Investors push cable merger

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As UK cable operator Telewest began trading on the Nasdaq exchange yesterday in the final act of a lengthy financial restructuring, fellow cable company NTL disclosed that it may once more putting its broadcast business up for sale, this time with a price-tag of around £1bn.

With pressure rising on both sides of the Atlantic to effect the long-mooted merger between the two companies ahead of time, both moves were seen as closely interlinked. After numerous rounds of cable consolidation, they are finally poised to form a digital powerhouse able to compete as never before with digital satellite broadcaster BSkyB, the BBC and ITV.

NTL tried to sell its broadcast infrastructure business two years ago during major financial surgery. The business consists of almost 2,000 TV and mobile phone masts. Reportedly, it has now decided the division is no longer a "core interest" - but a merger would anyway obviate the need for duplicate cable TV operations, so the move may now appear in a different light.

NTL's management has reportedly talked to several private equity companies, among them Apax Partners, Texas Pacific and Permira. In 2003, NTL's broadcast division notched up earnings of £115.2m on turnover of £268.6m - one of the most profitable parts of NTL's business, it pulled in only 11% of total earnings compared to 15% in 2001.

After Telewest's £3.8bn debt-for-equity swap, reducing its debt levels by some £2bn, neither company is struggling any more under the crushing financial burden incurred while building out their networks. According to The Observer, the merger could be accomplished up to six months in advance of stock market expectations, creating a company valued at some $7bn.

NTL boss Simon Duffy is tipped to take the reins if the merger goes ahead, while Telewest chairman Cob Stenham has just received a £3.4m pay deal with more than 1m share options.

Lovelacemedia  |  20.07.2004

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