OFT finding could force Sky to sell off blocking stake in ITV

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The Independent Online

BSkyB's controversial purchase of an 18 per cent blocking stake in ITV may have given it a material influence over its rival broadcaster, resulting in a de facto merger of the two companies, the Office of Fair Trading said yesterday in a statement with potentially far-reaching implications.

Should the OFT refer the deal to the Competition Commission, Sky could be forced to dispose of its entire stake - bought for £940m in November - opening up the way once again for the cable operator, NTL, to mount a bid for ITV.

The OFT said it believed "it may be the case that a relevant merger situation has been created since Sky and ITV may have come under common control for the purposes of the Enterprise Act 2002 as a result of Sky acquiring material influence over ITV". The statement followed two complaints to the OFT last month from NTL and its biggest shareholder, Virgin Group, urging the regulator to unscramble the deal on competition grounds.

The OFT has given third parties a fortnight to submit views on whether Sky's stakebuilding in ITV will result in a substantial lessening of competition before deciding what action to take.

NTL and Virgin described the announcement as highly significant, saying it vindicated what they had always argued. NTL called on the Department of Trade and Industry to order the communications regulator, Ofcom, to investigate Sky's move on public interest grounds. "The OFT has confirmed what has always been our view regarding BSkyB's purchase of the 17.9 per cent - that it was a move intended to give it influence over the future direction and strategy of ITV," they said.

The regulator is expected to examine, in particular, the impact of a tie-up between Sky and ITV on the advertising market, the free-to-air digital service Freeview and bidding for sports rights.

Sky said it would continue to engage with the OFT as the inquiry moved forward. "ITV has put in place strong, independent leadership and is capable of turning around its performance to the benefit of viewers, employees and all its shareholders. ITV is a good investment for Sky," it said.

Sky is sitting on a £177m loss on its ITV stake. It paid 135p for 696 million shares in November compared with ITV's closing price last night of 109.5p.