Nothing left to gain

2 October 2007 By Una Galani Follow @ugalani

Now that Britain s competition regulator has said the stake in rival ITV restricts competition, Sky should sell it. Other remedies, like keeping the stake but losing its votes, are less palatable. What’s more, Sky has achieved its main goal scuppering a merger of ITV and Virgin Media albeit at significant financial cost.

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Britain's competition regulator said on Tuesday that satellite broadcaster BSkyB's acquisition of a 17.9% stake in commercial broadcaster ITV restricts competition by giving it the ability to influence ITV's strategy. The Competition Commission, publishing provisional findings of its investigation, said it would now consult on possible remedies, including a possible divestment. The final report is not due until January 2008.

The regulator also concluded the stake acquisition does not have an adverse effect on the sufficiency on plurality – a reference to concerns it could reduce the choice of news providers or have an adverse impact on television advertising. Further, that had the stake purchase not occurred, ITV is likely to have remained independent.

James Murdoch, the BSkyB chief executive, spent £940m last November to acquire the stake in ITV at 135p per share. The move was widely interpreted as scuppering a bid for ITV from Virgin Media, formerly NTL, and sparked complaints by Virgin Media's biggest investor, Richard Branson, the British Broadcasting Corporation and Channel 4.

A BSkyB spokesman said: We note the Competition Commission's announcement of its provisional findings and possible remedies. We will continue to engage with the Commission during the remainder of this process.

ITV shares traded up 2.8% in early trade at 104p.

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