Jeremy Warner's Outlook: It's out with the old and in with the new at ITV, but is the transformation fast enough?

A once great broadcasting brand now in sad decline, or a company which is energetically reinventing itself as a serious player in the brave new world of alternative media fast opening up before us?

As fresh rumours swirl of a private equity bid, Charles Allen, the chief executive of ITV, would like us to think of his company as the very much the latter. Yet with audience share for the core ITV1 brand in sharp decline, it is the former view which tends to get the greater airtime. Critics bemoan the loss of a glorious past which with bigger programming budgets and the requisite degree of creative talent - come back Greg Dyke, all is forgiven - could easily be revived.

Somehow I doubt it. More imagined than real, the supposed triumphs of ITV's "glory years" were built largely on a foundation of monopoly and low budget, popular pap not far different from that served up today. In fairness, there was also a reasonable smattering of the high brow and the classy, but this was there only for the purpose of satisfying public service broadcasting obligations.

For good or bad, those days are now gone, together with the duopoly of the airwaves ITV used to enjoy with the BBC. As for the triopoly of commercially driven TV that ITV once had with Channels Four and Five, that too is but a distant memory. Today the brand must fight for a living alongside a riot of different channels and rival media. As homes switch away from the five channel monotony of analogue to the plethora of choice offered by digital platforms, the old legacy channels are bound to suffer.

From where I sit, ITV seems to be handling this transition passably well, though this has yet to be recognised in the share price, which continues to reflect the worry that the new sources of income ITV is creating for itself won't be nearly as lucrative as fast declining old ones.

The concern is understandable enough, to judge by figures announced yesterday. The point Charles Allen would like us to focus on is that a third of ITV's revenues now come from outside ITV1 advertising.

What's more, margins on this revenue are apparently better than they are for the core ITV1 brand. Yet strip away the benefit ITV is getting from reductions in the licence fee negotiated with Ofcom, and group profits for last year would have been flat. In other words, underlying profits at ITV1 are in steep decline, a phenomenon you might expect, given that the channel has high fixed costs which cannot be cut as fast as revenues fall, but is hardly what shareholders want to hear.

At this stage, growth in new wave revenues are failing to compensate. The £300m share buy-back and 38 per cent rise in the dividend announced yesterday are in essence being financed from reductions in the licence fee.

Part of the response is to demand further regulatory concessions. Mr Allen asks to be released from all his remaining public service broadcasting obligations in religious, educational and regional programming, which he reckons cost him nearly £250m a year. He is also lobbying hard to be released from the contract right renewal system which binds him in the way he sells his advertising. This was thought a small price to pay when it was made a condition by competition regulators of the creation of a single ITV. Now it is condemned as "a disproportionate remedy".

Yet Mr Allen cannot live for ever on regulatory concessions. Eventually he must find powerful new sources of growth to substitute for the decline of his legacy business. By his own standards he's succeeding. He expects to meet his target of £150m of revenues from digital channels and interactive a year ahead of schedule. He's also set himself the new target of 50 per cent of revenues derived from non ITV1 revenues by 2010. A cynic would say that's easy given the way ITV1 revenues are declining, but that's presumably not what Mr Allen meant.

There's undoubtedly progress here, but whether it is swift enough remains open to question. When TV ownership was opened up to foreign concerns, it was widely thought ITV would fast fall to one of America's media goliaths. That now seems unlikely. If it is a UK presence they want, it would be much easier and cheaper merely to stream in new digital channels.

Might Mr Dyke, who would still dearly love to get his hands back on ITV, persuade Apax to back him in a private equity bid? Nothing is impossible in these markets, but the numbers look no less challenging after these figures than they ever were.

Winning the debate on interest rates

I may have to eat my words, but if so, I'll certainly be in good company. Nobody expects a cut in interest rates from the Bank of England's Monetary Policy Committee when its monthly meeting concludes at noon today. This is a marked turnaround from the position of only a few months back, when most analysts would have put money on a cut by now.

This might seem odd, for not very much has changed in the wider economy since then. The housing market has picked up a bit, but consumer confidence and spending remains subdued, and there is still little sign of the anticipated pick-up in private sector investment to compensate.

What plainly has changed, however, is the Bank of England's view, which is now more in tune with the Treasury's relentlessly optimistic forecasts for the UK economy than it used to be. In the last Inflation Report, the Bank forecast that growth would return to a little above trend this year and then broadly stay there for the next two years. So is all set fair for the Chancellor as he approaches the Budget the week after next?

As it happens, the big numbers won't have to be changed very much, either for the public finances or the economy, from those pencilled in at the time of the pre-Budget report in December. This in itself marks something of a turnaround in fortunes for the Chancellor, who for the past five years has been forced into a steady erosion of his forecasts for the public finances.

This time around, there will be no such further deterioration. Indeed, they may even have improved a bit, given the buoyancy of tax revenues caused by higher North Sea oil taxes and a bumper bonus season in the City. Provided the Chancellor can deliver the squeeze in public spending he's committed to from 2008/9 onwards, the longer term outlook for the public finances doesn't look too bad either.

Yet this in turn is dependent on the economy growing as forecast. The Treasury assumes, and the Bank now seems to accept, that there is sufficient spare capacity in the economy to allow for strong growth in the economy for at least the next two or three years without creating inflationary bottlenecks.

However, that raises the question of whether monetary policy is sufficiently loose to allow such growth. The Bank won't cut today, but to deliver on the Treasury's growth forecasts, it may have to start cutting soon. Almost everywhere else in the world, rates are on a rising trajectory. In the UK, most of the pressures are the other way.

Another knifing at Vodafone

Arun Sarin, the chief executive of Vodafone, has for the time being survived attempts by his predecessor, Sir Christopher Gent, to oust him, and as generally occurs with failed coups, he's now acted with speed to remove all vestiges of the disaffected, ancient regime. The latest victim of this night of the long knives is Peter Bamford, who is being retired early as chief marketing officer.

He follows a string of other "disappeared". But what to do with Lord MacLaurin, the chairman? He leaves in July in any case, but has embarrassingly demanded a £500,000 going away fee. One possible way of appeasing enraged investors would be to allow him to "earn" it in a continued consultancy role. After what happened with Sir Christopher, whose continued presence at Vodafone as life president after he was meant to have left allowed him to attempt his coup, Mr Sarin won't much fancy that approach either. Tricky stuff.

j.warner@independent.co.uk