France Telecom Takes £640m Stake In NTL To Back CWC Bid
France Telecom last night agreed to acquire a 10% stake in UK cable and telecoms company NTL for $1 billion (£640 million). The backing by France Telecom offers NTL further leverage in its £8 billion merger discussions with rival UK cable company Cable & Wireless Communications (CWC).
If NTL’s bid for CWC were to succeed, France Telecom would increase its stake in NTL, probably to become the largest shareholder without taking a majority stake. The deal by France Telecom is a move to muscle in on the fast-consolidating UK cable industry. If CWC and NTL completed a merger, France Telecom could take a stake in the resulting group.
There are now only three major players in the UK cable industry: CWC, Telewest Communications and NTL. It is expected that eventually all three will merge in to one large operator which would have a combined potential reach of over 12 million homes. A mega-operator would also present a much stronger competitive force against BSkyB and ONdigital in the world of pay-TV and interactive services.
CWC has been conducting ‘exclusive’ merger negotiations with Telewest since April this year (see Cable Giants Meet For Merger Talks) and although nothing has been officially announced to date, reports are now suggesting the discussions are reaching an advanced stage. Potentially a key player in a three way merger, is Bill Gates’ US software company Microsoft. Microsoft recently acquired a 29.9% stake in Telewest (see Sharewatch) and also holds a 5% stake in NTL (see NTL Teams Up With Microsoft). It is understood that Gates is keen on such a merger.
CWC is continuing to hold discussions with both Telewest and NTL and an outcome is expected within days.
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