Telewest's Flextech merger puts back break even

TELEWEST, THE cable operator and Flextech, the producer of the Bravo and UK Gold channels, confirmed plans for a pounds 10bn merger yesterday.

However, the deal was criticised by some analysts who said the two companies loss-making period would be extended. Nigel Hawkins of Williams de Broe, said: "This delays profitability again. The promise is of jam tomorrow but the jam gets further and further down the track." The company admitted profitability would be delayed for two more years, to 2003, due to goodwill write-offs.

Adam Singer, who will be chief executive of the merged company, said the deal wouldcombine Telewest's distribution network, which has access to six million UK homes, and Flextech's 15 TV channels. Tony Illsley, who will be managing director, said a tie-up with US cable group NTL was less likely, though he did not rule out future deals. "This strengthens our ability to be independent and strengthens our hand if there is a push for consolidation," he said.

The merger is being effected by way of an offer of 3.78 Telewest shares for each Flextech share. The deal will give Telewest shareholders 80 per cent of the equity of the group, with Flextech shareholders holding the remaining 20 per cent.

Mr Illsley, who said there would be hardly any job losses as there is very little overlap between the two companies, dismissed suggestions that he and Mr Singer would not be able to work together. "I think we're both big enough and old enough not to worry about that kind of thing," he said.

Flextech shares fell 20p to 1195 valuing the business at pounds 1.9bn. Telewest shares fell 5.5p at 334.5p.