NTL to buy Telewest for $6bn

NTL now becomes a credible rival to BSkyB

NTL has agreed to buy Telewest Global for $6bn, creating a cable firm with a combined customer base of five million and a more credible rival to BSkyB.

The deal follows a three-year partnership between the firms, during which time they have co-operated on marketing and technology.

Analysts predict that up to £200m of savings could result from significant job losses across the combined workforce of 19,000.

NTL chief executive Simon Duffy will lead the combined company, which provides telephony, TV and broadband services.

Industry watchers have long predicted such a merger, suggesting that consolidation had been occurring in many parts of Europe and that the close partnership made this all the more possible.

Mark Main, senior analyst at Ovum, said: "This has been long overdue. The companies have already been cutting costs and there is little overlap between the businesses.

"Many markets are tending towards three main players for supplying broadband so it is a question of whether the combined firm is one of the three."

But some observers are concerned that merging the firms will not be easy.

Ian Fogg, an analyst at Jupiter Research, said: "Mergers often distract firms from their role of innovating and product development. This is a very fast moving area so that is a risk.

"I think they will be distracted by this and will not be able to keep up with some of the faster competition like BSkyB. In telephony they are also threatened by the emerging VoIP services.

"The cable industry also has a bad reputation for customer service. We will have to see if they take the best from both companies or whether they fail to improve customer satisfaction levels."

Neil Ricard, research vice president at Gartner, added: "The really interesting part of this deal is the merging of the business services where there is currently competition between them for the provision of data services.

"I hope they can get it right and become a significant player by streamlining their services."

Today's agreement ends months of talks that had stalled as the companies debated what to do with Telewest's programme-making division, Flextech, according to newspaper reports.