We have harped on in the past that with a convergence of interest between broadcasters and cellcos over UHF spectrum and over the delivery of entertainment experiences to portable devices, that there must be an increasing tendency for mergers to occur between members of these two major constituencies.
The very first attempt that we noted was almost a year ago when Virgin Media in the UK made a $9 billion bid for ITV, the original independent UK free to air broadcaster, in a deal that was scuppered by the intervention of News Corp’s BSkyB, which acquired a large chunk of ITV to prevent the deal.
Now the UK Competition Commission has found that the acquisition by BSkyB of a 17.9% stake restricts competition and is therefore against the public interest.
These provisional findings will go out for consultation over remedies, among which is almost sure to be the requirement of Sky to divest over a period of time, all of those shares. Sky has already said that it will take legal action if it loses money on any share sale.
The question however remains how to ensure that BSkyB doesn’t come back and try again, and to legislate over whether or not Virgin is allowed to mount a full bid.
It’s complicated. BSkyB is part of a group which owns content and sells its own advertising, and which in the UK owns a satellite DTH, unbundled broadband lines and has control of content including one of the dominant film channels in Europe. Virgin on the other hand has control of a quadruple play network, including an MVNO mobile network, but has no content. However the services that it puts together are likely to be seen to be competitive with ITV.
The Competition Commission said that BSkyB would be able to influence ITV key decisions, particularly relating to investment in content or technology and perhaps business model. The question must be asked that as operators try to transition out of simply running a network, into service operators, whether this should necessarily prevent them from buying existing broadcast and content agencies. We don’t think that this can be sustained as a principal, especially as the introduction of digital terrestrial broadcasting services across Europe has meant that there is a rapid broadening of competition among TV channels.