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OFT to examine BSkyB, Virgin deal

The UK’s Office of Fair Trading is to examine BSkyB’s £160m (US$241.6m) acquisition of Virgin Media TV to decide whether it is anti-competitive, despite the deal getting regulatory approval in Ireland.

The OFT today invited comment from interested parties on whether Sky’s buy-out of channels including Challenge, Bravo and Living, constitutes a merger situation under the 2002 Enterprise Act.

Should the regulator determine that it does and that the deal would result in a “substantial lessening of competition” then it will refer the matter to the Competition Commission for investigation.

Last week, Sky received regulatory approval for the deal in Ireland and started the process of bringing the Virgin Media TV portfolio under its own umbrella, rebranding the business Living TV Group in the process.

Under the terms of the deal, Sky is paying Virgin £105m in cash, with another £55m payable if UK regulators give approval. The agreement also allows for Sky to pay less if the OFT raises competition issues.

News Corp-backed Sky sees the acquisition as an opportunity to tighten its grip on the UK cabsat TV market by expanding its basic line-up and eliminating the carriage fees it previously paid to VMTV to air its networks.

The acquisition is taking place against the backdrop of Rupert Murdoch’s attempts to take complete control of BSkyB. In June, the satcaster’s independent directors turned down an £7.8bn (US$11.5bn) offer from News Corp for the 61% of the UK satcaster it does not already own.

Another element to the deal secures Virgin Media’s cable TV service wholesale carriage of Sky’s basic channel line-up, including Sky1 and Sky Arts, plus the newly acquired VMTV channels.

Virgin will also offer Sky’s basic cable HD channels, Sky Movies HD and Sky Sports 1 and Sky Sports 2 HD for an incremental fee. It was announced separately today that Virgin has also added Five HD and two time-shifted networks, Fiver +1 and Five USA +1, to its line-up.

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