Telewest Buys General Cable For £649m

Telewest this morning announced that it would be buying up rival cable operator General Cable for an agreed £649 million. This will mean Telewest overtaking Cable & Wireless Communications as the UK’s largest cable operator.

At present Telewest owns and operates 28 franchises which, along with stakes in other operators, means that its networks cover 4.4 million homes in the UK. General Cable, meanwhile, owns nine franchises covering 1.7 million homes.

As a result of the deal Telewest will be expanding its services in the London, Birmingham and Yorkshire areas.

News of the deal resulted in a slight drop in Telewest’s share price, down 0.75p to 88.25p, perhaps mirroring investor’s trepidation at more investment in an industry which has so far failed to live up to expectations.

Despite ambitious and costly build programmes by the big cable players, penetration rates have remained static. Latest ITC data shows that of 11 million homes which have been passed by a cable network, only 2.454 million have taken up services – a penetration rate of 22.3%, up only 0.1% on the previous year.

It is believed by many in the business that only by consolidation can the cable industry begin to make a significant impression as a medium and Telewest’s move mirrors that of Cable & Wireless, which bought three cable companies in 1996 to form Cable & Wireless Communications (subscribers see Cable Companies Merge). The company is now producing profits which are the envy of many in the industry: its last set of results showed an increase in profit before tax of 103% to £65m. Telewest however announced a rise in pre-tax losses from £249.9 million to £309.9 million for 1997.

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Telewest: 01483 750900