C4 close to Worldwide deal as landmark report looms

BBC expected to agree joint venture to secure C4's future 'within days'

Channel 4 and BBC Worldwide are locked in last-minute talks over the fine print of a joint venture that would transform the broadcaster's parlous finances but ministers have set a deadline of less than a fortnight for the plan to be sealed.

They are believed to be within days of signing an agreement that would secure C4's future, though insiders warned that there were still sticking points to overcome before an agreement is reached.

A source close to the talks said: "We are in the final throes of the negotiations. The two sides are getting closer and closer; there is a deal in outline." C4 and BBC Worldwide declined to comment.

It is understood that senior executives from C4 and Worldwide are meeting on a daily basis, and sometimes several times a day, as they look to hammer out an agreement.

Regulators first mooted the tie-up last year to solve C4's financial woes; the broadcaster said it faces a funding gap of £150m by 2012.

The ultimate decision over C4's future rests with the Government, but it is understood that this joint venture is the preferred option. Andy Burnham, the Secretary of State for Culture, Media and Sport, said he favoured the Worldwide joint venture in January

If the talks collapse, which insiders admit is still a possibility, C4 is likely to be forced into the arms of rival broadcaster Five, a move that chief executive Andy Duncan has repeatedly rejected as making "no sense".

While there is no official deadline for an agreement between C4 and Worldwide, Stephen Carter, the Communications minister, is expecting to announce the outcome when his Digital Britain report is published on 16 June. A spokesman for the Department for Culture, Media and Sport (DCMS) said: "There is the expectation that C4 and Worldwide will come to a sort of conclusion by the release of the Digital Britain report." C4 and Worldwide hope to have a draft memorandum of understanding in place in time for inclusion.

Digital Britain is a landmark report from the DCMS and the Department for Business, Enterprise & Regulatory Reform, spearheaded by Lord Carter.

The source close to the talks said: "There is a lot of pressure. It has to be secured in the next few days, otherwise the Government could look at other options. We are in the last window for a deal to be agreed.

"There is no guarantee it will happen, but it has reached a stage when it will be awkward for both sides if the talks fall apart," the insider added.

C4 is desperate to generate more revenues to support its commercial model. Its chairman, Luke Johnson, said recently that the broadcaster could carry on without the extra funding but it would cause "death by a thousand cuts".

C4 has been devastated by the collapse in advertising revenues around the world. It managed to post a £1.8m surplus last year after cutting budgets and jobs to make up for the fall in revenues. The company warned that it could have to cut a further £75m out of its commissioning budget this year.

The joint venture is expected to generate a profit of about £200m, Worldwide's chief executive, John Smith, told the House of Lords' Communications Committee last month.

Among the assets included will be Worldwide's 50 per cent stake in UKTV pay channels, which include Dave and Watch, as well as its 60 per cent stake in Entertain, the music and DVD publishing group.

Mr Smith said the venture would "take account of things they are very good at and the things that we are good at and put them together in a new venture," but added that a full merger would not be a good idea.

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