New share values jeopardise US West-Continental merger

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The Independent Online
What had promised to be the biggest deal ever, involving Baby Bell telephone company US West, and television cable operator, Continental Cablevision, may falter because of shifting share values.

US West gripped the industry last February with plans to purchase Cablevision in a cash and stock deal worth $5.3bn (pounds 3.4bn). It represented the first major realignment after the passage by the US Congress of a bill liberalising telecommunications and allowing telephone companies for the first time to enter the cable business.

Doubts that the two companies will be able to consumate the merger in time for the planned deadline for closing later this year have surfaced because of a recent dive in the value of US West's Media Group stock. The shares are hovering just below $17, down about 25 per cent from the $22.15 they were trading at when the pact was announced.

Further damaging prospects are quarterly earnings announced by the Media Group last Friday. It reported its first loss of $11m, or three cents a share, compared with a profit of $25m in the same quarter a year ago.

Publicly, US West says it remains committed to the transaction, however. "We like this deal, we get along famously as partners"a company spokesman said.

There has been intense interest in US West's push towards global expansion and use of the liberalisation bill by entering cable distribution rather than by seeking new partners in the telephone business.