Channel 4 this morning abandoned its plans to launch three digital radio stations, saying it can no longer afford the £10 million cost of launching the service as advertising revenues collapse in reaction to the credit crunch.

Andy Duncan, Channel 4's chief executive, said that the decision had been taken reluctantly but the broadcaster had little choice, given that it was aiming to make £100 million of savings in response to a 5 per cent fall in television advertising.

He said: " Frustratingly, our plans have been overtaken by a drastic recent downturn in our revenues and we will have to forgo this future profit stream. We can no longer afford the short-term investment necessary given that we are having to cut so deeply across all parts of the organisation.”

The broadcaster will shut its start-up radio division, affecting 15 jobs, and withdraw from the 4 Digital consortium that had been awarded a multiplex, or frequencies, block of radio spectrum by Ofcom in July 2007. Channel 4 had planned to launch the first of its stations, E4 Radio, next spring.

Channel 4's decision leaves its partners in 4 Digital to decide whether to proceed. The companies, H Bauer, BSkyB, Carphone Warehouse Group, UBC Media and UTV, were planning to launch stations or services on the multiplex in addition to Channel 4.

Ofcom said it would hold urgent talks with the remaining investors and the owners of the other two blocks of radio frequencies, the BBC and Global Radio. In a statement, it said that it "recognises that the economic environment is very challenging".

Channel 4 had held talks with Global Radio about merging the two commercial frequencies blocks but these foundered last week, paving the way for today's decision.

The collapse of Channel 4's digital radio plans is embarrassing for a broadcaster that had enthusiastically embraced the prospect of moving into radio as a competitor to the BBC. It is also a blow to Ofcom, the broadcasting regulator, which was keen to license a third radio multiplex in the hope of introducing more competition.

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