Telewest calls off Channel 5 talks

Telewest, the UK's largest cable operator, has abruptly called off talks with Channel 5 Broadcasting aimed at agreeing terms to retune video recorders, or VCRs, in Telewest franchise areas around the country.

The retuning is necessary to prepare receiving equipment for the new Channel 5 signal, which could cause interference to millions of VCRs. The backers of the new broadcaster, including Pearson Television and United News & Media, are to spend at least pounds 100m to visit 9.6 million homes during the campaign.

The negotiations with Telewest, which had lasted several months, foundered on disagreements over the price and schedule of the retuning exercise

"The money they were talking was just not enough, and the terms were just ridiculous," said one insider at Telewest.

"We felt the same about them," a Channel 5 spokeswoman retorted yesterday. "We felt that their figures were not realistic, and Channel 5 knows better than anybody how much homes can retuned for."

According to sources close to the discussions, Telewest had wanted up to pounds 14 a household, and to hire as many as 10,000 retuners to complete the job. The company had offered to retune all households in its franchise areas, or roughly 4.3 million, although it had also suggested it could handle just the homes already connected to its cable network, roughly 750,000. Both options have now been dropped.

Channel 5 has already reached an agreement with Nynex CableComms, franchise- holder in Manchester, under which about 12,000 homes will be retuned by Nynex staff.

According to Channel 5, the homes there have cable receiving equipment that cannot be easily retuned by non-specialists.

The broadcaster has also reached an agreement with Granada and Thorn, the leading rentals companies, under which they will retune their own kit in as many as 2 million homes.

That still leaves Channel 5 with more than 7.6 million homes to visit within the next four months. The spokeswoman said yesterday that the company was still on schedule to launch in January.

Channel 5 must complete 90 per cent of its retuning project before the Independent Television Commission allows the service to be switched on.

Meanwhile, Telewest is poised to announce it has dropped Mercury as its long-distance supplier for calls to the Pacific Rim, in favour of a new deal with Telstra, the Australian telecoms company.

The move may be the first sign of a shift by UK cable companies away from British telecoms companies, in search of lower carriage fees for their long-distance traffic.