Channel 5 on hold as Thames bid fails

EXPANSION of British television was put on hold by the Independent Television Commission yesterday when it decided not to award the licence for the proposed Channel 5 to the sole bidder, a consortium headed by Thames Television.

The decision, reached because the ITC doubted the bid's financial viability, is a disaster for Thames, which for 24 years has been a leading force in television.

The ITC will decide next year whether or not to offer the franchise again. It seems more likely that the spare space in the broadcasting spectrum - which covers only 74 per cent of Britain - will eventually be used for independent city stations when the economy improves.

Thames will take legal advice next week before deciding whether to challenge the ruling. It was outbid in last year's auction for its London weekday ITV franchise, and hands over to Carlton at the year's end. It will stay in business as an independent programme producer and a partner of the BBC in the satellite channel UK Gold. Yesterday its share price sank to 158p, a drop of 22p.

Thames executives were bitter last night at the second blow from the ITC in 15 months. Richard Dunn, chief executive, was silent but David Elstein, the outgoing director of programmes, called the ruling 'a public disgrace'.

Sir George Russell, the ITC chairman, gave two reasons. He said the Commission was not satisfied with the business plan submitted by the consortium, Channel Five Holdings, which he thought had underestimated costs and overestimated the audience share and advertising revenue that the new channel was likely to earn in the current economic climate.

He added that the Commission had been unconvinced by the level of 'investor commitment'.

The two biggest shareholders would have been Thames itself and Time-Warner, the multinational media conglomerate, both of which would have owned 35 per cent. Had both sets of funds been irrevocably in place, that would have constituted the guaranteed 70 per cent of funding that the ITC regarded as the minimum.

However, part of the Time- Warner commitment depended on a further board decision, and the ITC was not willing to grant a 12-week delay.

Yesterday's decision was welcomed by the London commercial television companies. Their advertising would have been affected by the station and they would probably have gone to law if the verdict had been different. Greg Dyke, chief executive of London Weekend, said Channel 5 would have 'undermined the advertising market'.

Future for Channel 5, page 4

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