Hacking scandal costs News Corp a contract

The scandal stemming from phone hacking by the News of the World in London has cost News Corp’s newly acquired US education business a valuable contract, demonstrating the risk to Rupert Murdoch’s media group of wider political and commercial fall-out from the affair.

Thomas DiNapoli, New York State comptroller, has rejected a $27m contract the state had planned to award to Wireless Generation, a News Corp-owned education technology company, “in light of the significant ongoing investigations and continuing revelations with respect to News Corporation”. News Corp paid $360m for a 90 per cent stake in Wireless Generation last November, and the contract would have been a sizeable one for a company with reported revenues last year of about $60m. The rejection is a blow for Joel Klein, recruited by Mr Murdoch in November to set up News Corp’s education division. Mr Klein, a close counsellor to Mr Murdoch, is now leading News Corp’s response to the hacking scandal.