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Cable Operators

AOL U.K. Sale May Lift Cabler NTL

10/13/2006 8:00 PM Eastern

The acquisition last week of AOL U.K. by rival British broadband service Carphone Warehouse Group could actually prove to be a catalyst for leading U.K. cable operator NTL, according to a recent research report by Oppenheimer & Co. media analyst Tom Eagan.

Eagan — who maintained a “buy” rating on NTL — wrote that while the AOL U.K. acquisition gives Carphone additional scale in the increasingly competitive U.K. broadband market, it could reduce pricing pressure as the number of overall players in the market declines.

NTL was not considered to be a bidder for AOL U.K.: Early candidates were British Sky Broadcasting Group, Carphone and France Telecom’s Orange.

The deal will make Carphone one of the top three players in the U.K. with about 2.1 million subscribers — including 1.5 million broadband customers — equal to No. 2 provider British Telecom. NTL still leads the pack with about 3 million broadband customers.

“This acquisition could put some pressure on the remaining, smaller players,” according to Eagan.

Carphone is a relatively new player in the U.K broadband market. Although it has been in the residential telephone industry since 2003 — and has about 2.7 million voice subscribers — it began offering broadband as a free add-on in April of this year.

So far it has received about 600,000 applications for the broadband service in the past six months.

September