By Karim Hammam
ITV will publish its third-quarter trading update next Wednesday as regulators examine its £1.6 billion agreement to sell its media and entertainment division to Sky. The Culture Secretary, Lisa Nandy, has intervened on public interest grounds, prompting investigations by the Competition and Markets Authority (CMA) and Ofcom.
The probes must report back to Nandy by January 27 on the deal's impact on media plurality and free speech. The scrutiny has raised questions about whether the transaction, announced in July, will face delays or be blocked.
Regulatory Scrutiny Delays Deal
Nandy's intervention has "upset the applecart," according to AJ Bell investment director Russ Mould. He said the move could at least delay the deal's completion and that management will need to address concerns about the strategic shift if the sale is blocked. Nandy also plans to bring forward new streaming legislation to ensure public interest tests apply to on-demand programmes as well as traditional broadcasting.
Financial Performance Context
The sale includes ITV's terrestrial TV channels and streaming service ITVX but excludes its production arm, ITV Studios, which produces shows such as I'm A Celebrity… Get Me Out Of Here! and Mr Bates Vs The Post Office. ITV's update on Wednesday will be watched for signs of revenue and profit recovery after the company said performance would be weighted to the second half due to scheduling and licensing deals.
In July, ITV cautioned that advertising revenues were set to fall around 5% year-on-year in the third quarter because of macroeconomic headwinds, despite a boost from the World Cup that helped advertising revenues rise 3% in the previous quarter. In the first half, pre-tax profits increased 16% to £78 million as total group revenues rose 2% to £1.89 billion.
