The UK government has sparked a bidding war for Sky by approving two rival bids for the UK pay-TV giant.

Both Comcast Corp. (Nasdaq: CMCSA, CMCSK) and 21st Century Fox have had their respective bids for Sky approved, though the Fox bid is conditional: Comcast has offered £22 billion (US$29.4 billion), while Fox, which already holds a 39% stake in Sky, is offering to buy the rest of the stock in a deal that values Sky at about £18.5 billion ($24.7 billion). (See Eurobites: Comcast Formalizes £22B Sky Bid , Why Sky's the Limit for Comcast and Comcast Bids $31B to Steal Sky From Fox, Disney.)

Fox's bid had been initially blocked due to media plurality concerns, but has now been approved on the condition that Fox would sell the Sky News operation "to a suitable third party" if its bid was successful.

The decision to approve both bids "opens up a fierce bidding war for Sky... the gloves are now off," according to Paolo Pescatore, vice president of Multiplay and Media at research house CCS Insight . "However, it is unclear what happens to Sky News and who will come in to buy the UK news broadcaster... it will open up other opportunities for US-based companies to buy other media assets in the UK," he adds.

Higher bids are already expected, and indeed priced in, by investors: Comcast's bid values each Sky share at £12.50, yet the pay TV company's share price ended Tuesday trading on the London Stock Exchange at £13.55, giving Sky a market capitalization of £23.2 billion ($31 billion). "This is a great time to be a Sky shareholder," states Pescatore (though, to be clear, we're sure he wasn't referring to himself...).

So which of the two bidders is the best strategic fit for Sky? They both have decent cases, reckons Pescatore, but "the best fit for Sky is Disney," which is on course to acquire Fox. That's because both Disney and Sky are both, at heart, content companies, notes the analyst. (See Disney Buys Fox for $52.4B.)

However, Sky could also be a strategically good for Comcast, giving it a greater international presence, but if Comcast wins the prize that would likely take Sky in a more of a communications networking infrastructure direction as Comcast would seek to play a role in Europe's Gigabit broadband rollout, even though that's not Sky's traditional focus or core strength, notes the analyst. (Sky sells broadband and mobile services but doesn't own and manage its own infrastructure.)

In its most recent full fiscal year (ended June 2017), Sky, which has operations in Ireland, Germany, Austria and Italy as well as the UK, reported revenues of £12.9 billion. It currently has about 23 million customers, of which about 13 million are in the UK and Ireland.

— Ray Le Maistre, Editor-in-Chief, Light Reading