Granada savages TV merger

Carlton-United deal would heighten North-South divide, Robinson claims

GRANADA will call this week on the Office of Fair Trading to refer Carlton Communications' pounds 8bn merger with United News & Media to the Competition Commission, claiming the move threatens to create a North-South divide in ITV.

Gerry Robinson, Granada's chairman, will argue against allowing the merger to go ahead in a letter to John Bridgeman, the Director-General of Fair Trading.

His objection to the deal puts him - unusually - in agreement with Rupert Murdoch, the publisher of The Times and The Sun and a 40-per-cent shareholder in BSkyB. Mr Robinson fell out with Mr Murdoch over the running of BSkyB, where Mr Robinson used to be chairman and Mr Murdoch is now in the chair. Granada sold its holding in the satellite broadcaster earlier this year.

Although Mr Robinson has said he favours further consolidation in the British commercial television market, he is expected to argue that the Carlton-United deal is the wrong way to go about it.

Granada's objections to the deal are twofold.

The first is timing. The Government is currently reviewing the regulation of commercial television, and Granada will argue that any deals should be put on hold until that review is completed. Currently, no ITV group can have more that 15 per cent of total audience share and 25 per cent of advertising. Carlton-United would have a tantalising 14.9 per cent of audience share but at least 36 per cent of advertising.

Though Granada has said it is in favour of relaxing these rules - not least because it wants to expand by buying other ITV franchises - it believes that new rules should be in place before any deal goes forward.

The second objection is more fundamental. Granada believes that the merger of Carlton-United would create a North-South divide within ITV, with the new company controlling all the franchising south of the wash - apart from Granada's LWT - and Granada dominating the North.

Although Prime Minister Tony Blair has said that the North-South divide does not exist, most economists and business people would disagree, and Granada feels that there is a danger of advertising, programme making and talent being sucked towards the South-east if the dominant ITV company is focused on London.

Analysts have speculated that Granada's reason for objecting to the Carlton- United merger is that it would like to bid for United itself.

Granada denies this, however, despite Mr Robinson's announcement that he wants to do one more big deal before he hands over the reins to Charles Allen next year. The cost of a bid for United would be more than pounds 4bn, plus the assumption of United's heavy debts. Granada is more likely to bid for Scottish Media Group, using some of the money it has released from the demerger of its TV rental arm, announced on Friday.