NTL has bought the consumer operations of Cable & Wireless Communications in a £8.2 billion deal that significantly strengthens its artillery against rival UK media giants BT and BSkyB.
NTL said today it will pay £2.85 billion in cash and issue 54.4 million in new NTL stock for CWC's consumer cable TV, telephone and Internet operations. NTL will also take on £1.9 billion assumed debt from CWC.
"Now UK cable will really have the competitive scale and national presence to compete against BSkyB and BT," said Greg Clarke, chief executive of CWC.
France Telecom, which put $1 billion into NTL earlier this month, will raise its investment in NTL by $4.5 billion to $5.5 billion.
Parent company Cable & Wireless has split CWC - of which it owns 53 per cent - in two. The cable telephone, Internet and TV operations will be sold to NTL, while C&W will take total ownership of the corporate, business, IP and wholesale operations.
C&W in May announced plans to refocus on business markets and dispose of its consumer assets.
"Today's announcement is another key step in the implementation of Cable & wireless' strategy of focusing on the high growth markets of IP and data services to the business customer," said C&W chief executive Graham Wallace.
NTL said the combined company will serve over 2.8 million customers and pass around 12 million homes in the UK and Ireland. NTL said it will make savings in equipment purchasing, reduced telephony interconnect and termination costs.
France Telecom has gained a strong footing in the UK through this deal, according to analaysts.
"The cable market in the UK is one of the most developed, so it's quite a nice morsel from that point of view," said Ovum analyst Tim Johnson.
France Telecom's chief executive said the deal is an important part of the French operator's international strategy.
"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," said Michel Bon.
CWC has frequently been slammed for its poor customer service levels. Customers can expect to benefit from NTL's slicker approach, according to Johnson.
"You'd expect them to make more investment in telephony and probably cable modems. If NTL is anything to go by, there will be more vigorous marketing as far as Cable & Wireless customers are concerned - they're going to get more attention," said Johnson.
Today's deal depends upon approval by the board of Bell Atlantic, which owns 18.5 per cent of CWC.
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