THE BOTTOM LINE

TELETEXT WARS: `MAIL' GROUP vs MURDOCH

It is still almost three whole weeks before Channel 5 goes on air, but it has already got the Daily Mail's dander up. Don't imagine, though, that it is just the prospect of soft porn and gory horror films that is making Middle England's favourite tabloid hostile towards the fifth terrestrial service. The Mail's management also resents C5 because, with the backing of Rupert Murdoch's satellite giant BSkyB, it is poised to muscle in on a low-profile but lucrative medium which it had hitherto had sewn up in a commercial sense: teletext.

Teletext Ltd, which runs such services on both ITV and Channel 4, is 75 per cent owned by the Daily Mail and General Trust. DMGT raised its stake a few weeks ago by buying pounds 25m-worth of shares from Philips Electronics UK.

Channel 5 will have its own version of teletext, and a bidding war is under way to run it. One of the bids has been submitted by Text5 Ltd, an offshoot of Teletext Ltd. But the one that looks likely to win comes from Sky Five Text Ltd, a joint venture by Channel 5 Broadcasting and BSkyB.

When it advertised the licence, the Independent Television Commission indicated that it would be awarded by cash bid. Sky Five Text has put more than pounds 1.5m on the table - almost five times as much as Text 5. The Mail-backed venture has offered only pounds 313,000.

But Teletext Ltd is lobbying feverishly - not least through the pages of the Mail and its sister title, London's Evening Standard - to ensure that the ITC does not simply toss its application aside. Having made pounds 8m profit last year on a pounds 35m turnover, it has a great motivation for seeking to guard its monopoly in this commercial sphere. But both Channel 5 and Sky have seen what a money-spinner text services can be, and are determined to grab a slice of the action.

Teletext's great earner is the travel trade, a rapidly expanding market. It attracts more than 20 per cent of all holiday advertising in the UK. But it has encountered a few setbacks: teletext recently lost pounds 1m in advertising revenue when Thomson Holidays and Lunn Poly withdrew their business.

Sky Five Text says it will offer holiday advertisers "a far more cost- effective means to build their businesses, while at the same time extending the range and quality of holiday offers available through text".

Having a competitor in this lucrative sphere for the first time (BBC's Ceefax does not run ads) is also discomfiting the Daily Mail's owner because it had hoped to take advantage of the digital revolution to expand the size, scope and sophistication of its teletext services, which have been constricted by old analogue technology. The advent of a competitor will not necessarily jeopardise investment in interactive services, but it could reduce the likely financial return. It is certainly a distraction that Teletext Ltd could do without.

Its pitch to the regulator is that its experience in the sphere, plus the fact that it has tendered a lower bid, will allow it to fund a better service for the public. In a major feature in the Daily Mail 10 days ago, Sir David English, chairman of Associated Newspapers (publisher of the Mail) and also of Text5, promised "an unprecedented level of interactivity and information that young people want about lifestyle, education and jobs".

Sir David and his colleagues are hinging their hopes on a clause in the ITC's tendering guidelines which states that it may opt for a lower financial bid "if there are exceptional circumstances which make this appropriate". But, however much Teletext Ltd talks up its bid in supportive newspapers, this is not like the auction war for ITV licences a few years ago. The bidders do not have to cross the same sort of quality threshold. Money could well be the deciding factor. If it is, and Sky Five Text emerges triumphant at the end of May, life will be no holiday for Teletext Ltd. It will have to mix it with Murdoch...

Rob Brown