Flextech Aims to Bring Pay-TV Content to the Telewest Party ; NEWS ANALYSIS New Combine to Challenge BSkyB in Interactive Media
Associate, Nigel Cope, The Independent (London, England)
FOR A deal that was supposed to be announced first thing yesterday, the proposed pounds 9bn merger between cable TV groups Telewest and Flextech appears to be having an awkward birth.
It was 4pm before the market had a statement and even then it said only that talks between the two parties "are progressing". Formal notification is expected today after lawyers on both sides of the Atlantic have ironed out all the wrinkles.
What the deal will create, when it is eventually confirmed, is a combined cable television-pay TV group with 1.6m subscribers and access to more than 6m homes. More importantly, it creates a potentially serious challenger to the "Big Daddy" of the pay-TV market, BSkyB.
On the face of it, these two companies are nothing to shout about at present. Both have yet to record a profit. Telewest will only be number two in the UK cable TV market if NTL's takeover of Cable & Wireless communications goes through. And the value of Flextech's channels, which include Bravo and Trouble, a channel aimed at teenagers, is open to question.
So why are they doing it? The answer is that both companies need a deal. And both believe scale will be important as digital cable battles for dominance in the market for interactive services such as shopping and banking.
With the cable market clearly consolidating, Telewest needs to be able to negotiate from as strong a position as possible. Flextech, for all its innovation, is a relatively small player in the media jungle.
For Flextech, the merger will give its channels access to a far wider distribution base. Telewest gains access to Flextech's programming content which forms a major part of the basic packages on satellite, cable and OnDigital. But in the broadest sense this deal is about maximising cable's bandwidth advantages over satellite's more limited capabilities.
Digital cable technology is capable of pumping far greater volumes of digital data down its "pipes" than rival means of distribution.
Telewest is confident that as interactive television takes off the value of cable's rapid access will become a major advantage though it has given its satellite and terrestrial rivals a head start. …