ITN shareholders 'ready to sell' if law changes

Daily Mail & General Trust and United Business Media, two of the five shareholders in ITN, are believed to be ready to sell their 20 per cent holdings in the commercial television news producer if media ownership rules change next year, sources said yesterday.

Remodelled rules governing media ownership, the subject of a recently published Government White Paper could soon be put into legislation and approved by Parliament – opening the door for changes at ITN, run by chief executive Stewart Purvis.

The sources said yesterday they thought the three remaining ITN shareholders - Granada, Carlton Communications and Reuters Group - would raise their stakes proportionately leaving each with a one-third interest if DMGT and United decide to sell.

The matter of how much the DMGT and United stakes are worth remains uncertain pending ITV's selection of a news provider in late September or early October to produce the ITV news bulletins from 1 January 2002. ITN is facing a competing bid from a consortium called Channel 3 News Ltd, which has linked BSkyB with CBS, Bloomberg, Ulster TV and Chrysalis.

Commenting on changes to ITN's ownership structure, an executive with one of its shareholders said: "In practical terms, I think nothing will happen until it is known what will happen with the ITV contract. After that there could be a more fluid environment for change. At this stage it's only an intellectual discussion."

Granada and Carlton, which together own all but a handful of smaller ITV franchises, are likely to favour continuing with ITN as the exclusive provider of news broadcasts for ITV. But executives at both companies, along with ITV's programming executives, realise that a fair and transparent selection process is necessary to satisfy any possible scrutiny by the Office of Fair Trading.

Under competition guidelines, ITV is a deemed to be a dominant operator with nearly 60 per cent of the country's total commercial television advertising revenue. Though ITN beat out a rival consortium led by BSkyB in 1998 for the most recent Channel 4 news contract, the current tender round for ITV news is the first time that it has faced competition for ITV's news programming.

For both BSkyB and ITN, it is difficult to overestimate the importance of the ITV news contract. With the BBC supported by the licence fee and committed to distributing its News 24 service for free to all three digital broadcasting platforms, some industry watchers believe that in the long term there may only be room for one competitive UK commercial news channel.

Despite providing news services to all three of the UK's free-to-air broadcasters, ITN would be seriously crippled without the ITV contract. Indeed, the news company's profit margins are slim given that in 1999, the latest year for which figures are available, it recorded pre-tax earnings of £9m on sales of £96m.

Around 75 per cent of those sales came from the contracts to produce news programmes for ITV, Channel 4 and Channel 5. The remaining revenue was generated from other programmes, such as ITN World News for the Public Broadcasting System in the US, as well as the sale of syndication rights and archive material.

Sky News, for its part, is believed to cost its parent company around £20m annually.