UGC aims to take on Eircom


6 May 2005

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When European cable operator UGC gains control of NTL later this year the company will embark on a €200m infrastructure investment strategy that will position the company to compete aggressively against Eircom for telephony and broadband services, sources have told siliconrepublic.com.

In recent weeks UGC, which put in the highest bid for NTL with a €320m offer, passed its preferred bidder status to US bank Morgan Stanley, which will buy NTL Ireland and pass control on to UGC later this year.

siliconrepublic.com has learned that Morgan Stanley could announce its acquisition of NTL Ireland as early as next week. The company will then immediately commence discussions with the Competition Authority aimed at paving the way for UGC to gain control of the company. It is predicted that UGC will gain control of NTL Ireland within six to nine months.

UGC acquired Irish cable operator Chorus last year for US$55m. It is envisaged that if the company came to own NTL Ireland it could run into competition issues with the Competition Authority, which could end up drawing out the sales process by up to six months. Morgan Stanley’s negotiations with the Competition Authority will be aimed at offsetting such issues.

Informed sources have told siliconrepublic.com that UGC — with a war chest of €1bn for infrastructure and acquisitions — is planning to spend €200m on upgrading its cable infrastructure in Ireland to be capable of handling frequencies of up to 850MHz and beyond.

By upgrading existing cable ducting to fibre cable and deploying coaxial cable capable of carrying up to 850MHz from the street to the living room, sources suggest that the company could deploy broadband speeds of between 15Mbps and 30Mbps to the home, ideal for the triple play of television, broadband and voice that will define the communications market of the future.

An informed industry source told siliconrepublic.com: “DSL across copper can never go beyond a couple of megahertz. However, a cable modem on coaxial cable can hold 50 times more capacity than copper wire and as a result Eircom will have a real competitor on its hands.

“If UGC succeeds in acquiring NTL Ireland in six to nine months, it will be able to upgrade its network very quickly and ultimately offer 15Mbps to 30Mbps of always-on internet, free phone calls and television services. Dublin has the highest penetration of cable than any city in Europe. The only problem is the cable network is in bad shape and needs investment. In the US, cable companies such as ComCast and Time Warner are outperforming traditional fixed-line telecom companies.

“If UGC does succeed in acquiring NTL Ireland, it could be a huge competitor to Eircom,” the source told siliconrepublic.com.

By John Kennedy