ITV duo told to quit digital race

CARLTON and Granada were told not to apply for licences put up for sale when their joint venture, ITV Digital, went into administration, Financial Mail has learned.

The warning is believed to have come from Patricia Hodgson, chief executive of the Independent Television Commission, the industry regulator.

She feared the two companies were planning to buy back the licences and re-enter the pay-TV market with a slimmed-down version of ITV Digital.

There is no legal or regulatory reason why the pair could not buy the digital terrestrial licences, which reverted to the ITC when ITV Digital folded in March after admitting it could not afford to pay its suppliers. But Hodgson is thought to have felt that such a move would be politically unacceptable.

ITV Digital's demise severely embarrassed the Government by undermining its plans to introduce digital television throughout the UK by 2010. It also put at risk the future of many Football League clubs. They face possible liquidation because money expected from the TV deal with ITV Digital was withdrawn.

The Football League, which is owed the £187.5m agreed in the contract with ITV Digital, is still threatening to sue Carlton and Granada for £500 million in damages. It claims that the firms gave parent company guarantees. Last week it told the two companies that it held them responsible for the ITV Digital's failure to pay the contract figure. Carlton and Granada deny that they are liable for the amount.

The deadline for initial licence applications is this Thursday, though the licences will not be awarded until June 13. So far, response to the offer has been poor.

Only Crown Castle and SDN, a group made up of troubled cable operator NTL and S4C, the Welsh Channel 4, are thought to have shown any interest.

ITC said no one was in a position to warn off potential bidders. Granada denied it had been warned not to bid. Carlton refused to comment.