Investors give Green digital deadline

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Michael Green, who built Carlton Communications from a small printing firm into one of Britain's leading media groups, is under pressure to step down as chairman because of its loss-making foray into digital television.

Leading institutional shareholders hold Mr Green responsible for the lacklustre performance of ITV Digital's joint venture with Granada, which has already drained £800m and is estimated to sap a further £300m before it reaches its break-even target in 2003. One senior fund manager, who asked not to be named, said: "If they don't do something with ITV Digital soon things will get bloody." He said if there was no movement in "two to three months" the fund would approach Carlton's non-executive directors about ousting Mr Green. "We were never a great fan of Green, anyway," said another fund manager. "Shareholders cannot afford to keep subsidising ITV Digital."

Leading investors met Carlton's chief executive Gerry Murphy at the beginning of the month to voice their concerns. After the raft of bad publicity over the digital service in the past two weeks, some institutions are planning to contact executives again for further meetings.

Shareholder fury is mainly centred on Carlton, which was ejected last month from the FTSE 100. Granada's shares fell 40 per cent this year, in line with the FTSE Media & Photography index. But Carlton's shares have tumbled more than 65 per cent.

"Our view of Charles Allen [Granada's chairman] has diminished considerably because he was too bullish," said a leading investor. "But he is liked. That's the difference between him and Michael Green."

Many investors and analysts believe ITV Digital's backers were overly optimistic about subscriber growth, potential advertising revenue and its ability to challenge the dominant satellite broadcaster BSkyB. Last week, ITV Digital, run by Stuart Prebble, offered a nugget of good news by revealing it had added 82,000 subscribers in the three months to 30 September. That is better than analysts predicted, but there are concerns that ITV Digital's churn rate (the number of subscribers leaving) remains high at 23 per cent.

Mr Prebble insisted last week that Carlton and Granada would not close ITV Digital. But it is understood the two companies have approached cable company NTL and BSkyB about a possible restructure plan.

BSkyB is under pressure from the Office of Fair Trading to cut the amount it charges ITV Digital for premium channels, such as Sky Sports, and the price it will pay for ITV1, ITV2 and ITV Sport. It is believed the OFT has sent BSkyB a letter demanding changes to its pricing structure and a deal is likely to be agreed within weeks.

Mr Green has kept a low profile during the painful saga, but Mr Murphy, who joined Carlton only last year, tried to defend his chairman and the investment in ITC Digital. "In a downturn you are more sensitive to heavy investment but we won't be panicked into a premature move."

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