Costs may rule out Channel 5 bidder

UKTV, the leading bidder in the auction to run Channel 5, has proposed a budget so large that the Independent Television Commission may disqualify it for being non-viable. The consortium, led by Canadian broadcaster CanWest, plans to spend between £150m and £200m a year, a source close to the bid told the Independent on Sunday.

The figures include £70m-£80m spread over the first two years to retune four million video recorders and a further £70m-£80m a year on programming, which would rise to as much as £150m by the end of the 10-year licence.

It also covers set-up costs and overheads as well as the £36.3m a year it bid for the licence fee. The source said UKTV expects to break even within five years.

But City analysts and advertising agencies believe it can only expect to earn between £90m and £120m a year in revenue, partly because it will cover only 70 per cent of UK viewers. "Their expenditure figures appear to add up," said Lorna Tilbian, a media analyst at stockbrokers Panmure Gordon. "The wild card is the revenue. They won't know that until they start doing it."

A serious shortfall could lead to a vicious circle in which programming budgets were trim- med, costing the new channel viewers and ultimately reducing its advertising support. David Asper, head of the company, refused to comment on details of its bid, sticking to an earlier state- ment that advertising was hard to predict beyond two years.

"We've been very conservative and cautious," he said. "We wouldn't have submitted our bid unless we were certain the business plan would give a fair return to our investors."

If it did throw out the UKTV bid, the ITC would have to decide how to choose between the consortia led by Richard Branson's Virgin and Pearson, which both bid £22,002,000. Rupert Murdoch's BSkyB, the pre-bid favourite, seems out of the running after offering just £2m.

The ITC would also have to reckon on a lawsuit if it uses one of the get-out clauses in its invitation-to-apply document to dump UKTV. "I would be very concerned if any government acted deliberately against one individual," said Mr Asper.

UKTV has been under fire since Tuesday, when the ITC opened bids from four consortia eager to run Britain's last available terrestrial channel.

Some critics complained that it is largely foreign-owned, while others pointed out that it was a last-minute entry, which was scraped together from the ruins of the NBC-Mirror Group-SelecTV consortium that pulled out eight days before the auction closed.

But the Independent on Sunday source said the CanWest package was essentially in place two weeks before that. The negotiating team was within minutes of deciding which of two companies would fill the final slot in the equity structure when news broke that SelecTV was available.

The independent British producer of shows such as Birds of a Feather was already acquainted with CanWest and the other members of UKTV, Australia's Network Ten and the Scandinavian Broadcasting System.

Talks between CanWest and other interested parties had been going on since November. The Canadian group had even co-sponsored a study with the Mirror and Virgin consortia into the cost of retuning videos.The final equity structure gives CanWest 29.9 per cent, SBS 30 per cent and SelecTV 20 per cent.

Profile, page 16

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power