Sky's deal with Granada for the Rover's golden days

BSkyB has clinched the sole rights to more than 3,000 vintage episodes of Coronation Street in a deal which will see it join forces with the ITV company Granada to launch eight channels on satellite late next year.

The move makes Granada the first UK terrestrial broadcaster to start its own national pay-TV channels but will confirm fears that BSkyB has a stranglehold on the pay-TV market.

It is a coup for BSkyB because Granada - immersed in a bitter takeover fight with Forte - owns one of the world's best libraries of 40 years of Granada and LWT programmes, which could provide a key to attracting new subscribers.

The venture will exploit this archive for the first time, running repeats of old Coronation Street episodes on a channel called Granada Gold Plus.

However, Granada will also face criticism from the soap's 20 million devoted fans that they will only be available to viewers with a cable or satellite subscription.

The gold channel will also offer repeats of The Adventures of Sherlock Holmes, First Among Equals, Jeeves and Wooster, Dempsey and Makepeace, The Charmer and Please Sir.

The other seven channels will be Health and Beauty, Home and Garden, Food and Wine, Granada Good Life - "stimulating discussions on lifestyle issues" - Granada Men and Motoring, Granada Talk TV - talk shows and gossip - and a TV Shopping Guide.

The eight channels are expected to cost pounds 25m over two years, shared between Granada and BSkyB. They are expected to move into profit in three years and recoup the start-up costs in four.

Granada and BSkyB will form a joint venture company, Granada Sky Broadcasting, for the deal. But Granada will own only 20 per cent of it due to media ownership restrictions - a proportion likely to expand to 60 per cent after the broadcasting bill is published in the next few days.

Profits will also be divided between Granada and BSkyB, with Granada taking 60 per cent of the profit and BSkyB the rest.

Granada's chief operating officer, Charles Allen, admitted he had looked at other options before signing with BSkyB but denied he had been forced to come to do so because of BSkyB's control of conditional-access technology.

"We recognise BSkyB are the experts in the area. They have marketing abilities and knowledge of the market," Mr Allen said.

David Chance, deputy managing director of BSkyB, claimed it would be wrong to think his company had "bullied Granada into this. Over a period of months we've looked at different partners and Granada has looked at different partners. Both companies came to the view that our partnership is the best suited."

Two weeks ago the Office of Fair Trading announced an inquiry into BSkyB after complaints from small cable companies that BSkyB is abusing its dominant position in the pay-TV market.