Fears growing for ITVDigital

GRANADA may buy itself a new lease of life if it abandons its ailing ITV Sport channel. It would cut costs but leave the fate of ITV Digital looking increasingly bleak.

It emerged on Wednesday that joint owners Granada and Carlton have threatened to axe the sports channel unless the Football League accepts £25m a year instead of £89m. Each would salvage £64m from what is left to pay of the £315m three-year agreement, now seen as hugely overpriced.

But there is the prospect of big legal fees and compensation for the League. There will also be an outcry from small clubs, which face the threat of bankruptcy.

Granada chairman Charles Allen said at the annual general meeting that it would be 'misleading' to say if ITV Digital has a future. Sorting out the venture, which has so far cost nearly £1bn 'is a top priority'.

Lorna Tilbian, at broker Numis, reckons Granada and Carlton's shares will rise if they abandon ITV Sport. 'It would be very favourably received because the market doesn't want ITV to go head to head with BSkyB, buying up sports rights. It will enable ITV to get back to what they do best - selling advertising and using the revenues to create home-grown programmes.'

Granada shares were down 1 3/4p to 142 1/2p. They have rallied 30% in a month on hopes of an advertising recovery.

Initial estimates for advertising revenue in May are a 9% rise, the first for 16 months. Hyper-cautious Allen said: 'It may just be a blip before the World Cup in June.'

Granada is considering closing its final-salary pension scheme to new members. It has 3,000 members and was in deficit by £60m soon after 11 September. The company, maker of Coronation Street and Pop Idol, wants to merge with Carlton. This is not possible until the law changes.