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Monday, June 14, 1999 Published at 18:36 GMT 19:36 UK

Business: The Company File

Cable mega-merger on the cards

Cable & Wireless has refused to comment on the speculation

Merger speculation in the telecommunications sector is set to be rekindled after reports that the UK's three biggest cable companies are plotting a multi-billion pound merger.

The Mail on Sunday said the three companies - Cable & Wireless Communications, Telewest Communications and NTL - plan to forge a single cable group to take on BT and BSkyB in the telephone and pay-TV market.

[ image: There are reports that Deutsche Telekom will be invited to take part in the venture]
There are reports that Deutsche Telekom will be invited to take part in the venture
The paper also reported that European phone groups Deutsche Telekom and France Telecom had been invited to take a stake in the venture.

All three companies are already known to have discussed possible tie-ups but the introduction of international backers could provide the final push needed to get a deal off the ground.

CWC and Telewest responded to the reports by saying that they announced in April they were in early-stage talks about various corporate options, including asset swaps.

"Those talks are progressing, but we have no comment to make on any other speculation," a Telewest spokesman added.

For its part, CWC added that the company's position hasn't changed since the April 6 statement, calling the Mail's report "pure press speculation".

There was no immediate comment from NTL. However the speculation could spark a fresh round of share price hikes in the already strong sector.

Such a deal would be the final and biggest step in a series of mergers in the cable industry, which have left the three companies dominating the business.

The move could also involve US software group Microsoft, which has a 29.9% stake in Telewest, and is keen to see its software adopted as widely as possible in the emerging digital TV sector.

Web TV

All three of the cable groups are expected to launch digital cable services later this year which could eventually include interactive services such as Internet access through the TV set.

A deal would raise the stakes with the cable industries' two main competitors in telephone services and pay-TV, BT and BSkyB.

The involvement of one or both of the leading European telecoms companies would also mark a new phase in international consolidation in the phone industry.

Deutsche Telekom recently lost out to Olivetti in a bidding battle to take over Telecom Italia and is thought to be still seeking a route to expand internationally.

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