ITV Digital is given six-month switch-off deadline
Clayton Hirst and Colin Brown
14 October 2001
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."