After John Hutton, Business and Enterprise Secretary in Britain decided he'd follow the recommendations of the Competition Commission to force BSkyB to lower its stake in ITV to below 7.5 percent, it was projected by Morgan Stanley it would result in the company's first loss since 2002.
Hutton added that he agrees that Sky doesn't need any more influence ITV, as it would end in a "substantial lessening of competition within the UK market for all television."
Morgan Stanley (NYSE:MS) projects a pre-tax loss for the company at about £112 million when it reports results for the half-year Wednesday. Sky said the result of divesting will be taking an accounting charge of £343 million as of the end of last year. That will bring the yearly profits to about £340 million, close to half the £674 million the company enjoyed in the previous year.
There's the possibility that some of this will change, as a competition lawyer at DLA Piper, Martin Rees said, "I think that remedy was highly cautious and disproportionate. Sky did nothing wrong. The requirement to divest was only to restore effective competition - 10pc would have been a more reasonable figure."
It seems to imply what Rees calls "cautious and disproportionate," may be a reference to it being done because Rupert Murdoch's News Corp. (NYSE:NWS-A) has ownership in BSkyB.
Sky has four weeks to challenge the decision with the Competition Appeals Tribunal, and said in a statement that they "will give careful consideration to the announcement and confirm any further steps in due course."
This battle has been going on since Sky CEO at that time, James Murdoch, moved quickly to intercept a bid from bitter competitor Virgin Media, through buying the shares in ITV. This is the result of Richard Branson's challenge to that action.
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