Telewest in black; NTL merger may loom

Flextech revs rise 19% to $56 million

LONDON — Telewest, the U.K.’s second biggest cable combo, edged into profit Thursday amid rumors that its long-expected merger with rival NTL is about to happen.

Announcing first-quarter results, Telewest, which last year completed a protracted financial restructuring, increased its customer base to 1.82 million subscribers and upped revenues by 3% year-on-year to £338 million ($608 million).

Revs at Telewest’s TV channels arm, Flextech, rose 19% to $56 million.

Speculation is intensifying that a Telewest/NTL merger — necessary if U.K. cable TV is to compete with dominant satcaster BSkyB and digital terrestrial television service Freeview — is in sight.

NTL’s sale of its TV masts business and Irish division are seen by analysts as evidence that preparations for the marriage are under way.

But before any merger can proceed, Telewest is expected to float Flextech, owner of the UKTV bouquet of channels run jointly with the BBC, and the Living, Bravo and Challenge channels.

Flextech sale is complicated because the BBC has an automatic right to buy the half of UKTV it does not own.

There is also the vexed question of how much Flextech is worth, with estimates varying from $800 million to $1.4 billion.

One possible buyer is RTL Group, the Pan-European outfit that has a controlling interest in U.K. terrestrial broadcaster Five.

Its chief executive, Jane Lighting, is the former CEO of Flextech.

Following the collapse of merger talks with Channel 4, Five needs to develop a multichannel digital strategy fast, as RTL topper Gerhard Zeiler indicated when he addressed the Royal Television Society in London last week.

Provided the price is right, Flextech would represent a smart strategic move on the part of RTL since the UKTV channels plus Living are some of the most watched niche webs in Blighty.

During a conference call with analysts, Telewest declined to comment on a merger or the disposal of Flextech.

Both Telewest and NTL are listed in the U.S.

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