A shortage of flash memory chips is delaying the digital rollout of the UK’s second largest cable group, Telewest Communications. The chips are a key component of the set-top boxes, manufactured for Telewest by Pace Micro Technology, and essential for the receipt of digital TV signals.

Bemoaned Telewest chief executive Adam Singer: “We have been connecting digital TV subscribers as fast as we can get the boxes.” Digital sales to date had reached 223,000, eighty per cent of which had been connected to the DTV service. Existing analogue subscribers are still being transferred to digital, while new customers are being offered analogue boxes pending a free digital upgrade.

To make matters worse, Telewest’s churn rate (subscriber cancellations) has risen to 14.5 per cent, with some 10,000 customers deserting the network. However, analysts see this as an inevitable side-effect of the switch to digital, affecting all providers including BSkyB.

But the money market was less than sympathetic to Telewest’s woes, and its share price declined yesterday by 11% after the company announced interim losses up from £264 million to £296m. “Every year break-even drifts one year further away,” said HSBC analyst Stephen Scruton, who now predicts that a move into the black will not happen before 2010.

Telewest intends to launch a broadband internet portal early next year, coincident with a full video-on-demand service.

News source: Financial Times