Amsterdam-based United Pan-Europe
Communications NV Tuesday teamed up with Excite@Home to form one of the largest
broadband companies outside of the U.S.
The merger combines UPC’s Chello Broadband NVsubsidiary with
Excite@Home’s international operations in Europe, Latin
America, Australia and Japan.
Dubbed Excite Chello, the merger features Excite@Home’s international
portal, media and high-speed data ventures with Chello’s high-speed
Internet operations and its exclusive access to the broadband networks of
UPC and its business partners in Europe, Asia and Latin America.
The combination of the companies makes Excite Chello the operator of the
largest cable footprint outside North America.
Liberty Media Corp. will invest
$187 million in Excite Chello in the form of a note
convertible into Excite Chello shares. ExciteAtHome and UnitedGlobalCom Inc., the owner of United Pan-Europe Communications, will each invest 100 million euros.
Liberty has a controlling stake in UnitedGlobalCom.
Analysts say Chello/Excite@Home stands to have a big advantage over competitors in Europe.
“In connectivity, Excite Chello is competing with all the normal names which use DSL and satellite connections. (And) it has a first mover advantage there,” Jamie Wood, technology analyst at JP Morgan & Co., told Reuters.
European carriers such as Deutsche Telekom’s Internet service provider T-Online and France Telecom’s Wanadoo rival have recently begun offering broadband services.
But such companies tend to upgrade ordinary copper telephone wires with DSL, leaving Chello/ExciteAtHome with a dominant position on higher cacity TV cable wires. And analysts say it has an 18-month lead over DSL entrants.
George Bell, Excite@Home chairman and chief executive officer said the deal
creates global scale in the Internet’s most dynamic growth area, broadband
services.
“We have watched Chello Broadband’s growth and success in Europe and
believe that the combination of assets in our new venture cannot easily be
replicated,” Bell said.
Bell added that the broadband company would be unrivaled by competitors in
the regions for years to come.
“The two companies are the early leaders in the North American, European
and Asia Pacific broadband markets and we know how to win,” Bell said.
“Excite Chello presents a rare opportunity to take everything that we have
learned and built over the past six years and use it to accelerate the
global broadband market and create an instant leader in the field.
Mark Schneider, UPC chairman and chief executive officer, said Excite
Chello would deliver a compelling broadband proposition to subscribers.
“Excite@Home has demonstrated its leading media and broadband credentials
throughout its markets,” Schneider said. “Furthermore, this merger gives us
a way to reach narrowband Internet customers worldwide through the Excite
portal. The momentum this transaction generates will maximize our growth
opportunities as we continue to enter new countries.”
The two also intend to marry their advanced television device and platform
strategies, combining Excite@Home’s set-top platform technologies with
Chello’s exclusive rights to roll out television set-top box services to
the current UPC footprint.
Excite@Home’s Bell said set-top-box deliver of broadband services would
dominate the market.
“The marriage of our set-top box technology with Chello’s exclusive set-top
box footprint is a powerful combination and we expect this to be one of the
most promising areas of development in the global Internet marketplace,”
Bell said.
Before the ink dries on the deal, Excite Che
llo will have operations in 15
countries on 4 continents and the exclusive rights to deliver broadband
internet services to over 30 million cable homes. Excite Chello will serve
more than 300,000 broadband subscribers in the UPC footprint.
John Malone, Liberty Media chairman said the firm was
delighted to have the opportunity to invest in a company that it believes
will be the international leader in the broadband market.
“This strategic investment complements our other broadband and media
interests, and further strengthens our already close relationship with the
United Group,” Malone said.
Excite@Home and UPC partner UnitedGlobalCom also committed to invest $93.8 million each in Excite Chello.
The new company will be equally owned and jointly controlled by Excite@Home
and the United Group.
As a result of the merger, Chello Broadband’s initial stock offering,
announced in March, has been cancelled. The merger is expected to close by
year-end, pending regulatory approval. Excite Chello plans to float an initial public offering later this year or early next year.
With principal offices in Amsterdam and London, and technology research and
development operations in Amsterdam and California, Excite Chello expects
to leverage its scale of operations to pursue a strategy of accelerated
broadband service deployment for consumer and commercial use worldwide
Excite Chello plans to distribute services globally across cable modem,
DSL, wireless, satellite and other delivery platforms.
Bell and Schneider will co-chair the supervisory board of directors of
Excite Chello. Roger Lynch, currently president and chief executive officer
of Chello Broadband, will serve in the same capacity for Excite Chello.
