Telecoms man plugs Granada into the future; THE MONDAY INTERVIEW Duncan Lewis

The new head of the hotel and leisure giant's media arm talks strategy with Mathew Horsman
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Duncan Lewis is excited. Not in an obvious or childish way, for his passion is held in check by a new-found reticence which makes him appear more sombre and sound oddly older than his 45 years (he looks, of course, far younger, helped by a trendy beard). The old "showman" instincts, much in evidence during a tumultuous nine months at the helm of Mercury, the telecoms company, seem muted. But there is no mistaking his genuine pleasure at being asked to head Granada Media Group (GMG), the sprawling media arm of Gerry Robinson's hotels and leisure giant.

The choice was a brave one for Granada, as Mr Lewis's background was wholly in industry and telecommunications, without any grounding in traditional media. But the changes that the sector is undergoing - not least a fundamental, if still gradual convergence between "content" and "carriage" - suggest that even a broadcaster-programmer like Granada could usefully tap the experience of a telecoms man.

After all, futorologists promise a plugged-in world of video-on-demand, tailored niche programming, on-line shopping and electronic banking. Telecommunications is one building block of such a new-age network, although there will still be a pressing need for quality "content" of the sort Granada has been making for decades.

Mr Lewis, installed at a bare, austere office at London Television Centre on the South Bank ("that's the way I like it"), plays down the convergence argument, although he concedes that four years with Cable and Wireless, including its subsidiary, Mercury, give him a particular insight into the communications market.

The C&W stint revealed a chief executive with big ambitions, a healthy ego and considerable talent for board room squabbling. But it also confirmed Mr Lewis's undoubted talent for developing corporate strategy - a skill first nurtured at Cambridge, where he held a research fellowship to study international industrial policy, and later honed at the National Economic Development Office, STC, the telecoms company, BT, and Hawker Siddeley.

His rise at C&W was swift: in just three years, he went from being managing director of the company's business networks to running Britain's second telecoms operator.

Variously described as extremely intelligent, personable and "his own best public relations manager", Mr Lewis likes above all to talk strategy. As soon as he joined Granada in April, he launched a three-month review of GMG's operations - including ITV licences, a satellite joint venture, and a stake in Rupert Murdoch's BSkyB.

"The idea was to focus - asking ourselves what we want to do in the long term, where we want to be in three years," he said. "Our conclusions were that the market is being globalised, but slowly. We believe that convergence will happen less quickly than was once thought."

The result of the review was last week's unveiling of GMG's new management structure. The goal was to clarify the roles of a handful of senior television executives and provide a hierarchy that more clearly matches the company's markets and its aspirations.

The core of the changes rests in a split between production and broadcasting, reminiscent of the radical re-engineering proposed at the BBC and similar restructuring at Granada's ITV partners, Carlton and United News & Media.

But the new structure differs from those proposed elsewhere in the sector in two key respects. First, GMG is retaining separate operating companies for its two regional licences, Granada (the North-west) and London Weekend Television. Second, it is adding two new divisions - one to handle multimedia products such as CD-Roms and spin-off videos and the other, Granada Vision, to explore the market for new channels, both in the UK and overseas.

In his strategic thinking, Mr Lewis has fashioned a general rule. GMG should have no interest in distribution, certainly not as an investment. "We want to concentrate on programme making, broadcasting and the development of channels. We will work with distributors but we won't be buying distribution. We simply don't want multiple, disconnected joint ventures as too many of the telecoms companies have done."

That strategy, already well confirmed before Mr Lewis arrived at GMG, was behind the Granada Sky Broadcasting joint venture with Rupert Murdoch's BSkyB, to launch seven new satellite services in October.

But it is Mr Lewis's plans for new regional channels that caught the fancy of the market last week. The City TV format in Manchester, Liverpool and elsewhere in Granada's TV franchise areas makes sense to media analysts, who see it as a relatively cheap way of extending the company's business to supplement advertising revenues.

"We have opened the door in Manchester," Mr Lewis said, "and are in the very early stages in Liverpool. But we also want to explore the idea for continental Europe." In each case GMG would work with a local cable operator, and perhaps a local newspaper publisher.

City TV can be cheap: as little as pounds 2,000 an hour, compared to pounds 800,000 for an episode of Cracker. Staff tend to be young, multi-skilled and very flexible, next to the regimented production structure in place for mass- market television.

But Mr Lewis is also thinking hard about international co-production ventures, and building on GMG's strength in costume drama and light entertainment. GMG has already approached as many as six potential partners in the US, and plans to develop programming for broadcast both in the UK and overseas. He sees a global market particularly for animation and other children's fare.

Despite his preoccupation with the US and City TV, Mr Lewis is well aware that mainstream terrestrial TV remains the company's core market.

And despite his protestations to the contrary, most of the City is convinced Granada will take advantage of liberalised ownership rules to make a full bid for Yorkshire-Tyne Tees, the ITV licence holder in which it already holds just under 24 per cent. Mr Lewis says management has not yet made up its mind, but it is more likely that YTT's stratospheric price, rather than any strategic doubts, are behind his self-conscious (and controversial) decision last week to publicly talk down the likelihood of a bid.

The media arm of Granada consistently performs well, and the decision by Mr Robinson and his chief executive, Charles Allen, to appoint a full- time chief executive for the division underlines the company's firm commitment. But for how long will it make sense for media, hotels and rentals to be held under a single corporate roof?

Mr Lewis may be betting that GMG gets spun off eventually, giving him a chance to run (perhaps even hold shares in) a stand-alone media company. He is certainly ambitious enough to have already thought about the angles at GMG.