TV advertisers oppose 'unrealistic' Carlton-Granada merger

Television advertisers have declared that the merger plans of Carlton and Granada are "hopelessly unrealistic" and they will oppose the deal as it stands.

The attitude of advertisers will be crucial to the way that the competition authorities judge the merger.

ISBA, the advertising trade body that represents more than 300 companies, has expressed new doubts over the merger, which would bring together most of the ITV network, and with it more than 50 per cent of the TV ads market.

Ian Twinn, director of public affairs at ISBA, said that even if one of the sales houses was separated, advertisers would still fight the deal. "To keep one [sales house] and sell one would not give us sufficient comfort. And keeping them both is a non-starter," he said.

In last month's merger announcement, the two main ITV companies signalled that their starting position would be to try to persuade the authorities to allow them to keep both sales houses. That would add £20m a year in synergies to the deal.

Failing this, Carlton and Granada indicated that separating one sales house would be offered as a concession to get the deal through. The Carlton ad sales operation would be put under independent management and ownership, selling airtime for existing Carlton franchises. "I find that [separate sales house] deeply unconvincing," Mr Twinn said. "They seem to be wasting everybody's time, they'd not even get to the starting block [with the current proposals]." Mr Twinn stressed that Carlton and Granada were yet to approach ISBA with detailed proposals and added that advertisers were keen on the programming improvements that the ITV merger promised. ISBA's views on a deal based on one sales house being spun off will add weight to the view of competition lawyers that a merger on this basis would probably be blocked by the Competition Commission.

Charles Allen, Granada's chairman, has said the group is not considering going as far as separating both sales houses.

Procter & Gamble, Britain's biggest TV advertiser, has warned that it may take its business away from ITV if the merger goes ahead.

The Communications Bill, expected to be in the Queen's Speech this month, will permit the Carlton-Granada combination but while the political will is there, the transaction still needs to clear the competition authorities. "Our fear is that at some stage, a single company will maximise profits for shareholders at the expense of customers [advertisers]. We don't want to go back to the double-digit airtime inflation of the 1980s," Mr Twinn said.

The main competition issue is the huge share of airtime sales that Carlton and Granada together would command. Channel 4 and Channel 5 will also argue against the deal.

In a revised paper on its position on the ITV deal, put out at the end of last week, ISBA said: "The logical conclusion of such onward consolidation activity would be an 'ITV/rest of the world' (ie Channels Four and 5, BSkyB, Flextech/IDS and others) duopoly in commercial airtime sales."