Chorus on the market but not hitting the right note

Independent News & Media's decision to write down its €82.5 million investment in Chorus is not surprising given the fall in the value of cable assets globally.

The huge sums paid for cable assets in the late 1990s has pushed several firms to the brink of bankruptcy, including NTL, Kirch, UPC and Telewest, who dominated the sector in Europe.

Even Microsoft misjudged the potential of cable and was forced to write down its investments by about $9 billion (€8.4 billion) last year. Firms have realised that the billions ploughed into the sector during the dotcom boom will never generate a return for investors.

Independent News & Media has made no secret of its intention to offload its 50 per cent stake in Chorus, which supplies cable television to about 200,000 Irish households. The biggest problem for the debt-laden media group will be finding a buyer.

Most analysts believe NTL's Irish cable operation and Chorus have been on the market for up to two years but no serious offer has yet emerged. Competition from BSkyB, which has picked up 272,000 digital subscribers in four years, is a serious threat to both companies' valuations.

Chorus has lost at least 20,000 customers since it filed its last return for the year to the end of December 2001. It also faces customer service and cost issues relating to its patchwork of regional networks.

BSkyB's strident opposition to regulation has also created an unequal playing field for the firm, which pays 3.5 per cent of its revenues to fund the regulator.

Despite generating revenues worth €70 million in 2001, analysts believe the firm would attract bids of below €100 million in the current market.

Mr Darragh Stokes, managing director of Hardiman Telecommunications, said perhaps the best chance of a bidder emerging for Chorus would be if a venture capital company such as Apax bought NTL UK and Ireland and then looked to consolidate the cable market in the Republic.

Chorus shareholders Independent News & Media and Liberty will be forced to sell at a rock bottom price unless they are prepared to wait for a general economic upturn.