Electricity supplier enters cable market: South Wales company links with Americans to offer TV and telephone services

Click to follow
SOUTH Wales Electricity is to go into the cable television and telephony market through a pounds 75m joint venture with CableTel of the US.

The company is among the first of the regional electricity suppliers to attack the cable market, and more are expected to follow suit.

CableTel will contribute franchises in Cardiff and Newport to the new company while Swalec will add the West Glamorgan franchise, which it is buying from Cast Holdings. The joint area covers about 300,000 homes and 25,000 businesses in South Wales.

Swalec's initial investment is pounds 4m, rising to pounds 30m over several years. The company expects the venture to have only a marginal effect on earnings and gearing. Mike Mackey, Swalec's commercial director, said the cable company - as yet unnamed - would be cash-positive by the mid- to late 1990s and would have a positive effect on earnings by the end of the decade.

CableTel has become one of the most active players in the British cable business. This month it completed a stock issue on New York's Nasdaq, raising dollars 270m ( pounds 182m) for investment. Formerly known as Ocom, CableTel also has franchises in Glasgow, Guildford, Huddersfield and the London area.

Cable television companies are regarded as the main threat to BT in local telephony services. They offer discounts of about 15 per cent on BT's call charges and have low connection charges. Some companies with their own telephone exchanges offer flat-rate or free off-peak calls as long as they do not have to be routed through BT or Mercury switches or wires.

The growth of cable has prompted BT to call for the abolition of the rule that prevents it offering entertainment services over its telephone network. Iain Vallance, BT's chairman, said yesterday that the time had come for the Government to look again at this restriction.

BT wants to send video-on-demand down the telephone wires and believes it can do so under its present licence. However, it cannot send broadcast television and will not be able to do so until 1998 at the earliest.

The cable industry was angered by a recent ruling by the Independent Television Commission that BT could provide video, although with the caveat that specific proposals would be carefully examined. The Government said the ITC had made a legal ruling and it would not act to stop BT's video plans.

(Photograph omitted)