Telewest has grabbed a lucrative piece of cable real estate from rival NTL, by securing total ownership of Cable London.
But NTL immediately criticised the deal saying Telewest had paid too much for its 50 per cent stake. The deal values Cable London at around £1 billion, or £5,000 per customer.
The North London cable operator was owned 50:50 by Telewest and Comcast, but when NTL bought Comcast last year, competition rules required one of them to buy Cable London outright.
Telewest had first refusal to buy the 50 per cent of Cable London that it didn't already own from NTL at a price set by NTL. NTL announced the price, of £428 million, after the London Stock Exchange closed last night.
Had Telewest refused the price, NTL would have had to buy the stake at that price. But Telewest, which saw a merger with Cable & Wireless Communications slip out of its hands and into NTL's last month, quickly decided to grab the stake.
By 8.30pm last night, Telewest had agreed with shareholders to raise cash for the purchase from a rights issue, where one new Telewest share would be offered, at 213 pence, for every 11 Telewest shares, to raise around £416 million.
Telewest today said it was "delighted" with the deal. "It's prime real estate. It's got some very attractive residential areas," said a Telewest spokesman.
Cable London operates four franchises in North London in lucrative areas including Camden and Islington. Spice Girl Mel C is a Cable London customer. Cable London also has several large business customer including Haringey council.
Even though NTL was prepared to pay the £428 million price tag itself, it said it was a high price for Telewest to pay.
"We valued it and came out at that price, but it is high," said an NTL spokesman.
But NTL would have preferred to have taken ownership of Cable London, which is surrounded by NTL and Cable & Wireless Communications franchises.
"In the context of the price we're paying for CWC, £428 million would have been easy. We would have happily taken it on," said the NTL spokesman.
NTL bought the consumer operations of Cable & Wireless Communications for £8.2 billion on 26 July. (see Newswire 26 July, 1999)
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