Granada Media looks set to buy stake in Optus bid

Granada Media has confirmed it is a possible buyer of a stake in Cable & Wireless Optus' broadband network in Australia, a deal that could pit the broadcaster against Rupert Murdoch on his home turf.

Granada Media has confirmed it is a possible buyer of a stake in Cable & Wireless Optus' broadband network in Australia, a deal that could pit the broadcaster against Rupert Murdoch on his home turf.

Optus, which is 52.5 per cent owned by Cable &Wireless, recently said it was looking for equity partners to provide funds and content for its high-speed network, which covers 2 million Australian households and is valued at about A$3bn (£1.2bn). The company, which is reviewing its mobile phone, corporate and consumer businesses, is rumoured to have 50 per cent of the broadband network up for sale.

''We've looked at it and held talks with them [Optus]'' about a broadband alliance, said Granada Media's managing director of operations, Jules Burns. He did not provide further details. Mr Burns and Granada Media chief executive, Charles Allen, are believed to have held discussions with Optus, Australia's second-biggest phone company, when they attended the Olympic Games in Sydney. C&W is seeking to cut its holding in Optus's consumer and mobile phone businesses to concentrate on providing telecom services to corporate customers.

Granada is likely to bid for a stake in the Optus broadband network jointly with the Seven Network, Australia's second-biggest free-to-air television company, in which the UK company has a 10.4 per cent holding. The two companies would provide content for the network, which would be upgraded at an estimated cost of A$1bn to allow the offering of interactive services, such as pay-per-view television, in addition to the OptusVision pay TV service, and voice and internet access.

Seven and Granada formed an independent production house in March to make content for the Australian broadcasting market.

Kerry Packer, owner of the Nine Network, Australia's most popular channel, and Bill Gates' Microsoft, had previously looked at buying into the Optus network but talks were scrapped after a disagreement over purchase price. Austar, the country's second-biggest pay-TV service provider, has also held discussions with Optus about a broadband alliance.

Optus offers high-speed Net access through Optus@Home, a joint venture with At Home Excite, the under one provider of fast online services in the US.

If Granada's deal succeeds, Seven, Optus and the UK broadcaster would face off against the three partners in Australia's biggest pay-TV company, Foxtel. Telstra, the country's leading phone company, owns 50 per cent of Foxtel, while Messrs Murdoch and Packer each hold 25 per cent. The partners in Foxtel, which has about 640,000 subscribers, are looking to expand into interactive services using Telstra's cable network.

Granada's interest in buying into the Optus network could be threatened by a recent plunge in its share price after it warned ad revenues in the first half of next year would fall below this year's levels. This means it may have to pay £1.75bn cash, rather than shares, for United News & Media's ITV assets.