Court orders Sky to cut 18 per cent stake in ITV

TV group must decide whether to take legal battle to Supreme Court
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The Independent Online

BSkyB has lost the latest salvo in the legal battle over its holding in ITV, after the Court of Appeal ordered it to slash its 17.9 per cent stake.

The court upheld a judgment from the Competition Appeal Tribunal in September 2008, which insisted the pay TV giant cut its stake in ITV to less than 7.5 per cent on competition grounds. Sky executives have 28 days to lodge an appeal with the Supreme Court, its last available legal recourse.

The company would not be drawn on its plans to appeal in the wake of the decision, saying it would "review the judgment and order carefully and consider next steps in due course".

ITV said it had noted the decision but declined to comment further on the court's decision.

Claire Enders, the chief executive of Enders Analysis, said the ruling was not a surprise, describing the move as "a long shot".

A spokesman for Virgin Media, Sky's biggest rival in the UK pay TV market, said: "After three years of challenges by Sky, the Court of Appeal's decision should now bring this matter to a close.

"The court's judgment reaffirms the prior rulings of the OFT, the Competition Commission and the Competition Appeal Tribunal that Sky's 17.9 per cent stake in ITV is anti-competitive." He added: "We hope Sky now reduces its stake in ITV without further delay."

There remains some uncertainty as to whether the group has the appetite to continue the fight, in the wake of the fourth judgment that has gone against them in the case. One market expert said: "Every appeal it loses makes it less likely the decision will be overturned."

One Sky insider said: "Is there going to be another appeal? It is not a racing certainty. We will be pragmatic over this," adding: "We believe we're in the right. It's about whether we stop making the argument."

Sky bought the stake in ITV in 2006 for £940m, under the stewardship of James Murdoch. It was seen at the time as a move to block a bid from rival NTL, now Virgin Media. The latest news is set to trigger a fresh round of speculation over potential buyers for ITV.

Selling the holding in the current market would mark a significant loss on Sky's original investment. It bought the shares when they were valued at 130p. They closed yesterday at 58.15p.

However, the group has already written down most of the value of its stake in a series of writedowns, so a sale would actually make it about £225m. Analysts at Goldman Sachs added: "The financial implications of any sell-down for Sky are immaterial." If it decides not to appeal, the company will have to start selling down its stake as soon as the undertakings to the Department of Business, Innovation and Skills are finalised.

The company is understood to be undecided over whether it would maintain a holding below 7.5per cent or sell out of the stake completely, if it decides not to appeal. It is thought to have received a number of approaches already.

This is a further setback for Sky as it waits for a final ruling from Ofcom over its prospective changes to the pay TV review. Ofcom ruled that Sky should cut its wholesale prices for premium sport and movies to rivals BT and Virgin. The final judgment is expected in March.