Sky may have to sell ITV stake

[BGonaSTICK]

Sky could be forced to sell its 17.9% stake in ITV at a substantial loss after the Competition Commission said this week that the holding restricts competition and is against the public interest.

In a provisional ruling, the commission said that the shareholding, which has been fiercely criticised by rivals, would allow the satellite broadcaster to weaken ITV or prevent it competing fully with BSkyB.

Sky bought the stake for £940m in November 2006. Based on ITV's current share price, the holding is worth £717m.

"The acquisition has made BSkyB ITV's largest shareholder by some margin and while our provisional view is that this would not necessarily affect day-to-day operations, BSkyB would be able to influence ITV's key strategic decisions, particularly relating to investment, whether in content, capacity or new technology," said Peter Freeman, chairman of the commission.

The ruling is a blow for BSkyB, part of Rupert Murdoch's News Corporation empire. But it is likely to please Sir Richard Branson, who last year attacked Sky's "reckless and cynical attempts to stifle competition, and secure creeping control of the British media".

Ofcom and the Office of Fair Trading both launched investigations into the acquisition last year. On their recommendation, the Department of Trade and Industry referred the issue to the Competition Commission in May.

Mr Murdoch has argued that the stake was legal as it observed cross-media ownership rules that prevent it owning more than 20% of a rival broadcaster.

Mr Freeman said that the commission will now consult on possible remedies, which could include forcing BSkyB to sell the holding. It was reported in May that the company had held talks about a possible sale or asset swap with RTL, which owns Channel Five.

The commission is aiming to send its final report to John Hutton, secretary of state for Business, Enterprise and Regulatory Reform, in December. He will then decide what action to take.

ITV said it welcomed today's findings. "We will be reviewing the commission's notice of possible remedies in detail and look forward to working with the commission so that the issues arising from BSkyB's stake can be addressed," it said.

A BSkyB spokesman said it would continue to engage with the commission during the remainder of the process.