Lower cable rates sank Bell merger

BOTH PARTNERS in what was to have been the largest corporate merger - between Bell Atlantic and Tele-Communications Inc - blamed regulators for the collapse of the dollars 33bn deal, but a sceptical market appears to have been the real culprit.

The companies called off their historic merger late on Wednesday, less than 72 hours before its scheduled consummation, citing a tougher-than-expected roll-back of US cable TV rates.

Bell Atlantic's offer for TCI shares was based on the cable company's cash flow, and the lower return - 4-8 per cent below earlier projections - would have resulted in a price 'below what TCI shareholders would accept', said Jim Cullen, president of Bell Atlantic.

Given the lower price, John Malone, chief executive of TCI, 'decided to take his house off the market for now', Mr Cullen said.

But the share prices of both companies, after a brief surge following last October's announcement, have fallen steadily in recent weeks, sharply reducing the payoff TCI expected.

Bell Atlantic investors, in particular, have been concerned that potential profits from inter-active multi-media do not justify the high price of the deal, almost 12 times TCI's 1994 cash flow.

There has also been speculation that Mr Malone, who has continued to discuss potential deals with other media firms, might have attempted to re-negotiate the terms. Both parties denied this.