US cable giants agree $60bn link-up
Tuesday 23 March 1999
The agreement, the costliest ever struck in the industry, turned the spotlight on two British companies part-owned by MediaOne - One2One, the mobile phone company, and Telewest Communications, Britain's second-biggest cable company by sales.
Comcast, based in Philadelphia, and MediaOne combined will be an industry heavyweight, well placed to offer not just television channels but also Internet and telephone services. It will have broadband access to 18 per cent of US homes. Its biggest rivals will be Time Warner and AT&T, which recently completed its buyout of cable giant TeleCommunications.
Speculation spread yesterday that the deal could trigger further consolidation in the British communications sector. MediaOne has a 29.9 per cent stake in Telewest it could be tempted to sell, analysts said. It also owns half of One2One with equal partner Cable & Wireless.
The future of Telewest may be doubly unclear as another of its owners, with 21.6 per cent, is TeleCommunications, that is now part of AT&T. As a result, as much of 51 per cent of Telewest could be up for grabs.
Yesterday's developments could also herald a public offering for One2One. "The net result may be that Telewest is bid for either by NTL or Cable & Wireless Communications," said John Tysoe, telecoms analyst at SG Securities. "The whole industry is looking for some kind of consolidation. This is only the beginning."
There was no indication from MediaOne yesterday that it intended baling out of either One2One or Telewest. Even so, the marriage to Comcast means that the contribution to revenues from international operations will shrink from 20 per cent, as it is now for MediaOne, to 10 per cent.
Comcast has wide interests in the US, including a 57 per cent stake in QVC, the home shopping network, as well as holdings in the E! and Golf channels and two Philadelphia sporting franchises. Among the owners of Comcast is Microsoft. Bill Gates paid $1bn for an 11.5 per cent stake in Comcast in 1997.
The cable industry is banking heavily on its ability to break into the fast-growing Internet market. Its broadband networks have an advantage over telephone lines as they can deliver sound and moving pictures more quickly.
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