One week after The Weather Channel made the stunning move
of bailing out of Europe, three more international players announced that they were
retrenching in parts of Europe and Asia.
Country Music Television International announced that it
was closing its European operation; Comcast Corp. signed a deal to sell its major
international asset, British operator Comcast U.K. Cable Partners Ltd.; and Sydney,
Australia-based Television Shopping Network (TVSN) pulled in its tentacles because of the
Asian currency crisis.
Comcast said last Thursday that it has signed a deal to
sell its U.K. operation to fellow U.K. MSO NTL Inc. for about $600 million. As far back as
December 1996, when it retained investment banker HSBC James Capel, Comcast has been
formally seeking a deal to merge or sell its systems in Britain.
As consolidation accelerated in the U.K., Comcast went from
being a major MSO to a medium-sized operator just by staying the same size. Comcast's
1.6 million homes under franchise will now be added to NTL's 2.2 million to create
the No. 2 British operator, after Cable & Wireless Communications.
Comcast president Brian Roberts said that while Comcast
U.K. had been a leading performer with higher penetration rates than some other U.K.
operators, Comcast had determined that long-term success in Britain couldn't be
achieved without getting larger. 'We concluded that our shareholders will be in the
best position to take advantage of the future growth in this market by owning shares of
NTL,' he said.
In the stock-funded deal with NTL, each share of Comcast
U.K. is valued at about $12 -- a premium on its recent trading price, but far below the
$19 to $20 range that it traded in after its initial public offering in late 1994.
The NTL/Comcast deal is similar to earlier transactions by
SBC Communications Inc. and Cox Communications Inc. -- two other companies that traded in
their U.K. systems stakes for holdings in another major MSO, Telewest Communications plc.
Telewest is currently considered 'in play,' as
well, with NTL viewed as a bidder. Industry observers also said some shareholders of
Telewest may try to buy out each other's stakes.
Factors in the British market also played a key role in
Gaylord Entertainment Co.'s decision to scrap CMT Europe. Although the company had a
lucrative carriage arrangement with British Sky Broadcasting, CMT Europe's ratings
never managed to grow significantly. The company spent millions of dollars trying to
relaunch the service in Britain, but it never caught on with viewers. On the European
continent, its carriage was far more limited.
CMT Europe had lost $10 million per year in 1996 and 1997,
according to Gaylord. That represented more than two-thirds of the overall losses for CMT
International, said Carl Kornmeyer, president of the company's communications group.
'We are significantly cleaning up our balance
sheet' by closing down CMT Europe, he said.
To make the move, the company may have to pay a
satellite-transponder-termination fee of $5 million. It will definitely take a $3.3
million shutdown charge in its fourth quarter of fiscal 1997, which represents a
In the Comcast U.K. deal, it remains to be seen exactly how
shareholders will come out. In a complex purchase agreement 'and plan of
amalgamation,' Comcast U.K. shareholders will receive 0.3745 shares of NTL common
stock for each share of Comcast U.K. common stock -- equivalent to $11.98 per Comcast U.K.
share, based on NTL's Feb. 4 closing price of $32 per share.
However, there is a caveat in the deal: If the purchase
price per Comcast share falls below $10, Comcast U.K. has the right to terminate the pact,
subject to NTL's ability to adjust the exchange ratio to ensure that Comcast
shareholders will get a minimum of $10 per share.
If the deal is completed, Barclay Knapp, NTL's
president and CEO, said, 'There will be no Comcast people on the board. It's a
straight-up stock acquisition, and we're retaining our own board.'
However, he added, 'we will certainly use all of our
techniques to push penetration and, in fact, I think that we can learn some stuff from
these people [Comcast], as well, because in Teeside, for example, they have greater than
50 percent telephone penetration.'
He described the deal as one that will achieve contiguity
for CableTel's existing Luton (north of London) franchise with Comcast's nearby
Cambridge (100 percent-owned) and Cable London (50 percent-owned) operations.
Additionally, 'adding Birmingham [27.5 percent-owned
through Comcast] gives us a stake in the third-largest city in the country, and it's
a very attractive opportunity,' Knapp said.
In the third international pullback development last week,
TVSN announced that 'the recent slowdown in Asian economies has necessitated a delay
in TVSN's expansion plans, resulting in some retrenchments.'
TVSN said its president and CEO for the past two years,
Bill Schereck, had suddenly stepped down from the post. Schereck left his job in late
January, the company said. Contacted at his home in Sydney, Schereck said he had 'no
comment' to make. TVSN said Schereck is moving back to the United States.
TVSN will concentrate its efforts on the markets of Greater
China and Japan. It is understood that the four-month-old, Bahasa-language version of TVSN
has ceased transmissions. The channel was carried on the Indovision direct-to-home
satellite TV channel based in Jakarta, Indonesia. That country has been the hardest-hit
southeast Asian nation during the recent financial slump.
In November, Schereck said TVSN had enjoyed a 20 percent
increase in business, but he conceded that it had not yet absorbed the full impact of the
downswing in Asian currency prices that has caused them to plunge by up to 75 percent in
Owen Hughes in Hong Kong and Chris Forrester in London
contributed to this report.