Stock woes undercut ITV revival


LONDON -- As shares in commercial broadcaster ITV continued their precipitous decline Monday -- hovering just above the all-time low of 0.67 pounds ($1.31) -- fears that the broadcaster could become an unstable takeover target threaten to overshadow its long-awaited programming revival.

Outwardly, ITV execs are in a buoyant mood as the core ITV1 network prepares for a primetime revamp, led by the return of much-loved nightly news bulletin "News at Ten" and a host of promising new dramas in the 9 p.m. slot.

The broadcaster can be justifiably proud of a range of successful new launches including "Honest," about a crime family who vow to go straight, and cop comedy-drama "Bike Squad" -- both garnered time slot-winning ratings with more than 6 million viewers last week.

ITV's high-concept sister shows "Moving Wallpaper" and "Echo Beach" also opened last week to decent viewing figures of 5 million apiece, despite receiving a critical mauling in some quarters. The show-within-a show approach leads with "Wallpaper," a sitcom about the behind-the-scenes production of failing soap opera "Echo Beach."

The broadcaster also is working with Kudos Prods., Wolf Films and NBC Prods. to create a hotly anticipated new British version of Dick Wolf's "Law & Order" that head of drama Laura Mackie believes will provide a long-running London-based drama that will be "British, glossy and dynamic." The network has commissioned 13 one-hour episodes.

Despite the hard-won creative renewal, however, many of ITV's own executives are looking askance at the tumbling share price and the consequences that investors may force on the business. Privately, even its most senior executives admit "we're vulnerable."

Each pence off the share price now represents almost a 1.5% fall in the value of the business, which is now at an all-time low of about 3.5 billion pounds ($6.8 billion). Though ITV executive chairman Michael Grade talked up the broadcaster's performance in a trading update issued at the end of last year, all the signs are that the shares are set to slide still further.

Not only is ITV caught up in the general economic jitters that have accompanied the credit hangover of 2007, its biggest shareholder, British Sky Broadcasting, could be forced to sell a hefty chunk of its 17.9% holding, diluting the value of shares still further.

The extent of ITV's fall from grace is evident in the fact that, when BSkyB acquired the stake just over a year ago, it paid 1.35 pounds ($2.64) per share for an investment now trading at just under half that.

Last week, three investment banks cut their targets for ITV's shares to about the 0.80 pound mark ($1.57), about 30% lower than the level shares traded at when Grade took over as executive chairman this time last year.

As if the news from Deutsche Bank, Lehman Brothers and UBS were not bad enough, the influential Bellwether survey on the U.K. advertising market, published by the Institute of Practioners for Advertising, suggested that spending cutbacks in the third quarter of 2007 were the deepest for two years.

The problem for ITV, and for Grade, is that even if its creative renewal continues, it still may not be enough.

As UBS analyst Daniel Kirven pointed out in an analyst note published Monday, "Just as ITV's onscreen performance is improving, the market's focus has shifted from its market share to market growth, which is out of (ITV's) control."