ITC gives United/Carlton deal qualified approval

The Independent Television Commission signalled qualified backing yesterday for the proposed £8bn merger of media groups Carlton Communications and United News & Media.

It is understood that the ITC would approve the deal on condition that advertising market share of the combined group is held to around 30 per cent. Given Carlton-United's 35 per share, it is likely that the group would be required to sell one of its six ITV regional franchises.

In a submission to the Competition Commission, which is investigating the proposed merger, the ITC said it is "not opposed to some increase" in the 25 per cent limit placed on the share of the national television advertising market held by an individual ITV group.

However, it noted that a Carlton-United merger would in effect require an increase in "the limit ... to something nearer to 40 per cent (and) that would be a major change by any standards". Among the franchises, United's Anglia Television, which has a 4.3 per cent share of the national advertising market, could be sold to lower the combined group's share to 31 per cent. Alternatively United's Welsh franchise, HTV, with a 3.5 per cent share, could be sold, perhaps in conjunction with Carlton's neighbouring West Country franchise, which has a 1.3 per cent share.

The ITC also urged the Competition Commission to consider whether existing policy and perhaps secondary legislation might be modified ahead of the introduction of a new Broadcasting Act in two or three years time. "This might allow further merger activity, though subject to certain constraints and conditions, and against a background which took account of current and rapidly developing competitive measures in the market place," the ITC said.

In a statement, Carlton and United News said: "We welcome the ITC's recognition of the case for consolidation in ITV. As they point out, the media industry is developing rapidly and the arrangements under which commercial television companies operate need to change."

Although Carlton and United shares have rallied since thedeal was proposed in December, stock in both companies fell yesterday as investors sold media and technology issues. Carlton fell 8.4 per cent to 697p, while United lost 4.9 per cent to 784p.

Granada, the largest ITV broadcaster by audience and advertising market share, has also had possible bids for either Carlton or United or both before the Competition Commission. It is expected to rule next month.