BSkyB shares soar after triumph in dispute with rival pay TV providers

BSkyB's share price reached a nine-month high in the wake of the Competition Appeal Tribunal (CAT) ruling in its favour in its long-running dispute with rival pay TV providers over the price it charges for its flagship Sky Sports channels.

The satellite broadcaster's share price rose 19p, more than 2.5 per cent, to 762p on Thursday as investors welcomed the Competition Appeal Tribunal's ruling, which looks set to reverse Ofcom's decision to cut the wholesale price at which it sells Sky Sports 1 and 2 to competitors.

The Guardian reports: “The ruling is a serious setback for Ofcom. The media regulator takes pride in its historically airtight evidence-based approach to investigations. But the CAT ruling contradicts Ofcom work dating back to 2007 relating to BSkyB's power in the UK pay-TV market.”

It quotes Will Smith, media analyst at Jefferies, as saying: "This is a big blow for Ofcom to be told that they have misinterpreted the evidence, it flies in the face of everything that Ofcom is based on.”

The defeat for Ofcom follows the Competition Commission's report clearing BSkyB of being anti-competitive in the pay-TV movie market.

In its report on the pay-TV movie market Laura Carstensen, chairman of the inquiry group at the Competition Commission, said that the BSkyB has "market power" over rivals in the pay-TV sector and that "competition is not effective".

A board meeting needs to be held by Ofcom to assess the situation and a final decision will be made before the CAT's deadline in early October.

"An appeal by Ofcom looks likely given the questioning of such a major body of work (the regulator took three years to conduct the review)," is the assessment of Laurie Davison, media analyst at Deutsche Bank. "So, most likely, we are still in legal limbo with no clear date for resolution."

If BSkyB eventually does win the battle to allow it to set its own price for what it charges rivals to carry for Sky Sports 1 and 2 then it could have major ramifications for BT in particular.

In June BT became the first rival in 20 years to snatch a package of the best Premier League games from BSkyB, with a £735m bid to secure 38 matches a season in the three years from 2013.

To make the most of its rights observers have argued that BT should withhold the matches from being aired on Sky, to maximise value to subscribers of BT Vision, while Ofcom's order still forces BSkyB to offer its matches on Sky Sports 1 and 2 to the telecoms company and other rivals.

If BSkyB were to win the battle to have the "wholesale must offer" order scrapped then it could force BT to offer its football matches to Sky or face having Sky Sports pulled off BT Vision.

Sky's challenge to Ofcom had the backing of sports governing bodies including the Football Association, the Rugby Football Union and the England and Wales Cricket Board – which warned of the "serious consequences" and "irreparable damage" at grassroots level of taking money from Sky.

Get The Drum Newsletter

Build your marketing knowledge by choosing from daily news bulletins or a weekly special.