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

A link-up would have given the broadcasters 90% control of commercial television network ITV. But the 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, which have kept the merger talks secret, have been hit hard by a slump in advertising revenues.

"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."

The government is to drop legal restrictions on one group controlling ITV when it shelves a 15% cap on TV audience share and a rule preventing one group owning London's two broadcasting licences in 2003. But single ownership of the dominant TV network would face scrutiny from competition watchdog the Competition Commission.

The decision to call off the merger is seen as leaving 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.

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