Blocking News Corporation's £8bn bid for BSkyB would be "contrary to the public interest" because it could lead to a reduction in the number of news providers in the UK, the pay-TV company claims.

In a strongly-worded submission to media regulator Ofcom, published today, the Sky board said blocking the takeover would threaten the future of its 24 hours news channel, Sky News.

Barring News Corp from buying the 61% of Sky it does not already own would set a regulatory precedent that would discourage Sky from seeking to expand and prevent the pay-TV group from making further investment in Sky News.

Ofcom has been asked by the business secretary, Vince Cable, to advise him on whether the News Corp acquisition breaks media plurality rules designed to prevent a single company from becoming too powerful.

Sky argued in its submission that blocking the deal on plurality grounds would have the opposite effect.

"A conclusion that the transaction would result in a loss of plurality could perversely increase the risk of that very situation by undermining the incentives which have resulted in the provision of Sky News to date," the company said.

The company told Ofcom that Sky had spent heavily on Sky News because it makes its overall offer more attractive to its 10 million subscribers.

It argued in its submission there would no incentive to continue investing in the service if Ofcom bars the News Corp takeover because it would mean the success of Sky News is an impediment to further expansion.

"This incentive [to invest] has the potential to be undermined if merger control were to operate such that the operation of Sky News inappropriately or unduly restricted any merger or acquisition opportunities which may be available to Sky," it said.

News Corp offered 700p a share for the stake it does not already own in June. The BSkyB board rejected that offer and negotiations over an increased bid have been put on hold until the regulatory hurdles to a possible takeover have been negotiated. The Sky board has said it believes a higher offer would be in the best interests of shareholders.

The Sky submission attempts to turn the argument advanced by commercial rivals about the effect the News Corp takeover would have on the UK media on its head, saying that preventing the deal could be a threat to plurality.

An alliance of rival media groups – including Guardian Media Group (which publishes the Guardian), Channel 4, BT and Daily Mail owner DMGT – have urged Cable to veto the proposed deal.

They have said it would lead to too much concentration of media power in the hands of Rupert Murdoch, News Corp's chairman and chief executive.

Sky also pointed out to Ofcom that Sky News only has a 7% share of the UK news TV market.

It insisted the independence of Sky News would not be affected by a News Corp takeover.

Sky cited an earlier ruling by the Competition Commission into its 17.9% stake in ITV, which has since been reduced to just under 7.5%, in support of its argument.

The commission found that Sky's stake in ITV had no impact on the provision of TV news because there was no evidence BSkyB executives exerted any "direct editorial influence" over Sky News.

Sky said in its submission to Ofcom that Sky News "operates within a strong culture of editorial independence across television news broadcasting".

If the takeover goes ahead, News Corp would take full ownership of BSkyB, the country's most powerful commercial broadcaster, which is on track to make profits of £1bn next year.

The company controls more than 35% of the UK national newspaper market through its News International subsidiary, which publishes titles including the Times and the Sun.

From: Mediaguardian