ITV Enters New Phase With Merger Completion
Fourteen years of gradual consolidation of the ITV Network have finally come to fruition with the long-awaited merger of Carlton and Granada creating a single ITV company worth more than £5 billion.
ITV plc made its first appearance on the stock exchange this morning with a share price of 143˝p. Shares in Carlton and Granada were delisted at the end of trading on Friday after the deal received the final go-ahead from the High Court.
The completion of the merger represents something of a fresh start for ITV. Regulatory changes under the Government’s recently passed Communications Act have allowed the broadcaster to create a leaner structure, with lower costs and a more focused approach.
It is expected that the merged ITV company will benefit from cost savings of around £100 million. Some analysts predict this figure could be even higher and Merrill Lynch believes that even greater synergies could be found if it were to buy up the remaining five ITV licensees. However, such acquisitions would be subject to further competition scrutiny by the competition regulators.
Further savings may come from a reduction in the £300 million fee ITV pays for its licence, if Ofcom decides to renew the terms for ITV franchises from January 2005. This could lead to fall in licence fees of as much as 60%, although Merrill Lynch analysts are modelling for a slightly less significant 40% cut.
Ofcom is also due to review ITV’s public service broadcasting obligations this year and there is a possibility that its responsibilities in this area may be relaxed. ITV currently spends around £250 million a year on regulatory requirements and public service broadcasting commitments. Merrill Lynch estimates that this may save the broadcaster somewhere in the region of between £25 million and £75 million.
The broker also predicts that ITV1’s audience share decline will begin to slow. Over the last decade the broadcaster has seen its share of viewing fall by more than 40%. However, this is expected to slow to just 19% over the coming ten years.
The controversial contract rights renewal system, which dictates what ITV can charge advertisers, is also likely to have some effect on revenue growth. ITV’s share of advertising has declined by more than 30% over the last decade and its share of commercial impacts is almost 40% lower. However, it is expected that the CRR will go some way to balancing this discrepancy.
ITV has decided to mark the completion of the Carlon/Granada merger with the launch of its third main stream channel by the end of this year. The company’s chief executive, Charles Allen, claims that ITV3 will be aimed at older, upmarket viewers with an appetite for drama.
He said: “The third channel will give us the chance to do things like whole nights of Prime Suspect, or to get viewers switching from one episode of a drama on ITV1 straight to the next episode on ITV3.”
The final decision on whether or not ITV3 will be a free to air or a subscription channel has not yet been made. However, the broadcaster intends to keep creating new channels and the next most likely project is a channel aimed specifically at children.
ITV has also relaunched its late evening news to coincide with the completion of the Carlton and Granada merger. What had become referred to as the News At When will now be fixed at 10:30pm every weeknight (see ITV To Relaunch News Programming For Upmarket Viewers).
ITV: 020 7843 8000 www.itv.com
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