France Telecom to Buy US$1 Billion NTL Stake

France Telecom SA today announced that it will acquire a US$1 billion [B] stake in telephone and cable network operator NTL Inc. in an effort to consolidate its market share in the U.K. telecommunications arena.

With the investment France Telecom said it is supporting NTL's bid to acquire the consumer division of Cable & Wireless Communications PLC (CWC), according to a statement from France Telecom. If the CWC deal goes through, it would double NTL's current cable and telephone coverage in the U.K., to 2.3 million [M] telephone subscribers and 2.15 million [M] cable television users, according to France Telecom.

If the NTL-CWC deal is completed, France Telecom will increase its equity stake in NTL beyond the acquisition announced today, to become a "strategic shareholder," France Telecom said. It did not specify the value of such an investment.

NTL has offices in London, and is headquartered in New York. NTL shares on the Nasdaq exchange in the U.S. rose 4.19 points from the opening level today to trade at $97.94 in late afternoon. France Telecom was trading at $75 per share in late afternoon trading, up 37 cents from the opening price.

The deal announced today calls for France Telecom to buy $250 million [M] in NTL common shares and $750 million [M] in NTL 5 percent preferred stock. The preferred stock is convertible to common stock at $125 per share. Once converted, the investment would equal about 10 percent of NTL's entire outstanding common stock, according to France Telecom.

France Telecom's funding of NTL will allow NTL to bid 8 billion pounds (US$12.4 billion [B]) for the CWC consumer unit, according to a report in the Financial Times of London.

Today's France Telecom announcement follows Microsoft Corp.'s US$500 million [M] January investment in NTL, aimed at developing broadband services for customers in the U.K. and Ireland.