Fresh Channel 5 bid evidence

MATHEW HORSMAN

Media Editor

The row over the controversial Channel 5 auction last night threatened to intensify, as fresh evidence came to light of possible irregularities in the award of Britain's last terrestrial television licence.

On the eve of this morning's High Court hearing on the contentious award, it emerged that the winning bidders for the disputed licence agreed to up their financial commitment by pounds 100m four months after the final applications were due in May. The information is contained in affidavits and documents scheduled to be presented in the High Court today.

Virgin TV, the losing bidder, which saw its own application for the licence turned aside on quality grounds, will argue that the revised funding offered by the winning consortium, Channel 5 Broadcasting, constituted a material change, and was against the terms of the licence process.

According to a shareholder agreement dated mid-September, Pearson, MAI, CLT and Warburg Pincus agreed to provide additional funding to cover the "worst-case" scenario of their bid to run Britain's last new terrestrial television service.

The revised financing arrangements were made after the Independent Television Commission, the regulating body responsible for awarding the licence, wrote two letters to Channel 5 Broadcasting asking for clarification of its funding for the channel. Following receipt of the second letter, the Pearson-led consortium agreed to add pounds 100m to the pounds 200m it had set aside to fund the channel's launch and development.

The ITC commissioners thereafter rejected the advice of their staff, and failed two bidders, Virgin TV and UKTV, on quality grounds. UKTV, which bid the most for the licence, pounds 36m, was backed by the Canadian broadcaster CanWest and SelecTV, the independent production company.

Virgin TV will argue in the High Court today that the Pearson-led consortium was given an unfair advantage over other bidders, because it was invited to make a "material alteration" in its bid. Virgin TV was given leave to seek judicidal review.

The bid timetable

May 2: Bids deposited with ITC

Late Aug: ITC asks Channel 5 Broadcasting for clarification of funding arrangements

Sept 14: All four bidders cleared by ITC staff on quality grounds

Sept 15: Channel 5 Broadcasting confirms revised funding arranagements

Oct 11: Leading bidder UKTV questioned on financial arrangements

Oct 19: UKTV and Virgin bids rejected on quality grounds

Oct 27: Award to Channel 5 Broadcasting announced