Merger Possibilities in U.K. Cable

Rumors were flying last week in the European cable market that Telewest was in talks with United Pan-Europe Communications, a relative newcomer to the high yield arena, about a possible alliance. And if it is indeed true, it could position itself to compete more directly with NTL, analysts said last week.

The U.K. cable industry has been undergoing a consolidation trend, and has been whittled down to essentially NTL and Telewest. The third major issuer, Cable & Wireless, agreed to sell its residential cable business to NTL in July. Furthermore, NTL was viewed by a number of analysts as the eventual sole firm in the industry.

But with the possible backing of Amsterdam-based UPC, Telewest could remain a competitor of NTL instead, a cable analyst said last week.

UPC issued a $1.5 billion offering last month, and is expected to become a benchmark in the continental European cable market. But it has no presence in the U.K. as of now.

And indeed, one analyst said that NTL still may have a slight advantage if an all-out bidding war ensues for Telewest, because NTL already has its large U.K. cable business. Telewest officials could not be reached for comment.