The Videotron acquisition would catapult Bell Cablemedia alongside TeleWest as the country's largest cable operators and would affirm the company's commitment to the UK market.
However, Cablemedia's enhanced muscle in both the cable and telephony markets could prompt a reshuffling of the industry pack, bringing further consolidation among cable companies and signal new involvement from European telecoms operators.
Videotron has been on the auction block for eight months since its eponymous Canadian parent decided it wanted to concentrate its activities on the newly liberalised US market and sell its 56 per cent stake in the UK cable operator.
There have been numerous suitors and permutations during the complex negotiations that have thrown up difficulties on valuation, offer structure and cross shareholdings.
Bell Cablemedia has always been in the running since it already has a 26 per cent stake in Videotron in the UK. It clinched the deal by increasing the amount of cash on offer.
The Videotron acquisition could provide the springboard for a reshuffling of Bell Cablemedia's own ownership structure.
Bell Cablemedia is 42 per cent owned by Bell Canada International and Mercury Communications, the Cable & Wireless subsidiary has a further 13 per cent stake. BCI has a 20 per cent stake in Mercury.
There is speculation that BCI is ready to sell its stake in Mercury and create a new partnership with Deutsche Telekom, which would buy a significant stake in Bell Cablemedia.
Relations between Mercury and BCI are frosty. Tension could increase with Bell Cablemedia's acquisition of Videotron, since this would throw it into direct competition with Mercury in the London market.
Deutsche Telekom is keen to secure a UK presence and investment in cable is seen as a cheap way in. Cable companies have had their greatest successes in the telephone business. Residential telephony penetration continues to grow, and growth in the business sector is accelerating.Reuse content