NTL and Chorus, the two main Irish cable companies, will lose the exclusive right to broadcast in their franchise areas from March 1st and could face extra competition from market entrants.
There is also growing speculation that both firms have been put up for sale by their parent organisations to reduce billions of dollars of debt built up during the internet boom.
US cable firm NTL, which has cable operations throughout Europe and the Republic, has $17 billion (€14.7 billion) debt and is expected to unveil a restructuring plan next week. This will include cutbacks in its capital expenditure programme that could undermine the company's ability to upgrade its network and introduce new services for Irish consumers.
Mr Aizaz Shaikh, senior telecoms analyst with BNP Paribas, believes NTL's 2002 and 2003 capital expenditure will be lowered to £600 million (€762 million) annually, from £925 million forecast.
This could delay NTL's revenue growth by one year and reduce the firm's subscriber targets, according to Mr Shaikh, who is based in BNP's London office.
NTL has already defaulted on its plan to upgrade its Dublin, Galway and Waterford networks to offer so-called "triple play" services - digital TV, telecoms and high-speed internet. It spent £70 million on this capital infrastructure during 2000 before halting its upgrade programme. It is estimated it would cost up to £300 million to complete this programme.
Plans by NTL to introduce voice-over-internet protocol technology to offer telephony services here may also have to be dropped due to the current cash crisis.
The difficulties faced by NTL are not unique in the cable sector and several other operators, such as UPC, will also have to undertake restructuring plans, according to Ms Susan Richardson, analyst with Gartner Dataquest.
"Cable firms got caught up in all the rush of the telecoms stocks at that time and overestimated the potential of digital TV, internet and telephony," she says.
But the huge cost of upgrading networks and making acquisitions has hobbled the sector. Cable firms are desperately seeking to increase their average revenue per subscriber, but many cannot afford to continue expensive network builds to offer the required "triple play" services.
Most international analysts think NTL is seeking a new investor to convert its debt into equity. It may also end up being acquired by a major international player such as AOL Time Warner, Liberty Media or Microsoft.
It could also decide to sell off its non-core assets such as its Irish and Swiss cable operations, although it is not clear this would satisfy its bankers.
"Both firms [NTL and Chorus] are up for sale and I don't think any reasonable offer would be refused," says Irish telecoms consultant, Mr Enda Hardiman.
"NTL overpaid considerably for Cablelink by a factor of two... There would be a paper loss if it sold," Mr Hardiman said
Potential bidders for NTL's Irish operations would include a range of US or UK private equity firms such as Apax Partners. In a similar fashion to the recent sale of Eircom, a successful bidder would probably hold onto the cable asset until valuations in the sector improved. But NTL would be forced to sell at a bargain price due to the current crisis in the cable sector and increasing competitive threats in the market.
Satellite provider BSkyB's recent entry into the Irish market has been dramatic and could hurt its own valuation. Sky already has 193,000 subscribers and is estimated to be claiming 10,000 cable and microwave TV customers every quarter.
A decision by the telecoms regulator to remove the cable firm's exclusive right to broadcast digital television services in the cable firm's franchise areas from March 1st is another blow. It opens the way for a number of regional TV deflector firms to enter the digital TV market. One of these companies, Southcoast,said recently it planned to offer services to 100,000 customers in the Cork area. The regulator's decision may also enable telecoms firms such as Eircom and Esat to provide TV over their own networks.
This may hit Chorus, the cable and microwave TV provider owned jointly by Independent News and Media and Liberty Media, because of its relatively dispersed subscriber base. It has significant customer relations issues and has failed to deliver on its proposed network upgrade due to cashflow difficulties.
Uncertainty over the intentions of its shareholders is also affecting Chorus. Independent News and Media has signalled that it would like to sell Chorus, and Liberty Media - which seems more interested in expanding in Germany.
But whoever owns the State's cable firms, Irish consumers can only hope that a potential bidder for NTL Ireland or Chorus is willing to invest millions to supply innovative services.
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