Telewest in pounds 50m deal with Racal

Telewest, the UK's largest cable company, yesterday pledged even tougher competition with British Telecom and BSkyB by announcing plans to invest pounds 50m in developing a national fibre optic network in a deal with Racal.

The investment will link Telewest's regional cable franchises based around London, Bristol, the West Midlands, the North West, Tyneside and Scotland by 1998, allowing many phone calls and cable television services to be transmitted without using the existing fibre networks of BT and Mercury.

Racal, the defence electronics group, is close to signing contracts to lease capacity on its BRT fibre network which it bought from British Rail two years ago for pounds 133m. Of the total investment it is thought about pounds 10m could flow through to Racal in a deal expected to last for 15 years.

The agreement will be seen as further distancing Telewest from some of the other cable operators that are in the process of merging with Cable &Wireless's Mercury subsidiary in a pounds 5bn deal. Telewest is thought to have previously discussed joining the merger with Dick Brown, C & W's chief executive.

Stephen Davidson, Telewest's acting chief executive, also promised to offer a digital television service to cable customers by the end of this year, the same timetable as BSkyB. He said he was close to agreeing contracts with companies to make set-top boxes to access programmes.

Telewest yesterday said its total residential customer base had grown by 34 per cent last year to 768,755. The strongest increase in demand was for telephone services, rising 46 per cent to 627,009 customers, compared with 528,142 television subscribers.

Mr Davidson also disclosed that a decision was due soon on whether to appoint him as permanent chief executive. A board meeting held last Tuesday again failed to resolve the appointment.