Brooke to allow large television companies to merge: Announcement could lead to restructuring and flurry of takeovers Further review of media ownership likely

CHANGES that will lead to a fundamental restructuring of the British television industry will be announced before Christmas by the Heritage Secretary, Peter Brooke.

The changes to television regulations will allow, for the first time, large ITV companies such as Carlton, LWT and Central, to merge and will unleash a flurry of takeover activity that could leave the industry in the hands of large media groups.

The regulations, as set down in the 1990 Broadcasting Act, now allow ITV companies to merge so long as any deal is agreed and none of the nine 'large' ITV companies come together. There has only been one television merger, the takeover of Tyne Tees Television by Yorkshire.

There is also a moratorium on takeovers of ITV companies by outside groups, with the exception of the owners of national newspapers, which can only own 20 per cent of a broadcaster. This runs out at the end of this year.

Mr Brooke is expected to announce that he will allow large ITV companies to come together so long as they do not own more than two 'large' franchises or control more than 25 per cent of the total advertising revenue for commercial television. However, it is now thought that the changes will not include a special protection for the licences in Scotland and Wales.

The changes would allow LWT, which has a 14 per cent stake in Yorkshire-Tyne Tees, to take it over or would allow Granada, which has a 20 per cent stake in LWT, to take it over.

However, if LWT did buy YTTV, this would prevent Granada taking over the London station. It is also expected that Mr Brooke will extend the moratorium protecting ITV companies from outside takeovers for at least a year and open the way for a more fundamental review of media ownership legislation.

This would look at the rules that prevent, say, Associated Newspapers, publishers of the Daily Mail and Mail on Sunday, owning more than 20 per cent of Westcountry Television yet allow Associated to own a cable television station and allow Rupert Murdoch's News International, which publishes the Sun, the Times and Today among others, to own 50 per cent of British Sky Broadcasting. Newspaper groups such as The Telegraph, Mirror Group Newspapers and Pearson all want to expand into television.

Mr Brooke's initiative is expected to gain the support of the Labour Party, which recently changed its stance on takeovers after the replacement of Ann Clywd as shadow heritage secretary by Marjorie Mowlam. Ms Mowlam is understood to be happy to support a relaxing of the takeover rules so long as the moratorium on outside bids is extended. Peter Mandelson, MP for Hartlepool, held an adjournment debate in July when he proposed a review of broadcasting legislation.

The move is also expected to gain the support of most of the ITV industry. Six of the nine largest ITV companies are believed to be in favour, although Lord Hollick, the chairman of Meridian TV, has joined HTV and Anglia in opposing any changes.

Leslie Hill, chairman of Central, has been one of the strongest proponents, arguing that the British companies are too small to compete internationally and will be swamped by European and US competitors.