BSkyB ordered to cut stake in ITV

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BSkyB has been ordered to reduce its controversial 17.9% stake in ITV to below 7.5%, the Competition Appeal Tribunal has ruled.

The long-awaited ruling - as ordered previously by the Competition Commission and secretary of state John Hutton - leaves Sky facing a £650m loss on its investment.

Delaying the process could help Sky save hundreds of millions of pounds. Since it bought the stake in November 2006, ITV's value has declined massively and Sky is unlikely now to get close to the 135p per share it originally spent.

With ITV shares closing at 41p today (29 September), the stake is now worth less than £300m.

The satellite giant has been given a set period to reduce its stake, which is thought to be around six months. However, if Sky decides to appeal it can request a suspension of that remedy while it argues its case at the court of appeal.

It could potentially end up in the House of Lords or even the European Court of Justice.

In a statement, ITV said: "We welcome today's judgment by the Competition Appeal Tribunal dismissing in full BSkyB's appeal against the decisions of the Competition Commission and the Secretary of State in relation to the acquisition of Sky's 17.9% interest in ITV.

"We also note that the Competition Appeal Tribunal upheld Virgin Media's appeal in relation to the media plurality test and we now await the next steps in the process."

A BSkyB statement said: "British Sky Broadcasting plc ("BSkyB") notes today's judgement by the Competition Appeal Tribunal in respect of its investment in ITV plc.

"We will review the judgement carefully and decide on next steps in due course."

Sam Szlezinger, competition Law Partner at Denton Wilde Sapte LLP said Sky faced an uphill task from the outset of this case.

"This case shows us that the competition authorities can, and indeed must, take account of the specific circumstances of a case when applying principles of law," he said.

"Sky is no ordinary commercial entity and its impact on the commercial policy of ITV had to be assessed accordingly. Once you accept that fact, it is hard to see how any alternative conclusion could have been reached as to the competitive impact of its stake building in ITV."

He added: "Equally interesting is the CAT's finding as to Virgin's cross-appeal on plurality of the media which quashes the Secretary of State's conclusions. The CAT has asked the parties to appear at a separate hearing to determine the impact of this part of its decision. This opens up the intriguing possibility that Sky might be forced to further reduce its stake.

"However, I think such an outcome is unlikely given that the level at which the original remedy was set (less than 7.5%) is already very low."

When Sky spent £940m on the 17.9% stake, it was described by Sir Richard Branson as a "blatant blocking tactic" to prevent Virgin Media (then NTL) from acquiring ITV.

A spokesperson for Virgin Media said: "ITV's independence has been compromised for nearly two years as a result of Sky's actions. We've consistently maintained that this undermined the plurality of the UK's media and reflected a systematic effort to suppress competition.

"We're pleased that the Competition Appeal Tribunal has rejected Sky's appeal and we now expect Sky to divest its ITV stake as previously ordered by the Competition Commission."