City unconvinced by ITV Digital optimism

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The Independent Online

ITV Digital yesterday hoped to silence its critics with subscriber figures ahead of expectations that it said proved the company was on course to meet its business plan.

Analysts, however, continued to question the viability of the venture in the face of a crash in the earnings of its joint owners, Carlton and Granada. Advertising is going through its biggest slump in a decade.

The pay television digital service added 82,000 subscribers, after a major marketing push, in the three months to 30 September, well ahead of most forecasts which predicted about 60,000 new customers. It meant that total subscribers hit 1.22 million. The business plan targets 1.7 million subscribers by 2004 in order to break even. To get there, Carlton and Granada will have to invest a total of £1.1bn.

Paul Richards, an analyst at Numis, said: "The business might be performing in line with the plan but that has to be funded by advertising revenues that are down 25 per cent. There was nothing wrong with the plan, it's just that the world has moved on."

Analysts said ITV Digital's churn rate – the rate at which customers leave the service – remained high at 23 per cent, which is twice the figure at its rival broadcaster, BSkyB. There has been speculation that ITV Digital could be subject to a major restructuring or even shut down.

Stuart Prebble, the chief executive, said: "They [Carlton and Granada] are sending out strong signals that they will continue funding ITV Digital. They are examining all options and, I guess, if you run out of other options, closure is what remains. But that's not where we are."