Carlton and Granada plan to create first 'single ITV'

ITV, Britain's leading independent broadcaster, is to be controlled by one company for the first time. Carlton and Granada announced yesterday that they are to merge.

The media companies were forced to rush out a statement after their talks were revealed in The Independent yesterday.

The merger is an attempt to stem the haemorrhaging of audience and advertising sales that have beset ITV over the past two years. Combining the companies will also save at least £50m a year in costs.

When ITV was created in 1955, it was divided between 15 regional franchises owned by as many different companies. A series of mergers and takeovers has concentrated ownership of most of the network between Carlton and Granada. But the division has led to indecision and disagreements over strategy and programming, according to insiders. The two companies lost £1bn in their failed ITV Digital venture.

A previous merger attempt failed in February. The problems with the structure were brought homewhen Dawn Airey turned down the job of chief executive of ITV in favour of a job at BSkyB, because she feared she would be caught between warring factions.

By announcing that they are in "advanced negotiations" to consummate a £2.5bn merger, Granada and Carlton are moving ahead of new legislation, contained in the Communications Bill. The Bill, which is now passing through Parliament, allows a single ITV company to be created for the first time. Michael Green, the chairman of Carlton, said: "A single ITV is within sight. In a rapidly changing broadcast industry we need to combine to compete effectively. Delay is not in the interest of viewers, advertisers, stakeholders or the future of British broadcasting."

Although the new media law will allow one ITV company, a tie-up still faces formidable regulatory hurdles. This is because the combined companies will have 54 per cent of television advertising, a level of market share that would normally be blocked by the competition authorities.

To allay some of the objections, Carlton and Granada will separate one of their two advertising sales houses, which will then operate under its own management.

The two firms will also try to convince the competition regulator and Downing Street that the current set-up is undermining Britain's leading commercial television network, damaging programming and making it vulnerable to a foreign takeover.

Charles Allen, the chairman of Granada, said: "For viewers, it [one ITV] means we can continue to put our money into programmes on screen. For advertisers, it ensures that ITV will go on attracting the mass audiences they want."

The industry is now wondering how the softly spoken Mr Allen, who will be chief executive of the combined company, will get on with the more volatile Mr Green, who will become chairman.