March 1, 2007 / 8:28 AM / 12 years ago

UPDATE 1-BSkyB's basic TV channels withdrawn from Virgin Media

(Updates with Virgin statement)

By Kate Holton

LONDON, March 1 (Reuters) - The new Virgin Media VMED.O UK cable TV platform has lost BSkyB’s BSY.L basic channels — which offer hit shows such as “Lost” and “24” — after the two rivals failed to agree a new carriage deal, they said on Thursday.

Virgin Media has more than 3.3 million TV customers who will be affected by the move and the announcement comes as a blow to the group which rebranded less than a month ago from NTL promising to improve its reputation for poor customer service.

BSkyB has said it will also take a hit of up to 20 million pounds ($39.18 million) in operating profits for the remainder of the year to end June.

Attempts to negotiate a new deal had turned in to a public slanging match in recent weeks.

“We’re disappointed but not surprised by this outcome: nothing Sky have said or done in the course of the negotiation indicates they had the slightest interest in doing a commercially viable deal,” Virgin Media’s Chief Executive, Steve Burch, said in a statement.

British entrepreneur Richard Branson, who is Virgin Media’s largest shareholder, said on UK television programme GMTV his group would reinvest the money saved into new content and “compete with our own channels”.

The BSkyB spokesman said the group was disappointed with the outcome but was ready to reopen new negotiations at any time.

The two sides, who are rivals in the highly competitive television, broadband and phone markets, had been locked in negotiations for several weeks but could not agree on terms.

Virgin Media said Sky had demanded that the fees for the basic channels be nearly doubled. BSkyB said its latest offer of 3 pence per customer per day was value for money and reflected its increased investment in the channels.

Analysts are mostly divided over who will come out worse from the dispute and over how many customers would leave Virgin Media in favour of Sky.

They have said BSkyB would have to attract around 150,000 new customers from Virgin Media to be better off. Sky’s premium channels of sports and movies will not be affected. (Additional reporting by Deborah Haynes)

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