Dutch cable giant looks likely to enter Telewest bid stakes

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The Independent Online

UPC, the Dutch cable company, last night emerged as a likely bidder for Telewest, after a weekend of speculation about the future of the the UK's second-biggest cable TV company.

UPC, the Dutch cable company, last night emerged as a likely bidder for Telewest, after a weekend of speculation about the future of the the UK's second-biggest cable TV company.

Industry sources pointed to the likelihood of an offer from UPC, which already owns 25 per cent of Telewest, saying that it would complement the strategies of both companies.

Last month UPC merged with America's leading provider of fast internet access to create Excite Chello, now Europe's largest supplier in the emerging broadband internet market. In the UK Telewest holds a strong position in the same market.

The news of UPC's interest in Telewest came after the struggling cable company dismissed weekend reports that it has been in talks with Callahan Associates, a US private equity firm specialising in the telecoms sector. It is headed by Dick Callahan, who sat on Telewest's board until the mid-1990s.

Callahan, which owns Spain's largest cable operator, ONO, as well as Numericable's cable operations in France, was reported to have approached Telewest's board with an offer valuing the business at up to £6bn. But industry watchers said any deal between Callahan and Telewest would not be viable.

One said an offer could well be trumped as there are a number of other firms interested in Telewest, which is currently valued at £4.6bn. In addition, Callahan would have to refinance the business due to Telewest's $10bn debt, much of which is in low-grade bonds.

UPC took on its stake in Telewest from the US cable programming group Liberty in June, although Liberty retains voting rights on board. UPC has said it is interested in forging closer ties with the company. Despite the scale of its merger with Excite, it does not have a substantial operational presence in Britain. Roger Lynch, chief executive of Excite Chello, said at the time of the merger: "We're very interested in Telewest and hope to work with them closely in the future."

However, any move by UPC could be contested by rival bidders or by Telewest's other major shareholder, Microsoft.

Telewest is unlikely to be given up without a fight by NTL, the UK's largest cable TV operator. Telewest has also said that it may talk to its rival. Last week Telewest chief executive Adam Singer said that talks with NTL would be "legitimate speculation" and admitted that there would be advantages in consolidating the industry.

However any bidder would come up against Microsoft, which owns 23.6 per cent of Telewest and is thought to want to increase its stake. But the software giant, which also owns 5 per cent of NTL, may not be an insurmountable problem. People close to the companies say it too wants to see consolidation. A merger would give competitors the power to fight Sky Digital in the battle to control the roll-out of set-top boxes.

Telewest said it is not talking to any potential bidders at the moment. But that situation could easily change as it is at a particularly weak point. Its share price dropped 11 per cent in one day last week, after it admitted its digital roll-out would be delayed and revealed disappointing subscriber figures. Its shares have plunged 71 per cent from a high of 563p in March to 160p on Friday.

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