Ofcom opens inquiry into BSkyB's swoop on ITV shares

[BGonaSTICK]

Ofcom opened a highly sensitive and unprecedented inquiry into BSkyB's £940m raid on ITV shares yesterday to see whether it was a "change in control".

BSkyB is also facing accusations that it acted anti-competitively by acquiring a 17.9% stake in ITV, blocking a potential takeover by the cable company NTL.

After a meeting of the policy executive yesterday, chaired by the chief executive Ed Richards, Ofcom will consider how BSkyB's acquisition of a 17.9% stake in ITV could affect the broadcaster.

"The Communications Act requires Ofcom to assess whether a change in shareholding has the effect of a change of control with reference to public-service broadcasting and the public interest," an Ofcom spokesman said. "Under the act, we are required to undertake that assessment which we will do from today - that's the focus of our attention from this time."

Under rules on cross-media ownership, BSkyB, which is 39%-owned by R. Murdoch's News Corporation, cannot take a stake in ITV above 20%. This is the first time since Ofcom was established in 2003 that it has looked into a "change of control" issue. The investigation is likely to take weeks rather than months.

It is unclear what might happen if Ofcom decides there has been a change of control, though one possibility is that the Department of Trade and Industry would require the regulator to carry out a public interest test. BSkyB believes it has acted within the law and hopes that by not seeking a seat on ITV's board or influencing the search for a new chief executive, it can head off regulatory concerns.

Separately, the Office of Fair Trading will look into accusations from NTL and its largest shareholder, Sir Richard Branson, that BSkyB acted anti-competitively. In an attack on BSkyB at the weekend, Sir Richard claimed that it had breached the 2002 Enterprise Act, which forbids shareholders with more than 15% of a company having "material influence" over commercial decisions.

The City seemed unsure about the effect of BSkyB's move on ITV. Although ITV's shares slid by as much as 7% in early trade yesterday, they rallied to close at 114.5p, down just 1.1% on Friday's closing price. BSkyB bought its shares at 135p, raising the bar for any potential bidder. There was a high level of trading yesterday - 286m shares changed hands - prompting speculation that BSkyB could be topping up its stake or another major buyer could have entered the fray.

ITV is determined to press ahead with finding a new chief executive now that the likelihood of a bid has receded. The broadcaster said in a statement to the City that it was looking forward to discussions with BSkyB "in due course".

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"material influence"?
"change in control"?

Save your money Ofcom. It's bloody obvious it's had both of these effects.