Britains NTL Buys ComTel, Diamond for $1.5B

Publish date:

London -- Two more inevitable steps of consolidation in the
U.K. cable market surprisingly occurred on the same day last week, as NTL Inc. announced
its acquisition of two other MSOs for a total of about $1.5 billion.

NTL said last Tuesday that it will acquire ComTel Ltd. for
£550 million ($900 million). Later that day, NTL also announced the purchase of Diamond
Cable Communications plc for £390 million ($630 million).

The two deals came on the heels of NTL's acquisition
of Comcast U.K. Cable Partners Ltd. Together, the three acquisitions thrust NTL into the
ranks of the largest U.K. MSOs.

"With the Diamond and ComTel transactions announced
today, NTL has moved to the forefront of the U.K. telecommunications industry," said
J. Barclay Knapp, president and CEO of NTL, in a prepared statement. "We will now
cover approximately 25 percent of the U.K. with our cable/telephone franchises, with a
total of approximately 5.2 million homes under franchise."

Knapp noted that NTL will now reach "nearly 850,000
residential-telephony customers, more than 700,000 cable-TV customers and more than 85,000
business-telephony lines." The company will have "approximately $1 billion in
annualized revenues," he said.

Telewest Communications plc retains the No. 1 MSO spot in
England, after adding to its size recently with its purchase of General Cable plc.
Telewest is followed by Cable & Wireless Communications -- itself the product of a
merger of four companies -- and NTL, which will now also be the product of a merger of
four firms. Together, the three MSOs dominate the U.K. cable business, which was once
divided among two-dozen MSOs.

Here's how the two NTL deals were structured:

• NTL's acquisition of ComTel is structured in
cash and preferred stock, with two steps involved. First, NTL will acquire certain ComTel
assets for £275 million ($450 million) in cash. In the second phase, NTL will pay another
£200 million ($330 million) in cash and £75 million ($125 million) in new, preferred NTL

• Under the Diamond deal, Diamond shareholders will
receive 0.25 shares of NTL common stock for each Diamond ordinary share. Diamond has
approximately 60.7 million fully diluted shares outstanding. The total consideration for
the transaction will be about 15.2 million NTL shares.

The Diamond deal contains provisions so that if NTL's
stock price exceeds $52 per share "for a measuring period prior to closing ... the
number of NTL shares issued to Diamond will be decreased such that the consideration for
four Diamond shares will not exceed $52," NTL said.

The company's stock was trading at about $46 per share
last week.