BSkyB snacks on ITV shares, casting a shadow over NTL takeover plans

Posted on 20 Nov 2006 at 15:54

BSkyB has taken an 18 per cent share in ITV in what is widely considered to be a spoiler to prevent a takeover of the terrestrial broadcaster by NTL Telewest.

The satellite broadcaster's £1 billion stake falls just short of the 20 per cent limit that the 2003 Communications Act places on cross-media ownership. BSkyB chief executive James Murdoch stressed that he was not interested in a place on ITV's board, though whether this will be enough to placate industry-regulator Ofcom remains to be seen.

NTL said a week ago that it was interested in acquiring ITV. If successful, the move would make it the first 'four-play' player, with mobile, fixed line, Internet and broadcast services to its name.

If it were to be successful - an outcome that seems unlikely now - it would create a media group capable of competing with BSkyB. Currently NTL has around a third the number of pay TV subscribers that Sky has, putting it at a distinct disadvantage when it comes to bidding for the rights to sports events, a major driver for new subscriptions.

As well as enhanced buying power, an NTL-ITV merger, under the Virgin Media brand that NTL will adopt next year, would also have enabled the cable company to use ITV's free to air channels to promote its pay-TV service as an alternative to Sky and its Internet access business, an area where BSkyB has invested heavily in recent months.

Murdoch avoided stating outright that the share purchase had been motivated by NTL's interest.

'Clearly the market environment around the company is part of what has created this opportunity for us,' he said. 'We've moved quickly to take advantage of this opportunity and we have [sic] pleased right now to be a large investor in ITV. We believe ITV is well positioned given the room and the time to create real long-term value.'

BSkyB's pre-emptive strike drew a sharp retort from Richard Branson, who owns 11 per cent of NTL.

'This move is seriously damaging to the interests of viewers, programme makers, artists and shareholders and the time has come for regulators, politicians and consumers to finally show that they're willing to stand up to reckless and cynical attempts to stifle competition and secure creeping control of the British media,' he said.

He added that ITV will now be run with one eye on BSkyB's interests, rather than the interests of the 82 per cent of shareholders who were not offered this 'sweetheart deal'.

Channel 5's owner, Germany's RTL, had also been preparing a bid for NTL, which would possibly be partly financed buy the sale of Channel 5 to another broadcaster. Coincidentally, BSkyB has a rumoured interest in Channel 5, a takeover that would not be prevented by the Communications Act.

Andrew Neil, a former BSkyB chairman and close confidant of Murdoch's father, Rupert, said that the ITV investment has been motivated by fear.

Murdoch fears and respects Branson,' he told The Guardian. 'He knows the Virgin name is potent among the Sky demographic. What ITV needs is somebody like Branson and the kind of people with flair he could bring - that would not suit BSkyB.

Author: Simon Aughton