LWT buys into Tyne Tees

London Weekend Television has snapped up 14% of fellow ITV company Yorkshire Tyne Tees TV, underlining its ambition to remain one of the ITV web’s dominant players over the next few years.

LWT paid T14.9 million ($ 22.8 million) to retailing group W.H. Smith for the stake, a premium of 10% above the stock market price. Under the agreement, LWT will take over responsibility for YTT’s airtime sales from next year.

The deal further complicates the already tangled web of alliances between the 15 companies that make up the ITV network.

LWT, which holds the London weekend ITV broadcasting license, already co-operates closely with Carlton TV, London’s weekday broadcaster, as well as owning 20% of national breakfast station GMTV alongside Scottish TV, and co-owning an international program sales company with Granada TV.

Carlton Communications, which owns 90% of Carlton TV, itself owns 20% of ultra-rich Central TV, which in turn holds 20% of Meridian Broadcasting and has long been rumored to be plotting a link-up with Anglia TV.

Meanwhile, Granada and Pearson (which owns 14% of Yorkshire Tyne Tees and is in the process of buying major ITV producer Thames TV) are both significant investors in ITV’s main commercial rival, British Sky Broadcasting.

Owners jostling

The major ITV owners are jostling for position in preparation for next year, when the government will lift its ban on hostile takeovers of ITV stations.

Many observers, including most ITV bosses, expect to see a consolidation of ITV ownership, leaving perhaps four to six companies controlling the entire network. This is currently forbidden under the U.K.’s media cross-ownership laws — under existing rules, for example, LWT cannot own more than 20% of YTT. But ITV chiefs are lobbying hard for a relaxation of these restrictions, and are optimistic that the government will respond.

The position is complicated by the huge disparity of wealth between the ITV companies, created by the 1991 auction of broadcasting licenses. LWT is one of the network’s richest stations, having bid a modest T7.6 million ($ 11.6 million) a year to win its franchise.

By contrast, Yorkshire Tyne Tees TV, which was formed last year by the friendly merger of two ITV stations in northeast England and has approximately the same advertising revenues as LWT, is burdened with a combined annual payment of T52.8 million ($ 80.8 million).

Reasonable doubt

There is considerable doubt within the TV industry about the continuing financial viability of YTT, and the company is under huge pressure to cut costs and boost income.

At the same time, the Independent Television Commission is scrutinizing the company closely over suggestions that it is not meeting the minimum programming obligations laid down in its license.

Against this troubled background, YTT Tuesday unveiled weak half-year profits of T3.8 million ($ 5.8 million) before tax. But its share price shaded upwards as the financial institutions welcomed LWT’s arrival as a significant shareholder.

LWT chairman Christopher Bland said the investment in YTT was worthwhile only because it was tied to the contract for LWT to sell YTT’s airtime.

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