Opinion - In my view - Sky falls in for ITV.
By Kate Bulkley
Friday 24 November 2006
What a difference a week makes. Seven days ago, ITV was the belle of the ball, courted by Branson-NTL and, separately, RTL. Then Sky swoops in and all bets are off. Or at least they are, it seems, until James Murdoch decides who is the best owner for the UK's largest commercial broadcaster.
Never has a declining asset felt such love. And what must Ofcom's Ed Richards be thinking now about the 20% cap on Sky's broadcast ambitions - 20% too far? Even though Sky is precluded from buying ITV outright, the 17.9% stake it now owns gives it an effective veto on any deal that ITV might contemplate.
While Richard Branson jumps up and down in exasperation and calls on the regulator and Parliament (and even consumers) to block Murdoch's "cynical attempts" to "secure creeping control of the British media", Sky has bought itself time.
Time is important to Sky, especially now that it is reformatting itself from a supplier of pay-TV into a converged, one-stop shop of TV, broadband and phone services. Sky can use the time it will take the market, regulators and potential ITV suitors to unravel what its intentions are to sign up more subscribers to its TV, broadband and telephone services. Time that Sky can use to move further ahead in the race to be the dominant supplier of media and communications to UK consumers.
So, whatever happens to ITV, Sky's 1bn punt on ITV shares will yield dividends. Putting the effective kibosh on NTL and Branson's ambitions to merge ITV into their own cable and mobile phone businesses means it will take NTL longer to become a more effective competitor - a fact underlined by ITV's rejection of NTL's bid this week. And any bid by RTL for ITV will now have to take into account the position of Sky.
Even before Sky's move on ITV, an RTL takeover of ITV was always likely to mean selling Five, both for regulatory reasons and to help finance the deal. Now, wouldn't it be convenient for Sky to know when and how RTL decides to structure an ITV bid, given Sky's own past interest in owning Five?
Squeezed by a declining ad market and an uncertain revenue future in a converged age, ITV has been looking peaked for months, a situation underlined by its struggle to find a chief executive. It's a gruesome state of affairs for the network. Its limping share price is what attracted interest from strategic buyers backed by private equity groups in the first round. Now, with more uncertainty thrown into the mix, a decision on just who ends up controlling ITV - much less who will be its chief executive - could be months rather than weeks away. The network might not now be sold at all. Good news in Isleworth perhaps, but not such glad tidings at Gray's Inn Road.