The collapse of pay-TV service ITV Digital has helped push broadcaster Granada to a �169m loss for the six months to March 2002.

ITV Digital was run jointly by Granada and Carlton Communications.

Granada spent �99m on its share of the pay-TV venture's operating losses during the six months.

It also wrote off a further �104m for other debts related to ITV Digital.

And it said that, excluding exceptional closure costs, it had spent �573m on ITV Digital and ITV Sport over five years.

Irresponsible

Granada's chairman, Charles Allen, said the company had decided it could not afford to carry on investing in the venture.

The creation of a single ITV company is a logical step

Charles Allen Granada

In a statement he said: "We are only too aware of the consequences that this decision has had for many people.

"But it would have been irresponsible for Granada to continue to fund ITV Digital without a viable plan that would deliver an eventual return for shareholders."

ITV Digital collapsed owing �178.5m to the Football League for television rights to show games.

The League is trying to recover that money from Carlton and Granada through the courts.

No guarantees

But Mr Allen told BBC Radio 4's Today programme that the companies were not expecting to have to pay up.

"We've been given very strong robust legal advice that there is no legal liability for Carlton or Granada," he said.

Charles Allen says advertising is improving

"The question comes down to did Granada or Carlton give parent company guarantees, and Granada and Carlton did not give parent company guarantees," he added.

ITV Digital was not the only headache for Granada.

It was also hit by the slump in advertising, and its advertising revenue fell by 12%.

Mr Allen said that conditions were improving, helped by the World Cup.

He said the company was now putting all its energies into driving its core broadcasting business.

Merger discussions

There has been speculation about a merger between Granada and Carlton.

The government's draft communications bill, published last month, removes some of the regulatory obstacles to a tie-up between the two firms.

Mr Allen said that the companies were not pursuing merger discussions.

But he added: "The creation of a single ITV company is a logical step in the development of the UK television sector".

Granada said its underlying profits were �43m in the first half of the financial year, compared with �82m last time.