The government has ordered BSkyB (NYSE: BSY) today to divest its 17.9 percent stake in broadcaster ITV to below 7.5 percent, in a ruling that could cost the satellite TV company some £250 million pounds if sold at Monday’s closing share price. Business secretary John Hutton said he had to accept the decisions of the Competition Commission that had found a merger had been created that had resulted in a less competitive market for all television services. He also required Sky “not to dispose of the shares to an associated person, not to seek or accept representation on the board of ITV and not to reacquire shares in ITV”. (Press release is here, or find Hutton’s entire decision here.)

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The government did not reveal, however, the time frame in which Sky must sell its stake. Sky had argued that to do so could “be unduly prejudicial to their legitimate commercial interests.” ITV, which had bitterly opposed Sky’s purchase, said today it “warmly welcomed” Hutton’s ruling, which was not an unexpected one following the Commission’s findings last year. “We believe this decision is in the best interest of the overwhelming majority of our shareholders,” the company said in a statement.

According to Reuters, Sky bought its ITV stake for £940m in November 2006. At the time, cable firm and competitor NTL - now Virgin Media (NSDQ: VMED) – was considering buying its own stake in ITV, and Sky’s purchase effectively shut it out.

Sky had tried in vain to head off a forced divestment in its ITV stake, suggesting last October that it could put its shares in an independent trust or agree not to use their voting power. The Commission believed, however, that this would not reduce its economic interest in ITV (LSE: ITV). It has four weeks to appeal the decision. Meanwhile, Sky’s ITV woes aren’t over. It still faces an Ofcom review that will look at whether its control of film and TV rights is anti-competitive.