From Colin Mann in London
UK Business and Enterprise Secretary John Hutton has ordered BSkyB to reduce its 17.9 per cent holding in ITV to a level below 7.5 per cent, having concurred with the Competition Commission’s decision that the transaction resulted in a substantial lessening of competition within the UK market for all television.
Hutton's decision followed the Competition Commission’s detailed investigation and report into the effects of BSkyB’s shareholding in ITV on competition and on the public interest as it relates to the need to ensure a sufficient plurality of persons with control of media enterprises.
BSkyB has four weeks within which to apply to the Competition Appeal Tribunal for a review of the decision. A statement from BSkyB noted the decision, adding that the company would give “careful consideration to the announcement and confirm any further steps in due course”. ITV said it “warmly welcomed” the decision, saying it was “in the best interests of the overwhelming majority of our shareholders.”
BSkyB had contended that it was not seeking to influence ITV and when it bought the stake in November 2006, it did so as an investment. At the time, the deal was seen as an attempt to derail the bid made by cable operator MSO NTL (now Virgin Media) to acquire ITV. It spent £940 million (E1.3 billion) buying the stake. Having bought the shares at £1.35, BSkyB would lose several hundred million pounds if forced to sell; the holding having lost more than 40 per cent of its value as ITV shares have plunged.
At BskyB's request the time limit on it selling the shares has not been revealed as it argued this would the affect the price it might achieve.
Legal opinion seems to think an appeal would be difficult as it amounts to a judicial review, i.e. that the regulations have been misinterpreted, which would be difficult as the plurality guidelines are open to interpretation.
Stock market crashes not withstanding, Sky will likely be able to mitigate its losses somewhat as ITVs price should rise as the uncertainty lifts. Some observers believe of Sky ends up with a bill of £150-200m for effectively stopping the Virgin / ITV media, it will regard it as a price well worth paying.