Carlton, Granada end talks

February 27, 2002 Posted: 1043 GMT

LONDON (CNN) -- Granada and Carlton Communications, Britain's two biggest commercial broadcasters, said on Wednesday that they had ended merger talks.

Carlton, part owner of Britain's largest commercial TV network ITV, and Granada are experiencing the worst advertising slump in a decade and are under pressure from a plethora of new channels and pay-television networks.

Granada -- which makes the hit soap opera Coronation Street and prime-time show Blind Date -- and Carlton have long argued for the rules on media ownership in the UK be relaxed, otherwise they could not compete with international companies setting up shop in Britain.

Carlton has been the centre of persistent speculation that it could be a takeover target for Germany's Bertelsmann.

"Carlton and Granada have been in discussions regarding a possible combination of their businesses, in step with proposed legislative changes," the two companies said. "The two boards have decided not to pursue these discussions."

The companies had been looking at ways to turn around loss-making ITV Digital, their pay-TV multi-channel digital business, which has been losing customers to Rupert Murdoch's British Sky Broadcasting and platform's launched by cable operators NTL and Telewest.

ITV Digital costs around £788 million ($1.1 billion) to run and is not expected  to break even before 2003.

The British government said last month it would ease competition rules in 2003. It plans to drop a 15 percent cap on TV audience share and a rule that prevents one company owning two TV licences in London.

Carlton currently owns the licence to broadcast on weekdays, while Granada owns weekend rights.

Carlton (CCM) declined 2.2 percent to 222.4 pence, while Granada (GAA) rose 3.3 percent in early London trading on Wednesday.