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Monday, 29 April, 2002, 16:30 GMT 17:30 UK
Merger rumours lift Carlton and Granada
ITV Digital logo
ITV Digital's owners want to move forward
Shares in the parent companies of failed pay-TV service ITV Digital gained in response to reports that they are about to renew merger talks.

Though as the day's trading went on they slipped back to close below their intraday peak.

Investor eager for good news after the digital TV fiasco marked Carlton shares 7% higher at 257p by mid-morning trade on Monday, while Granada shares rose 2.6% to almost 127p.

When trading ended, Granada shares had gained 3.6% on the day while Carlton closed up 0.8%.

"The merger talk is the driving factor, particularly for Carlton's shares," one trader said.

"They have been working on this for years and the only thing that held it back is ITV Digital," said Numis Securities' Lorna Tilbian.

"It's just a matter of taking [the merger plan] out of the shelf and dusting it."

Strong desire

UK press reports over the weekend and on Monday morning suggested that the two companies are due to re-start talks over a tie-up.

"The strategic logic of a single ITV is inescapable," Granada executive chairman Charles Allen told the Sunday Telegraph..

"It is what shareholders want and I'm sure it will happen."

Legal changes

Speculation of a merger between the two broadcasters had already been doing the rounds ahead of legislative changes which would remove some regulatory obstacles to the tie-up.

The anticipated changes to the government's Communications Bill would scale down limits on cross-ownership between ITV companies.

However, the demise of ITV Digital, a drain on both companies' finances, also makes Carlton and Granada more attractive to external buyers.

Some senior managers within the two broadcasters are expected to lose their jobs in the wake of ITV Digital's collapse.

Moving forward

The two companies are also expected to re-focus their attention on their core businesses.

This would be achieved by revamping their programme-making capabilities to improve the content of the UK's leading independent television network.

"After ITV Digital, they're under pressure to focus on ITV operations," a Granada spokesman said.

"That is where the pressure is coming from; to regain the upper hand in terrestrial broadcasting."

Failure

ITV Digital, locked into a cripplingly expensive broadcast deal with the Football League, went into administration last month after failing to negotiate lower transmission fees.

ITV Digital's administrator, Deloitte & Touche, appears to have enough money to keep the company going for a few more days.

But the crisis has caused the broadcaster to lose subscribers at the rate of 4,000 per day.

ITV Digital, which needs 3.2m a week to survive, had 1.2 million subscribers before going into administration.

If a buyer for the company does not come forward in the next few days, ITV Digital is likely to be broken up and its assets sold off piecemeal.

Football hit

The situation could spell financial disaster for dozens of UK football clubs in England's First, Second and Third divisions, due for a slice of TV rights money.

The Football League, which oversees the divisions, is owed 178.5m by ITV Digital in TV rights.

The league has pledged to sue Granada and Carlton for the money, but there are fears some clubs could go under before any case was settled.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Mike Sergeant
"In the past such dominance would not have been allowed"
See also:

28 Apr 02 | Business
Microsoft 'mulls ITV Digital bid'
26 Apr 02 | Business
ITV Digital wins breathing space
25 Apr 02 | Football
Chairman urges solidarity
26 Apr 02 | Business
Your questions answered: ITV Digital
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