Excite, Chello form Euro broadband giant

European high-speed internet provider Chello has merged with the non-US operations of Excite@Home to form what the companies claim is the largest broadband cable service provider outside the US.

Replacing a planned flotation for Chello, the deal creates a multi-billion euro corporation, called Excite Chello. Both Excite@Home and Chello will own 43 per cent of the new company. Each is investing 100m euros (£62.7m).

A third company, Liberty Media, is investing 200m euros in the form of a convertible bond issue and will own around five per cent of the new venture. The remaining tranche is reserved for staff. Excite Chello will be floated later this year or early next year depending on market conditions.

The deal combines Excite's non-US portal business with Excite@Home and Chello's high-speed internet access.

Excite Chello plans to use its 400m euros in capital to increase its starting subscriber base of 300,000 to 500,000 before its planned flotation. It has exclusive rights to deliver broadband internet services to more than 30 million homes with cable access.

The company will also spend big to expand its web portals. With a presence already established in the UK, Germany, France, Spain, Italy, Sweden, the Netherlands, Australia and Japan, Excite Chello will look to add 10 more localised portals in new territories within the next 12 months.

The company's new management team refused to comment on its UK plans. Chello has no presence in the UK market but has previously been linked with Telewest, the UK's second largest cable operator which is part-owned by Liberty Media. When questioned at a news conference, Roger Lynch, Excite Chello's newly appointed chief executive, said of Telewest: "We'd look forward to working with them in the future, but we have nothing to announce right now."

Excite Chello will be run by an 11-strong board, comprising four members of Excite@Home and four of Chello, joined by three independent directors, one of whom will be Liberty Media chairman John Malone. The company will operate in 15 countries on four continents and employ 1000 people worldwide. It will be based primarily in Amsterdam and London with a 400-strong research and development unit in Silicon Valley, California.