NTL and Telewest Start the Heavy Breathing

24 June 2005

It takes two to tango. Furthermore, the Latin-American dance, which is said to have originated in the brothels of late nineteenth century Buenos Aires, has long been described as foreplay set to music.

All of which is an apt metaphor for the relationship between NTL and Telewest, the two US owned mega-lossmaking cable companies which operate solely within the UK.

Both share mutual investors and have recently emerged, restructured, from the financial doldrums.And both have been whispering sweet nothings into the ears of the other as they strut in ever decreasing circles towards congress.

According to the Financial Times, the tangoing twosome have been indulging in mutual due diligence and could announce the outline terms of a £5.9 billion ($10.75bn; €8.86bn) merger as early as next month.

Central to their nuptial negotiations - and a potential sticking point - is Telewest's TV content unit, Flextech, whose portfolio includes UKTV, a fifty-fifty joint venture with the BBC.

The Telewest camp believes that Flextech has not been valued accurately, with estimates of its worth varying between £450m and £1bn.

Despite this uncertainty, the talks have moved into what one insider calls the "detailed investigative phase". Although a formal offer has yet to be made, an announcement of the marriage could come before the companies' publish their respective interim results in early August.

Data sourced from Financial Times Online; additional content by WARC staff