Media giants consider options in ITV saga
At the end of a fractious week in the media industry, ITV is still rudderless, BSkyB almost £1bn (€1.47bn) poorer and NTL in a state of limbo.
While the media landscape is unchanged for the time being, analysts are certain there will be further instalments in a gripping soap opera that this week saw ITV reject NTL’s £4.7bn (€6.94) takeover offer.
Richard Branson, the biggest shareholder in NTL, lit the touchpaper for further fireworks with his angry tirade at Rupert Murdoch and the surprise role of BSkyB in the saga.
Furious at BSkyB’s decision to take an 18% stake in ITV – effectively blocking an NTL merger – Mr Branson called for media and trade regulators to step in, claiming the move was bad news for viewers, and anti-competitive.
The saga is now on hold pending the outcome of an inquiry by media regulator Ofcom. It has the next six weeks to decide whether there has been a change of control at ITV which could affect its role as a broadcaster.
However, the media industry thinks it is unlikely the move will be blocked as BSkyB’s stake is below the 20% limit laid down by Ofcom.
While the Virgin head described Murdoch as an “800lb gorilla” intent on influencing the ITV board, Sky insists a place at the ITV table is not part of its plans.
Mr Branson’s anger may, however, have had more to do with ITV’s rejection of the cable operator’s attempt to form a stronger rival to BSkyB.
NTL, which is keen to bolster the content side of its business, offered a mix of cash and NTL paper in a proposal worth around 122p a share, which many in the City believed to be unattractive even to a weakened ITV.
Analysts now believe the cable operator will have to conjure up a better offer considering the amount BSkyB paid for its stake last week – something it may struggle to do because of its level of debt.
Paul Richards, an analyst at Numis, said: “It looks very unlikely that ITV would have accepted NTL’s bid, even if BSkyB had not come in, and I think the NTL offer was only ever an initial approach to test the water.
“But BSkyB has laid down a marker in the sand at 135p-a-share and that is significantly north of NTL’s 122p offer, which I think it will now find very difficult to better.
“I think NTL is now pinning a lot on regulatory hopes and the chance the BSkyB move will be blocked.”
Mr Richards also believes interest in ITV from German TV firm RTL could have cooled as a result BSkyB gobbling up the shareholding.
Julien Roch, an analyst at Merrill Lynch, thinks BSkyB’s step was a sensible one, which could have helped see off competition for the time being.
He said: “In our view, BSkyB destroyed 2% of its market capitalisation to prevent its largest competitor (NTL) potentially buying a company (ITV) which could have given the cable operator some competitive advantage in the future.
“This seems like a reasonable price to pay.”
David Buik, from spread betters Cantor Index, said: “You have to hand it to James Murdoch (BSkyB chief executive) and his very astute and shrewd advisors.
“To go wading in to the ring and buy up Fidelity’s 11.5% at 135p, plus a few other bits and pieces to make just under 18%, was inspiration personified.
“It’s dog-eat-dog out there and no prisoners will be taken. Nobody knows that better than Sir Richard himself, one of the greatest entrepreneurs of this dynasty.”
While the Square Mile doffed their caps to Sky’s dusk strike and NTL weighs up its next move, the question remains: where now for ITV?
The broadcaster is leaderless, without fresh creative investment and still scraping around for advertising revenues.
NTL may have a hefty pool of cable customers, but it is still hungry for content and is weighing up its options after being told by ITV there was little, if any, logic in a tie-up.
Meanwhile, BSkyB may be happy as NTL heads off with its tail between its legs, but it now has a stake in a rudderless and struggling broadcaster.
Then, of course, there is the viewer – still abandoning ITV for a host of other alternatives, both on the box and the internet.
Professor Steven Barnett, from the University of Westminster, said: “Now the dust is settling, it’s hard to see exactly who has benefited from these shenanigans. In consumer terms, it is the worst of all outcomes.”
Perhaps ITV’s biggest headache will be in its hunt for a new chief executive following the departure of Charles Allen in the summer.
The group’s operations – now including quiz channel ITV Play and the Friends Reunited website – have big appeal with Champions League football, Coronation Street and reality shows such as I’m a Celebrity... and X-Factor.
It is, surely, still capable of pulling in decent audience figures.
Professor Barnett said: “There is no doubt ITV has been very badly let down in terms of creative leadership. But this is an exciting challenge for a new chief executive.
“But people have been scared off, perhaps because of the way Charles Allen was treated. The job is in a similar category to the England football manager’s job. It is a role where you will be stepping onto a very public stage.”
And there will need to be a rethink over the way it deals with big events, such as the summer’s World Cup in Germany, which saw weak viewing figures compared with the BBC’s coverage.
Professor Barnett added: “The question that needs answering is: where is the edge going to come from?”
One thing is for sure – it looks like a soap opera that will run and run.
