Sky has withdrew its basic channels from Virgin Media's television services as of midnight on the 28 February following failed negotiations between the two firms.

Virgin Media was formed from the merger of cable TV firm NTL/Telewest and Virgin Mobile.

Sky had demanded that the fees for carrying its channels be nearly doubled, despite the fact that the popularity of their basic channels has declined by 20 per cent in the last three years.

The withdrawal is limited to Sky's basic channels: their sport and movies channels are unaffected and will continue to be available to Virgin Media's customers.

Virgin Media said that money saved due to Sky's withdrawal of its basic channels will be used to build on a series of major programming acquisitions over recent months. The 2,700 hours of programming currently available through its unique video-on-demand service will be extended to over 6,000 hours by the end of this year.

Virgin Media said that on Tuesday evening (27 February), after a breakdown in discussions, the company offered to let a mutually trusted independent expert decide what was fair and reasonable. Sky formally rejected this offer on Wednesday morning and again on Wednesday afternoon following a personal call to James Murdoch, instigated by Virgin Media's chairman Jim Mooney and CEO Steve Burch.

Steve Burch, said: "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. Their action here is consistent with their plans to withdraw their free channels from Freeview and, in our view, reflects their desire to limit consumer choice."

Richard Branson said: "Consumers have my whole-hearted assurance that Virgin Media will not allow this dispute to prevent us from giving them the freshest and most exciting TV service in the UK."