Big fish seeks bigger pond

Ulster TV may go from strength to strength in Ireland, but its CEO wants mainland success, too. Raymond Snoddy reports
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Compared to the might of ITV plc, Ulster Television is, in the words of its chief executive, merely "a 2 per cent player". But the ITV company for Northern Ireland is continuing to demonstrate that there is considerable independent life for the minnows left behind after the merger of Carlton and Granada.

Compared to the might of ITV plc, Ulster Television is, in the words of its chief executive, merely "a 2 per cent player". But the ITV company for Northern Ireland is continuing to demonstrate that there is considerable independent life for the minnows left behind after the merger of Carlton and Granada.

UTV's share price surged last week after the company announced far better advertising results and viewing figures than its big brother, which controls 92 per cent of ITV. And the share price rose again after UTV beat off opposition from 10 other rivals to win a new FM radio licence for the greater Belfast area. In doing so it became the first ITV company to win a radio licence in its television patch, something that could not have happened before the passage of the Communications Act. "It is a significant step forward. It couldn't be better," says John McCann, group chief executive of the Belfast-based company.

The award of the Belfast licence by Ofcom is the latest stage in a strategy to create a television and radio advertising proposition for the whole of Ireland. Apart from broadcasting direct to the population of Northern Ireland and adjacent counties in the Republic, UTV is carried on cable systems in major Irish cities such as Dublin and Cork, and can reach 62 per cent of the Irish population.

Through acquisition - and now the licence award in Belfast - the company has built up a network of commercial radio interests throughout Ireland. UTV has stations in Dublin, Cork and Limerick, and last month paid £6.7m for LMFM, the radio station covering the Dundalk and Drogheda areas in the north-east of the country. The Belfast company also sells advertising for stations beaming into Waterford, Galway, Kilkenny and Wexford.

"With the exception of Derry we have a presence in every significant Irish city, and that gives us a very strong all-Ireland sell to national and multi-channel advertisers - both television and radio," says McCann, an accountant who joined UTV in 1983 and became its chief executive in 1999.

The successful bid for the Belfast radio licence was a huge win, particularly in the face of opposition that included significant radio players such as GWR, which has now received final approval for its £711m merger with Capital, and Scottish Media Group (SMG), the owners of Virgin Radio.

The UTV application was based on a large research project that looked into what Belfast listeners wanted, and whether there were any gaps in the market. The study showed that, in the absence of a radion station they saw as their own, the over-45s in the area were picking up bits of Radio Ulster (the main local BBC offering) and Radio Five Live. "What they wanted was a good mix of speech and music that appealed to them, but it just wasn't there," says McCann, who at 51 is firmly in his target audience range.

UTV has not yet been told why it won the licence, but McCann believes it was probably a combination of the fact that his company was offering greater choice to the market by targeting over-45s, and UTV's existing experience in running radio stations. The new station, U105, aims to be on air early next year, and should be able to reach 750,000 adults in Belfast and surrounding towns such as Ballymena, Larne and Banbridge.

Last year UTV had pre-tax profits of £17.5m, a rise of 28 per cent, and for the fifth year running out-performed ITV as a whole in advertising sales growth. The company's advertising revenue rose by 16 per cent compared to 2.6 per cent for ITV1 and around 5 per cent for commercial television as a whole.

But it is the movement in small percentages that tells the story of UTV's progress most eloquently. Since the 1990s the station's share of total ITV advertising has risen from 1.49 per cent to 2.69 per cent.

McCann believes this growth is as a result of the company's position in the three markets of Belfast, Dublin and London. He sees no need whatever for the company's position to change, unless someone such as ITV plc came in with a large bid. UTV pays inflation-linked fees for guaranteed access to ITV's national schedule. "We have a life of our own and we are ploughing our own particular furrow quite successfully at the moment," he says.

The company even made a cheeky attempt in 2003 to mount a takeover for its larger Scottish ITV colleague, SMG, a move that McCann admits was more than a little opportunistic. Granada, which owns 17 per cent of SMG, was totally focussed on the successful completion of its merger with Carlton, and as a result the SMG share price was on the floor.

The initial approach was to acquire SMG's two ITV licences, Scottish Television and Grampian. This first offer was rejected, and so UTV put together a consortium of trade partners to try to buy the entire company. "We were absolutely confident that we could put the deal together and we had the financial backing to make it happen," claims McCann.

Then the SMG share price began to rise. UTV decided that a deal was no longer feasible, and the issue has not been on the agenda for more than a year. The plan now is to: "drive the TV business as aggressively as we can drive it. We cut the costs and we drive the revenue", McCann says.

At the same time the company has been trying to create new revenue streams via radio and new-media ventures. UTV runs an internet service offering broadband web access that last year made a profit of £900,000. But its radio investments have not all been smooth. Only a year ago the company's Dublin station, Lite 102, was losing listeners in a serious way. Research showed that the name was a problem. "Lite" was associated in people's minds with "something that was not quite butter and was not quite full-strength beer".

A decision was made to change the name to Q102, a title with no baggage attached. The rebranding allowed the company to create whatever imagery it wanted to promote the station. "The name change has done the trick for us," McCann says. "We tweaked the output a bit but mostly our success has come as a result of the branding."

UTV says that Q102's market share has increased by 60 per cent following the relaunch, giving it an overall market share of 8 per cent. Despite these figures, McCann says that the station will have to get into "the teens" to be really effective.

Even though the move on SMG was quickly rebuffed, UTV has not given up hope of an expansion on "the mainland". The company is a member of a consortium that has been set up to bid for new radio licences and which bought a 36 per cent stake in the Liverpool station, Juice FM. "It's more of a toehold than a foothold," says McCann, but the future creation of a foothold, particularly following the launch of U105, cannot be ruled out.