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ITV Rejects $8.9B NTL Bid

British broadcaster and TV program maker ITV plc (London: ITV) today turned down a cash and stock bid worth £4.7 billion (US$8.9 billion) from U.K. cable giant ntl group ltd. (Nasdaq: NTLI), saying in a statement that the offer "materially undervalues" the company.

ITV says NTL offered cash and stock worth 122 pence ($2.32) for each ITV share -- 105 pence ($1.99) in cash, plus new shares worth an extra 17 pence ($0.32) per ITV share. ITV's stock closed today at 112 pence per share, down 2.5 pence.

But the number of shares on offer as part of the deal is fixed, so if NTL's shares drop in value, so does the bid. ITV notes that NTL's share price fell by 9 percent between Nov. 9 and Nov. 16.

"There is little, if any, strategic logic for ITV to combine with NTL," ITV said in a statement. Based on that view, the company feels it can't recommend to shareholders that they accept NTL stock as part of the bid, which "materially undervalues ITV," the statement said.

NTL first announced its intentions towards ITV earlier this month, and talk began to circulate of a £5 billion cash bid. NTL is still preparing to relaunch itself as Virgin Media following its acquisition of Virgin Mobile earlier this year, a move that means it can now offer a service package of fixed voice, mobile voice, broadband, and TV/video services. (See NTL Fancies TV Merger and NTL Takes Virgin.)

But NTL's move prompted a reaction from one of its fiercest rivals, satellite TV and broadband player Sky , which expanded its service offerings earlier this year with the acquisition of Easynet. (See Murdoch's Sky Takes on BT and BSkyB Unveils Strategy.)

Late last Friday, Sky made what is widely viewed as a spoiler move by spending £940 million ($1.8 billion) on a 17.9 percent stake in ITV. Sky has been insisting ever since that this is simply a good investment rather than a tactical challenge. "BSkyB believes that ITV is one of Europe's premier broadcasting and production businesses, and holds substantial potential for long-term value creation," noted Sky in its press release. (See Sky Buys ITV Stake.)

The consensus opinion, though, is that Sky is worried that NTL's move for ITV could result in a challenge for one of its prized assets. While NTL could use ITV's capabilities and experience to create dedicated and unique content for its cable and mobile customers, analysts and industry watchers believe a joint NTL/ITV could bid for the rights to show live English Premiership soccer matches when they next become available. The current holder of those rights? Sky.

While NTL hasn't yet been deterred by Sky's intervention, other British service providers attending the FT World Communications conference in London Tuesday are struggling to see the logic in a service provider owning content and content production capabilities.

When asked by Light Reading if there is an advantage to service providers owning content, Peter Erskine, CEO of mobile and broadband operator Telefónica Europe plc (O2) , said, "No. It's better to do partnerships. We have IPTV services in our Czech operation [O2TV] and we have plenty of content without owning it." (See O2 Czech Updates on IPTV.)

And Andy Green, CEO of BT Global Services , agrees. He says that creating content is "something that millions of people will do" by creating and developing their own video and audio content and uploading it onto the Internet and into community networks to share with others. BT is not "interested in owning the content," he says.

The retail arm of BT Group plc (NYSE: BT; London: BTA) is due to launch its IPTV service, BT Vision, in December. (See BT: 21CN Slips, IPTV Nears.)

— Ray Le Maistre, International News Editor, Light Reading

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