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Last Updated: Monday, 2 February, 2004, 08:58 GMT
ITV: A third force in broadcasting

By Jorn Madslien
BBC News Online business reporter

ITV logo

As the shares in ITV plc, formed by the merger of Carlton Communications Group and Granada, start trading in London, BBC News Online asks what the future holds for the independent television company.

Even before the formal approval of the merger on Friday, it was clear that ITV Plc would become a third force in British Broadcasting, alongside state broadcaster BBC and commercial rival BSkyB.

The new giant, whose sheer size makes it significant well beyond the borders of the UK, is worth around 5.8bn according to early stock market valuations.

ITV hopes that the merger will help slash costs by around 100m.

Savings will in part come from job cuts, though no formal statement has been made about how many of the companies' combined 8,500-strong workforce will have to leave.

Upmarket

Achieving these cost savings, and a revival in the advertising market, could mean that ITV's earnings will head higher, even though the broadcaster lacks its competitors' strong digital presence.

As the owner of 12 of the country's 15 regional commercial broadcasting franchises, the company is expected to bring in more than 50 pence in every pound spent on television advertising from the start.

And a strategy is already in place to boost ITV's advertising revenue by improving the broadcaster's scheduling.

Its main News at Ten Thirty on the free-to-air channel ITV1 is to feature more sport, foreign and business news to attract "upmarket" older male viewers, according to its editor-in-chief David Mannion.

In addition, ITV may bid for the eight live Premier League football games that BSkyB has been forced to sub-license.

The relatively recent addition of the digital channel ITV2 should also appeal to advertisers, though some are concerned about rising advertising prices if the new giant is allowed to flex its muscles.

Following the success of ITV2, the company plans to launch ITV3 as part of its move to enhance its digital offering.

Recommendations

On their last trading day on Friday, Granada shares gained 7.5p to 140.5p, while Carlton shares gained 14.25p to 281.5p.

Both shares were lifted by recommendations and optimistic predictions by several investment houses, including UBS, Deutsche Bank and Merrill Lynch.

Carlton and Granada's shareholders have got used to a rise in their stock portfolios over the last year or so.

The value of their shares have more than doubled during the last 12 months, as the two companies have bounced back from the ITV Digital fiasco that cost them billions of pounds and sparked a shareholder revolt that ended in the ousting of Carlton chairman and founder Michael Green.

ITV shares started trading at 141p on Monday and quickly rose to 144p.

Granada chairman Charles Allen is taking on the role as ITV's chief executive, and as yet a new chairman has not been appointed.

Some ITV shareholders object to Mr Allen taking on the top job.


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