ITV's shares surged 16% on Friday after the broadcaster confirmed talks to sell its television business to Sky for £1.6bn. However, analysts have flagged three major obstacles: the price, regulatory concerns, and political implications of US ownership.
On price, the £1.6bn offer is seen as low for a division that generated £250m in operating profits last year. The broadcasting arm, despite competition from Netflix and YouTube, still achieves 10% operating margins and annual revenues of around £2bn. Some argue it should fetch at least that revenue figure.
Regulatory hurdles are immense. The Competition and Markets Authority, even under pro-growth orders, would scrutinise a deal that combines the UK's dominant free-to-air commercial broadcaster with the leading pay-TV operator. Media plurality concerns are heightened by Comcast's ownership of Sky, with its commitment to loss-making Sky News expiring in 2028.
Politically, US ownership raises questions. Sky's identity has faded under Comcast, and its financials are not separately reported. ITV's public service obligations, including regional content, might be harder to enforce from a Philadelphia-based media empire. CEO Carolyn McCall is seen as seeking a deal to boost the share price, but Sky/Comcast may not be the right partner.
