C&WC and Telewest enter merger talks

NEWS Cable & Wireless Communications (C&WC) and Telewest have confirmed they are in merger talks. The announcement follows speculation yesterday that the two companies are planning to merge their residential cable businesses. Neither company has confirmed the nature of the talks but C&WC said it is in the early stages of discussions with shareholders from both companies "which may include, among other things, the transfer of various businesses of C&WC and Telewest". Andy Greenman, senior analyst at Yankee Group, said this could signal a major refocusing of operations in the parent company Cable & Wireless. "Cable & Wireless is talking about pulling out of the cable business and buying back Mercury so it can concentrate on its corporate business. While C&WC had planned to integrate Mercury's network with its cable networks but failed drastically - so it could well be wanting to concentrate on its cable operations," he said. Greenman warned the merger could face regulatory problems: "There is a US interest in both Telewest and C&WC which would probably clash." Telewest customers currently benefit from free local voice calls, in certain circumstances. Most C&WC customers gained from other cable operators have been encouraged to switch over to a bundled cable TV and telephone product that charges for all local calls. Greenman said: "C&WC was worried about the Internet and providing free local calls to ISPs, so they pulled the whole thing. If they do the same with Telewest, its customers will probably get a bigger bundle with cable TV and ISP, as well as phone services." Share prices for both companies rose sharply during trading yesterday.