A joint venture between Channel 4 and the BBC’s commercial arm is on the verge of being agreed, the chief executive of BBC Worldwide said yesterday.

Speaking as revenues for the corporation’s commercial subsidiary passed the £1 billion mark for the first time, alongside a sharp fall in its profits, John Smith said that the two broadcasters were on the verge of an agreement.

It is hoped that the joint venture will help to plug a £150 million shortfall that Channel 4 says it will face by 2012 if it is to continue as a public service broadcaster.

Mr Smith, speaking to The Times, said: “When can we find an in-principle agreement? We are literally weeks from that. I really think we’re getting somewhere.”

The future of the joint venture became more uncertain when a solution was not included last month in the Government’s Digital Britain report, by Lord Carter of Barnes. Mr Smith admitted that the two organisations were then at an impasse, thought to be over the valuation of the assets each would bring to the table.

Mr Smith said: “There have been aspects of it that have been quite hard to agree. We’ve now taken those things out and it’s got a very good chance of happening.”

Channel 4 is thought to be willing to contribute its E4, More4 and Film4 digital channels and its advertising sales and online activities.

Mr Smith has previously said that Worldwide was willing to include “non-BBC branded UK television businesses” such as its half share of UKTV, the owner of pay channels such as Dave and Blighty. He said yesterday that the deal would not include Worldwide’s overseas assets.

The BBC’s annual report, published yesterday, disclosed that despite a 9.5 per cent rise in Worldwide’s revenue, the company had a 27 per cent fall in pre-tax profits, to £85.7 million. This was largely because of write-offs on Kangaroo, the now abandoned online video venture, and the collapse of Woolworths, the company’s partner in the 2entertain DVD distribution business.

Mr Smith also hinted that he was interested in the job of ITV’s chief executive, which Michael Grade is due to vacate by the end of this year. “It’s a very attractive job, with big money involved,” Mr Smith said. He refused to comment on whether he had been approached for the position but declined to rule himself out of the running.

The BBC’s annual report showed that Mark Thompson, the Director-General, and Sir Michael Lyons, the Chairman, were both given pay rises this year, despite public pronouncements by the corporation that it was banning bonuses and freezing the salaries of senior staff.

Mr Thompson received a 2 per cent pay rise to £834,000 and Sir Michael saw his package boosted by 30 per cent to £213,000, largely as a result of a rise in taxable benefits from an increased amount for travel and accommodation.

The total pay of the BBC’s ten most senior executives — who make up the corporation’s executive board — fell by 7 per cent, as a result of a ban on bonuses that Sir Michael announced would not be revoked until economic conditions improved.

Mr Thompson was the only member of the executive board to receive a rise in his total pay, as he took no bonus last year but benefited from a corporation-wide 2 per cent increase in salary that came into effect last August.

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