Chello, Excite@Home Seek Strength in Numbers
By BARRY FLYNN -- Multichannel News, 7/23/2000 8:00:00 PM
London-High-speed access providers Chello Broadband N.V. and Excite@Home Corp. should benefit from each other's strengths as they aim to build a global presence together.
"It does, in a single stroke, change the broadband-Internet landscape outside of the USA," Excite@Home chairman and CEO George Bell said. "We're in footprint mode now. It's a footprint battle. The idea is to deploy the greatest number of homes around the world."
As expected, Chello and Excite@Home's international unit agreed to merge last week, creating a high-speed Internet-service provider with 300,000 subscribers in 15 countries. The deal doesn't include Excite@Home's Canadian operations, which are among its best performing anywhere.
Liberty Media Group will invest 200 million euros ($187 million) in the merged company, to be known as Excite Chello.
Excite@Home and UnitedGlobalCom Inc.-parent of Chello owner United Pan-Europe Communications N.V. (UPC)-will each invest 100 million euros ($93.6 million) in the new company, which they plan to take public by early next year. Liberty agreed last month to acquire a 45 percent stake in UGC.
Excite@Home and UGC will each hold around 43 percent of the new company, with employees holding another 10 percent. Liberty will hold about 4 percent, according to published reports.
"Chello needed content for their operation.and Excite@Home needed to have their content validated by a third party that was not one of their original cable partners," investment bank Janco Partners said in a research memo. "This is another deal that is about scale and scope, and it will be difficult for others to replicate."
Excite Chello's initial focus will be on growing its coverage.
Excite@Home-which will contribute about 100,000 broadband subscribers to the deal-operates Web portals in 10 countries that could be used to prime customers for high-speed access. The company is aiming to add another eight to 10 local portals. It also has broadband operations in Japan, a potentially huge market for high-speed access.
Chello has particularly strong European operations and infrastructure, as UPC is the region's largest private cable operator. It will also be able to contribute considerable rich-media content thanks to UPC's burgeoning TV-programming division.
Chello president and CEO Roger Lynch will hold the same post at Excite Chello.
The new company may form partnerships in existing or new markets, company officials said. Bell, for one, said he expects the company's broadband-access client base to grow to 500,000 by year-end.
Excite@Home is ranked as the United Kingdom's No. 2 Web portal. However, Chello conspicuously failed to secure a distribution deal there as part of parent UPC's recent agreement to buy about one-quarter of MSO Telewest Communications plc.
Bell said he is not discouraged. "The U.K. market should be a great broadband market. We do plan to take a part in that," he said.
As for a deal with Telewest, "We hope to work with them in the future," he added.
Mike Galetto contributed to this story.
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