18/03/2005

NTL and Telewest merger might be scuppered by Ofcom

The industry has long predicted the merge of the cable duopoly NTL and Telewest in the UK. The merger would make sense for a lot of reasons both economic and technical. Let's call the combined entity NTelewestL.

However it might all fall through as NTelewestL might be considered to have significant market power (SMP) - which of course it would have in the cable market. If Ofcom put NTelewestL in that position, they can be forced to open the network up and allow other companies access to network services - much like BT have a wholesale and retail devision.

So there would now have to be NTelewestL Wholesale and NTelewestL Retail. Retail would operate just as the current operations do now attracting customers and offering bundled services. However a wholesale division would require a complete new set of procedures, billing operations, network breakout etc. This is where problems will occur, it adds a hige ammount of complexity and cost to the deal which is already fragile as both companies are not in the healthiest of financial positions. In fact the costs are likely to be so significant that they could completely break the merge, which must put the regulator between a rock and hard place.
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