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Tuesday, 12 March, 2002, 09:33 GMT
ITV merger looks inevitable
Nick Higham
By media correspondent Nick Higham

The news the other week that ITV's big two, Carlton and Granada, had come within a couple of days of announcing a merger provoked a flurry of speculation.

But it should not have been remotely surprising.

Most people in broadcasting think it is only a matter of time before a single company emerges to control the whole of ITV.

In charge
Granada owns: Border, Yorkshire, Tyne Tees, Meridian, Anglia and LWT
Carlton owns: Central, HTV and Westcountry
Scottish and Grampian are owned by SMG
UTV and Channel remain independent
The government wants to see more world-class, British-based media companies.

It announced a year ago that it would sweep away the rules that currently prevent a merger.

Marriage

Last year, Carlton and Granada themselves even produced an estimate of how much they could save if a merger went ahead - 60m.

A marriage, then, is seen as a foregone conclusion.

Even so, no-one seems to have expected the bride and groom to turn up at the altar quite so soon.

That is partly because the necessary changes in the law are still some way off.

The forthcoming Communications Bill will sweep away the legislative obstacles to a merger, like the requirement for two different ITV companies to serve London.

But the Bill, due to be published in draft form at the end of April, will not go on the statute book until the autumn of 2003 at the earliest.

London Television Centre
LWT's South Bank HQ: ITV currently has to have two London companies

If the two companies merge before that, they will have to go to elaborate lengths to "warehouse" many of their broadcasting assets, or sell them on to another company.

That company might perhaps be owned by their existing shareholders, and they might have the right to buy the programmes back once the law permits it.

But even when the law has changed, a combined company would have to negotiate another hurdle.

Carlton and Granada between them have well over 50% of all television advertising revenue.

The Competition Commission could block the merger on monopoly grounds.

The commission's decision will be heavily influenced by the attitude of advertisers and their agencies.

Survivor
Survivor: Will Carlton seek safety in numbers?

Publicly, advertisers' representatives are opposed to a merger because less competition in the sale of airtime might well mean they end up paying higher prices.

On the other hand, if a merger makes ITV stronger and better able to stop its audiences slipping away to the BBC, advertisers are unlikely to object.

Privately, one leading figure in the advertising world tells me that if a way can be found to maintain competition in the sale of airtime, advertisers may not object.

At present, Carlton and Granada each have a subsidiary selling airtime in their ITV regions.

Those subsidiaries could be sold off, continuing to work for ITV plc, but as independent agents.

They would be in competition with each other as well as with Channel 4, Channel 5, Sky and Flextech.

Artifice

Or one subsidiary could be sold off while the other remains in-house.

Coronation Street
Coronation Street: The jewel in Granada's crown
Such an arrangement has a whiff of artifice about it.

Would the Competition Commission accept it?

It seems, on the face of it, unlikely.

But if the people most likely to object - advertisers and their agencies - are all for it, the commission may decide to let it go through.

Carlton and Granada have indicated that, though the merger talks may be off for now, they are likely to restart some time soon.

When they do, expect the arrangements for ITV's advertising sales to be high on the agenda.

E-mail: nick.higham@bbc.co.uk

A version of this column appears in the BBC magazine Ariel.

See also:

23 Jan 02 | TV and Radio
ITV's big break
27 Feb 02 | Business
ITV Digital in crisis, owners say
04 Jan 02 | Newsmakers
ITV: Switching over
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