Consolidation A Threat To Granada And BSkyB

As further news of the United/Carlton merger emerged over the weekend, the two groups most likely to lose out as a consequence of the deal made moves to prevent it. BSkyB and Granada have both said they want the merger referred to the Competition Commission before it is given the go-ahead and there have been rumours that Granada will spoil the bid by bidding itself for United.

Rupert Murdoch was believed to be furious at news of the merger and has called for it to be carefully reviewed by the Competition Commission. If the merger is passed it is believed he will begin to demand a relaxation of cross-media ownership rules which currently prevent him expanding his interests. Under current regulations BSkyB cannot own more than 20% of any terrestrial broadcaster. News Corporation already has a 40% stake in BSkyB as well as controlling the Times, News of the World and Sun newspapers.

Under the merged deal, however, the new group would have similar cross-media interests and there would be pressure for the current rules to be relaxed.

The Granada group would be in trouble if it tried to scupper the deal by making a bid for United or Carlton. If its own advertising revenue and audience share were added to that of either of the two companies involved in the merger, the group would breach the current regulations on the amount of ad revenue and share one media company can control (see Media Merger May Hit Regulatory Obstacles). It would be allowed however to take over some of the remaining franchises without breaching ownership rules.

By the end of today it was believed that Granada would bide its time and await the outcome of the regulatory issues involved before making a move.