TV Franchise Bids-Speculation Continues

With over three months to go before the ITC announces the winners of the new ITV franchises, rumour, speculation, and the attendant headaches and fears, are approaching fever pitch.

After last week’s flurry of bid rumours, Thames now takes centre stage with the ‘news’ that it has been outbid by both of its rivals. CPV-TV is thought to have bid around £58m, whilst Carlton is understood to have put in a cash bid of £53m, just one million ahead of the sum pledged by the incumbent.

Industry analysts favour the Carlton bid, since CPV-TV is widely tipped fail the quality test. Whilst the ITC would be reluctant to risk the concomitant disruption should both London franchises change hands, LWT is generally expected to retain its franchise (with a bid of around £40m, level with rival LIB). The ITC is understood to be satisfied with the Carlton bid.

Also in the news is the TSW bid, now set at about £16.7m, well above the sums pledged by its rivals. There is growing concern that incumbents are bidding too high.

Whilst the ITC had hoped for secrecy and protocol during the run up to October, the recent spate of hearsay and leaks has renewed criticism in the auctioning system itself.

Whilst many of the larger incumbents seem to have been outbid (TV-am, Thames, Granada), some of the smaller companies appear to have been prompted to bid constrictingly high amounts (HTV, TSW, HTV, Anglia). It must be remembered, however, that part of the quality threshold includes the viability of the business plan to produce the schedules being promised. For some of the highest bidders at least, this may prove to be a stumbling block. In addition, some TV companies have based their business plans on ad revenue forecasts by the National Economic Research Associates. These predict 5.4% per annum average real growth in advertising revenue between 1993 and 2002. Some analysts see these figures as being too optimistic.

The bidding process is also being excoriated because of the degree of luck involved. Not only have STV and Central reportedly managed to escape with bids of under £1m, but the rumours have had a very positive effect on the market for shares in the two companies. Following the news of the fortuitously low bids, investors pushed up shares in STV by 148p, while Central rose by 182p.

The news has also left the two companies vulnerable to takeover. After the franchises are awarded in October, there will be a moritorium on takeover bids until 1994. Up until October, how- ever, companies like Central and STV must look increasingly attractive to those who by now have a good idea that they will not be amongst the winners when the ITC’s decisions are made public. There seems to be an increasing amount of bitterness about the whole process. Even the majority of winners, come October, will have little cause to celebrate.

At the end of the day, concensus of opinion holds that there will only be one real winner – the Treasury. If the highest bids are accepted, it now seems likely that the total sum raised will be in the region of £300m.