Telewest looks into illicit commissions

Telewest launched an inquiry yesterday into the payment of £5m in illicit commissions by its advertising sales house.

The cable operator said in a statement last night that IDS, the sales house for its Flextech channels business, paid commissions to media buyers without its knowledge. Media buyers book advertising space on television channels on behalf of clients, but broadcasters do not pay commissions in exchange.

Telewest said its audit committee had started an independent review of "certain business practices" at IDS that ran from 2001 to this year. IDS, the sales company for the UKTV channels, is run by Mark Howe.

"The business practices to be reviewed, which were brought to the attention of the audit committee by senior management, involve the payment of commissions, believed to be no more than £5m in total, to commercial counterparties over the period from 2001 to date," said Telewest.

The company said it did not believe that there would be a "material impact" on its financial statements as a result of the review or of terminating the commission payments.

One analyst believed that the case could have wider ramifications for the advertising sales industry if the allegations of illegal commission were proved. Eliot Spitzer, the New York attorney general, turned the spotlight on unacceptable commissions paid by the insurance industry earlier this year.

Telewest was expected to complete its £1.7bn refinancing this week. Investors believe that the US-listed UK company is likely to pursue merger talks with its bigger rival, NTL.

Telewest owns 100% of Flextech, which has channels such as Living TV, and 50% of UKTV, a BBC joint venture.