[email protected] Under Threat as chello Merges with [email protected]

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

Chello’s parent, International cable operator UPC
and [email protected], 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 [email protected]’s non-US operations, combining
[email protected]’s international portal, media and high-speed data ventures with
chello’s high-speed operations and networks in Europe, Asia and Latin
America.

An [email protected] 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 [email protected] 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
[email protected]’s Australian operations]. I think we’re quite complimentary
with chello’s focus on the regional market and [email protected]’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
[email protected]’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.
[email protected] 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 [email protected] 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 [email protected], 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 [email protected] and the United
Group including Joe Kraus, co-founder of Excite, a

nd John Riordan,
President of UPC, as well as three independent members that will be
mutually agreed on by the board, one of which will be John Malone, chairman
of Liberty Media. Roger Lynch, currently president and CEO of chello
broadband, will serve as President & CEO of Excite Chello.

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