The Office of Fair Trading said a three-year investigation had not revealed "sufficient grounds to conclude that competition law had been broken".

The OFT announcement, which came a year to the day after the regulator said it expected to find BSkyB guilty of anti-competitive behaviour, took investors by surprise.

In the City, BSkyB shares jumped 5% to 658 pence.

All clear

Analysts said the OFT decision had removed a major source of uncertainty weighing on BSkyB shares.

The OFT probe came in response to complaints from rival pay-TV firms that BSkyB was overcharging them for the right to broadcast its highly popular sports and movie channels.

The inquiry focused on whether BSkyB's fees were so high that competitors were prevented from making a normal profit from broadcasting its programmes.

BSkyB, part-owned by media tycoon Rupert Murdoch's News Corp., competes in the UK with cable TV firms Telewest and NTL.

Its third main rival, digital terrestrial broadcaster ITV Digital, went bust in May this year after talks aimed at renegotiating a cripplingly expensive sports broadcasting deal fell through.

Narrow escape

The cable broadcasters, burdened by heavy debts, both began emergency financial restructuring talks with creditors earlier this year.

Shares in Telewest, which had threatened to sue BSkyB if the OFT found against it, fell 11% to 2.05p on Tuesday.

However, the OFT made it clear that BSkyB had only narrowly avoided being found guilty of market abuse.

"We found BSkyB to be around the borderline of anti-competitive behaviour," the watchdog said.