U.K. set to investigate cable, pay TV mergers

Move sends stock south

LONDON — Britain stunned the media industry Friday by saying it would probe two major deals that advance consolidation in the cable and pay TV industries, sending the stock of several major firms tumbling.

Trade Secretary Stephen Byers said Cable and Wireless Communications’ plans to sell its cable business to NTL Inc. will be referred to the official Competition Commission for review. Shares of CWC stood at £6.70 ($10.83), down 9%, by market close.

Stock in BSkyB was off by $10.26 after Byers said he was asking the commission to look into French conglomerate Vivendi’s acquisition of a “material interest” in the satellite TV giant.

But Carlton Communications and Granada Group, which jointly own rival digital terrestrial TV company ONdigital, jumped 7% and 2%, respectively. ONdigital chairman Michael Green “gets his Christmas and birthday all rolled up in one,” said WestLB Panmure analyst Lorna Tilbian. “There’s a three-way fight between satellite, cable and ONdigital. To have your two main competitors referred (to the Competition Commission) within moments is about as good as it gets.”

NTL said it hoped its CWC deal can still be closed on time. “We continue to believe the combination of the companies involved is in the public interest,” chairman Barclay Knapp said.

The commission is to report by Feb. 25 on both cases; the referrals are both linked to pay television.

NTL said in July it was buying the cable TV arm of Britain’s market leader C&W Communications for $13 billion, leaving Telewest Communications (whose shares also suffered, falling 3%) as its only U.K. rival.

Byers said he was “concerned about the possible effects on this developing market of the reduction in the number of cable operators from three to two”; analysts have argued that a further merger to cut the field of two to one in the capital-intensive industry would aid competition, creating a cable giant with the power to take on British Telecommunications and BSkyB.

NTL issued third quarter results on Friday that showed losses widening to $278 million from $134 million a year earlier as it absorbed acquisitions. The government said Vivendi’s acquisition of an increased BSkyB stake “raises concerns in respect of the market for film and sports rights and for conditional access to technology in the U.K.”