ITV rivals plan merger of advertising sales houses

Channel 4, Five and BSkyB believe they have no option but to merge their sales operations in response to the clearance of the deal to create a single ITV.

The media sector regulators, the ITC and Ofcom, have launched a consultation exercise on the rules that currently prevent the sales houses of Channel 4, Five and Sky combining. One media executive said he feared that although the ITV merger was allowed, the retention of these rules may prevent the other three big commercial broadcasters from pursuing a merger of their sales operations. Others said the existing rules would be swept away and either replaced with a new legal requirement or the issue would simply be left to competition law.

Separately, industry figures warned it would be difficult to put in place the conditions for the Carlton-Granada deal, which creates a single ITV by 7 November, as required by Tuesday's regulatory verdict on the merger. Carlton and Granada must agree the terms of a behavioural remedy with both the ITC/Ofcom and the competition watchdog, the Office of Fair Trading, by that date. An independent adjudication system for the remedy must also be agreed by then.

Jim Marshall, chairman of the policy forum at the Institute of Practitioners in Advertising, who was called to see Ofcom yesterday, said: "This is a nightmarish timetable. Time is short and there are a lot of complex issues. I don't see how they can get it done."

The combination of Carlton and Granada brings together ITV for the first time, giving the new company 52 per cent of the £3.1bn television advertising market. The nearest competitor is Channel 4, with some 20 per cent of the market, while Sky has 9.5 per cent and Five has about 8 per cent.

Ahead of the verdict on the Carlton-Granada deal, the three other major commercial broadcasters had held informal talks, discussing all the possible combinations of bringing together the sales of two players or all three. However, none of them expected the ITV deal to be cleared with its sales houses intact.

Senior sources at these three broadcasters told The Independent yesterday the ITV clearance meant these talks would have to kick off seriously. One insider said the trio outside ITV had "no choice" but to pursue their own merger, as otherwise they would be unable to compete with the combined Carlton-Granada.

He said: "No one wants to do it but in light of ITV, what the hell else are we expected to do? If I could put it all together, I'd do it tomorrow."

Chris Hayward, head of television at ZenithOptimedia, the media buying group, said: "Talks [between the non-ITV players] have taken place. It wouldn't surprise me if, for instance, Channel 4 and Five came together."