ITV Digital is given six-month switch-off deadline

Shareholders in Carlton have given the troubled media group just six months to turn around its ailing digital channel, before they demand its closure.

Top institutional investors have held meetings with Carlton executives during the past two months to express concern over ITV Digital.

The joint venture with Granada is haemorrhaging money – £121m in the first half of this year – and is not expected to break even before 2003 at the earliest. However, to get to that point, analysts predict that Carlton and Granada will have to spend another £250m.

But Carlton's investors are worried that there now appears to be little chance of making ITV Digital work, against competition from BSkyB and falling advertising revenues.

Today ITV Digital, formerly known as ONdigital, has 1.1 million subscribers; its backers predict that it needs 1.7 million to break even.

One major shareholder, who asked not to be named, said: "We think Carlton's investment is too aggressive. It is funding they can ill afford. We are biased towards Carlton significantly reducing its investment. If there are no signs of improvement in six months, then I don't think our patience will last."

Shares in both Carlton and Granada have fallen sharply in the past six months, partly due to unease over the loss-making venture.

There are, however, two potential rays of light for ITV Digital.

The first is a possible tie-up with BSkyB over network sharing. Over the past month both parties – once bitter enemies – are believed to have held informal talks about co-operation.

The second opportunity is that the Government accelerates the timetable to switch off the analogue signal.

While the Government has not budged from its original switch-off year between 2006 and 2010, the Department for Culture, Media & Sport (DCMS) has warmed to digital television rollout.

The department is now preparing to increase the digital signal range in the UK, to cover over a million extra viewers.

The plan, which will increase coverage by 20 per cent, will be followed by a pre-Christmas digital television publicity drive.

DCMS Broadcasting minister Kim Howells said: "These plans should help increase the momentum in digital TV development for both the broadcasting industry and the viewers at home."