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Buyers Snare Euro Cable Subs

Two European cable properties that slipped away from Liberty Media Corp. last year have found new buyers, for prices considerably lower than Liberty was going to pay.

Deutsche Telekom A.G. agreed last week to sell its cable operations, with about 3 million subscribers, to a group of U.S.-based private-equity investors — Apax Partners, Providence Equity Partners Inc. and Goldman Sachs Capital Partners, the private-equity arm of Goldman Sachs & Co. — for $1.86 billion in cash.

That price was considerably less than the roughly $5.95 billion Liberty had agreed to pay the German conglomerate last year, before German regulators blocked the transaction.

Providence Equity — a past investor in such U.S. MSOs as Bresnan Communications and Northland Communications — has a history with DT. Providence was a founding investor in Western Wireless Corp., which spun off wireless-communications company Voice-Stream in 1999. DT bought VoiceStream (now T Mobile) in 2001.

Deutsche Telekom, which has been selling assets to pare down its $69 billion of debt, could receive as much as $405 million more from the three buyers, depending on the future value of the cable systems, the company said in a statement. Further details were not available.

DT said proceeds would reduce its debt. Its goal is to pare its debt to $56.6 billion, or three times 2003 cash flow, by the end of this year.

"The sale of the cable TV business is a key element in our program to dispose of non-core business activities," said Karl-Gerhard Eick, a member of DT's board of management, finance and control, in the statement.

Liberty had hoped to re-enter the fray for the cable assets last year, and sources said it was one of five groups under consideration. Liberty had partnered with U.S. investment firms Blackstone Group and Apollo International and German private-equity firm BFD Capital in its bid, sources said, in keeping with Liberty president Dob Bennett's earlier statement that if the company re-entered the auction it would be with a partner at a lower price.

In the fall, DT whittled down its list of prospective buyers to three. Liberty was not among them.

This is the second European cable deal that has slipped through Liberty chairman John Malone's hands.

In November, a $735 million deal to buy Dutch cable operator Casema from France Telecom was scuttled by regulators in the Netherlands. Liberty, through its holdings in UnitedGlobalCom Inc., controls the largest Dutch cable company, United Pan-European Communications N.V.

France Telecom agreed last week to sell Casema to Providence Equity, The Carlyle Group and U.K.-based GMT Communications for about $720 million in cash. That deal was completed on Jan. 28.

Liberty had hoped to link Casema's 1.3 million cable subscribers with UPC's cable customers. Although Liberty had said it would not combine Casema
with UPC — the largest cable operator in the Netherlands, with about 2.5 million subscribers — it also told Dutch regulators it wouldn't exclude closer cooperation between the two companies.

Dutch regulators had been concerned that the deal, which would have given Liberty control of 60 percent of Holland's cable market, would be anti-competitive.