Granada and Carlton plummet on football dispute

Granada and Carlton shares plunged yesterday as the City grew increasingly concerned that the companies' dispute with the Football League would lead to a £500m lawsuit and a boycott of ITV programmes by the game's fans.

It emerged that the basis for the league's view that Granada and Carlton are liable for its £315m media rights deal with the companies' ITV Digital joint venture is a bid document, rather than the actual contract signed. ITV Digital won a bidding war with BSkyB and the BBC for the Football League rights in 2000.

"The contract makes a clear reference to the ITV bid document, where it said that Carlton and Granada stand behind the deal," said one Football League source.

Carlton and Granada are relying solely on the actual contract signed, which they maintain makes no reference to shareholders honouring the deal. ITV Digital held a board meeting yesterday but it is understood no decision was taken on the venture's future. ITV Digital has said it will have to close unless the League accepts just £50m of the £180m it is due this year and next under the media rights contract.

The football source said: "Taking £50m would have the same practical affect as taking zero – the same number of clubs would go under if we got £50m or if we got nothing."

The League says a cut in the media rights deal would send 30 to 50 of its 72 clubs to the wall. It has said that all its commercial agreements, such as sponsorships, are underpinned by the televising of games leading to a total loss from the dissolution of the ITV contract of £500m.

Also, the League has said it will mount a campaign to encourage football fans to stop watching ITV programmes if the rights deal collapses. Carlton shares closed down 8 per cent yesterday at 262.5p. Granada lost 6 per cent to 138.25p.

Brandon Di Massa, an analyst at Dresdner Kleinwort Wasserstein, said: "Over the weekend the scenario being painted was of Carlton and Granada being liable. This is a legal dispute and the market does not know what to believe."

Separately, the Conservative party's culture spokesman, Tim Yeo, accused the Government of failing the troubled ITV Digital group by "dithering" over the future strategy of digital television.

"Do you understand the survival of ITV digital has been made much more difficult by your failure to set a clear timetable for digital switch over, your failure to turn up the digital signal and the failure to modernise the media ownership rules," he said in the House of Commons.