BSkyB may have to sell off its ITV stake
Oct 3 2007 by Iain Laing, The Journal
BSkyB’s ownership of a 17.9% stake in broadcaster ITV restricts competition and “operates against the public interest”, according to the Competition Commission.
The group now faces the possibility of having to sell down its stake, which it acquired for £940m last November.
The final decision on what action should be taken will be made by Business, Enterprise and Regulatory Reform Secretary John Hutton.
The group’s surprise move to snap up the ITV shares caused controversy by scuppering Virgin Media’s ITV merger plans, drawing fire from major Virgin Media shareholder Sir Richard Branson. The Commission will now consult on possible remedies to address the public interest finding, including possible divestment of the shareholding. BSkyB’s last annual report placed a carrying value of £795m on the ITV holding.
Commission chairman Peter Freeman said: “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.
“As a pay-TV operator, BSkyB faces competition from the free-to-air TV offer, of which ITV is an important part. BSkyB would, therefore, have both the ability and incentive to take advantage of opportunities to weaken ITV or prevent it from taking actions that would threaten BSkyB’s interests.”
He said the Commission did not think the shareholding was sufficient to give rise to competition concerns in other areas, such as advertising and television news. It also concluded that the acquisition will have no adverse effect on the sufficiency of plurality in persons with control of media enterprises. BSkyB is 39%-owned by Rupert Murdoch’s News Corporation. Mr Murdoch is chairman of the pay-TV operator.
The broadcaster said yesterday: “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.” BSkyB has described its ITV stake as for investment purposes. As well as the sale of shares, Mr Hutton could prevent BSkyB from seeking seats on the ITV board or rule that they do not vote against the majority of ITV shareholders.
Sky’s share acquisition was investigated by the Office of Fair Trading and Ofcom, which concluded that the stake raised “significant” competition and public interest concerns, leading to the launch of the Competition Commission inquiry in May.
