NTL & Telewest: Together at Last!

After years of talks, rumors, and excruciating anticipation, the U.K.'s two cable operators, ntl group ltd. (Nasdaq: NTLI) and Telewest Global Inc. (Nasdaq: TLWT) formally announced their $6 billion marriage today. (See NTL Acquires Telewest and Europe Is M&A Feverish .)

NTL, the groom, will buy its bride, for about $6 billion, or $23.93 per share, in cash and stock ($16.25 in cash and 0.115 ntl shares for each Telewest share). Telewest's current shareholders will own about 25 percent of the combined company.

The deal sent ntl's share price down by 83 cents, more than 1 percent, to $65.97. Telewest's share price rose 22 cents, nearly 1 percent, to $23.17.

The two triple-play operators, whose service territories do not overlap, are aiming to be a business with annual revenues of about £3.4 billion (US$6 billion) and a combined net debt of $3.2 billion ($5.6 billion). The two firms estimate that, by combining their businesses, they can ultimately reduce their annual costs by £250 million ($439 million) a year from 2008 onwards.

The new cable giant will have 5 million customers, of which 2.5 million are broadband customers. That gives it just over 31 percent of the U.K. broadband market, and something a bit more meaty for to compete against. (See BT Gets Aggressive With VOIP.)

"This is a logical outcome of the ongoing consolidation process, and one that's been expected for a long time," says Heavy Reading senior analyst Graham Finnie. "It doesn't make sense for them to just be regional players any more -- at last there's a single national competitor to BT.

"Whether they can pull it off is another matter. The proof will be in the pudding, as they'll have a lot of business and technical issues to overcome."

Those technical issues will be made a little less painful by ntl having already undergone the pain of a major network transformation that has seen it deploy a number of the same technologies from the same vendors as Telewest. (See NTL's NGN Hell, Brits Do VOD With SeaChange, and WWP Scores With Brits.)

— Ray Le Maistre, International News Editor, Light Reading