Granada urged to ditch ONdigital

ONdigital: not enough viewers are getting the message

Media giant Granada, which revealed two weeks ago it had slipped into the red, is facing growing pressure from investors to ditch ONdigital, a survey has revealed.

Four of 20 leading shareholders in Granada surveyed by the Financial Times said the firm should immediately close, or sell, the loss-making TV business, launched three years ago with Carlton.

And two further fund managers said that while ONdigital was worthless, it should not be ditched yet.

Granada has written to Prime Minister Tony Blair, attempted to win backing from utility firms and announced a rebranding in an effort to save ONdigital.

And the closure of ONdigital would represent a setback for the government in efforts to switch UK viewers to digital services between 2006 and 2010.

But many investors believe ONdigital, which feeds digital TV through conventional aerials, has lost the fight against cable and satellite operators, in particular the Rupert Murdoch-based firm Sky.

'Not enough muscle'

"Sky was always going to win the pay-TV war," one fund manager told the Financial Times.

"It was just a question of when."

Another shareholder said: "Carlton and Granada were very ballsy to take on Rupert Murdoch but they never had the financial muscle or the business model to make ONdigital work."

The two firms have injected £800m into ONdigital so far, with a further £300m proposed.

Further backers

Yet the number of ONdigital viewers, which was in January was revealed to have passed the one million mark, has struggled to climb nearer the 1.7 million break even point.

The platform is to be rebranded ITV Digital in an effort to improve its plight, and Granada has opened gas, electricity and telecoms firms in an effort to find new finance.

Chief executive Charles Allen has also written to prime minister Tony Blair warning that delays to the reform of media ownership could see Granada taken over by a European firm, which in turn could spell closure for ONdigital.

But investors have lost patience over the venture as it has continued to sap Granada's resources.

Granada two weeks ago reported pre-tax losses of £69m for the six months, compared with a £289m profit a year before.