Watchdog to investigate possible 'change of control' at ITV

A media regulator is considering whether BSkyB's newly-secured stake in ITV would hit the British broadcaster's requirements as a public service provider.

The Office of Communications (Ofcom) will look at whether BSkyB's 17.9% shareholding amounts to a "change of control" at ITV, which could spark an Office of Fair Trading (OFT) probe into whether the move is anti-competitive.

Both ITV and BSkyB shares fell following Friday's decision by Rupert Murdoch's satellite firm to spend £940m (€1.39bn) on the shareholding. The announcement incensed Richard Branson, who is a key investor in cable operator NTL, which was in talks with ITV over a potential takeover.

Sir Richard branded the move a "blatant attempt to distort competition" and called for regulators to launch an investigation into BSkyB's actions. He also urged politicians to "stand up to reckless and cynical attempts to stifle competition and secure creeping control of the British media".

However, BSkyB hit back and said it had every right to invest, insisting it had not broken any merger rules, nor was it planning a takeover of the firm.

The company said: "Sir Richard seems to believe that he and his partners in NTL-Telewest have a unique right to acquire ITV. Sky rejects Sir Richard's assertion that Sky needs to be stood up to."

BSkyB has already pledged not to make a full bid for ITV, although - under the 2003 Communications Act - it can take its shareholding up to 19.9%.

However, Mr Branson said BSkyB had breached the 2002 Enterprise Act, which prevents any shareholder with more than 15% of a company from having material influence over the commercial operations of another firm.

"Among a very large number of potential breaches of competition legislation and the Communications Act, at the very least we believe the OFT must intervene on the grounds that this is a breach of the general merger provision of the Enterprise Act," he said.

An Ofcom spokesman said it was considering whether there had been a "change of control" at ITV, which would affect its "public service obligations", including programming and programme investment.

If there has been, then the OFT will step in to see whether there has been a breach of merger rules, which could in turn lead to a Competition Commission inquiry or calls for BSkyB to sell part of its stake.

ITV shares dipped 5% in early trading, but later clawed back some ground to stand 1p weaker - or 1% - at 114.75p, while BSkyB was also in the red - down 5p - also 1% - at 532p.

The firming in ITV's share price came despite a raft of broker downgrades, including from Credit Suisse and Deutsche Bank.

Julien Roch, an analyst at Merrill Lynch, expects ITV shares to return to levels seen prior to the emergence of NTL's interest.