BSkyB appeals ruling on ITV stake

Published on Thursday 21 February 2008 20:32

BSKYB is to challenge the Competition Commission's decision to force the satellite broadcaster to sell down its stake in rival terrestrial broadcaster ITV.

BSkyB said yesterday t it would lodge its application with the Competition Appeal Tribunal today to appeal against the key conclusions from the commission, which were subsequently backed by the government.

The company said it would argue that the order to reduce the 17.9 per cent stake to below 7.5 per cent was "an unreasonable and disproportionate remedy", especially as BSkyB had offered to give up all its voting rights – an offer the commission refused.

Sky will claim that the commission made mistakes at key steps of its investigation, including its decision that a merger had occurred between the two companies and that the investment "prevents ITV from pursuing an independent competitive strategy".

The stake was initially bought last year by former Sky chief executive James Murdoch, whose father Rupert Murdoch's News Corp is Sky's biggest shareholder. But the commission ruled the stake hindered competition.

Murdoch junior has moved up to be Sky's chairman after taking on the responsibility for some of News Corp's business.

New Sky chief executive Jeremy Darroch said: "The reality is that competition in this marketplace is as vigorous as ever. A merger has not taken place, Sky and ITV are distinct entities with independent strategies and Sky could not block a shareholder resolution without voting rights."

The appeal tribunal has the power to quash part or all of the previous findings and send the case back to the Competition Commission.

ITV welcomed the government's initial ruling on the move. BSkyB paid 135p per share, or 940m, for its stake last November, effectively blocking cable group NTL – which is now part of Virgin Media – from buying ITV.

At the current ITV share price, 71.80p, Sky would be looking at a potential loss on the investment of about 250m.