In a significant reshuffle of the cable television industry, US West, the regional telephone company, announced plans yesterday to purchase Continental Cablevision, America's third cable operator, in a $10.8bn deal.
The transaction comes in the wake of the telecommunications deregulation bill recently passed by the US Congress allowing telephone and television cable companies to enter into each other's territories. It should transform US West, which already has an important stake in the cable interests of Time Warner, into a formidable power in the cable sector. It would serve nearly one of every three US households connected to cable as well as an additional 13.9 million homes internationally.
US West is alrady a player in the UK cable and telephony markets, via Telewest, its London-listed joint venture with major US cable company TCI.
Separately yesterday, AT&T unveiled ambitious plans to get into the Internet market. The telecommunications giant said it was launching a new Worldnet service to offer a low-cost connection to the Internet and the worldwide web.
Contentinal Cablevision has 4.2 million subscribers as well as holdings in programme companies which include Turner Broadcasting.
Chuck Lillis, who heads US West Media, said in a statement: "The Contentinental properties are widely recognised as some of the best-run and best-clustered cable systems in the world". US West will pay $5.3 bn in cash and stock for Continental's shares and assume the company's debt, put at $5.5bn.
It remains unclear how the transaction will affect US West's 25 per cent holding in Time Warner Entertainment, the unit of Time Warner that includes both its cable operations and its HBO programming arm. USWest is locked in a court battle with Time Warner over its attempt to buy Turner Broadcasting. USWest may be signalling a desire to buy out Time Warner's own cable operation or to relinquish its interests the media group altogether.
Meanwhile, US West's UK associate, Telewest, yesterday threw its weight behind a new marketing campaign to develop the struggling cable market in the UK. The industry is expected to spend pounds 12m promoting cable, in addition to spending by the main operators.
Alan Michaels, chief executive of Telewest, said the industry "needed to be proactive in promoting cable, now that UK networks are one- third built.