LONDON (ShareCast) - (Sharecast News) - A tie-up between broadcaster ITV and Sky was looking more likely after the Disney-owned company signed a deal with STV at the start of the week, broker Liberum said on Tuesday.
Analyst Ian Whittaker suggested that an ITV-Sky re-transmission deal was closer after Sky signed a five-year deal for Scottish ITV1 licence holder's video on demand services and regional channels overnight, with Sky appearing to be keen to resolve its outstanding deals sooner rather than later.

The STV deal was in effect a re-transmission deal and broadly similar to that which STV signed with Virgin Media in 2018 and which it stated would lead to £2m in extra profits in 2021, Whittaker said.

With the current retransmission deal with Sky due to expire this year, if the pair can come to an agreement on retransmission fees it would add around £120m of revenues and lead to a "material uplift" on ITV earnings, the analyst added.

"In effect, the STV-Sky deal is a retransmission deal but it is complicated as Sky (and Virgin Media) have been adamant they would not pay retransmission fees for the ITV1 channel and STV does not have the minor ITV channels (ITV2, 3 etc.) that ITV Plc has. The agreement - like the deal STV signed with Virgin Media - has been worded with no explicit reference for fees for ITV1 but with an implicit recognition it is included," Whittaker said in a note to clients on Tuesday.

ITV's share price fell around 30% in the second half of the year amid warnings about softer advertising spend. For the first nine months of the 2018, net advertising revenues were up 2%, driven by strong growth in online revenues, but the fourth quarter was expected to see a 3% decline, with November up 2% but the key month of December seen falling 6-8%.

Liberum's research suggests national TV advertising for ITV1 has "not started too badly", though there is some question how much benefit they are gaining from the dispute between Channel 4 and Publicis.

On Tuesday, the shares were up 5% to 132.25p by lunchtime.

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