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CWC and Telewest take aim at BSkyB

CABLE & WIRELESS Communications and Telewest, the two cable operators locked in merger talks, are preparing a major assault on BSkyB's domination of the digital television market with plans to recruit half a million subscribers to their rival service within a year.

Telewest, which launches its digital service this autumn, said it aimed to sign up 300,000 customers by the fourth quarter of next year. CWC, which will offload its cable television and small business customers to Telewest under the merger plans, has already said it expects to sign up 200,000 customers within a year once it launches its digital service in July.

BSkyB has 550,000 digital subscribers and analysts expect it to beat its target of one million by this October comfortably following its offer of free set-top boxes and cut-price telephony.

Tony Illsley, the chief executive of Telewest, refused to comment on the CWC talks . But he said consolidation in the cable industry would make a lot of sense if it enabled one operator to compete as a national brand. He also said he was excited about Microsoft's decision to take a 29.9 per cent stake in Telewest. This could result in the UK's third cable operator, NTL, in which Microsoft has a 5 per cent stake, joining the merged operation.

Telewest's subscriber numbers surged in the first quarter but so did net losses. It took on a net new 29,000 television customers and a further 24,000 residential telephony customers, increasing its total residential customer base to 1.4 million - 35 per cent of the homes passed.

Net losses rose to pounds 135m from pounds 87m a year earlier, largely because of a sharp increase in interest charges following the acquisition of General Cable.

Charles Biddick, Telewest's finance director, said expenditure would rise to around pounds 400m this year, including pounds 70m for digital. Marketing spend will rise to pounds 25m and Telewest expects to be offering digital services to 90 per cent of its market by April next year.

Outlook, page 22