UK cable consolidation plans unfold

Talk of a merger of the UK’s three cable operators into a single national cable giant intensified today, but analysts questioned whether BT should be concerned.

NTL confirmed it was at an advanced stage in discussions about selling an unspecified stake to France Telecom. NTL needs the cash to buy Cable & Wireless Communications, which parent company Cable & Wireless is keen to sell off.

France Telecom fueled rumors that the UK’s three cable operators will merge shortly in a statement that said its intention to take a minority stake in NTL was, “in order to facilitate the consolidation of the UK cable operators market.”

NTL described the move less dramatically, saying the investment, “would allow NTL to further its strategic initiatives in the UK cable industry.”

Cable networks pass around 25 per cent of UK homes, while BT’s copper network passes virtually all homes. Analysts say in the consumer market a mega cable operator could threaten BT, but the threat in the business market is much smaller.

A combined cable operator, “will be able to be more competitive in the residential sector, but not so competitive in the business sector,” said Robin Duke-Woolley, senior analyst at Schema.

BT is developing multimedia applications to stream over its network once it introduces broadband ADSL technology, due sometime over the next 12 months. NTL will have a big advantage in the interactive content field, according to Duke-Woolley.

“NTL understand entertainment. BT have now got quiet a lot of people that understand the TV business, but as an organisation it’s not an entertainment leader, so it’s bound to find it more difficult,” he said.

Meanwhile in the business sector, the cable operators’ offerings have been quite limited to date - in part because they are restricted to their franchise areas. Consolidation could help them increase their business customer base because they’d be able to offer nationwide services for business.

BT refused to speculate on how it would react to cable consolidation. Telecoms watchdog Oftel said it would examine the competitive impact of any new entrant, but wouldn’t comment specifically on today’s news.

“If it was a situation where it was obvious that a monopoly was going to be created and smaller players were going to be excluded, then that’s something we’d have to look at,” said an Oftel spokeswoman.

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