Danger for ONdigital

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The Independent Online

OnDigital, the digital TV venture owned by Carlton Communications and Granada Media, could lose a fifth of its subscribers over the next year, says a leading analyst.

OnDigital, the digital TV venture owned by Carlton Communications and Granada Media, could lose a fifth of its subscribers over the next year, says a leading analyst.

Neil Blackley, the media expert at Merrill Lynch who promoted last week's collapse in Granada Media's share price, is arguing that the churn rate at ONdigital - that is the number of subscribers who do not renew their annual subscriptions - is to leap from the current 4 per cent to 20 per cent.

This is because many ONdigital customers chose the service because of cheap offers giving free set-top boxes so long as they signed up for 12 months.

These deals are now coming to an end and Mr Blackley predicts that ONdigital may suffer similar problems to those that beset the cable TV industry in the early 1990s, when some churn rates reached 35 per cent.

A high churn rate would endanger ONdigital's target of achieving two million subscribers by the end of next year. Its most recent figures show 775,000 homes taking the service, which does not need a cable connection or a satellite dish.

It would also cast a pall over prospects for a £2bn flotation of ONdigital in the next few months. Carlton is understood to want to float the company soon but Granada Media is more cautious.

ONdigital and its shareholders are keen to play down the potential losses. Senior sources argue that as further programming - including Premier League football and services such as high speed internet access - becomes available over ONdigital, more customers will stick with the service.

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