Virgin row to cost Sky '£15 to £20 million'

Sky has said it stands to lose "£15 to £20 million of operating profit" if Virgin Media no longer carries its channels over cable.

Virgin Media - formerly known as NTL and Telewest - and Sky have been locked in a battle to renegotiate the contract which sees Sky's basic channels carried on cable. The channels include services such as Sky One and Sky Sports News.

In a statement released this morning, Sky said it "wishes the Sky basic channels that Virgin Media currently carries remain available to Virgin Media customers".

Last week, and in newspaper advertisements over the weekend, Virgin suggested Sky was being less than helpful over the negotiations to renew the contract.

"The nature of these negotiations leads us to believe that this outcome has been deliberately engineered by Sky in order to suppress competition and coerce Virgin Media's customers into switching to its service by denying them access to the basic channels," said a Virgin statement.

Sky fervently disagrees this. "We are simply seeking a fair price so that we can continue to provide the great shows and choice that Virgin Media customers value.

"Despite the constructive approach adopted by Sky throughout these negotiations, the recent behaviour of Virgin Media appears at odds with a genuine desire to conclude a commercial agreement "

Running out of time

Time is running out for the deal - it expires at midnight on 28 February. Jeremy Darroch, Sky's chief finance officer, criticised the publicity that has surrounded this surprisingly public spat: "With three days still to go before the deadline, we hope that Virgin Media will focus on getting a deal done rather than on their PR offensive."

The channels concerned include Sky One, Sky Two, Sky Sports News and Sky News. There has been another interesting twist to the story this morning as Virgin has announced a deal to show US series Lost - albeit after Sky One has shown it.

Sky says it has "negotiated in good faith with Virgin Media and shown flexibility on price. More has been offered to Virgin Media than ever before, including HD services and new channels such as Sky Three and Sky Arts," continued the statement.

Comments by Virgin have criticised Sky's basic channels as "under-performing". Sky has hit back at this, saying it has increased investment in these channels by 68 per cent. "As a consequence, the most watched pay TV programmes in cable households are on the Sky basic channels," insisted Sky.

Sky's estimate of the financial cost is both in terms of the fees it receives from the channels existing on cable, as well as the drop in advertising revenue it expects from the hit in viewing figures.

Sky says it "continues to be willing to negotiate with Virgin Media in good faith at any time".