Granada Faces Investor Pressure Over ONdigital, Reports FT

ONdigital is 50:50 owned by Granada and Carlton Communications. A spat between the two ITV giants has developed after Granada chairman Charles Allen’s letter to the Government was leaked to the Sunday Times (see Granada Warns Of ‘Potential Disaster’ For ITV). In it Allen said that delays to the Government’s plans to legislate the Communications Bill – which will relax ownership regulations and potentially pave the way for a merger between the two companies – could spell ‘potential disaster’ for ITV (see Insight Anlaysis).

Allen said that Granada’s increasingly depressed share price has led to oversees takeover interest in the company. He warned that a foreign buy-out of Granada would be unlikely to include ONdigital, which would probably be shut down. Allen also made reference to shareholders’ fraying tolerence of pouring more and more money into the digital terrestrial TV (DTT) business, which is currently competing poorly with Sky Digital.

Today’s FT reports that Granada is now facing calls from some of its largest investors to give up on the DTT business completely. An FT poll of major Granada shareholders, showed that at least four believe that ONdigital has lost the battle against the cable and satellite operators and that they would be in favour of withdrawing from the business.

So far Carlton and Granada have fed £800 million into ONdigital and it is not expected to break even until 2004. At present the service has just over a million customers; Sky Digital has upwards of 5.5 million.

Despite the worries, stock in Granada was up 1¾p at 144¼p; Carlton was down 1½p at 330¾p.