Analysis: Group's Irish operation does not fit neatly with the 'triple play' strategy of its parent, writes Jamie Smyth
The decision by NTL to begin a process to sell off its Irish division will surprise few insiders within the telecoms industry given the growing trend toward consolidation in the European cable industry. The biggest European cable firm, UGC, acquired Liberty Media's interests in the Irish cable firm Chorus Communications and the Belgium cable operator Telenet Group last month.
NTL Group, which is owned by a group of banks and hedge funds, has also recently begun to concentrate its activity on the British market and has divested non-core assets such as its UK broadcasting operation.
The group's Irish operation, which has about 340,000 cable television customers in Dublin, Galway and Waterford, is a comparatively small part of the wider NTL Group and does not fit neatly with the "triple play" business strategy pursed by its parent company. This strategy enables NTL's British operation to offer consumers a single bill for all their television, internet and telephony requirements.
However, NTL Ireland's failure to upgrade its cable network to carry broadband services and its recent exit from the domestic telecoms business makes the division less attractive.
Two prospective buyers have been contacted by Goldman Sachs: a group of Irish private investors advised by IBI Corporate Finance, and the cable giant UGC, which is controlled by the US cable and media entrepreneur, Mr John Malone, and owns Chorus Communications.
Goldman Sachs wants to conclude the sale of NTL Ireland by mid-March and has code-named the sale process "Jameson".
NTL Ireland's price tag will vary widely depending on the willingness of both potential investors to engage in a bidding process and the entry of any other rival bidders. But if the firm is sold, the price will not reach anything like the €680 million paid by NTL to Eircom and RTE for the cable operation in 1999.
A figure of between €150 million and €200 million is more likely given the precedent set in other recent cable industry deals.
This earlier sale process took part at the hype of the dotcom bubble and was fuelled by aggressive bidding by a rival consortium led by Mr Denis O'Brien.
It remains unclear if he is interested in NTL Ireland now.
Any prospective buyer of NTL Ireland will need to be careful they do not over-pay given the huge cost of upgrading the firm's cable infrastructure to carry broadband internet services.
NTL Ireland said last year it would spend $100 million over several years to upgrade the network for broadband, one of the few remaining growth areas for cable television companies worldwide. But investors will be wary of falling into the same trap that NTL Group did in 1999 of vastly overpaying for the asset.
The most recent financial accounts filed for NTL Ireland show that it generated €105 million revenue in 2003 but made a pre-tax loss of €2.39 million. NTL faces strong competition from the satellite operator Sky.
