Gov't bends rule allowing b'casters to hold more than 25% of TV ad market
LONDON — The U.K. government gave the go-ahead to ITV’s consolidation of ownership July 14 in a move that will reshape Britain’s largest commercial web.
The government’s greenlight allows a marriage of two of the big three ITV companies — Granada Media, Carlton Communications and United News & Media. The question now is: Which two will it be?
Carlton and United have already agreed to a merger, but Granada has declared its intention to break up the deal with a hostile bid for one or the other of them.
All three were forced to wait for a loosening of ownership regulations before the three-way battle could kick off.
Trade Secretary Stephen Byers conditionally approved a linkup of Carlton and United. The two agreed to an £8 billion ($12 billion) merger last year.
Byers also said yes to a possible takeover of Carlton or United by Granada. Granada was recently spun off from Granada Group and raised a $3 billion war chest in the process.
But combining the broadcasters remains tricky. Under any scenario, Byers has ruled, assets would have to be sold, which could allow outside players such as satcaster BSkyB or foreign TV groups to gain a foothold in ITV.
Granada owns four regional ITV stations: Granada, Yorkshire and Tyne Tees across northern England and LWT in London. Carlton has Carlton in London, Central and West Country. United is parent to Anglia, Meridian and HTV.
If Carlton and United merge, the government requires that Meridian, one of ITV’s four biggest businesses, would have to be sold.
Should Granada and Carlton get together, it would mean the sale of either Carlton in London or LWT, because no company can own both of the lucrative London licenses.
Granada and United seems the simplest combination — no licenses would have to go, although other shared stakes could be an issue.
To make these deals possible, Byers has scrapped the rule prohibiting a single broadcaster from holding more than 25% of the TV ad market. One company’s total viewership still cannot exceed 15%, however.
The changes have been granted to enable ITV to better compete with the growth of multichannel TV, now in about one-third of British households.
But there may yet be a backroom deal.
A Granada bid seems unlikely in the short term because a messy battle for control of ITV could damage the web.
Make love, not war
Acknowledging this possibility, Granada chief exec Charles Allen has of late been saying he would prefer talks over confrontation.
Rebecca Ulph, an analyst with Forrester Research, thinks “the first thing you’ll see is an attempt at negotiation. Any hostile bid opens the chance of a third party coming in.”
That would apply, in particular, to the sale of Meridian. If Carlton/United were to proceed under the cloud of a Granada bid, Meridian might attract the attentions of non-ITV players.
Meanwhile, both Granada and Carlton would be loath to give up their London licenses, which take in a disproportionate amount of ad revenue and become even more attractive now that the 25% limit has been lifted.
The government wants to see two reasonably comparable ITV companies created, not a lopsided structure with one broadcaster wielding all the power — that would set the stage for a single ITV company, perhaps in five years time.
For the government to get its wish, however, Granada, Carlton and United will have to restructure their businesses from three into two organizations — easier said than done.
Certainly there is little love lost between Allen and Michael Green, Carlton’s chairman. Even Green and Clive Hollick, United’s chief exec, are but tenuous pals.
Still, all three companies have successfully cooperated in areas such as acquiring soccer rights, while Granada and Carlton are partnered in terrestrial multichannel platform ONdigital.
The government has changed its regulations in another way, removing the rule limiting ownership of digital terrestrial licenses to three.
This would allow United — holder of the Wales-based SDN license — to become a part owner in ONdigital, which represents three licenses. It also removes an additional obstacle to Granada’s purchase of United.