News that UK telecoms company ntl/Telewest yesterday confirmed it had approached ITV to consider a merger has been welcomed by majority shareholder Richard Branson.
The report in today’s Financial Times said the Virgin boss, who owns an 11% stake in the cable and telco operator, was backing deal but named no source. And no comment was immediately available from Branson.
The deal, however, would realise a well-known ambition of Branson’s to enter the television industry, and ITV is the UK’s biggest commercial broadcaster.
ITV chairman is former Bank of Scotland chief executive Sir Peter Burt, confirmed ntl had made a "highly tentative expression of interest about holding discussions", but the broadcaster stressed that no meeting has yet been held nor any proposal received.
The financial markets responded favourably to the move by ntl, pushing ITV’s shares up from 6.5p to 112p following the news. The ailing broadcaster has faced tough times in response to advertising spend migrating online.
But many City analysts have questioned the viability of the deal when both are in heavily in debt. Ntl is also still working through its merger with Telewest last year.
Aleksandra Bosnjak, content and media analyst for research firm Ovum agreed with her financial services counterparts, calling the ability to integrate such huge organisations effectively into question in a daily Ovum newsletter.
“From a business strategy perspective, any idea of a full-scale merger between these two types of giants provokes an instant anxiety, given the amount of due diligence and audit required for a job of such unprecedented size,” said Bosnjak.
“New ventures resulting from these consolidations have traditionally been defined as risky, requiring evaluations of intangible assets, which are difficult to estimate, and, as often happens, the value of intangible property can be overestimated. However, it appears that this trend toward increased size and consolidation between media-telco businesses will intensify in the coming months, with the possibility of some form of joint-ventures, or less risky joint entities,” added the analyst.
ITV's market capitalisation is about £4.1 billion, while NTL is valued at about £4.7bn.