Microsoft has ditched its 23% stake in UK cable operator Telewest Communications, indicating that the UK cable and interactive TV sector is not as attractive a market as it once was. The holding has been taken up by US telecommunications group IDT for $5 million in cash (£3 million).
In July 2000, Microsoft paid for $2.6 billion for the stock. It had hoped to sell Microsoft-developed interactive television (iTV) software to the cable TV industry, but the slow uptake and general lack of interest in these services somewhat thwarted that plan.
Microsoft has gradually disposed of and written down investments in cable groups as a result of these market conditions. Reports claim the company has written off $7 billion in this way since over the last two years.
The opportunity to take the 23% holding in Telewest has also been declined twice by US media group, Liberty Media. Liberty, which already owns 25% of Telewest, had the right to buy the stake from Microsoft but withdrew on one deal as a result of weak markets and passed up completely on a further opportunity (see Liberty Media Passes Up 25% Telewest Stake Opportunity). Liberty Media will not receive the same first refusal rights now that the stake has passed over to IDT.
Telewest is about to emerge from a complex debt for equity swap in which the group will convert £3.5 billion of debt to shares. This will still leave the company with £1.8 billion of debt.
Shares in Telewest Communications were down by 4.7% at 2.1p this afternoon.
