Oct. 2 (Bloomberg) -- British Sky Broadcasting Group Plc may be forced to sell its 17.9 percent stake in ITV Plc because the holding hurts competition, the U.K.'s top regulator said.

The shareholding may enable BSkyB, the U.K.'s largest pay- television company, to influence the strategy of the country's biggest commercial television broadcaster ITV, the Competition Commission said in an e-mailed statement today. The regulator will now consult on ``possible remedies,'' including a possible divestment of the holding.

The decision may derail BSkyB's attempt to keep ITV out of reach for competitors. BSkyB bought the stake in November for about 940 million pounds ($1.9 billion) to block a potential takeover of ITV by cable company NTL Inc., now called Virgin Media Inc. The purchase pitted Rupert Murdoch and his son James against Richard Branson, Virgin Media's biggest shareholder.

``BSkyB would be able to influence ITV's key strategic decisions, particularly relating to investment, whether in content, capacity or new technology,'' Competition Commission Chairman Peter Freeman said in the statement. BSkyB would also have both ``the ability and incentive to take advantage of opportunities to weaken ITV or prevent it from taking actions that would threaten BSkyB's interests,'' he said.

ITV shares rose as much as 3.6 percent to 104.80 pence, while BSkyB dropped as much as 1 percent to 677 pence in London trading today. As of 8:18 a.m., ITV traded at 103.90 pence and BSkyB at 682.50 pence.

`Distort Competition'

BSkyB said today in an e-mailed response to the regulator's statement that it will ``continue to engage with the commission during the remainder of this process.''

The Competition Commission said it must send its final report to John Hutton, the U.K. minister responsible for business reform, by Jan. 2 next year, although it aims to do so in December. Hutton must then decide on the basis of the report what action should be taken, the regulator said.

U.K. entrepreneur Branson described the stake purchase by BSkyB as a ``blatant attempt to distort competition even further by blocking any attempt to create a strong and meaningful competitor.''

Branson has criticized Rupert Murdoch's influence over the U.K.'s media, saying in December it amounted to a ``threat to democracy.'' Murdoch's News Corp., which owns 39 percent of BSkyB, also owns newspapers including the London-based Times and the Sun. News Corp.'s Twentieth Century Fox studio produces movies and television shows that are distributed in the U.K.

BSkyB Chief Executive Officer James Murdoch said in November that the stake was a long-term investment. BSkyB paid 135 pence a share for the holding, a 17 percent premium to the share price on the day of the purchase.

To contact the reporter on this story: Simon Thiel in London at sthiel1@bloomberg.net.

Last Updated: October 2, 2007 03:23 EDT