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NTL Backs Away From ITV Buyout Effort

12/08/2006 7:00 PM Eastern

After raising a ruckus over what it called an attempt by rival British Sky Broadcasting to block its bid for ITV, NTL last week threw in the towel, abandoning its pursuit of the United Kingdom broadcaster.

NTL said on Dec. 6 it would no longer pursue ITV and that a deal would be “unlikely to be attained on terms acceptable to NTL.”

NTL's about-face comes a little less than a month after it began its initial $8.9 billion bid for ITV, the largest commercial broadcaster in the U.K., on Nov. 9.

BRANSON INCENSED

Days later (on Nov. 17), BSkyB said it had purchased a 17.9% stake in ITV for $1.8 billion. BSkyB said the investment was made for strategic purposes and not to block an NTL deal — but NTL's largest shareholder Richard Branson thought differently.

On Nov. 19 Branson, who got 10.5% of NTL after selling his Virgin Mobile wireless telephone business to the cable company earlier this year, issued statements calling BSkyB's ITV purchase a blatant attempt to stifle competition in the British television market.

The outspoken British billionaire urged regulators to look into the purchase.

“BSkyB claims its investment in ITV will have no impact on the company's future direction,” Branson said in a November statement. “It appears that this share purchase has already had a material influence on the company and damaged the plurality of the British media.”

Branson had earlier called the BSkyB move a “blatant attempt to distort competition even further by blocking any attempt to create a strong and meaningful competitor.”

BSkyB, the largest pay TV provider in the U.K. with about 8.3 million subscribers to its direct-to-home satellite service, was largely thought to have been trying to keep ITV out if its main rival's hands.

Any acquisition of ITV would have required a 75% vote from ITV's board. So while BSkyB's interest didn't prevent an NTL-ITV deal, it possibly made it more difficult.

That all appeared moot after ITV rejected NTL's bid as too low on Nov. 21.

But at the time, NTL, the top U.K. cable operator with about 3 million subscribers, said it would still pursue a deal.

All that ended last week with NTL's declaration it was withdrawing the ITV bid.

NTL said instead it would focus on integrating its recently purchased Telewest Group cable systems and Virgin Mobile wireless-telephone operations.

NTL plans to change its name to Virgin Media in the first quarter of next year.

An ITV deal would have been the third big acquisition in a year for NTL. In March, it completed a $6-billion acquisition of No. 2 U.K cable operator Telewest Global and in July it completed the $1.1 billion purchase of Virgin Mobile.

BSkyB, controlled by media giant News Corp. and run by News chairman Rupert Murdoch's son James Murdoch, has said publicly that it does not intend to seek a seat on ITV's board of directors and that it would be a “supportive shareholder.”

Under British law, BSkyB is prohibited from owning more than 20% of ITV.

TRIPLE PLAY SOUGHT

At the UBS Global Media & Communications conference last week, NTL chairman James Mooney said his interest in ITV was to create a “triple play” of content assets across different platforms to compete with BSkyB, which dominates the pay-TV landscape in Britain and has access to exclusive sports and entertainment content.

“The reason we looked at ITV was because we developed half a dozen content strategies which were designed to leverage our existing content to then bring content across platform,” Mooney said. “Think of it as triple play production of content.”

For example, Mooney said that with ITV — which has about 12 of the top 30 shows in Britain — NTL could exclusively put 15-minute clips of programming on its broadband service, show vignettes of the same shows on its Virgin Mobile cellular service in addition to offering the programming on its cable service.

“We felt it was a quick way to level the playing field that existed for 20 years vis a vis Sky, at the right price,” Mooney said at the conference.

Although its move to own ITV has been shelved at least for now, Mooney said NTL is in discussions with the programmer to possibly offer that triple play.

“We have already initiated discussions with the new chairman of ITV to create as many of those things as we can on a commercial basis, and they have been very receptive to doing that, based on the announcement that we are not going to rebid,” Mooney said.

“There are other opportunities to do the same things with U.S. based companies and there are other smaller, much less capital intensive opportunities in the U.K. as well.”

Some analysts have speculated that NTL could set its sights on RTL's Channel 5, a much smaller U.K. broadcaster.

 

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