UK Competition Commissioner wants BSkyB to divest ITV stake

Worried over the possibility of ITV cutting its programming budget, the UK Competition Commission has recommended that media moghul Rupert Murdoch's British Sky Broadcasting, better known as BSkyB, be forced to divest its 17.9 per cent stake to below 7.5 per cent.

ITV is a public network of British broadcasters, set up to compete with the BBC.

The Competition Commission's report said report said that BSKYB, which was both a competitor and a shareholder in ITV, ''would have the incentive to reduce ITV's investment in content".

According to the regulator, BSkyB's stake was large enough to allow it to block special resolutions and would limit ITV's strategic options, and ability to raise funds. The regulator also wants BSkyB to undertake not to have a presence on ITV's board.

However, BSkyB has said that it had not attempted to influence ITV and the stake that it bought in November 2006, was only an investment, a defence debunked by the regulator; the Commission's report says, "We thought it unlikely that that BSkyB would have chosen to invest in ITV purely as an investment vehicle".

Most commentators had viewed BSkyB's share grab of 17.9 per cent in ITV for £940 million as a blocking manoeuvre to prevent NTL, now Virgin Media, from acquiring the broadcaster, especially since NTL had already announced its intentions for ITV.

BSkyB stands to loose over £200 million if forced to sell most of its shares at the current price of 83 pence, which is 37 per cent lower than the 135 pence it paid last year.

BSkyB and ITV said they were studying the report and awaiting a final decision by John Hutton, secretary of state for business, enterprise and regulatory reform, who is bound by the Competition Commission's finding about BSkyB's stake in ITV but has the powers to modify the remedy suggested by the regulator.