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The BBC's Torin Douglas
"This opens up the way for ITV to be controlled by just two large companies"
 real 28k

Friday, 14 July, 2000, 13:19 GMT 14:19 UK
ITV braced for power struggle
ITV big three set for merger battle to shape future of independent television in the UK
A landmark decision by the UK government has set in motion a three-way power struggle which will determine the future of the independent television industry.

The Trade Secretary, Stephen Byers, has approved a proposed 8.3bn merger between media giants Carlton Communications and United News & Media, subject to certain conditions.

ITV franchises - who owns what
Granada:
Granada, LWT, Yorkshire, Tyne Tees

Carlton:
Carlton London, Carlton Central, West Country

United:
Anglia, Meridian, HTV
He also gave the go-ahead for their main rival, Granada Media, to mount bids for either of the two companies.

The long-awaited result of a Competition Commission report potentially paves the way for the eventual creation of a single company to run the whole ITV network.

Some industry figures expect this to be inevitable because increasing globalisation and the huge costs of developing technology mean media companies are having to expand merely to survive.

But for now, Mr Byers has laid the foundations for a restructuring of the existing three big players into two dominant companies of roughly equal size thereby, he hopes, retaining a healthy degree of competition.

Bidding battle

It is now down to Granada to make its move for Carlton or United and, ultimately, for shareholders to decide which of the merger options to accept.

Trade Secretary Stephen Byers
Stephen Byers: Competition concerns
The outcome will shape the future of independent television in the UK.

Aware of this, Mr Byers said he was concerned that Carlton and United's plan, announced in November, could operate against the public interest because of the likely impact on the advertising market.

So he ruled that it could go ahead only if the companies gave an undertaking to sell Meridian within six months of the date of the completion of the deal.

Meridian - currently part of United News & Media - broadcasts to the south and south-east of England, and would most likely be bought by Granada, if Granada failed to buy up Carlton or United.

Size matters

Mr Byers said: "The UK media scene has changed radically since the early 1990s.

"It is important that we allow ITV to develop in a way which allows it to compete effectively in an increasingly diverse market.


It is important that we allow ITV to develop in a way which allows it to compete effectively in an increasingly diverse market

Stephen Byers, Trade Secretary
"My decisions today should ensure that there is effective competition in the ITV sector, protecting the interests of viewers, advertisers and programme makers."

Officials from the Competition Commission had been examining the consequences of the various possible link-ups between the three major ITV companies for the industry as a whole.

All the ITV companies gave undertakings in 1994 that they would not exceed a competition limit of 25% of all TV advertising revenue.

The effect of Mr Byers' clearance of Granada's merger plans is to allow these limits to be exceeded.

However, he has retained a competition failsafe, whereby any party would be required to divest franchises to meet guidelines on audience share.

The Competition Commission concluded that there would be cause for concern if any merger were to result in one dominant ITV company emerging which was significantly bigger than the next largest.

There would also be concern if it owned more than two of the four leading licences (Carlton London, Carlton Central, Meridian and LWT).

But it felt there was no reason why two broadly balanced leading companies should not compete just as effectively as the current three broadly balanced companies.

Reaction

Granada Media chairman Charles Allen said his company was "now well placed to lead consolidation in ITV".

In a joint statement, Carlton and United said: "We welcome the prospect of a relaxation of regulatory restrictions.

"Carlton and United will be considering carefully the implications of today's announcement on their merger plans and a further announcement will be made in due course."

Granada shares rose on the competition ruling, but United and Carlton fell because of the stipulation that if they merged they would have to sell off Meridian.

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See also:

11 Jul 00 | Business
Granada raises 1.3bn warchest
25 May 00 | Business
Carlton 'renegotiates merger'
08 Feb 00 | Business
Inquiry into TV merger
07 Jan 00 | Business
Granada to bid for rivals
26 Nov 99 | Business
Is Carlton United a winning team?
26 Nov 99 | Business
8bn media merger agreed
26 Nov 99 | Business
Hollick makes his move
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