The sale of Cablelink for £535 million to the US-based NTL Communications was completed yesterday after the High Court and later the Supreme Court rejected applications by an Esat-led consortium, Howberry Lane, for an injunction to prevent it. To the average citizen, the price might seem excessive. Cablelink provides television and radio signals to 360,000 customers in three cities in the State but with little investment in upgrading its network, it has hardly been at the cutting edge of the technological revolution. Only one year ago, industry analysts estimated that the old-style cable company was worth about £200 million, less than half of the eventual price paid by NTL.
But the bidding race for Cablelink and the acrimonious legal dispute between NTL and Howberry underpins the huge, and still unrealised, potential of the cable sector in this State. NTL is now poised to invest a further £200 million plus in upgrading Cablelink services to provide voice telephony services, high speed Internet access and advanced video and cable services. Critically, NTL, which already has extensive operations in Northern Ireland, will now be in a position to provide an alternative service to Telecom Eireann. In stark contrast, Esat's ambitions to emerge as the most serious long-term rival to Telecom Eireann is under threat.
The sale of Cablelink provides a rich harvest for its majority shareholder, Telecom Eireann, which, on the instructions of the Government, took a 75 per cent stake in the company nine years ago - RTE retained the other 25 per cent. At that time, the company was valued at some £70 million, so it has now been sold on at very handsome profit. Few will begrudge Telecom or RTE this windfall, but the wisdom of retaining a cable television company in State hands for so long must be questioned. Cablelink's shareholders have been slow to invest in new infrastructure and to provide the kind of value-added services that are already in place in most other EU states. The consumer has suffered with little price competition and a relatively underdeveloped level of services on offer.
The hope is that the consumer will fare better under Cablelink's new ownership. The omens appear bright; NTL is clearly prepared to invest very significantly in the company and to provide a much greater range of product services. The worry is that the company will need to keep its prices high for voice telephony, television and other services in order to recoup a total investment of over £700 million.
The entry of NTL will act as a catalyst for major change in the entire telecoms market. Not only will it provide a new competitor in the telephony market, its arrival is also likely to spark a significant rationalisation of the cable market. Similar trends are evident in the UK, where the decision of US software giant Microsoft to invest in Telewest - as part of a larger investment in AT&T - has led to speculation of further mergers and consolidation. Microsoft also, of course, has a stake in NTL; such cross-investments underline the rapid convergence in the telecoms, cable and software sectors.
Other developments - such as the advent of digital TV - must also be added to the equation. It will all mean a bewildering array of new services to consumers and business and the companies which prosper will be those which can deliver the services their consumers want - at a reasonable price.