Editors note: There are many people in the United States who feel that the digital transition is getting more and more "pregnant" and simply cannot fail. But the digital transition is not so easy to accomplish, perhaps even more so than it is in Brittain. It has "terror" written across every business plan. The public must respond completely to the offerings made in digital no matter what governments and manufacturer and signal providers do to force it. Everyone working as if this transition were a national objective to be fully realized is the only way we can hope to find enough courage to finish the transition. --Dale Cripps
Granada tells Blair: ITV faces disaster
Nicholas Hellen and Dominic Rushe
GRANADA, the media company, has written to the prime minister warning that ITV faces disaster because of the government's alleged U-turn on media ownership. The firm says Britain's top commercial network could fall to a foreign predator and that ONdigital, its troubled digital service, faces closure.
The leaked correspondence gives an extraordinary insight into the crisis gripping the network. Charles Allen, chairman of Granada, ITV's biggest company, discloses in the letter that it has already been approached by overseas buyers keen to capitalise on its shrunken share price.
Allen had hoped to merge Granada with Carlton, the only other large ITV company. His letter to Tony Blair said the government's decision to delay the consolidation of ITV until 2003 at the earliest would mean he could not be sure of fending off foreign bidders.
The letter was sent last Monday when Allen learnt that the Queen's speech, setting out the government's legislative programme, would not include a communications bill.
He wrote that he might pull the plug at ON, the digital television business operated by Granada and Carlton, which is budgeted to cost 1.2 billion. Allen warned the prime minister: "Even if we remain independent, a further depressed share price could exhaust our own shareholders' tolerance in our continuing investment in ONdigital."
He added: "The plans tabled by the European companies who have approached us do not feature ONdigital. These companies consider that a retreat from the platform would be well received by the market."
Scrapping ON would be a blow to the government's plans for a "digital Britain".
The government aims to raise billions of pounds by selling off the analogue spectrum from 2006, but can do so only when the whole of Britain has access to digital TV. ON is the only multi-channel service available to viewers without satellite or cable.
ON is to be rebranded ITV Digital and relaunched in mid-July. To date, both Granada and Carlton have given their full backing to the service.
Granada's shares have steadily fallen since the company demerged its catering assets in February.
There have been especially heavy losses in recent weeks because of bad advertising revenues. Allen believes the stock can fall further.
In the letter, he wrote: "The current share price incorporates a consolidation premium, which is based on the perceived value of a consolidated ITV company. They will become cheaper still and more vulnerable if there is a block on that consolidation."
No suitors have yet emerged but potential buyers within
the European Union could include TF1, Mediaset and RTL, the majority shareholder in Channel 5.
Allen warned that a foreign owner could cut ITV's 1 billion-a-year programme budget. He wrote: "If we lose our independence, the price could be high."
He also pointed out that many of the firm's 5,000 staff work in employment blackspots in the north of England. The company makes some of Britain's most popular programmes, including Coronation Street and the Royle Family.
The letter, co-signed by Steve Morrison, Granada's chief executive, makes clear the company knew Blair planned to put back any change in media-ownership rules before the Queen's speech.
Allen asked that "full consideration should be given to whether there is any way that the artificial restrictions on ITV companies can be removed in this parliamentary session [by July 2002]".
Carlton and Granada have been looking for a third partner for ON to share the costs, but have so far failed to find one.
Centrica, the utility company, and BSkyB, in which News Corporation, parent company of The Sunday Times, has a 37.5% stake have both been rumoured partners.
Granada said: "We will make no comment on private correspondence. There had been significant speculation of material delays in regulatory reform.
"But government has confirmed to us that it is sticking to the original timetable."
