TCI willing to cede control of Flextech in cable deal

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TCI, the giant US cable company controlled by John Malone, would be willing to see its stake in Flextech drop to below 51 per cent as part of ongoing negotiations to consolidate Flextech's ownership of UK Gold and UK Living, the hit cable and satellite channels worth about pounds 200m.

In exchange for the stakes in the two channels held by Pearson Television and Cox Communications of Atlanta, it emerged last night that TCI was prepared to offer shares in Flextech, the programming packager, taking its own holding to below 51 per cent, perhaps to as low as 40 per cent.

The result would be a new force in pay-TV, with owners ranging from current shareholders TCI, Hallmark and US West to new investors, Pearson and Cox.

The group would be a formidable partner for the BBC, which is negotiating with Flextech to develop six new television channels, featuring BBC programming. US carriage for the BBC's channels could be arranged through TCI and Cox, the first- and third-largest cable operators in the US.

The deal would also safeguard UK Gold's close association with the BBC, through an existing programme licensing agreement that gives the cable channel access to the BBC's large library.

Insiders at Flextech maintain that the contract is iron-clad, having commissioned lawyers to analyse it line by line. With the exception of current affairs, documentaries and some childrens' programming, no BBC programmes can run on competing cable and satellite services, the lawyers have concluded.

Flextech therefore believes it has an edge over BSkyB, the satellite broadcaster, which has also offered to work jointly with the BBC on the development of the new channels.

The Flextech partners also assert they can help the BBC develop its interests globally, by combining strong distribution networks (TCI, Cox) with programming expertise (Pearson and Hallmark).

In the future, the group could form the embryo of a competing pay-TV service to the market leader, BSkyB.

The Flextech group would be willing to distribute the new BBC services by any means available, including through the Sky multi-channel package.