OTHER GOOD NEWS FOR XSNI....
The digital economy goes global
By Derek Reisfield, CBS MarketWatch
Last Update: 6:22 PM ET May 12, 1999 Media Report
NEW YORK (CBS.MW) -- The digital economy is going global. The first major stop on the world tour is Europe, especially the U.K.
The economics of international expansion are dramatically different from the traditional, physical world.
The best sign of this is the more than $5 billion Microsoft has invested during the last six months on U.K. digital broadband platforms. The folks in Seattle are investing a couple billion in Cable and Wireless' residential network according to industry rumors. Microsoft (MSFT: news, msgs) also invested in Telewest as part of the ATT, Comcast, Media One fracas. In addition, Microsoft invest $500 million for a small stake in NTL, Inc.
The U.K. cable industry is on a roll. The last 12 months have been a period of consolidation and growth. Although the U.K. cable industry got off to a late start, it generally has a more modern infrastructure than its U.S. brethren. Satellite multichannel services, such as British Sky Broadcasting, still have 60 percent of multichannel households. But that is down considerably from 70 percent two years ago. Also B Sky B has some deep pocketed owners, such as News Corporation and Pearson.
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They are not to be underestimated. Murdoch's planned purchase of the premier British soccer team, Manchester United, would have set off an expensive programming war. However the acquisition was blocked by the U.K. regulatory authorities. I bet Rupert Murdoch wishes Maggie Thatcher was still in office. However, B Sky B is fighting more aggressively with pricing and marketing.
Long run, though, the U.K. cable operators have the ability and advantage of bundling cable, telephone and Internet services. In addition, they have developed additional assets which may produce considerable upside.
The Tower
For example, NTL owns a national broadcast transmission infrastructure. This "Tower" business is very attractive and may be spun out to shareholders or sold. The "Tower" business is one of the hottest sectors in the U.S. American Tower Systems and other stocks appreciated dramatically over the last year. The demand for cellular phones is increasing in the U.K., so NTL Transmission business is benefiting from increased demand.
The other clear signal that the digital world is moving to Europe is Sportsline U.S.A's announcement yesterday of the formation of Sportsline Europe. Over the last year or two Sportsline has quietly built several interesting businesses internationally, Golfweb Japan, Crick Info, and Soccer Net being the best examples. Sportsline is partnering with Reuters in this effort.
Other major Internet players have also been moving aggressively on the international front. All the portals: Yahoo, Lycos, Excite are over there. The eCommerce folks have already landed, Amazon for example. And the equity traders; Etrade and Schwab have major businesses.
The economics of international expansion are dramatically different from the traditional, physical world. The cultural issues are not. So it will be interesting to see how this all plays out. The one thing you can be sure of is that there will be a dramatic increase in cross border digital deals in the future.
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