THE UK’s two largest commercial television companies will hear next week that they will be allowed to merge on more favourable terms than they dared hope for, The Times has learnt.

The £4 billion deal will strengthen ITV in its battle with the BBC and satellite broadcaster BSkyB and release an extra £50 million for new programmes. The news will be greeted with delight by Charles Allen, chairman of Granada, and Michael Green, chairman of Carlton. The jobs of both executives would have been in jeopardy if the merger had been blocked and the share price of Carlton and Granada would have plummeted.

In a report now under consideration by the Department of Trade and Industry, competition officials recommended the deal but demanded that the enlarged company bow to new rules on how television advertising is bought and sold. The Competition Commission report did not rule out forcing the two ITV companies to sell off their advertising sales houses. But it made clear that a sell-off was not a preferred option, arguing that such a move would wipe out much of the rationale for a tie-up in the first place.

Carlton and Granada believe they can cut costs by £55 million if they merge and sell their own airtime. Savings would fall to £15 million if they had to get rid of their sales arms. Recently Mr Allen made it clear that if both sales houses had to go, a merger might not work. “As ever, the devil will be in the detail but we believe that double divestment significantly undermines the rationale of the deal.”

Patricia Hewitt, the Trade Secretary, could overturn the Competition Commission recommendation when she announces her decision on Wednesday. But that is unlikely, given the absence of a clear argument in favour of “double divestment” from the Commission. There is a clear will in both the Government and the Competition Commission to see the merger go ahead, as long as the interests of advertisers can be protected.

Despite the advance of multi-channel television, ITV still commands a share of about 51 per cent of all UK television advertising.

The detailed remedies envisaged would be designed to protect the interests of advertisers. A proportion of airtime would be set aside from the annual “share deals” in which advertisers commit to buying a share of ITV airtime and auctioned off. That could then be traded.

Advertisers would also be able to renew their annual ITV commitments on current terms and this right of renewal would last for a minimum of three years. If ITV audiences fell advertisers could cut their commitment accordingly.