ITV attempted to ratchet up the regulatory pressure on Sky, its largest shareholder, by urging the UK competition watchdog yesterday to force the pay TV giant to dispose of its entire stake in the broadcaster.
The Competition Commission has ruled that Sky's acquisition of its large stake in ITV restricts competition and is against the public interest. It is considering the best way to address its concerns that the pay TV giant, part of Rupert Murdoch's media empire, holds material influence over the broadcaster. It is due to complete its investigation by early December.
In particular, the watchdog is concerned that Sky could block ITV's attempts to raise funds for acquisitions or expanding its content production. In a submission to the Competition Commission, ITV has called on the regulator to force Sky to sell its entire stake in the company.
ITV said that it has identified "a wide range of genuine and realistic prospective investments" and that it could swoop on one of its targets within the next two years. "The ability to influence these decisions gives rise to material influence and, because of the competitive context in which decisions will arise, a substantial lessening of competition which requires a comprehensive and effective remedy. The only such remedy is a complete divestment of BSkyB's stake in ITV," the broadcaster said.
The revelation that ITV is considering a number of acquisitions that would be significant enough to require shareholder approval raised eyebrows among some investors. Back in September, ITV chairman Michael Grade revealed a wide-ranging strategy to revive the broadcaster's fortunes that included a plan to make acquisitions. However, he said that the £200m it had earmarked for purchases would be funded through asset disposals.
Sky, which has offered to give up its voting rights related to its near-18 per cent stake in ITV, said it would continue to consult with the Commission. It has argued that its £940m purchase of the stake last December was triggered by the opinion that ITV shares were undervalued. However, with ITV shares trading substantially lower than the 135p a share that Sky paid for the stake, it is facing a large loss on its investment.Reuse content