Media shares soar on deregulation

LONDON, England -- Shares in Carlton Communications and Granada, owners of the ITV network, soared on Wednesday as investors bet the two UK broadcasters would benefit from government deregulation of the sector.

Radio companies -- such as Capital Radio and GWR -- also jumped after the UK government announced late on Tuesday that it would end restrictions on cross ownership by television and radio operators, and lift a ban on companies having more than one national commercial radio licence.

The government said new legislation, expected to become law next year, would also permit non-European ownership of UK broadcasters.

The changes would make Britain one of the most deregulated broadcast markets in the world and clear the way for companies like AOL Time Warner (AOL) -- which owns CNN -- as well as Viacom and Disney to buy Britain's biggest commercial network ITV and rival Channel Five.

"The way now looks clear for Granada and Carlton to merge with the additional possibility of non-EU intervention,'' Neil Blackley, an analyst at Merrill Lynch, told Reuters.

"The changes are arguably the most radical (in radio), allowing both cross media ownership and foreign ownership, on top of expected national and local deregulation.''

Granada (GME) shares jumped 7.3 percent and Carlton (CCM) rose 6.6 percent in London midday trading on Wednesday. Capital Radio (CAP) gained 6.4 percent and GWR (GWR) was up 4.2 percent.

Shares in both Granada and Carlton have fallen by more than a third in the past year, as advertising revenue declined as the sector was hit by the economic slowdown. The two broadcasters have also been drained of cash by ITV Digital, their recently collapsed digital TV joint venture.

Changes to legislation would allow Granada and Carlton to merge, or individually seek out foreign-owned partners, to cut their losses and increase revenue.