Branson 'backing ITV move'

Richard Branson is backing cable company NTL’s merger attempt with ITV, the UK’s largest commercial broadcaster, according to reports today.

The entrepreneur is NTL’s biggest shareholder with a stake of 11% and is understood to have ambitions in the television industry.

If the deal proves successful, Branson would be pitted against Rupert Murdoch, who controls British Sky Broadcasting, in the battle for ratings.

Analysts say that yesterday’s surprise announcement from NTL that it was interested in a possible tie-up may now spark a bidding war for ITV. Channel 5 owner RTL has been mooted as one potential suitor.

The broadcaster, which is currently without a permanent chief executive, told NTL that it was willing to listen to any bona fide proposal.

The cable firm, which has already bought Virgin Mobile and Telewest this year, has scheduled an initial conversation with the blue-chip company, which has struggled in a weak advertising market.

It is thought that NTL is considering a cash offer for ITV as British shareholders are unlikely to want shares in the Nasdaq-listed company.

Any cash bid would therefore increase NTL’s debt. It already has debt of £5.9bn (€8.8bn) compared to ITV’s £700m (€1bn).

ITV is valued at more than £4bn (€5.9bn) after shares rose 6% yesterday on news of the potential merger although shares slipped 1% today.

NTL’s deals with Telewest and Virgin have created an operator capable of offering customers the “quadplay” of digital TV, broadband internet access, and mobile and home telephone services.

However, analysts said a merger with ITV would strengthen NTL’s position in programming. NTL’s content division, Flextech Television, specialises in providing TV channels for the UK multichannel television market.

Charles Allen announced his departure as chief executive in August – at the same time as ITV’s troubles were highlighted with an 8% fall in half-year revenues for its flagship channel to £654m (€973m).

ITV1 – home to Coronation Street and Love Island – accounts for about 90% of the company’s total advertising revenues.

ITV is struggling with the effect of the contract rights renewal system that pegs advertising rates to audience figures, although it is now pushing the regulator for a change to the arrangement, which was introduced in the wake of the merger of Carlton and Granada.

The company recently bolstered its portfolio with the development of more digital channels and the acquisition of Friends Reunited.

In March, Mr Allen fended off interest from private equity firms who had planned to replace him as chief executive with industry veteran Greg Dyke.