NTL and Telewest = UK Cable

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NTL finally did its deal and <u>bought Telewest</u> for £3.4 billion. (As a sidenote, the reports tended to describe this as a "$6 billion" deal, because both companies are listed in the US public markets, where investors are perhaps less aware of the trecherous state of the UK TV market.)</p>



Combined, they'll lay claim to around 5 million households (around 20% of all UK households, and just under 40% of UK pay TV households), putting them 3 million households behind Sky and maybe a million households behind Freeview. This isn't, despite how it's been portrayed by some in the media, a merger of two competitors -- NTL and Telewest have distinct geographic footprints. It's a deal of largely complementary businesses -- which could make it harder to find cost efficiencies. The combined entity is, for now, being referred to as "UK Cable." Flextech, the Telewest TV production arm which was rumored to be on its way out the door, appears to be sticking around for now. I like the decision to keep Flextech, as Sky's always been able to get an edge by offering great exclusive content -- mostly sport -- and Flextech could allow UK Cable to play a similar hand. Especially if the European Commission forces the Premiere League to distribute its TV rights among <u>multiple rightsholders</u>, as threatened.</p>



The most interesting note of the conference call, pulled out by my colleague <u>Ian Fogg</u>, was that both companies said they planned to start rolling out HDTV towards the end of 2006 (though Telewest sounded more sure of this prediction). If they hit that mark, they'll only be six months behind Sky -- which is no difference at all in such an early market.</p>



Bottom line: the merger itself probably won't change much in the UK TV market -- consumers aren't losing any choice or gaining any value. But if the combined company is emboldened to change its strategy -- for instance, to start competing with Sky rather than just <u>reselling Sky's content</u> -- things could get very interesting.</p>

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