28/03/2002

Troubled ITV Digital goes into administration

An administration order made by Carlton Communications and Granada in relation to ITV Digital has been granted by the High Court in London.

Not only does the judgment throw a shadow of the future ITV Digital, but the future of the government's 'Digital Britain' policy and the financial health of many Nationwide League clubs is also in doubt.

After the March 27 judgment, ITV Digital will now be run as a going concern by administrators from Deloitte & Touche. For ITV Digital, the hope remains that the company can emerge from the administration period in a position to compete with BSkyB – albeit on a more limited front.

For this to happen, the ability of the administrators to renegotiate existing contracts will be crucial as the consultancy seeks to limit liabilities. The Nationwide League contract is one such obligation that must be reduced if the business is to survive administration. Currently, ITV Digital has £178 million of that two-year contract still to pay, and before the administrators went in, the company offered football chiefs a reduced payment of £50 million. The administration order was made after this proposal was rejected.

While the football league teams are making robust noises through lawyers threatening a £500 million lawsuit, too much pressure could force the liquidation of ITV Digital – and the realistic prospect of retrieving some revenue from the deal.

Keith Harris, chairman of the league, described ITV Digital's actions as "low, cheap, bad behaviour" and, according to league directors, up to a third of the league's 72 clubs could be forced into administration if ITV Digital is unable to meet its obligations.

The failure of ITV Digital will also have an impact on the government's policy to remove analogue transmissions by 2010.

Behind closed doors, ministers are conceding that the prospect of wholly digitalised transmission by that time now appears to be in tatters. In public, however, media minister Kim Howells is saying the government will "be sticking to its target because we think switchover is achievable between 2006 and 2010".

The problems, however, did not end there for Carlton and Granada as they reached stalemate in talks with BBC over a joint promotion of low-price set-top boxes capable of upgrading to pay-TV services.

The corporations are at loggerheads over proposals for an Internet browsing facility and the levels of interactivity on offer. The boxes are due to be launched on March 30 and priced under £100.

ITV Digital, www.itv-digital.co.uk

(GMcG)

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