Channel 5 bidders seek loopholes

Newspaper companies bidding for the Channel 5 licence are seeking innovative ways of getting around existing media cross-ownership ceilings. The moves will test the Government's commitment to limits on concentration in the media sector.

Associated Newspapers, publisher of the Daily Mail and part of the Virgin- led consortium bidding for Channel 5, is expected to propose taking a direct 5 per cent stake in the new national channel, the maximum allowed under the current rules. A further 15 per cent would be held through White Rose, a holding company formed four years ago to bid - unsuccessfully - for the Yorkshire Television licence.

Associated is thought to be negotiating to take a stake in White Rose. Sir David English, Associated's chairman, who is believed to be taking a leading role in developing the television bid, could not be reached for comment. Sir David is one of many newspaper publishers campaigning against the Government's strict ownership rules.

William Lewisham, a director of White Rose, refused to comment on the link with Associated. "We may have something to say imminently," he said.

Virgin, Richard Branson's holding company, is to take 20 per cent of Channel 5 if its bid prevails. HTV, the independent television holder for Wales, will take 20 per cent, Philips, the electronics company, 15 per cent and the investment company Electra 5 per cent.

Pearson, the media and information company which owns the Financial Times, is also limited to a 5 per cent holding. It is preparing a bid with partners MAI, the media and financial services company, and the European broadcaster CLT. Pearson is reliably thought to be reviewing ways of lifting its holding to 20 per cent. These include creating an innovative voting structure whereby its equity holding would be 5 per cent and its "economic" interest much higher.

More dramatically, Pearson might "park" its 14 per cent holding in Yorkshire- Tyne Tees, the northern licence holder, allowing it to raise its stake in Channel 5 to 20 per cent.

Media cross-ownership rules currently limit national newspaper publishers that already have a stake in an ITV company from owning more than 5 per cent of a second licence holder. Stephen Dorrell, the Heritage Secretary, is reviewing those limits, and is expected to suggest changes within a month.

The bidding for Channel 5, however, is to be conducted by the Independent Television Commission under current ownership rules. "We will be unbundling the business plans of the applicants to see what their ownership structure is," an ITC spokesman said.

A third group thought to be bidding includes BSkyB, the satellite and cable broadcaster owned 40 per cent by Rupert Murdoch's News International, and Granada, the ITV licence holder and independent production company which owns LWT.

A fourth consortium, led by Mirror Group, pulled out once its US partner, network broadcaster NBC, declined to participate.

Channel 5 will be broadcast to 70 per cent of the UK, and is scheduled to begin by 1997 at the latest. The winning consortium is expected to have to spend £200m in start-up costs. Bids are due by noon next Tuesday.

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