ITV Digital needs a "fundamental restructuring... as a matter of urgency" if its long-term future is to be secured, the struggling network's owners Carlton and Granada have said.

The brief statement came hours after the UK media groups said they had ended secret talks about a possible merger.

"Carlton and Granada have been in discussions regarding a possible combination of their businesses, in step with proposed legislative changes," Carlton said in a statement.

"The two boards have decided not to pursue these discussions."

In November, the government announced plans for changes to media ownership rules in the UK that would allow the UK's commercial ITV network to become just one company.

New talks

Some observers said that although the discussions have come to an end, they could well be resumed at a later date.

"They have said no for now, but I'm sure Carlton and Granada have had merger talks before and I'm sure they will have them again," said Numis media analyst Paul Richards.

Carlton and Granada are the biggest independent broadcasters on ITV.

They also jointly run the troubled digital television operation ITV Digital.

Both broadcasters have been hit by a fall in advertising revenue in recent months.

Mr Richards said it would make sense for the two to join forces.

Share prices

Rumours about the merger talks lifted Carlton shares 13.6% higher to 228p on Tuesday.

By mid-morning, Carlton shares traded at 221p, down about 3% while Granada shares rose almost 3% to 166.5p.

Traders reacted to recommendations by Goldman Sachs which lowered its recommendation on Carlton to "market outperformer" from "trading buy" while leaving Granada unchanged as a "market outperformer".

In November, Granada's shares were trading as high as 156p, while Carlton was trading at up to 258p.