Outlook: A rocky road ahead for this celebrity marriage

FROM A commercial point of view, the merger of Carlton and United News & Media seems credible enough. Whether it works on any other level is a lot less clear. Together, Carlton and United are plainly a more powerful force in the fast globalising business of broadcast TV than alone, and by shedding the non core interests in mature and declining industries, such as Technicolour, they become a more focused pure media play, even if the picture remains a little blurred around the edges. The expected cost savings, at just pounds 40m per annum, are nothing spectacular, but even so will pay for quite a bit of Internet and other new media investment.

So why is the City so underwhelmed by this deal, long rumoured and now finally announced? One reason is that it quite obviously faces severe regulatory difficulties. If it survives the competition authorities at all, clearance might be made conditional on a degree of ITV franchise disposal that would cancel out much of the benefit. Advertisers are already screaming blue murder and although Carlton's Michael Green is right to claim that ITV's share of the total advertising cake is eroding fast, in the meantime this is a mighty powerful combination capable of quite serious monopolistic abuse.

The Broadcasting Act presents less of a problem, but even here there is a questionmark over the claim that together the two companies would fall below the permitted 15 per cent ceiling on share of TV viewers. Anachronistic this rule might be, but for the time being it is still there and not even Lord Hollick's close connections with New Labour are going to remove it.

Think about it. Together, the two companies will have 55 per cent of ITV, 25 per cent of Channel Five, 20 per cent of commercial breakfast TV, 20 per cent of ITN and half of digital terrestrial TV. If Stephen Byers, the Trade and Industry Secretary, can refer the relatively insignificant merger of NTL with Cable & Wireless Communications, he is certainly going to do the same to this one.

The regulatory position is one thing, but perhaps as important is the City's general lack of enthusiasm for these two companies and the people who run them. Over the past year, both the Carlton and United share prices have severely underperformed the media sector average. It would be unkind to characterise this as two drunks propping each other up, but certainly both Michael Green and Lord Hollick had to do something.

The question is, can they make it work? The omens are not good. Personality wise, this is quite clearly a marriage made in hell. The two main protagonists are both strong characters, unused to living at anybody's beck and call. A dirty weekend spent together at the Ritz hammering out the finer details of the wedding is no proof they can make the relationship work long term. The division of responsibilities is the conventional one - Clive will run the show while Michael will do the vision thing and swan around Europe looking for acquisitions.

This sounds eerily like the division agreed when Lord Hollick merged his MAI with United Newspapers, then run by Lord Stevens. Within days Lord Hollick had the Stevens bust removed from reception and not long after the living version went too. It is hard to believe that this latest "partnership" of chalk and cheese will work together harmoniously on anything, let alone the really important stuff like the colour of the carpets and who gets the en suite bathroom.

In other respects too, this is a quite similar merger to the original MAI and United deal. The grandeur of the rhetoric is almost exactly the same, concerning as it does the creation of a new global media player.

The reality is of a further semi- monopolistic carve up of local TV franchises, of an essentially defensive merger of two vulnerable and underperforming companies, the better to make them indigestible to predators. The City would in truth much prefer a big bad wolf to come and gobble them up for cash, and by agreeing to jump into bed together, both Lord Hollick, but more particularly Michael Green, have risked bringing about precisely this outcome. This "merger of equals" is by no means a done deal. There are plenty of twists and turns to come