UPC Deals Heat Up Euro Consolidation

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Consolidation continued on the European cable front last
week, with two of the region's key players taking center stage.

United Pan-Europe Communications N.V. (UPC) said it has
agreed to buy two of MediaOne Group Inc.'s European cable businesses for $527
million, including assumed debt.

The deal marks the latest chapter in UPC's acquisition
binge. This month alone, UnitedGlobalCom's European cable arm agreed to spend about $2.4
billion to snap up cable, programming and direct-to-home satellite (DTH) properties.

At the same time, MediaOne continues its pullout from the
international cable business after agreeing to sell out to AT&T Corp. In May, MediaOne
agreed to sell its 29.99 percent interest in British MSO Telewest Communications plc to
Microsoft Corp. for an undisclosed price. Analysts have estimated the interest at about $3
billion.

MediaOne International officials did not return phone calls
seeking comment.

UPC will buy MediaOne's 50 percent stake in
535,000-subscriber Dutch MSO A2000 for $379 million, including assumed debt. The deal
gives UPC 100 percent control of the operator, its crown jewel in the region.

At the National Show in Chicago this month, UnitedGlobalCom
CEO Gene Schneider described one element of his company's current strategy as
"getting a dominant position in all the countries we're involved in. We can
control our own destiny and control our platforms."

UPC will also pay $177 million -- also including assumed
debt -- for MediaOne's 97 percent stake in Kabel Plus, which has 400,000 subscribers
in the Czech Republic and Slovakia.

UPC CEO Mark Schneider, who couldn't be reached for
comment, had long voiced his interest in MediaOne's stake in A2000.

"This is the single most important transaction that
the markets have been looking to us to make," Mark Schneider said of the purchase in
a prepared statement. "We will now move forward early next year with the rapid
deployment of UPC's digital-computer set-tops over the A2000 system."

People who follow European cable industry say they're
not surprised by UPC's voracious appetite.

"They're playing a game of connect the
dots," said Richard Woollam, director general of the Association of Private European
Cable Operators, a trade group that includes about 250 cable systems.

At the same time, UPC is creating a subscriber base to
leverage other businesses, including the chello Broadband N.V. high-speed Internet-access
operation, the UPCtv programming unit and the Priority Telecom telephony division.
Including announced deals, UPC has 5.1 million subscribers.

"You need the economies of scope and scale to make
[all] this work. They are creating the economies that will allow them to operate,"
Woollam said.

Three weeks ago, UPC swept into Poland, agreeing to buy
beleaguered cable and DTH platform @Entertainment Inc. for $1.55 billion in cash and
assumed debt. The move gives UPC its first foothold in Eastern Europe's biggest
market, with @Entertainment's 948,170 cable subscribers and 130,000 DTH homes.

On June 8, UPC said it would pay $106 million for 12.8
percent of SBS Broadcasting S.A., an owner of broadcast-TV and radio stations throughout
Europe. Under that deal, the two companies will cooperate to buy and develop programming
that can run on UPC's systems. Woollam said that's smart, because Europe's
MSO's have traditionally lagged in terms of programming.

Goldman Sachs & Co. analyst Lou Kerner also gave a
thumbs-up to UPC's buying spree.

"Because of all their businesses, they're able to
do more with the cable subscriber than other cable companies can do," he said.

Most expect UPC to continue as a consolidator. A move into
Germany's mammoth market -- where Deutsche Telekom A.G. is moving to sell parts of
its cable holdings -- is likely.

"We have a lot of interest in looking at
Germany," Schneider said at the National Show.

UPC is part of a wider sea change in Europe's cable
business this year. British MSO NTL Inc. has spread its arms into Ireland and France. And
Microsoft - which owns 7.85 percent of UPC - has established a major presence in
the market with stakes in Telewest, NTL and TV Cabo Portugal S.A.

UPC parent UnitedGlobalCom made other news last week,
hiring Rick Westerman, the former EchoStar Communications Corp. treasurer and director of
finance, as its new chief financial officer.

"Westerman was a real coup. He's a very well
respected financial executive and has a very strong relationship with Wall Street,"
Kerner said. "This is going to free up [UnitedGlobalCom president] Mike Fries to
focus on strategic issues."

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