BBC and C4 edge closer together with talk of joint UKTV bid

LONDON - BBC Worldwide is looking increasingly likely to tie-up with Channel 4 after what was described as "a very significant" move by the BBC Trust, which could, according to reports, involve a joint bid for Virgin Media's stake in UKTV.

Reports said that the BBC and Channel 4 are talking about a joint venture and according to someone close to the discussions the move is "very welcome and it is very significant".

The Financial Times reported that Sir Michael Lyons indicated "the BBC's compliance" in a scheme to bring together elements of BBC Worldwide and Channel 4.

This is Channel 4's preferred option after both its chairman and chief executive, Luke Johnson and Andy Duncan respectively, slated any talk of merging with rival Five.

Previously, the BBC has been cautious about potential partnerships with Channel 4. In September the BBC and its fellow state-owned broadcaster held early stage talks about a commercial alliance through BBC Worldwide.

The talks were thought to have discussed options including the BBC selling Channel 4's programmes abroad and taking a commission, and the BBC making international versions of Channel 4's hit shows using its own production facilities, with the pair sharing profits.

BBC Worldwide is self-funding and returns its profits to the BBC. While both it and Channel 4 made revenues of more than £900m last year, its profits of £112.5m dwarfed Channel 4's £1.6m, which faces a £150m funding shortfall by 2012.

Yesterday, speaking in Oxford at an Institute for Public Policy Research event, Sir Michael, said: "Partnerships can certainly include joint ventures and they can include the creation of new companies that bring together existing assets."

The acquisition of UKTV, reported by MediaGuardian this morning, could be one such new company.

UKTV, which includes channels such as Gold, UKTV History, Watch, Dave and Albi, is currently jointly owned by BBC Worldwide and Virgin Media. The two have talked in the past about the BBC buying out Virgin in partnership.

BBC Worldwide is not allowed to buy Virgin out on its own because its borrowings are capped at £350m.

MediaGuardian went as far as to say that the BBC and Channel 4 have joined forces in negotiations to buy Virgin Media out as part of a wider tie-up that would create a "UK content company", which could also in some way include Five.

Virgin Media could put its UKTV stake up for sale within the next ten days giving the BBC right for first refusal. Virgin Media has considered selling its TV channels, which also include Living TV and Bravo since last year.

It is thought the UKTV part of those assets would come with a price tag of less than £500m making a joint bid between BBC Worldwide and Channel 4 very feasible.