ITV eyes Channel 4, Five merger

Regulatory consideration, amendments required

LONDON -- Commercial broadcaster ITV is thought to be considering a radical merger with both Channel 4 and Five, creating a single commercial broadcaster in what would amount to the biggest shake-up in the history of U.K. commercial television.

In a move that underscores the broadcaster's anxieties over the future of the U.K. broadcasting sector, executives from ITV are reported to have outlined the proposals to the government as one of a number of possible outcomes aimed at securing the broadcaster's future, according to a report in the Media Guardian.

Executive chairman Michael Grade will unveil ITV's full-year results March 4, and is expected to provide the shareholders with a radical rescue plan that will include redundancies, the sale of non-core assets and a cut in dividends.

The merger of Channel 4, Five and ITV would require major regulatory consideration as well as amendments to broadcasting legislation designed to promote competition.

But it would enable the organizations to save millions of pounds from the merging of back-office functions and global program sales and licensing operations.

The move would face opposition from commercial rivals including BSkyB, which still owns 17.9% of ITV and is its biggest shareholder.

It is not known what Channel 4 and RTL-backed Five would make of such a proposal even if it did win government favor.

Under chief executive Dawn Airey, Five has been pursuing a merger opportunity with publicly owned Channel 4, but the option has been rebuffed by Channel 4 chief executive Andy Duncan, who is instead pursuing shared partnerships with the BBC's commercial arm, BBC Worldwide.

If correct, the merger proposal is an indication that ITV management feels that time is running out for Britain's biggest commercial broadcaster.

ITV1's advertising revenue forecasts for the next three years are down 20% year-on-year and the stock is trading at an all-time low of 22 pence (32 cents), compared with about 76 pence a year ago, valuing it at less than 1 billion pounds ($1.4 billion).

Since taking office two years ago, Grade has built a strategy around building ITV's production assets and urging regulators to diminish its public service obligations, with mixed results.