Virgin Media will be selling its Virgin Media Television (VMtv) division to rival British Sky Broadcasting (BSkyB) for approximately $234 million in cash.

In addition, BSkyB struck a deal with Virgin to carry its own cable channels – including Sky1 and Sky Arts – on Virgin’s cable line-up. Meanwhile, Virgin will have the option of carrying BSkyB’s basic high definition (HD) channels and all Sky Movies HD channels. Overseas news reports also say Virgin will host programs from BSkyB’s channels on its video-on-demand (VOD) service along with having access to interactive sports coverage and being allowed to stream certain programming online.

Commented Jeremy Darroch, BSkyB’s CEO, “VMtv is an attractive investment opportunity which complements our existing content business and delivers strategic and financial benefits. We are pleased that, through commercial negotiation, we have been able to ensure wide distribution of our channels to a growing pay-TV universe.”

Added Neil Berkett, CEO at Virgin Media, "The sale of our channels business has generated substantial value. Together with the new commercial agreements we’ve announced today, it will allow us to focus more closely on our strategy of exploiting
Virgin Media’s super-fast connectivity to offer our customers a range of the very best content through a highly versatile next-generation entertainment application."

The acquisition of VMtv involves Sky acquiring LIVING, LIVINGit, Challenge, Challenge Jackpot, Bravo, Bravo 2 and Virgin1. Sky will not license the Virgin brand and will announce the new channel brand for Virgin1 in due course. Here are more specific details of the deal:

Sky will acquire VMtv for a total consideration of up to $234 million in cash, with $152 million paid on completion and the remainder paid following the regulatory process. The acquisition will expand Sky’s portfolio of basic pay-TV channels and will eliminate the carriage fees it currently pays for distributing VMtv channels on its TV services.

Sky will assume responsibility for selling advertising for the newly acquired VMtv channels starting in January 2011.

New carriage agreements will secure wholesale distribution of Sky’s basic channel line-up, including Sky1 and Sky Arts plus the newly acquired VMtv channels, on Virgin Media’s cable-TV service.

For an incremental wholesale fee, Virgin Media will, for the first time, have the option of carrying any of Sky’s basic HD channels, Sky Sports HD 1 and Sky Sports HD 2, and all Sky Movies HD channels.

Virgin Media will make available through its on-demand TV service a range of content from Sky’s basic and premium channels, including the newly acquired VMtv channels. Virgin Media will also have access to “red button” interactive sports coverage and the opportunity to deliver selected standard definition programming over the Internet.

The Republic of Ireland still needs to approve this sale. Regulatory agency Ofcom thus far has posted no comment on the proposed deal.

BSkyB and Virgin Media haven’t exactly been friendly rivals. Sky is appealing a ruling by Ofcom earlier this spring that said the satellite program provider has to slash by more than 20 percent the wholesale prices it’s been charging Virgin Media and others operators for premium sports channels. Customers would see their bills cut by a little bit more than 10 percent. The March ruling went into effect immediately, but BSkyB immediately asked for a stay pending resolution of its appeal.

BSkyB’s Darroch minced no words in a video that was posted on the company’s website following Ofcom’s decision.

"I think it’s very easy to say it would be nice if everything was cheaper but that is an argument you can apply to pretty much everything from cars to take away coffee. It’s not, in my view, the job of regulators to set prices in free markets unless there’s clear evidence of breach of law or consumer harm and that is manifestly not the case here,” he said.
“You know, in no other country in the world do people seek to regulate the price of TV in the way that Ofcom are proposing, and I think that tells its own story.”

The CEO concluded, "The U.K. needs companies that are willing to invest, to innovate and to take risks. And, ultimately, it’s that which will deliver good outcomes for consumers, not heavy-handed price regulation."

-CT Staff

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