ITC sees danger to television companies: Rule changes threaten viability of small regional firms

THE VIABILITY of small regional television companies could be undermined by the re-drawing of the ITV map, according to the industry's regulator, the Independent Television Commission.

The ITC is understood to be worried that the rule changes to be debated in Parliament today will widen the financial gulf between the nine biggest and six smallest companies.

Peter Brooke, the Secretary of State for National Heritage, has decided that a maximum of two ITV franchises can be owned by the same company, regardless of size. This is promoting mergers between the largest franchise holders, such as the pounds 758m agreed offer for Central Television by Carlton and Granada's hostile pounds 600m bid for LWT.

But the ITC fears that as a result smaller companies will be deprived of the support they receive from the larger groups, and it is angry the National Heritage Department failed to consult it before Mr Brooke made his announcement two weeks ago.

The ITC is particularly fearful that the subsidies made available to smaller companies by the larger ones will not be renewed when the arrangement under which they are provided expires at the end of 1994.

Under the network arrangements the largest companies offer a discount to small companies on the costs of buying in popular programmes such as Cracker. The discount is based on the size of the franchise and can be up to 80 per cent.

The ITC intends to argue that large companies are bound by their licences to support the regional network but the area is a grey one, and observers expect big groups such as Carlton, which opposes the discount, to fight any extension.

Peter Brownlow, finance director of Border, the smallest quoted ITV company, warned it could not survive without the discount. Its termination would add more than half as much again to costs, he said. 'They would rise from around pounds 8m to more than pounds 12m,' he said. 'The company would not be able to exist.'

Border, which reported its interim figures yesterday, made pre- tax profits of pounds 802,000 ( pounds 519,000) in the six months to the end of October. Turnover was lower at pounds 4.8m ( pounds 5.9m) as ITV companies are now no longer selling Channel 4 airtime, and the interim dividend was 1.6p (1.3p). Its shares rose 12p to 150p in response to what was seen as a generally positive performance.

About 75 per cent of Border's transmission is carried out by Granada, which keeps costs to a minimum. The company says this helps safeguard its independence by reducing the efficiency savings available to a predator.

But there are in any case growing doubts that regional programme- making can survive on any scale if the large companies consolidate. If Granada's bid for LWT goes ahead, its London presence is expected to encourage a drift of production to the capital. There is also doubt that Carlton Television will be able to direct more work through Central's Nottingham studios because, as a publisher-broadcaster, it cannot force independent producers to use in-house facilities.

Labour will oppose the ownership changes and argue for the current takeover moratorium to be extended. The ITC also wanted the moratorium to be kept while a review of cross-media ownership rules took place. But few expect the Government to be defeated.