Network management Toolkit

How will NTL-Telewest affect your business?

Tags:
NTL,
Telewest

Jo Best silicon.com

Published: 04 Oct 2005 18:15 BST

The long-awaited merger between NTL and Telewest has finally happened. Now the question is: how will it affect business users and the broadband market at large? With the merger having been in the offing for years now, both companies have had sufficient time to align their strategies and consumer product portfolios in order to make the transition as smooth as possible.

According to Neil Rickard, research vice-president at analyst house Gartner, the two are unlikely to make an important play in the business space.

He said: "Overall, as two separate entities, they were small, tier-two players. Combined, in business services, they're a stronger entity and more interesting [to corporates] than two little outfits. But they're still not a dominant or major player compared to BT and Cable & Wireless. I don't see them losing sleep about this. I think they'll mostly be losing sleep about each other."

BT has already made its presence felt in the business broadband market today by cutting prices for its business subscribers. And, with a new sizeable competitor in broadband, BT will now have a patsy to draw Ofcom's regulatory fire.

However, NTL and Telewest have one advantage over the telco: the united pair are now larger than BT in terms of subscriber numbers. How the two firms integrate post-merger will be a key factor in future performance. If the transition to a single brand is painless, the company can start to capitalise on the post-merger cost savings and efficiencies at once. If it doesn't, there are plenty of consumer and business ISPs hoping to capitalise on any customer dissatisfaction.

Ian Fogg, analyst at JupiterResearch, said the move could yet prove a hazardous one for NTL and Telewest. "There's a significant risk to the merger -- I wouldn't like to underplay that," he said. "They need to make sure any benefits come as quickly as possible."

He added: "They're merging because the broadband market's so competitive but if there's any turmoil from the merger it will damage the company -- and it will damage the company because the market's so competitive."

The merged company also runs the risk of inheriting the worst faults of either party, with ropey customer service or network performance having dogged both at some stage in their histories.

Staff morale may also be low, following news of expected £1.5m post-merger cost savings. Ovum senior analyst Angel Dorbardziev said: "If I was an employee working for either firm, I'd be thinking 'will that [cost-saving] be me?'. That won't help morale."

Despite the creation of the UK's biggest ISP, Jupiter Research's Fogg believes the move won't necessarily put the merged NTL-Telewest ahead of DSL.

"The thing about the broadband space is that cable operators both together had a lead but DSL as a whole has overtaken that. By merging into a much more significant retail ISP, it doesn't mean they will hold on to that. I expect the lead for DSL-based broadband to increase," said Fogg.

That's not to say there aren't benefits in a union, with economies of scale being one of the more obvious. "They have synergies not just at network level but at operational level. They can have much more efficiencies in operations with a much heavier punch in the UK," said Dorbardziev.

But competitors are coming thick and fast. NTL-Telewest is facing competition from a new wave of cheap landline providers, VoIP services and fixed-mobile substitution. The merged company will even soon be facing off against BT in the IPTV market.

With the merger just announced, industry watchers are already speculating on what NTL-Telewest's next move might be in this fiercely competitive market. Gartner's Rickard noted: "This is not the endgame. I would expect more mergers and acquisitions, perhaps even involving these two companies."