Outlook: Concerns ignored to offer ITV chance of a new beginning

Manchester United
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The Independent Online

According to Tony Ball, outgoing chief executive of BSkyB, the bosses of ITV couldn't run a bath, let alone a TV station. Whatever you might think of Charles Allen, chairman of Granada, he plays a mean hand when it comes to dealing with competition regulators. He seemed virtually to have dictated the Competition Commission report of three years ago which allowed Granada to buy Lord Hollick's choicest TV assets, and he managed to get a similarly positive outcome from the Commission when he merged the country's two largest TV rental businesses to form Boxclever.

Yet the crowning glory in regulatory sweet talking belongs to yesterday's report on Granada's merger with Carlton, where the two companies have succeeded beyond their wildest dreams in being allowed to form a single ITV on the bare minimum of conditions. When the merger was first proposed almost exactly a year ago, it was stated in the documentation that at least some of the advertising sales might have to be divested in order to get the deal through regulators.

In the event, the Commission has accepted a series of seemingly feeble behavioural remedies, allowing the merged company to keep full control of all its sales. No wonder Michael Green, chairman of Carlton, sounded almost deliriously euphoric in responding to the news yesterday. This is more than he could ever have hoped for.

It also amounts to an intellectual somersault of quite breath taking proportions by the Competition Commission. The chairman of this particular investigation, Professor Paul Geroski, is the very same who recently blocked the takeover by GWR of a tiny radio station in Bristol on the grounds that it would give GWR more than 25 per cent of Bristol's radio advertising market. Yet he is apparently quite happy to see the formation of a TV goliath with more than 50 per cent of the national advertising cake. At every point in the report, Prof Geroski leans over backwards to accommodate the single ITV project.

Carlton and Granada told the Commission that the merger would be unworkable if the authorities insisted on divestment of both sales houses, and blow me down if the Commission didn't take them at their word. It didn't work that way when Interbrew tried the same trick. We can't live with the suggested divestment remedy, said Interbrew when the Commission was examining its takeover of both Bass and Whitbread. OK, said the Commission, then we'll block the whole thing.

The real politik of the matter is that the Commission has come up with the result the Government wanted to see. Conspiracy theorists will believe the Government overtly interfered, instructing the Commission to set aside normal competition concerns so as do the right thing by public policy, as well as create a viable alternative to the big bad, anti-Government BBC. But to be fair on Prof Geroski and his colleagues, they needed to reach this conclusion, however much it flies in the face of the usual conventions of competition law.

Broadcast media in Britain is in any case not a properly competitive market place, with the licence fee funded BBC sitting there at its heart and a monopoly pay TV player in the form of BSkyB progressively eating away at the edges. Divided and caught between the two, ITV looked condemned to slow death by a thousand cuts.

Ten years ago, when the process of consolidation among the 15 ITV franchise holders began, Mr Green predicted that it would ultimately end in a single company. Regulators have been trailing the reality of the market place ever since. Media has become a global business, however much it might still service local needs, and to be a player requires critical mass. Even after this merger, the amount ITV has to spend on programming will be dwarfed by the BBC's budget and by what Sky could spend if it were so minded.

After the trauma of the last three years, yesterday's report offers the opportunity of a new beginning for ITV. We may already be seeing some of the benefits of a more unified approach to programming and management coming through in the ratings improvements ITV has managed to achieve in recent months. The City is still in no mind to forgive Messrs Allen and Green for the disaster of ITV Digital, but their success in getting this merger through on favourable terms certainly helps make amends.

That said, nobody believes they are capable of working together for long. The odds on one or both of them being gone within a year look short. For the time being, however, they can allow themselves to bask in some well deserved applause.

Manchester United

If the Irish horseracing duo of JP McManus and John Magnier truly have bought BSkyB's 10 per cent stake in Manchester United purely as a passive investment, then they too are in need to follow Rio Ferdinand in taking a belated drugs test. The Sky shareholding, acquired at a cost of £62m, takes their interest in the club to close on 25 per cent. A month ago, few people outside Old Trafford, thought the shares would ever see £2 again. Last night they closed at 247.75p - which is even more than the very full price Sky itself was offering back in 1998 before its bid for United was ruled offside by the competition authorities.

Messrs McManus and Magnier waded in at 237p for Sky's 26 million shares through their front company Cubic Expression. People rarely spend that sort of money on that number of shares unless they intend to bid themselves or because they reckon a bid is winging its way in from somewhere else.

If we are to believe the assertion that the Irish duo genuinely intends to remain spectators in an unfolding takeover battle, then the sixty-four million dollar question is where else might the bid come from. The favourite still seems to be the American football supremo Malcolm Glazer, who has built up a near 6 per cent stake but is avoiding all invitations from the Manchester United board to come in for a chat about his intentions.

Yet a trophy asset such as United could easily tempt all sorts of exotic bidders on to the field of play. Roman Abramovich signalled that the Russians were coming when he bought Chelsea. His mentor, Boris Berezovsky, fresh from escaping the clutches of the Kremlin and an extradition order, has said he will not be joining the stampede.

That leaves the creator of big brother, Jon de Mol, the chairman of Celtic, Dermot Desmond, and a mining millionaire, Harry Dobson, waiting on the substitutes bench, all with shareholdings which could be used as the springboard for a bid. Unless, of course, they decide the price is out of their league. At £650m, Manchester United is already valued at a level which is hard to justify on any fundamental basis and, unlike other industries, buying a market leader in football does not guarantee you a monopoly.

Messrs McManus and Magnier must have a game plan which justifies the big fat transfer fee premium the market is attaching to the club. Otherwise there are going to be a lot of burnt fingers in Dublin and elsewhere.