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Sunday, 16 July, 2000, 13:55 GMT 14:55 UK
RTL may enter ITV fray
ITV big three set for merger battle to shape future of independent television in the UK
Could RTL be about to enter the battleground?
Speculation is growing that the newly formed European television giant RTL is poised to enter the scramble to control the UK's ITV network.

It follows the decision by the UK's trade secretary Stephen Byers to give regulatory clearance, with conditions, to merger plans between United News & Media and Carlton Communications.

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

Carlton:
Carlton London, Carlton Central, West Country

United:
Anglia, Meridian, HTV
The condition, that a combined group dispose of the lucrative Meridian regional ITV licence, has cast doubts over whether it will proceed.

ITV is the UK's main free-to-air terrestrial independent television channel, divided into regional franchises.

The past few years have seen these regional owners gobble each other up to leave three dominant players, who are now positioning themselves for the day when the rules are changed so that one company can own the whole network.

Meridian

Known to be determined not to be left on the sidelines by the merger is Granada Media, which was also given approval by Mr Byers to bid for either of its two rivals.

What is RTL?
Pearson Television
Germany's Bertelsmann's TV assets
Belgium's Audiofina's TV operations
Among the raft of speculative reports in weekend newspapers were ones suggesting that Granada might now be satisfied to take Meridian if Carlton and United did merge.

But then there were other reports that Carlton might not be so keen to proceed with the deal if it was not able to get its hands on Meridian.

Meanwhile industry sources were quoted as saying that RTL was readying itself to make an offer for United News & Media.

RTL, due to list on the stock market shortly, is made up of the TV assets of the UK's Pearson, Germany's Bertelsmann and Belgium's Audiofina.

Channel 5

Part of the attraction of taking over United is to take its 35% stake in Channel 5, which comes with a veto over key management decisions. RTL controls the other 65%.

These reports suggest RTL would sell off United's Express newspaper interests and hold on to the ITV franchises and sell them when the rules on audience share are relaxed.

If RTL did hang on to the ITV franchises, they would come under the control of its director of strategy, Richard Eyre, who is a former ITV chief executive.

"What RTL really wants is Channel 5. If it needs to bid for United to get that, it will, and it is looking at all possible options," one source was quoted as saying.

Channel 5 is a minnow compared to ITV, which accounts for nearly two thirds of the UK's TV advertising revenue.

Fine print

RTL, whose flotation on the London Stock Exchange later this month will provide financial muscle power, is valued at about 14bn.

United has a market value of 4.5bn, Carlton 5.3bn and Granada Media, 8bn.

Some analysts say RTL might face regulatory problems if it tried to control United's ITV regional licences - Meridian, Anglia and HTV - and all of Channel 5.

Carlton, United and Granada were studying the fine print of the government's ruling over the weekend before deciding how to proceed.

Many industry figures believe it inevitable that ITV ends up being run by a single company.

Audience share

This is because the rules limiting ownership were brought in during the days when there was little or no competition from satellite, cable and terrestrial digital rivals.

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.

But 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.

As multi-channel digital television increases its reach in UK homes, the overall audience share of ITV is expected to fall to a level where competition authorities might not be so concerned at one company owning the whole network.

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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
14 Jul 00 | Business
ITV braced for power struggle
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