for British Sky Broadcasting.

Rupert Murdoch's dream of controlling a major European television service has evaporated as his News Corporation withdrew its bid for British Sky Broadcasting.

The dropping of the bid came ahead of a vote on a motion in the British Parliament. The motion demands the takeover be scrapped. Meanwhile, the British government has ordered an inquiry into the phone hacking scandal involving the Murdoch-owned News of the World newspaper.

Murdoch has stepped back from making potentially his biggest, most lucrative acquisition. He accepted that he could not win the approval of the British government for the takeover of BSKYB with the country's major political parties united against it.

His decision to drop the takeover came Wednesday before a vote in the British Parliament on a motion declaring Murdoch's bid for BSkyB against Britain's national interest.

All three of the main political parties had pledged to back the nonbinding motion.

The vote was finally cancelled due to Murdoch's withdrawal from the bid, amid the growing political and legal firestorms.

Britain's Prime Minister David Cameron welcomed Murdoch's decision.

He said, "I think this is the right decision. I've been saying this company clearly needs to sort out the problems at News International, at the News of the World. That must be the priority, not takeovers. So the right decision, but also the right decision for the country too. We've now got to get on the police investigation and public inquiry that I've set up today."

Earlier, Cameron announced he is putting a senior judge in charge of the inquiry into the phone hacking and police bribery allegation's against the Murdoch-owned tabloid, the News of the World.

The inquiry will be empowered to compel witnesses, including government figures, to give evidence under oath.

He also met with the family of murdered schoolgirl Milly Dowler - one of the victims in the phone hacking scandal engulfing News of the World.

Outrage has grown, and Murdoch's News Corp.'s share price has plummeted after reports last week that News of the World hacked into Dowler's phone in 2002, and may have impeded a police investigation into her disappearance.

This was followed by claims of intrusion into private records by Murdoch's other UK papers, The Sun and The Sunday Times.

Police have arrested eight people so far, including Cameron's former communications director Andy Coulson, a former editor of News of the World. So far, no one has been charged.