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NTL in $10B cable deal
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July 26, 1999: 6:00 p.m. ET
Company will become Britain's largest cable operator with 2.8M customers
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NEW YORK (CNNfn) - Britain's NTL Inc., a U.S.-traded stock, signed a deal Monday to buy the residential cable operations of market leader Cable & Wireless Communications for about $10 billion plus assumed debt, making it the country's largest cable company.
The deal, which mirrors the rapid consolidation taking place in the U.S. cable industry, leaves Telewest Communications PLC -- Britain's second biggest cable operator -- out in the cold. Telewest had been in merger negotiations with CWC since April.
But NTL hinted Monday that further deals in the sector could be imminent, and observers say U.S. software powerhouse Microsoft Corp. (MSFT), which owns stakes in both NTL and Telewest, could be the power broker in any such arrangement.
"We have made no secret about the fact that further industry consolidation would be desirable under the right terms," NTL president and chief executive Barclay Knapp said during a conference call.
Knapp said Microsoft would "definitely" play a role in future discussions.
Microsoft, which owns 5 percent of NTL, is acquiring stakes in cable systems throughout Europe in an effort to gain a foothold into the market for interactive TV services in the future. Microsoft also owns a controlling 29.9 percent of Telewest.
"They are interested in cable because this is where part of online services appear to be heading," said Neil Bradford, at Fletcher Research in London. "If they own part of these guys, their standards are more likely to be adopted."
Shares in NTL (NTLI) closed a little over half a percent higher on the Nasdaq, adding 9/16 to 99-13/16, as the deal was mostly priced in after the company said last week it was in exclusive talks with CWC.
NTL clinched the deal through the backing of France Telecom SA, which agreed to invest a further $4.5 billion in NTL on top of the $1 billion it already paid for a 10 percent stake in the company. France Telecom will own 25 percent of the enlarged NTL.
The head of France Telecom said the deal marks a step forward in the company's international strategy. Investors agreed and marked the stock 3.7 percent at the close in Paris to 68.65 euros.
"It is a unique opportunity for France Telecom to participate in the development of innovative and convergent services combining telephony, digital TV and the Internet with one of the largest alternative telecom companies in the UK," chief executive Michel Bon said in a statement.
Under the deal, NTL would have a total of 2.8 million customers. Knapp said that the expansion would allow NTL to better compete with BSkyB -- the satellite TV company run by media mogul Rupert Murdoch -- and British Telecommunications in developing new interactive TV and high-speed Internet access services.
NTL will pay Cable & Wireless Communications 54.4 million new NTL shares and 2.85 billion pounds, or $4.5 billion, in cash, for a total of 6.3 billion pounds, or $10 billion. NTL also will assume 1.9 billion pounds ($3 billion) in CWC debt.
CWC will cease to exist, in effect, after Cable & Wireless, which owns 53 percent of the company, buys the group's corporate telecommunications business for 5.3 billion pounds, plus 1.2 billion pounds of debt. C&W has wanted to shed its residential operations as part of a strategy to focus on the corporate data communications business.
As part of the deal, NTL has agreed to obtain a secondary listing on the London Stock Exchange within six months. When the dust settles from the complicated round of arrangements, C&W will own up to 12 percent of NTL.
The deal is expected to close in six to nine months.
In London Cable & Wireless stock closed down 2.4 percent at 747 pence and CWC shares fell 1.3 percent to 690 pence, having traded over 5 percent higher earlier in the session.
-- from staff and wire reports
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