ITV faces threat to merger plans

As commercial broadcasters prepare to make their representations to the Competition Commission regarding the proposed merger between Carlton and Granada, it is becoming increasingly likely that a full-blown merger of the sales houses will not be allowed.

Although both companies are pushing for a single ITV sales house to go with the merged company, it now seems likely this will be diluted and, as per the recommendations from the IPA and ISBA, there will be two sales points. It is possible either one or both of these sales houses will be spun off from the ITV holding company, should the merger go ahead.

While Carlton and Granada have privately resigned themselves to the fact that sales concessions may have to be made, of greater concern is the issue of control of the lucrative London weekday and weekend franchises.

In a move that will surprise the media industry, Carlton and Granada have claimed in their submission that the two London franchises (LWT and Carlton London) attract different audiences. This despite London being traditionally dealt with as one region with both companies competing for share of its revenue.

According to a research note from Lehman Brothers, Carlton and Granada will have to come up with more convincing arguments or risk being told to spin off one of the two London ITV franchises, which could cause the deal to flounder.

The City has questioned if the Carlton chief executive, Michael Green, and Granada's chairman, Charles Allen, are competent to run ITV, should the merger go ahead.

The Office of Fair Trading referred the merger to the Competition Commission last month. Members of the Competition Commission have been taken on site tours by the management of the ITV companies in a bid to show them the benefits of a merger.

Senior representatives from Channel 4 and five are due to meet the Commission next week to put their case against the proposed merger. The Commission is due to make its recommendation to the secretary of state on 25 June.