pounds 5bn C&W deal runs into snags

The landmark pounds 5bn deal brokered by Cable & Wireless to merge its Mercury phone subsidiary with three cable companies is unlikely to meet the planned April deadline after a hitting a series of obstacles.

Sources have pointed to growing disagreements between the companies involved, with insiders blaming a clash of cultures between the notoriously bureaucratic Cable & Wireless and the smaller cable operators. In a move to speed up the process, a large team of management consultants from the Boston Consulting Group has been deployed, along with public relations advisers Brunswick. However, concern has been expressed that C&W, essentially a telecommunications business, has little previous experience of the television industry.

The deal, which would see C&W with a controlling stake in the company, is now thought to be unlikely to be completed until the summer. Another problem is the sheer complexity of the task, with lawyers and brokers acting for Mercury, Nynex CableComms and Bell Cablemedia, which is in the process of taking over Videotron's UK operations.

The difficulties have emerged as the joint steering group organising the merger, headed by C&W director Stephen Pettit, has been forced to postpone the announcement of a chief executive to run the new company, to be called Cable & Wireless Communications. The appointment was due to be announced on 6 January, but speculation is mounting inside the various organisations that the original preferred candidate for the job has unexpectedly turned it down. Another theory is that the post has been offered to an American from the entertainment or computing industries but the appointment has become bogged down in contractual difficulties.

Mr Pettit has kept the shortlist a closely guarded secret, though two preferred candidates were thought to be Adam Singer, president of TCI's international division, and Mike Harris, head of the Prudential's banking arm and a former C&W executive.

However, Mr Singer is also believed to have turned down the job after concern at the way the deal was being organised. Sources have complained that failure to appoint a chief executive has led to a damaging lack of leadership, not so far alleviated by the appointment of Dick Brown as chief executive of C&W last July.

Meanwhile, Dan Somers, the chief executive of Bell Cablemedia, has told colleagues he will return to Canada to work at Bell Canada Enterprises, the parent company. He has been removed from the list of possible candidates for the C&W Communications top job.

It is understood that Duncan Lewis, the former chief executive of Mercury who left Granada Media Group late last year after a row with the head office, has also been ruled out, following at least two meetings between Mr Lewis and Mr Brown. They are believed to have decided it would be "inappropriate" for Mr Lewis' name to be added to the list of candidates.

John Killian, chief executive of Nynex CableComms, another merger partner, has also been ruled out. He was kept out of the secret discussions that led to the dramatic merger, announced last year.

Bell Cablemedia and Videotron, meanwhile, are making further progress on their own merger, which is seen as a first step toward finalising the broader merger of the four companies within Cable & Wireless Communications. In the next few weeks, most of BCM's staff will be relocated to Videotron's Hammersmith headquarters.

The four companies involved in the merger are bracing themselves for thousands of job losses, with several senior and mid-management executives likely to lose their posts.

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