* BBC Trust head says changes must be made
* Director general quit over "shoddy" journalism
* Government warns broadcaster needs to restore trust
* Murdoch and others will try to take advantage, Trust says
By Michael Holden and Kate Holton
LONDON, Nov 11 (Reuters) - Britain's BBC must undergo a radical overhaul in the wake of "shoddy" journalism which led to the resignation of its chief or its future will be in doubt, the head of the state-funded broadcaster's governing body said on Sunday.
Chris Patten, chairman of the BBC Trust, said opponents of the BBC, especially Rupert Murdoch's media empire, would take advantage of the turmoil to up the pressure on its long-term rival.
"If you're saying, does the BBC need a thorough structural radical overhaul, then absolutely it does and that is what we will have to do," Patten, a one-time senior figure in Prime Minister David Cameron's Conservative Party and the last British governor of Hong Kong, told BBC TV.
BBC Director General George Entwistle resigned late on Saturday just two months into the job, after the corporation's flagship news programme aired mistaken allegations of child sex abuse against a former leading politician.
Already under pressure after revelations that a long-time star presenter had been a paedophile, Entwistle quit saying the unacceptable standards of the Newsnight report had damaged the public's confidence in the 90-year-old BBC.
"As the director general of the BBC, I am ultimately responsible for all content as the editor-in-chief, and I have therefore decided that the honourable thing for me to do is to step down," he said.
Patten joined critics who said a complex hierarchical management structure at the BBC was partly to blame. One of the BBC's most prominent journalists Jeremy Paxman, a Newsnight presenter, said in recent years, management had become bloated while cash was cut from programme budgets.
"He (Entwistle) has been brought low by cowards and incompetents," Paxman said in a statement.
Patten, in charge of finding a successor to sort out the turmoil at an institution affectionately known as "Auntie", said changes needed to be made after describing the Newsnight journalism as "shoddy".
CHINESE COMMUNIST PARTY
"One of the jokes I made, and actually it wasn't all that funny, when I came to the BBC ... was that there were more senior leaders in the BBC than there were in the Chinese communist party," Patten said.
Entwistle only succeeded Mark Thompson, set to take over as chief executive of the New York Times Co, in September and almost immediately faced one of the biggest crises in the history of the BBC, funded by a licence fee paid by TV viewers.
This was the revelation by rival broadcaster ITV that the late Jimmy Savile, one of the most recognisable personalities on British television in the 1960s, 70s and 80s, had sexually abused young girls, some on BBC premises.
Suggestions then surfaced of a paedophile ring inside the BBC at the time, and a cover-up. Police have launched an inquiry and detectives said they had arrested their third suspect on Sunday, a man in his 70s from Cambridgeshire in central England.
Entwistle was condemned for the BBC's slow response to the Savile furore and then lambasted after it emerged that Newsnight had axed a planned expose into Savile shortly after his death and that the broadcaster had gone ahead with tributes instead.
His appearance before a parliamentary committee provoked mockery, with one lawmaker saying he had shown a "lamentable lack of knowledge" of what was going on at his own organisation.
Thompson has also faced questions from staff at the New York Times over whether he is still the right person to take one of the biggest jobs in American newspaper publishing.
The knives were out for Entwistle on Friday after the BBC apologised for the mistaken allegation that an ex-politician, later identified on the Internet as a close ally of former prime minister Margaret Thatcher, had abused children, and had not asked him for a comment before broadcast.
The last straw came when Entwistle was forced to admit on BBC radio that he had not been told about the Newsnight report before it aired nor known - or asked - who the alleged abuser was until the name appeared in social media.
Asked if the Newsnight fiasco was just an embarrassing episode or something more fundamental, Home Secretary (interior minister) Theresa May said: "I think it's between the two.
"There is an issue about the quality of journalism which is what the BBC has been renowned for over the years, so that strikes at the heart of the BBC."
While respected around the world, the BBC has long been resented by its commercial rivals, who argue the licence fee gives it an unfair advantage and distorts the market.
Murdoch's Sun tabloid gleefully reported Entwistle's departure with the headline "Bye Bye Chump" and Patten said News Corp and others would put the boot in, happy to deflect attention after a phone-hacking scandal put the newspaper industry under painful, intense scrutiny.
"You've only got to watch television in America or France or Italy to know how good the BBC is. The basis for the licence fee, the basis for the BBC's position in this country, is the trust that people have in it," he said
"If the BBC loses that, it's over. There are one or two newspapers, Mr Murdoch's papers, who would love that but I think the great British public doesn't want to see that happen."
Murdoch himself was watching from afar. "BBC getting into deeper mess. After Savile scandal, now prominent news program falsely names senior pol as paedophile," he wrote on his Twitter website on Saturday.