Jobs to be lost in merger of NTL and Chorus

UnitedGlobalCom (UGC), Europe's biggest cable television operator, confirmed yesterday it has agreed to buy NTL Ireland in a transaction worth €329 million.

The company, which already owns the Irish cable firm Chorus, also signalled that it plans to merge the two firms in a process that will lead to future job losses.

In an interview last night, Shane O'Neill, the UGC executive leading its acquisition team, said a transition management team would consider the issue over the next six to 12 months if, and when, the merger is approved.

"There will be a headcount reductions in the fullness of time," he said. "But it is not axiomatic that on day one it will lead to significant reductions."

NTL Ireland and Chorus together employ about 1,000 staff and are not as efficient as other UGC's operations, such as its Austrian unit which attains earnings margins of 40 per cent. NTL Ireland achieves margins in the low 30s while Chorus is below that figure, according to Mr O'Neill.

UGC will also rebrand NTL and Chorus over the next 12 months, most likely using UGC's pan-European brand "UPC" for the combined cable operator.

Mr O'Neill said UGC would invest more than the €70 million that NTL Ireland management had indicated needs to be spent to upgrade the network. This would enable UGC to launch telephone and broadband services.

However, the complex deal will have to pass a review by the Competition Authority before UGC is able to take control of NTL Ireland. A process that may take up to six months or more.

UGC has structured the deal in a complex "warehousing" arrangement in order to be able to pay cash to NTL as quickly as possible. This deal saw UGC loan the funds to buy NTL Ireland to its bankers Morgan Stanley, who signed and completed the purchase of NTL Ireland yesterday.

Because Morgan Stanley does not own any other cable assets in the Republic, this does not trigger a competition review allowing the cash to be released to NTL. UGC said it was now proceeding to acquire NTL Ireland from Morgan Stanley, which is being paid €4 million by UGC to facilitate the deal.

In a separate announcement last night, NTL said it intended to use the proceeds of the sale to repay debt. It is understood NTL was eager to complete the sale of its Irish unit before it pursues a merger with Telewest in Britain.

The purchase price paid by UGC represents a multiple of about 8.6 times estimated 2005 operating cash flow, a higher price than other cable deals agreed recently. The price, however, is lower than the €680 million paid for the asset back in 1999 by NTL.