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Optus@Home Under Threat as chello Merges with Excite@Home

[Sydney, AUSTRALIA] The Australian broadband Internet market faces major change following an announcement that Excite@Home International and chello broadband will merge, potentially forcing the restructure of broadband joint ventures Optus@Home and Austar chello.

Chello's parent, International cable operator UPC and Excite@Home, have announced a merger which they claim will form the largest broadband company outside of North America, to be named Excite Chello. Chello broadband will merge with Excite@Home's non-US operations, combining Excite@Home's international portal, media and high-speed data ventures with chello's high-speed operations and networks in Europe, Asia and Latin America.

An Optus@Home spokesperson was insistent that the announcement meant "business as usual for the joint venture." "We believe that the merger is only good news for us, the joint venture and our customers, it'll obviously expand on the range and capacity of the Optus@Home offering eventually, but for now we'll be assessing the deal in more detail." Optus made no comment as to how the merger would impact the ownership of the HFC broadband network and its customer base. "Obviously there has been a lot of speculation in the media about the sale of our HFC network, but at the moment we have made no announcement and it is just speculation," said the spokesperson.

A chello spokesperson was equally uncertain, but slightly more forthcoming. "Its too early to tell at the moment. All I could say is that we'd be looking forward to exploring the possibility of a merger [with Excite@Home's Australian operations]. I think we're quite complimentary with chello's focus on the regional market and Excite@Home's focus on the metropolitan." The spokesperson thought it was unlikely, however, that the satellite and cable offerings would retain separate branding. "I think the idea would be that we'd all go to the Excite Chello brand." So where does that leave Optus? "Good question."

Internationally, the Excite brand will be associated with the media aspect and portal services, and the chello brand will be used for the new company's access service, and the two companies will distribute Excite@Home's set-top box platform.

Excite Chello said it would operate in 15 countries on 4 continents, and has the exclusive rights to deliver broadband Internet services to over 30 million cable homes, as well as to deliver set-top box services to over 10.5 million cable homes. The merged companies have over 300,000 broadband subscribers and almost 1,000 employees globally (including joint venture employees).

Liberty Media has agreed to make a 200 million Euro investment in Excite Chello in the form of a note convertible into Excite Chello shares. Excite@Home and UnitedGlobalCom have also committed to invest 100 million Euros each in Excite Chello. The new company will be equally owned and jointly controlled by Excite@Home and the United Group (chello's parent). As a result of the merger, chello has canceled its IPO, announced in March this year. The merger is expected to close by the end of the year, and Excite Chello plans to issue an IPO in late 2000 or early 2001, "business and market conditions permitting."

The venture's head offices will be located in Amsterdam and London, and technology research and development operations will be based Amsterdam and California.

George Bell, chairman and CEO of Excite@Home, and Mark Schneider, chairman and CEO of UPC will be co-chairs of the new company. The board will be made up of three additional appointees from each of Excite@Home and the United Group including Joe Kraus, co-founder of Excite, a