Ofcom's ominous signal to NTL's £1.2bn mast sale

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The Independent Online

The planned £1.2bn sale of NTL's radio and television broadcasting business has been dealt a potentially fatal blow after Ofcom announced tougher than expected restrictions on how the market operates.

The planned £1.2bn sale of NTL's radio and television broadcasting business has been dealt a potentially fatal blow after Ofcom announced tougher than expected restrictions on how the market operates.

The rules, which are expected to be introduced next year, could reduce the value of the NTL business and hinder its efforts to reduce its £3.8bn debt mountain. The Nasdaq-listed cable company has said it will announce whether to go ahead with the sale of the broadcast business at the end of the year.

One private equity source close to the sale auction said: "It will force some of the bidders to take a second look at its numbers." Around six bidders are thought to be on the shortlist, including Apax Partners, Macquarie Bank and Guy Hands' buyout fund, Terra Firma. The source added that some could drop out because of the uncertainty caused by the changes planned by the regulator. Terra Firma unsuccessfully made an offer for utility group National Grid Transco's heavily regulated pipes businesses earlier this year. It is understood that uncertainty over how it would be regulated dampened its enthusiasm for the deal.

NTL and rival mast operator Crown Castle, which is owned by National Grid Transco, own around 1,100 masts in the UK. Between them they dominate the broadcast transmission business. The companies charge television and radio companies to use their masts to carry analogue and digital signals. The two companies generate more than £250m in annual revenue from the charges, but this will rise as more broadcasters go digital.

But last week Ofcom, headed by Stephen Carter - ironically a former chief executive of NTL - declared that the market was "not effectively competitive". The regulator said that restrictions to prevent the cable companies abusing their duopoly needed to be introduced.

These include forcing the companies to free up access to their masts, for example by stopping them signing exclusive access deals with broadcasters. Ofcom also wants access bidding to be transparent and competitive.

The new pricing rules, which are expected to be introduced next spring, come as broadcasters prepare to invest billions of pounds to go digital, ahead of the analogue switch-off in 2012.

NTL said it was still digesting Ofcom's consultation document, and declined to comment. It is selling the business to reduce its debts. This is NTL's second attempt to hive off the business: it postponed the sale in December 2001 over fears that its debt restructuring plans would depress the price.

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