NTL reveals ITV merger interest

The firm says it has "scheduled an initial conversation" with ITV.

NTL said the process was at a very preliminary stage and there was no assurance that these discussions would lead to any offer being made for ITV.

ITV said a "highly tentative expression of interest" about holding talks had been received from NTL, but no meeting had yet been held or proposal received.

However, it expressed a "willingness to listen to any bona fide proposal".

Shares in ITV, which has been hit by a decline in advertising revenue, were ahead by 6% at 112 pence in afternoon trade.

ITV's market capitalisation is about £4.1bn ($7.8bn), and NTL's is about £4.68bn ($8.9bn).

Rebranding

ITV is currently in the process of drawing up a shortlist of possible candidates to take over as its new chief executive.

The broadcaster was a bid target earlier this year, but former chief executive Charles Allen rejected an approach from a consortium of private equity firms. The investors had wanted to replace him with Greg Dyke.

"Adding content to their (NTL's) platform of services will put them in a powerful position and more of a rival to the likes of BSkyB"
Henk Potts, Barclays Wealth

ITV is obliged to consider the approach, but has not yet been given basic information on what NTL is prepared to offer, how it will finance any offer and whether a bid would be in cash, shares or a mixture of both.

In September, NTL, which plans to rebrand itself under the Virgin name in 2007, unveiled a package which bundles together TV, high-speed internet, and fixed-line and mobile phone services.

NTL is the dominant provider of cable TV services in the UK, having merged with Telewest.

Sir Richard Branson is NTL's biggest shareholder, after its £960m acquisition of Virgin Mobile.

Debt issue

In May, NTL revealed that it had debts of £5.4bn, at the same time as it announced plans to cut or outsource 6,000 jobs by the end of 2007.

Its large debts could be an obstacle to any merger.

Henk Potts, equity analyst at Barclays Wealth, said ITV's lack of a chief executive may have been behind the timing of the NTL approach.

And he said a tie-up with ITV made sense for NTL's hopes of becoming a major media player.

Mr Potts said: "Adding content to their platform of services will put them in a powerful position and more of a rival to the likes of BSkyB."

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