ITV Merger Set For Approval This Week
The Government is this week expected to green-light the £4 billion merger of Carlton and Granada with a series of conditions designed to alleviate concerns over the power wielded by a single ITV in the television advertising market.
An outright rejection seems unlikely as it would fly in the face of the Government’s recently passed Communications Act to liberalise the media ownership regulations. However, a number of conditions look set to be imposed to appease advertisers, who are fearful of a combined ITV controlling more than 50% of the market for airtime sales (see Advertisers Wary Of Revised ITV Merger Plans).
Carlton and Granada have described the forced sale of one or both of their sales houses to be run separately as unworkable. Reports suggest that the broadcasters have convinced the Government to stop short of ordering such a remedy after senior ITV executive, Mick Desmond, warned that divestment could cause the television network to face an annual loss of £100 million in advertising revenue (see ITV Boss Warns Divestment Could Lead To £100m Ad Loss).
However, there will have to be some compromise and other possible solutions include a potential ban on share deals, which see advertisers agreeing to commit a proportion of their budget to ITV in return for air-time discounts, and the requirement that a percentage of ITV’s airtime budget be auctioned off to a third party (see Competition Commission Delays Verdict On ITV Merger).
Advertisers are sceptical that such behavioural remedies will go far enough to protect competition in the television advertising market. However, there are not entirely opposed to the merger and are keen to see the creation of a strong ITV competing more effectively for viewers against a well-funded BBC and the increasingly powerful Sky.
If the merger is approved, Carlton and Granada reportedly plan to create three divisions focussing on news, broadcasting and production. The merged ITV plc company is expected to make high-quality news a platform on which to compete with BBC and BSkyB.
Shares in the ITV companies rallied today with Carlton up 9.2% at 181.5p while Granada rose 5.4% to 103p by the close of trading.
