Watchdog to inform UK govt of verdict on Sky's ITV stake
The Competition Commission is expected to send its final verdict on BSkyB’s controversial 17.9% stake in rival ITV to the Government by the end of the week, reports said today.
The watchdog is understood to be outlining a recommendation that Sky cuts its stake to between 5% and 10% within six months of the official decision, according to the Financial Times.
The Commission provisionally found in October that Sky’s holding operated “against the public interest” and restricted competition.
Sky could make substantial losses if it is forced to sell down the stake, bought for £940m (€1.3bn) last November and now worth less than £600m (€834m), based on today’s share price.
ITV shares have fallen by more than a third in value since BSkyB made the surprise move to snap up the stake amid falling net advertising revenues and profits.
But John Hutton, the Business, Enterprise and Regulatory Reform Secretary, has the final say on action that should be taken to address the public interest and competition findings, within a month of receiving the Commission’s report to give his own ruling.
While he does not have to make the Commission findings public until he announces his conclusions, the Times reported today that the Department for Business and Enterprise is preparing to publish the report before Christmas.
A spokesman remained tight-lipped on the exact timing, but confirmed the Government intends to “publish relatively early, perhaps before the final decisions are made”.
Such a move would raise eyebrows, given the pressure that Mr Hutton could find himself under to accept the same findings and recommendations from the Commission.
According to the Department for Business and Enterprise, he is duty bound to accept the findings for the competition inquiry, but can make his own conclusions entirely on the public interest probe.
BSkyB has offered in a submission to the Commission to give up the voting rights on 3% of its holding in the hope of being able to avoid a sell-down.
However ITV has urged the competition regulators to demand a complete sale of the stake, although in the same submission it said it would be prepared to accept a cut to 4.9% if Sky was denied a seat on the board.
The Competition Commission released its provisional findings last month, in which it said it believed BSkyB would be able to influence ITV’s key strategic decisions, particularly relating to investment.
ITV said in its latest submission this was of particular concern with a number of “genuine and realistic prospective investments” under consideration.
BSkyB’s acquisition of the holding last year shocked the industry, scuppering Virgin Media’s plans to merge with ITV and angering major Virgin Media shareholder Richard Branson.
Investigations by watchdogs Ofcom and the Office of Fair Trading concluded that the stake raised “significant” competition and public interest concerns, leading to the Competition Commission inquiry, launched in May.
BSkyB – until recently headed by chief executive James Murdoch, who last week took over from his father Rupert as non-executive chairman – has always maintained that it has not broken any merger rules and made the shares purchase as a long-term investment.
Virgin Group and Virgin Media have both argued in submissions to the Competition Commission that Sky should be forced to sell its entire 17.9% holding in ITV.
