UK commercial television companies Granada and Carlton have called off merger talks, it was announced on Wednesday (Feb 27).

A link-up would have given the broadcasters 90% control of commercial television network ITV. The decision is said to have been made because of onerous regulatory hurdles, although talks could restart ahead of a relaxation of media ownership rules expected in 2003.

"Carlton and Granada have been in discussions regarding a possible combination of their businesses, in step with proposed legislative changes," the companies said in a statement. "The two boards have decided not to pursue these discussions."

Wednesday's announcement that talks are off leaves the way open for overseas TV rivals to make a play for one of the companies. German media giant Bertelsmann has been cited as a possible suitor for Carlton.

Another factor behind the decision may have been that annual savings from the merger - estimated at $71m (£50m) by 2002-3 - pale beside existing costs at Carlton and Granada's ITV Digital service. The operation reportedly needs a further $510m (£360m) to keep it going until 2003-2004, when it is due to break even. Carlton and Granada have been hit hard by a slump in advertising revenues.

The government is to drop legal restrictions on one group controlling ITV when it shelves a 15% cap on TV audience share in 2003. Also set to be axed is a rule preventing one group owning London's two broadcasting licences.

But single ownership of the dominant TV network would face scrutiny from competition watchdog the Competition Commission.

Shares in Carlton slid almost 6% to£2.15 on Wednesday morning, while Granada shares rose 1.32% to£1.15