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Tuesday, 15 October, 2002, 09:51 GMT 10:51 UK
ITV's merger drama starts
Carlton boss Michael Green
Would Carlton's Michael Green still be smiling at an ITV plc?
Nick Higham

There is a sense of relief in the television industry and the City that, after so much speculation, Carlton and Granada are at last moving towards a merger.

London Television Centre - home of LWT
London's ITV licences must be owned by separate companies
One company running ITV has looked inevitable for several years.

It would save money, sharpen decision-making and make the network a more formidable competitor to the BBC, Channel 4, Five and Sky.

But the deal still faces tough obstacles. There are at least six reasons why it may collapse, or why Carlton and Granada's shareholders may decide the marriage isn't such a good idea.

  • As the law stands the two London ITV licences must be owned by different companies and no single group can control more than 15% of the television audience. The law will be changed by the forthcoming Communications Bill, but that won't be on the statute book until late next year - plenty of time for the deal to go sour or for someone else to make a bid for one of the companies.

  • The Competition Commission may rule against the deal because the combined group will have 54% of all television advertising.

    To get round this the Carlton sales team will be hived off as a separate company. Will the Competition Commission be convinced by this fiction?

    That will depend on the reaction of the advertisers and their agencies. They are in two minds - fearful of a combined ITV's market power but enthusiastic about a slimmer, more competitive ITV with a good chance of winning bigger audiences.

  • The two men at the top - Charles Allen, chairman of Granada, and Michael Green, founder and chairman of Carlton - have big egos and a reputedly combustible relationship. Can they agree terms? Can they work together?

  • The senior management of both companies lack credibility in the wake of the ITV Digital fiasco, which cost them 1.1bn. The one top executive not held responsible for that - Carlton's chief executive, Gerry Murphy - is leaving.

  • We have been here before, back in February, when merger talks fell apart because the two companies couldn't agree how big a slice of ITV Digital's losses each should be responsible for.

  • There are serious disparities between the two companies. Granada's programme division, for instance, is extremely successful at selling programmes to ITV; Carlton's isn't.

Granada boss Charles Allen
Charles Allen: Can he work with Carlton's team?
Meanwhile the ITV network, though next year's programme budget has been boosted by 8% to 836m, is still suffering from falling audiences, and is still without a chief executive.

Now that Carlton and Granada have signalled a merger, indeed, it's hard to see why they need a chief executive for the network.

Perhaps the two companies will settle simply for someone to replace David Liddiment as director of programmes - if they can find a suitable candidate, and if they can take their minds off merger negotiations long enough to recruit them.

The BBC's Nick Higham writes on broadcasting

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11 Oct 02 | Business
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