London -- Fast on the heels of its $1 billion investment in
NTL Inc., France Telecom has offered to pony up another $2 billion to help the British MSO
in its bid for peer operator Cable & Wireless Communications plc (CWC), according to
sources familiar with the deal.
The final elements of NTL's bid for CWC, which is
worth more than $12 billion, are apparently being hammered out, and an announcement is
likely to emerge this week.
CWC is 52 percent-owned by British telecommunications
conglomerate Cable & Wireless plc and 18 percent by Bell Atlantic Corp. of the United
States.
Rival CWC bidder Telewest Communications plc reportedly bid
about $12.8 billion, comprised of some $8 billion in stock and around $5 billion in cash.
NTL's offer carries a proviso, to which CWC has
agreed, giving it the exclusive right to bid for CWC for a 21-month period, apparently
shutting out Telewest. However, both camps claimed to have the edge.
Several market observers said they believe NTL's
vision and execution skills would contribute something extra to a "hideously
undermanaged CWC," as one industry source put it.
Whichever company wins the bidding for CWC, there are now
some concerns that the process of consolidation will slow the rollout of digital cable in
the United Kingdom. British MSOs are under considerable pressure from both digital
direct-to-home and digital-terrestrial platforms.
NTL's view, according to a company insider, is that
there will be no delays. "Both CWC and ourselves are currently rolling out digital,
and I expect that to continue. Integration will then run side-by-side with current
[digital] launch plans," the source said.
There has been much speculation that all three MSOs will
eventually merge into one company, and that a deal for CWC is just an initial step toward
that.
"Not so," one analyst said. "All three U.K.
MSOs are already significant companies quite able to stand on their own."
The source did suggest, however, that there will likely be
increased cooperation between the two large MSOs that emerge from the current bidding
process. As an example, he pointed to NTL's and Telewest's successful
cooperation in pay-per-view programming service Front Row.
Morgan Stanley Dean Witter & Co. media analyst Sarah
Simon said greater consolidation in the United Kingdom would benefit the industry in the
medium to long term, "so that transmission equipment, and even set-top boxes, can be
integrated and harmonized." She also noted that an enlarged NTL would have little
difficulty absorbing CWC's operations.
An analyst who follows France Telecom noted that the
company -- the stock of which "has performed poorly this year" -- was under
pressure to boost short-term earnings.
"But if NTL can be the architect of a consolidated
U.K. cable sector, with France Telecom bankrolling the venture, then we feel comfortable
with that," the analyst added.
