RTL, the pan-European broadcaster, sliced £83 million from the value of Five yesterday, admitting that intensifying competition, rising programme costs and collapsing call-televison revenues meant that it was no longer worth what it had paid for it.

The network is valued now at a little over £510 million, compared with the implied £705 million when RTL bought the 35 per cent that it did not own from United Business Media in July 2005 - and comes after a period of tumbling profits at the broadcaster of CSI and House.

Interim figures disclosed yesterday showed that earnings fell by €10 million (£6.7 million) to €5 million, which was accounted for by investment in Five’s new digital channels, FiveUS and Five Life, while income at the core channel remained flat after a year in which it lost viewers in the face of multichannel competition.

Five has long been seen as the loose piece in the jigsaw of British broadcasting, lacking the financial scale of ITV or BSkyB. The decline in profits mean that its profit margin was 2.1 per cent, far below the overall group average of 17.8 per cent, where the broadcaster enjoys market-leading positions in Germany, the Netherlands and in French-speaking Belgium. RTL is, in turn, 90 per cent-owned by Bertelsmann, the private German media group.

Gerhard Zeiler, the chief executive, blamed “strong competition in an increasingly fragmented UK market, which is affecting all established UK broadcasters”. He said also that RTL had had “no talks” with BSkyB - which is 39.1 per cent owned by News Corporation, parent company of The Times - about a deal in which RTL would buy Sky’s 17.9 per cent holding in ITV or swap it for Five. Last year Five was the worst-performing of the free-to-air channels and so far this year its audience share is down to 5.3 per cent, from 5.8 per cent, with only Channel 4 having suffered a steeper decline. The launches of FiveUS and FiveLife offset the overall decline, but they are nothing like as commercially valuable.

Five has also been hit by the growing costs of programme acquisitions, in particular from American studios, the source of the bulk of its hits, and the collapse of call-television revenues in the wake of scandals across all Britain’s big broadcasters. Five itself was fined £300,000 after it emerged that winners’ names had been faked on its Brainteaser quiz.

However, Mr Zeiler said he was “very confident” that the broadcaster could increase audience share of “the main channel and its digital channels” from next year, helped principally by the acquisition of Neighbours at an estimated cost of £30 million a year.

Neighbours is made by Fremantle Media, RTL’s production arm, so the cost of the deal is broadly neutral to the group as a whole. Shown twice daily on BBC One, the programme has more than 4.5 million viewers and shares of 36 per cent at lunchtime and 20 per cent at teatime – meaning that its switch to Five should help to boost its overall viewing average.

Outside Five, RTL’s performance was brighter. Its Fremantle Media production unit, run from London by Tony Cohen, increased interim profits by €7 million to €91 million, while turnover was 7.8 per cent up at €603 million. Performance was driven by international sales of the Got Talent talent contest format, which Fremantle co-produces with Simon Cowell, which has been sold to 13 countries.

Group turnover was 1.2 per cent up at €2.89 billion, while pretax income, including the €123 million impairment charge relating to Five, which was partly offest by €96 million of gains on disposals, were down 2.8 per cent at €499 million. On an underlying basis, stripping out one-time gains, earnings were ahead 7.7 per cent at €515 million. Profits in Germany, the company’s largest market, were 5.6 per cent ahead at €160 million.

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