Senior ITV executive, Mick Desmond, has reportedly warned that the television network could face an annual loss of £100 million in advertising revenue if the Government forces the sale of both of its sales houses.
Desmond, joint managing director of ITV, reportedly said that the divestment of Carlton and Granada’s sales houses to be run by third parties could lead to a two to three percent cut in the national television advertising market.
Insiders at ITV told the Independent On Sunday that this translated into an annual loss in sales of £100 million for the combined group. However, the figures are only estimates and the broadcasters are awaiting details of the decision before the final costs can be calculated.
Trade and Industry Secretary, Patricia Hewitt, is due to announce her ruling on the proposed £4 billion merger of Carlton and Granada early next month. It is widely expected that she will approve the deal, but with a number of conditions to prevent the merged ITV company becoming too dominant in the television advertising market.
The Competition Commission has already proposed the double divestment of Carlton and Granada’s sales houses, along with a potential ban on share deals, or the requirement that a percentage of ITV’s airtime budget be auctioned off to a third party (see Carlton And Granada May Have To Sell Sales Houses).
The ITV companies initially described the sales house proposal as a deal breaker. However, Granada chairman, Charles Allen, recently conceded that he may accept the double divestment of the sales houses to save the merger (see Granada Chief May Accept Divestment To Save ITV Merger).
He remained insistent the move would “significantly undermine the rationale” of the entire deal, but said: “If the Government requires divestment of both sales houses we will have to look very carefully to see if we can make that work.”
Former head of Channel Five, David Elstein, argues that the benefits of the merger do not depend on the savings generated by combining Carlton and Granada’s sales houses.
Elstein, who has been linked with plans to parachute in a replacement management team following the completion of the merger, claims that substantial savings would come from combining transmission, programme making and news operations, as well as head office and other regional departments (see Sales House Divestment Will Not Halt ITV Merger).
