ITV Sky deal: £1.6bn sale faces January 27 deadline as ITV reports figures

ITV will update investors on trading next Wednesday, and the ITV Sky deal will dominate the questions. The £1.6 billion sale of its media and entertainment arm is now under formal scrutiny after Culture Secretary Lisa Nandy intervened on public interest grounds.

What the ITV Sky deal investigations will examine

Ms Nandy’s intervention has triggered parallel investigations by the Competition and Markets Authority (CMA) and the media regulator Ofcom. They have until January 27 to report back to her on how the deal would affect media plurality in the UK and free speech. That deadline sets the first real timetable for the political and regulatory test the tie-up must pass.

The sale covers ITV’s terrestrial channels and its ITVX streaming service. It does not include ITV Studios, the production business behind I’m A Celebrity… Get Me Out Of Here and dramas such as Mr Bates Vs The Post Office. If completed, the deal would create what supporters describe as a significant UK competitor to the global streaming giants. In the UK, Sky employs about 20,000 people, while ITV has roughly 2,400 workers in the division being sold.

Legislation on streaming

Ms Nandy has also said she will bring forward new streaming legislation, citing her “specific concerns” about this transaction. The aim is to ensure the public interest test can apply to on-demand programming as well as traditional broadcasting. The move suggests the government sees a gap between how media mergers have been assessed and how audiences now watch TV.

A strategy shift in question

For ITV, the sale is the centrepiece of a plan to become a production-focused business. Russ Mould, investment director at AJ Bell, said the company hopes to “change the channel and start a new season with a fresh cast”. He said that would cut its reliance on advertising spend, which tracks the economy closely and has an “outsized impact on investor sentiment”.

But Mr Mould said the minister’s move has “upset the applecart”. “At the very least this could delay any deal from getting across the line,” he said, adding that management would be expected to explain what it would do if the ITV Sky deal were blocked.

What the numbers might show

The trading update will also be read for signs of recovery. ITV has said its performance this year would be weighted to the second half, owing to the scheduling of programmes and licensing deals. In July, however, it warned that third-quarter advertising revenue was set to fall about 5% year on year, blaming macro-economic headwinds. That came despite a World Cup-related boost that helped advertising revenue rise 3% in the preceding three months.

The first half was healthier. Pre-tax profit rose 16% to £78 million, and group revenue climbed 2% to £1.89 billion. Investors will want to know whether the second half can build on that while the ITV Sky deal remains under review.

For now, the outcome is uncertain. The investigations may take the sale in several directions, and the January 27 reports will show how much weight regulators give to plurality and free speech concerns.

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