The controversial £1bn merger between Radio Rentals and Granada's rental business was cleared by the Government yesterday, fuelling concerns that it would lead to stores closures, significant job losses and the social exclusion of lower-income groups.
Granada and Nomura International, the Japanese bank which owns Radio Rentals, announced plans in December to merge their operations into a new business called Box Clever.
Clearance gives the merged company a near 100 per cent monopoly of the UK market for television and video recorder rental. It will have 900 stores and almost 2 million customers.
Alex MacGillivray, deputy director of the New Economics Foundation, expressed concern that the deal could lead to the group pulling out of marginal areas. He added: "If this merger makes it harder for lower-income groups to take advantage of new technology such as internet-enabled televisions we would be concerned."
Roger Mavity, chief executive of the merged group, claimed the company would offer a strong competitor to rivals such as Dixons and Comet. He denied lower-income groups could suffer, saying there was little difference between renting and buying a TV on hired purchase. He said: "We have credit-checking criteria like other retailers. We are running a business not a social service."
He said that without a merger the future would have been bleak for the separate chains as the rental market declines. However, Granada Technologies recorded profits of £75m on sales of £359m last year.
Stephen Byers, the Secretary of State for Trade and Industry, cleared the deal following the advice of the Office of Fair Trading. He pointed out that although rental formed a small part of the overall market, it was an important option for some groups, such as the elderly. "There may be scope for Box Clever to exploit this customer group and I want to ensure they are protected against this," he said.
He is seeking undertakings which stipulate that the new company should not increase rental charges for all existing rental contracts and for new customers who rent for more than five years without upgrading equipment. The company must also make a one-off offer for all customers of more than five years to upgrade their equipment for free. The minimum rental period will also be set at 12 months.
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