Byers accused of favouring Murdoch in Vivendi referral

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The Independent Online

In a surprise dual move yesterday, Stephen Byers, the Secretary of State for Trade and Industry, launched an investigation of NTL's £8.5bn takeover of Cable & Wireless's residential cable network and unveiled a probe into French conglomerate Vivendi's acquisition of a 25 per cent stake in BSkyB.

In a surprise dual move yesterday, Stephen Byers, the Secretary of State for Trade and Industry, launched an investigation of NTL's £8.5bn takeover of Cable & Wireless's residential cable network and unveiled a probe into French conglomerate Vivendi's acquisition of a 25 per cent stake in BSkyB.

In the case of NTL's agreed acquisition of Cable & Wireless Communications, Mr Byers overruled advice from the Office of Fair Trading and referred the deal, citing concerns over how the reduction of three cable companies to two could affect the market for pay-TV services. Earlier, John Bridgeman, director-general of the OFT, had advised against referring the deal, concluding that the take-over would boost pay-TV market competition and be beneficial to consumers.

In the second case, Mr Byers referred Vivendi's acquisition of a "material interest" in BSkyB to the Competition Commission. Vivendi's acquisition of BSkyB stakes held by Pathe, Pearson and Granada, in addition to its control of French pay-TV operator Canal Plus, "raises concerns in respect of the market for film and sport rights and for conditional access technology in the UK." Conditional access technology is the software codes that allow broadcasters to restrict a signal to paying subscribers.

The moves also signaled a new, more interventionist approach to corporate regulation from Mr. Byers. Since taking up the post 11 months ago following the resignation of Peter Mandelson, Mr Byers had been seen to follow Gordon Brown's lead in reducing Government involvement in business deals.

City analysts expressed shock at the rulings. Some speculated that Mr Byers, having disallowed BSkyB's take-over of Manchester United, was anxious to improve relations with Rupert Murdoch in the run up to the general election. Others noted that the potential setback to Vivendi and France Telecom, which is NTL's largest shareholder, served up a warning to Jacques Chirac, the French President, to resolve the impasse over exports of British beef to France.

"The decisions were completely unexpected and, for cable, their strategy has backfired and this is potentially very serious," said a City observer. "This might be the first step towards complete open access on cable networks and regulated rate cards."

For Mr Murdoch, the rulings are highly beneficial. In recent months, the media mogul has come under pressure from Jean Marie Messier, the chief executive of Vivendi, who has stated he doesn't intend to be a "passive minority shareholder" in BSkyB. Concern about the determined French corporate predator's long-term designs saw Mr Murdoch, whose NewsCorp owns a 40 per cent interest, become BSkyB chairman in June.

Media industry observers said BSkyB has since the disallowal of the Man United bid made it very clear to the Government that the cable industry should be exposed to more robust scrutiny. A BSkyB spokesman confirmed that the company has advocated a competition inquiry into the cable industry. "We believe the cable platform should have open access like the satellite platform," he said. "We can't control who can go on the satellite platform, but cable does control who goes on its platform."

NTL and Cable & Wireless expressed disappointment with Mr Byers rulings, while continuing to believe their deal would eventually be cleared.

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