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NTL Continues Continental Advance with French Deal

Extending its reach across the English Channel, the United Kingdom's largest MSO agreed last week to buy into France's leading cable operator.

NTL Inc. said it will partner with Morgan Stanley Dean Witter Private Equity to acquire just under one-half of French MSO Noos for $1.5 billion. It also named an executive to oversee its growing investments in continental Europe.

NTL will pay $627 million for 27 percent of Noos, and Morgan Stanley will acquire 22.9 percent. The French MSO has 736,812 cable-TV subscribers and 44,000 high-speed Internet customers. All told, it has 2.6 million homes under franchise in Greater Paris and smaller urban areas. NTL said Noos boasts an 860-megahertz hybrid fiber-coaxial network.

"It's a great way for NTL to strengthen its position in the French market without having to take a majority stake," said Roger Metz, who follows NTL for Janco Partners in Denver.

By taking a minority stake, he added, NTL won't have to worry about integrating Noos with its existing network-a major task it faces in the U.K. with the assets of Cable & Wireless Communications plc, which it acquired this year.

NTL and Morgan Stanley are buying their stakes in Noos from France Telecom S.A., which is gradually exiting the domestic cable business amid pressure from regulatory agencies.

However, the telco still has an iron in the fire, as it owns 18 percent of NTL with an option to increase that stake to 25 percent. French utility company Suez Lyonnaise des Eaux will retain 50.1 percent of Noos.

European MSO United Pan-Europe Communications N.V. (UPC) was in talks to acquire a stake in Noos, but it pulled out last month due to "strategic and operational issues."

UPC officials couldn't be reached for comment, but one analyst speculated that the company-saddled with a heavy debt load and a sagging stock price-might have been looking for a bargain in Noos.

The deal is NTL's latest to increase its footprint in continental Europe, where it has been building business over the past year. In addition to existing French operations, New York-based NTL owns or has investments in cable companies in Switzerland, Germany, Sweden and Ireland.

Last week, the company named Bruno Claude-formerly with media investment banker CEA Capital Advisors LLC-to the position of chief operating officer for continental Europe.