Telewest, Flextech Discuss U.K. Merger

London -- Merger talks between two of Britain's leading pay
TV companies could represent one of the cable industry's first real attempts to achieve
greater vertical integration among programming and distribution.

Telewest Communications plc, the country's No. 2 MSO, and
Flextech plc, one of the market's leading pay TV programmers, said they're in discussions
about "ways of working closer together to develop their respective businesses."
The talks "include the possibility of a combination of the two businesses," they

Flextech's increasingly attractive portfolio of interactive
products is just what Telewest wants as it goes forward with its own digital-cable
rollout. Two weeks ago, Telewest said it signed agreements with 13 content providers for
the interactive service it plans to launch next year over its cable network.

There is some speculation that Flextech may be a sort of
consolation prize for Telewest, which was outbid by rival MSO NTL Inc. in its effort to
buy the consumer assets of Cable & Wireless Communications plc, the United Kingdom's
other big cable operator.

A merged Telewest and Flextech would have a market
capitalization of about £10.5 billion ($17 billion) -- smaller than DTH platform British
Sky Broadcasting Group plc's £13.7 billion ($22.2 billion), but larger than those of
media companies Pearson plc and Granada Group plc.