NTL and Telewest plan to take on BSkyB in the UK

The deal will create the UK's dominant cable TV company, enabling it to compete more effectively with market leading pay-TV broadcaster BSkyB.

Analysts have been expecting a tie-up between NTL and Telewest for some time.

Both companies are recovering from a downturn, which saw NTL emerge from bankruptcy protection in 2003 and Telewest undergo restructuring.

Although NTL and Telewest's operations are focused in the UK, shares in both companies are traded in New York.

By the close of Monday's session, NTL has lost 1.2% to $65.97, while Telewest had added 1% to $23.17.

According to these figures, both companies have a market capitalisation of about $5.6bn.

'Competitive force'

The combined company will have TV, telephone and internet customers in about 5 million UK households, compared with BSkyB's 8 million subscribers.

This transaction positions the enlarged company for greater success than either company could have achieved alone James Mooney, NTL chairman

The new group will also rival BT Group as Britain's second-largest residential telephone company.

The takeover will create "a new competitive force in the communications and entertainment sectors in the UK", said NTL chief executive Simon Duffy.

Mr Duffy will become chief executive of the combined group, while Telewest chief Barry Elson will step down once the merger has been completed.

"We are very pleased to recommend this value-enhancing combination with NTL to our shareholders," said Telewest chairman Anthony Stenham.

Greater reach

NTL said it was too early to speculate how many jobs may be cut under the deal. The company employs about 10,000 people, while Telewest has 8,400 staff in the UK.

The takeover will see NTL take control of Telewest's key Flextech digital TV business, which includes UKTV, a joint venture with the BBC.

Telewest had put Flextech up for sale, and potential suitors included BSkyB and European broadcaster RTL.

NTL said it would pay $23.93 a share for Telewest, funding about two-thirds of the deal with cash. The company will also take on $3bn of Telewest debt.

"Underpinned by a national strategy and increased scale and reach, this transaction positions the enlarged company for greater success than either company could have achieved alone," said NTL chairman James Mooney.

The UK's media landscape is consolidating, with a unified cable company squaring up against Freeview, commercial satellite operator BSkyB and soon Freesat, the free-to-air satellite service from the BBC and ITV. Who do you think will win the race for audiences?

Your comments:

Surely, the method that delivers the lowest and cheapest common deminator. Isn't that the only valid standard in our present society?
W. Paton, Leeds

Sky already won ages ago. The next big deal comes when Britain's broadband services get fast enough (no thanks to BT in this reader's opinion) to cope with good enough quality video streaming from the internet.
Anon, UK

I have serious concerns over how NTL will manage the merger technically. They haven't really got to grips with the various smaller company areas with differing set-ups. In an effort to save money they have closed regional offices and amalgamated call centres with a resultant plummeting of customer service.
Paul Baxter, Huddersfield, UK

I have been an NTL customer for some years and am wondering what benefits this merger will have for NTL? Telewest have a better service for broadband and their customer support, I have been told, is pretty good too. Will NTL broadband customers get the 10Mb lines that Telewest are getting? Or will NTL customers be second class citizens in this new cable world?
Patrick Mortiboys, Farnborough, Hants

In my (limited) experience, Telewest is a much more reliable, customer focused, customer friendly company when you compare them to the mighty BT and BSkyB; I know who I'd prefer to use. Let's hope they retain that focus and show their rivals how it's done.
Charlie, Edinburgh

I still think sky but I hope all this competition will eventually bring down the prices and then maybe some day one of the companies will equal to Sky.
Denis Wilson, Belfast N Ireland

I've been a Telewest customer for many years and only hope that the quality of services doesn't deteriorate under NTL. Both can give BT a run for their money. As for BSkyB - well they're far too expensive and offer customers few options and poor value for money and no telephone service! I think the new boys on the block will beat them hands down!
Jean Statham, Linlithgow

This merger between NTL and Telewest has been mooted for years, and if it is value-enhancing now it just shows how shamefully slow this move has been for shareholders wiped out by the financial manoeuvrings of these two companies. Consumers, like shareholders, will learn that these cable services are simply too slow, and they are more likely to find the services they want, when they want them, elsewhere.
Steve Hitchcock, Bexley, UK

If a combined NTL/Telewest exploits fully its cable network; i.e. faster broadband speeds and a truly enhanced digital TV service with on demand capabilities, and if it strategically uses its content arm Flextech to compete and use as a bargaining tool against Sky then cable will inevitably win the battle. Cable companies have always suffered from bad management and mountainous debts ¿ if they can sort these issues out then there will be no stopping cable.
Jonathon Churchill, Swansea