Foreign bidders picked for BBC Transmission

The pounds 230m transmission business of the BBC last night looked set to pass into foreign hands, with the announcement that a US-French consortium, which includes a subsidiary of state-owned France Telecom, had been selected as the Corporation's preferred bidder.

The sale to foreign companies of a key part of the country's broadcasting infrastructure could generate additional criticism of the Government's privatisation policy. A wave of takeovers in the electricity industry has already seen foreign ownership of the sector soar.

The BBC has hotly denied that the sale is the first step toward the eventual privatisation of whole parts of the BBC, though it has confirmed it intends to spin off BBC Resources, which currently operates the transmission services and as well as other broadcast facilities, into a separate commercial subsidiary as early as this spring.

The managing partner in the preferred consortium is Castle Tower Corporation (CTC), based in Houston, while two investment firms, one of them American, are believed to own about 15 per cent. They are believed to have bid about pounds 220m for the BBC's domestic radio and television transmission operations, which include 740 transmitter sites and the Warwick headquarters.

An additional pounds 10m is likely to be raised through the sale of the domestic transmission operations of the BBC World Service, for which a management group, backed by the investment company 3i, was yesterday named the preferred bidder. The proceeds of this sale will go to the Treasury, while the BBC will keep the net proceeds from the domestic disposal.

The surprise decision left NTL, Britain's leading transmission company, out of the running. Also overlooked were a management group backed by Mercury Asset Management and a consortium led by Securicor. NTL, owned by US-controlled cable company International CableTel, was privatised in 1991, and provides broadcasting services to ITV and Channel 4.

NTL said yesterday: "We are obviously disappointed," adding: "We are willing and able to meet the needs of the BBC in the event that they do not consummate an agreement with their preferred bidder.

The final four were drawn from 17 serious bids, out of 100 companies that had requested sales memorandums last year.

CTC owns a stake believed to be at least 51 per cent in the preferred consortium, while two financial firms, Candover Investments and Berkshire Partners, a leading US private equity investment fund, are thought to have about 15 per cent between them. Telediffusion de France, a subsidiary of France Telecom, has the rest.

CTC, based in Houston, Texas, operates 1,200 broadcast and wireless transmission sites in the US and the Caribbean. TDF already collaborates with the BBC on the development of digital technology.

The announcement was hailed by Bob Phillis, head of the BBC's commercial arm, BBC Worldwide, as "excellent news for the licence fee payer". He added: "We have been concerned in this process not simply about the size of the bid in the brown envelope but about quality, reliability and costs." Under the privatisation, first announced in November 1995, the BBC will be assured a 10 year contract for transmission services from the new owners, under which any cost savings achieved will be passed on the the broadcaster.

"There will be no added burden to the licence payer," Mr Phillis said. "Quite the reverse." Currently, the BBC spends about pounds 50m annually on transmission services, according to internal market estimates.

The sale was part of a four-pronged strategy to prepare the BBC for the digital age. As a first step, the corporation intends to achieve additional savings of about 15 per cent over three years, and to increase its commercial revenues from the development of subscription TV channels and other services. The BBC had also hoped to convince the Government to agree a modest increase in the licence fee over five years. However, last month, the fee was set to be broadly neutral, with a second year increase offset by subsequent decreases over the period.

"The sale [of the transmission assets] is good news, and comes at a time when there is to be no real increase in the licence fee," Mr Phillis said. "It will help ensure we can continue to produce quality programming in the digital age," he added.

The privatisation has been fought by BBC unions, who complain that engineering expertise is being lost and that jobs are at risk.