GMTV, ITV’s breakfast broadcaster, has forfeited around half its profits – worth £10 million on an annual basis – since it suspended its phone-in competitions in April.

The quizzes were shut down after it emerged that shortlists of winners were being selected before the lines had closed.

The broadcaster is also likely to announce plans in the next few days to refund callers who had no chance of winning, as part of a package of measures aimed at restoring public confidence.

It has been estimated that refunds could amount to £10 million a year. It is understood that GMTV earned £10 million-a-year in profit from the phone-ins.

The company behind the block of programmes on the breakfast show earned £21.8 million in operating profit in 2005, the last year for which independent figures are available, and around £20 million in 2006.

GMTV is 75 per cent owned by ITV, with the remaining quarter held by the Walt Disney Company. Technically, the business is operated at an arm’s-length basis, but the operation is chaired by Clive Jones, a former senior ITV executive, who is now spearheading the task of restoring credibility.

ITV will disclose some information about how well GMTV is performing when it publishes its interim results on August 8, but the commercial broadcaster is braced for pressure on profits as phone-in revenues collapse. In the phone-ins that it still runs, such as on ITV Play, call volumes are down around 30 per cent as viewers respond to the series of scandals by simply not taking part.

After an investigation by the BBC’s Panorama in April, it emerged that a shortlist of potential winners was prepared for GMTV staff at around 8am – an hour before phone lines actually closed.

The competitions cost as much as £1.80 for people to enter, and prizes on offer included £20,000 in cash and a Mazda MX-5 sports car.

Watched by an estimated 6 million people at some point in the morning, GMTV says it is the “most watched breakfast show in Europe”.

Its advertising performance has been stronger than the rest of the ITV empire, and last year the programme contributed around 7.5 per cent of ITV’s overall operating profit of £264 million.

ITV’s accounts say that it generated £56 million in revenues during 2006, and cost £36 million to produce. In the half to June, the lost profitability will amount to about £2 million, because the phone-in competitions were suspended for a little over two months of the period.

However, it is not clear when GMTV will resume the phone-ins that propped up its profitability. An Ofcom inquiry, which is likely to lead to a significant fine – possibly as much as £4 million, or 5 per cent of turnover – is ongoing. That is not now expected to conclude until September.

Despite the problems, and a weak first half for advertising, GMTV is understood to remain profitable, but it is unlikely that its phone-ins, even if restored, will generate the same level of profitability as before.

ITV shares eased 0.7p to reach 109.3p yesterday. The commercial broadcaster is expected to earn £258 million before tax in 2007, according to a consensus of city analysts.

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