Carlton, Granada up on talk rumour

LONDON, England – Shares in Carlton and Granada, two of the Britain's biggest commercial TV companies, soared on Monday on speculation they would merge.

Charles Allen, Granada's chairman, fuelled the strong gains after saying in an interview with the Sunday Telegraph that the logic for a single Independent Television (ITV) company was "inescapable."

Granada (GAA) rose 4.2 percent to 128.75 pence, while Carlton (CCM) gained 3.5 percent to 249.5 pence in midday London trading on Monday.

"It is what shareholders want and I am sure it will happen,'' Allen was quoted by the paper as saying.

Carlton, part owner of Britain's largest commercial TV network, and Granada refused to comment on whether talks are taking place. An earlier attempt to merge collapsed after the two failed to reach an agreement on what to due with their loss-making joint venture ITV Digital, which is currently in administration.

Both broadcasters have hoped to strike a deal as the British government moves to relax media ownership rules. They have argued failure to do so would leave them vulnerable to international operators.

Carlton has been the centre of persistent speculation that it could be a takeover target for Germany's Bertelsmann.

The British government is expected to announced on May 7 the easing of competition rules by 2003. It plans to drop a 15 percent cap on TV audience share and a rule that prevents one company owning two TV licences in London.

Removal of the audience share rule would lift one obstacle but UK competition rules could still hinder any planned merger.

A combination of the two would give them a 60 percent share of the advertising market and analysts believe this would have to fall below 50 percent to appease the Competition Commission.

Another stumbling block could be their handling of the collapse of ITV Digital, which may be broken up and sold off by administrators, after failing to reach a deal with its main creditor, the English Football League.

ITV Digital owes the league £178.5 million and the loss of revenue may spell the end for dozens of smaller soccer clubs.

"The way they have acted with the Football League has not gone down well with the government ... Let's face it there are more votes from football than ITV,'' a media analyst, told Reuters.