France Telecom is investing $1 billion (£0.6 billion) in UK cable operator NTL, in a deal intended to help fund NTL's bid to acquire the consumer business of Cable & Wireless Communications.
France Telecom is taking a 10% stake in NTL, which would increase if NTL succeeds in buying CWC's residential cable assets. While a key move in the consumer market, the investment is expected to have little direct effect on the UK's business cable market.
Both NTL and CWC claim to be the UK cable market leader. Parent company Cable & Wireless announced earlier this year plans to move away from consumer markets towards business customers.
Prospects for a merger of CWC, NTL and Telewest, the UK's third-largest cable operator, appeared still to be alive last week. Telewest has been in merger talks with CWC for several months. "As far as I know, those discussions continue," a Telewest spokesman said.
NTL said the acquisition of CWC would double its size to cover 11.5 million homes in its franchise areas, representing 50% of the UK. The combined operator would have 2.3 million subscribers and 2.15 million cable TV subscribers.
Microsoft already owns 5% of NTL and 29.9% of Telewest.
Cable networks pass about 25% of UK homes, while BT's copper network passes virtually all homes in the UK.
A consolidated cable operator could threaten BT in the consumer market, but the threat in the business market is much smaller, said Robin Duke-Woolley, senior analyst at Schema, a telecoms consultancy. A combined cable operator "will be able to be competitive in the residential sector, but not so competitive in the business sector," he added.
BT is planning to roll out hihg-speed broadband ADSL technology to consumers and businesses within the next 12 months (see PC Week, 13 July).
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