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Virgin Media drops legal handbag

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A contract feud between Virgin Media and Sky has ended today with a new deal that will see the return of Sky's basic channels to cable.

The agreement begins on November 13 and will run until June 2011.

Negotiations between the pair acrimoniously collapsed in March 2007, when Virgin Media customers trying to watch Sky One were greeted with the message: "Thanks to Sky, the Sky One channel is no longer available. They've picked up their ball and gone home. Foul play? We think so."

Without Sky One, thousands of customers deserted cable.

Virgin Media argued that Sky had massively and unfairly increased is charges for its basic package, which also includes Sky News. The row escalated, and Virgin Media applied to sue Sky under competition rules in the High Court.

Today's deal puts a stop to the legal handbags. Virgin Media CEO Neil Berkett said: "I believe this agreement represents a fair deal and is the right thing for our customers. We recognise the quality and popularity of Sky's channels and look forward to welcoming them back to Virgin Media's TV service."

At the time of the original channel contract dispute, Virgin Media and Sky were also fighting over ITV. James Murdoch had put the kybosh on Richard Branson's proposed takeover of ITV by secretly buying up a large stake in the terrestrial broadcaster.

The withdrawal of Sky One from cable and ITV takeover block were widely interpreted as strategic victories for Sky. They were swiftly followed by the departure of then-Virgin Media boss Steve Burch "for family and personal reasons".

Competition authorities have since ordered Sky to slash its stake in ITV by more than half, however, which Rupert Murdoch has protested is a "huge injustice". ®

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