Sky prepares appeal against expected ITV ruling

by Daniel Farey-Jones, Brand Republic 28-Jan-08, 09:00

LONDON - BSkyB is preparing to appeal against the expected ruling from the government this week that it has to reduce its 17.9% stake in ITV.

John Hutton, secretary of state for business, enterprise and regulatory reform, is to announce by tomorrow what he requires Sky to do, following the ruling from the Competition Commission that Sky's stake in ITV is anti-competitive.

The commission recommended that Sky be forced to reduce its 17.9% shareholding to less than 7.5%.

With ITV shares now trading at 70.7p, almost half the 135p Sky paid in November 2006, the satellite operator faces making a loss of around £250m if it has to comply with the commission's recommendation.

Weekend reports claim Sky is preparing an appeal against the government's decision. This will centre on whether the Competition Commission's findings were right and whether the 7.5% ceiling it recommended was appropriate, according to the Sunday Telegraph.

The Communications Act allows Sky to hold a stake of up to 20% in ITV.

The Mail on Sunday claims Sky is even planning to claim damages from the government if it is forced to dispose of its shares at a loss.

Sky has until the end of February to decide whether to make an appeal to the Competition Appeal Tribunal.

The drop in value of ITV shares will show up in Sky's books when it publishes its interim results next Wednesday. Analysts expect Sky to write down the value of its £940m investment by £340m.