Setback for Ecclestone as TV rights dispute drags on

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The Independent Online
Plans to float Bernie Ecclestone's Formula One promotional business on the stock market received a further setback yesterday after it emerged that three leading teams were still locked in dispute over an agreement to share out television rights.

The news is the latest difficulty in the path of Mr Ecclestone, who wants to see his Formula One Holdings empire quoted on the stock market as early as July. Last week it emerged that top teams were unhappy with the potential 10 per cent stake in the business which would be shared among the constructors. The teams are understood to have asked Mr Ecclestone for a bigger slice of the company, which could be valued at up to pounds 2bn.

Advisers to Formula One confirmed that three teams, Williams, McLaren and Tyrrell, have still not signed the Concorde Agreement on television rights, despite hints earlier this year that the dispute had been settled. Seven teams, including Ferrari and Benetton, signed the agreement in March 1996 but the other three were unhappy at the division of spoils from television coverage in the world's most watched sport.

Mr Ecclestone is understood to have held talks with the seven signatories to Concorde at Heathrow last Monday in an attempt to find a formula to bring the three dissenting constructors back on board. Negotiations then followed, with team boss Frank Williams and Ron Dennis from McLaren, though sources close to the teams said the two sides remained a considerable distance apart.

"The trouble is that the teams now have the advantage in all this. They know Bernie needs their co-operation and they are busy exploiting that," said an observer.

Salomon Brothers, the US investment bank managing the float, indicated yesterday that a prospectus for the business could appear within four weeks. The sources insisted this was in line with the original internal timetable. However, during briefings a week ago analysts gained the impression that the prospectus was likely to appear much sooner.

Details of the latest discussions were revealed as Mr Ecclestone prepared to fly selected City analysts to tomorrow's Spanish Grand Prix at Barcelona to see the company in action. It manages the television coverage of Formula One and is behind much of the impressive on-board camera wizardry at the 16 yearly races which attract around 400 million viewers across the globe.

One problem still to be resolved is whether the three dissenting teams would be entitled to any back-dated cash to cover revenues lost since last year's agreement. Mr Ecclestone's advisers have insisted that the dispute was not simply a matter of money. "It's not about money. It's about sitting on the Formula One commission and at the moment the three teams can't do that."

Reaching a deal on Concorde could be the key to unlocking a complex series of obstacles, because the teams are likely to use a similar formula to divide up any share-stake received in the business after the flotation. The share-out of TV rights is secret, although top teams such as Ferrari receive more cash than the lesser teams. Williams, for example, accounted for an astonishing 53 per cent of race coverage last year as Damon Hill and team-mate Jacques Villeneuve fought for the world championship.

Mr Ecclestone's advisers were yesterday discounting any suggestion that the teams had a right to receive a share in the floated group, despite the assumption of analysts that the teams would emerge with 10 per cent of the company. Mr Ecclestone would receive a 30 per cent stake, plus proceeds from the 50 per cent of Formula One offered to the public, while 10 per cent would go to the FIA, the sport's governing body.

The message from the Ecclestone camp yesterday was that such suggestions were totally inaccurate. "The shares are 100 per cent owned by Bernie's wife and children. It's entirely possible that the teams will get a stake, but it is in no way a prerequisite for a float. It's in the gift of the shareholders. It's not a matter of negotiation."

Yet there is speculation in the Formula One world of yet another source of disagreement, this time over whether Mr Ecclestone should receive all the proceeds from the 50 per cent of shares sold to the public. With a ban on tobacco advertising expected from the new Government, a mischievous source suggested a slice of hard cash from the float would compensate teams standing to lose wealthy cigarette sponsors.

In reality the flotation plans have opened a huge can of worms for the closely knit Grand Prix fraternity. Though no one doubts Mr Ecclestone's huge achievement in building up the image of Formula One, the teams have long argued that they played the biggest part in the sport's success. In essence they provide the future promotional value which has enabled Mr Ecclestone to contemplate such an ambitious valuation for the business.

The advisers may suggest the teams are merely players on a stage created and managed by Mr Ecclestone. Yet this ignores the long pedigree of the leading constructors. Without the teams, the constructors argue, Mr Ecclestone would have nothing worth promoting.

Yet the teams are still expected to support the principle of a flotation, if only to secure the long term stability of the sport after Mr Ecclestone, who is 66, decides to retire. What has perplexed them most is why he is in such a hurry to complete the deal. As one source put it, with a salary of almost pounds 30m in 1994, he hardly needs the money.