Sky set to be grilled over controversial ITV stake
Thursday, May 24th, 2007Minister orders Competition Commision to review swoop purchase
With as many twists and intrigues as an entire season of Lost, the Sky/Virgin/Practically Everyone Else feud took another surprising turn today, when Trade and Industry Secretary Alistair Darling green lighted a proposal to refer the satellite broadcaster to the Competition Commission, two days ahead of when he was expected to make a formal annoucement.
Sky’s swift purchase of a 17.9% stake in ITV – effectively halting a potential takeover bid from anyone, including Virgin Media – has now been slated for an in depth investigation.
In his statement, Mr Darling said: “My decision reflects consideration of the reports I have received from both the Office of Fair Trading and Ofcom and of other representations I have received about this matter. On the basis of the evidence before me, a fuller investigation by the Competition Commission is justified.”
Sky’s spokesperson said of the ruling that they: “look forward to engaging with the Competition Commission as the ongoing regulatory process enters its next phase.”
Sky bought the stake in ITV last November, when Virgin Group head honcho Richard Branson was putting the finishing touches to the Virgin Mobile/ntl:Telewest merger, prior to the launch of the Virgin Media brand in March. At the time, Branson was particularly vocal about the purchase, calling it an attempt “to stifle competition and secure creeping control of the British media.”
This week has seen Sky doing its best to undermine Virgin’s credibility in a separate court battle over the carriage fees for the missing channels. Firstly, Sky allowed private correspondence between James Murdoch and Virgin Media boss Steve Burch to be published – the letters apparently show Sky offering Virgin apparently reasonable terms which, of course, were rejected, hence the subsequent publication of the letters.
Murdoch’s letter read: “Our new offer is that we simply split the difference between each party’s last offer in respect of the carriage of our basic channels…We hope that you will accept this proposal and meet us in the middle so that we can rapidly complete a legally binding agreement that enables the return of Sky’s basic channels to Virgin Media’s customers within days.” Burch responded to Murdoch in writing, saying that Virgin was “fully prepared to negotiate” further but was rejecting the proposed offer.
As was mentioned in yesterday’s blog, Sky also leaked news of talks with Tiscali, who are competing with Virgin in the broadband and digital TV markets, which apparently involve giving Tiscali the rights to show a range of Sky channels, including the very same ones that were pulled from Virgin. It is entirely possible that this talk is nothing more than that, designed to make Virgin look inflexible, whilst also presenting a threat – Virgin Media briefly enjoyed being the most popular ISP in the UK at the time of its launch, before swiftly being overtaken by BT – to Virgin’s position in the broadband league.
It could take several months for a Competition Commission review to make a decision on Sky. The TV company could be forced to sell or give up some or all of the stake, although if Sky chooses to appeal against any ruling, this could prolong the process, thereby increasing Virgin’s frustration.
Stay tuned for the next episode…
