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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: Stoctrash who wrote (38806)	2/4/1999 3:19:00 PM
From: DiViT	Read Replies (2) \| Respond to of 50808

Ahem...MICROSOFT BUYS INTO EUROPEAN CABLE 02/03/99 Cable Europe (c) 1999 Phillips Business Information, Inc. Microsoft has arrived. The news that US software giant is taking significant stakes in UK MSO NTL and Netherlands-based United Pan- Europe Communications (UPC) followed earlier UK press reports that Bill Gates was interested in purchasing British Telecom's cable operations in central London and Milton Keynes. NTL CEO Barclay Knapp dropped a hint of Microsoft's true intentions two weeks ago when he told Cable Europe that "where there's smoke there's fire - it may be you have the right story but the wrong target." The NTL deal effectively makes Microsoft NTL's largest single shareholder. The company's expansion up till now has been financed almost exclusively through debt. Microsoft will invest $500 million in NTL's 5.25 per cent convertible preferred stock, convertible into NTL common stock at a premium price of $100 per share. The deal effectively gives Microsoft a 5 per cent stake in the NASDAQ-listed cable operator. Microsoft will also receive 1.2 million five-year warrants for NTL common stock at a price of $84 per share. Almost simultaneously, Microsoft made a $300 million investment in UPC, announced at the same time as the Amsterdam-based United International Holdings subsidiary published the prospectus for its forthcoming IPO. Jeremy Thorp, NTL's group managing director, digital services, told Cable Europe that Microsoft would have "no seat on the board and no input in management. It will just be strategic stake." NTL and Microsoft have already developed a close working relationship and Microsoft is supplying technology in support of NTL's digital cable interactive service, planned for launch later this year. "When we announced that, everybody said, oh, what does this mean, where's the money and so on," he said. "Well obviously, this is one step forward and they've decided they very much want to take a piece of the action." As part of the latest agreement, NTL and Microsoft are to form a joint 'technology board'. Microsoft has a similar agreement with UPC. Some observers are already speculating on the longer term implications of Microsoft's close involvement with cable operators. NTL has supply agreements in place with a range of technology providers for its digital service, including C-Cube and its subsidiary Divicom, PowerTV and, for its off-franchise Internet-via-TV service, NCI. Thorp said that NTL would retain its independence with regard to choosing suppliers. "Obviously their main interest in doing this sort of thing is that they would hope that the companies they invest in would work with them on the technology," said Thorp. "We will be forming a technology board with them, but it doesn't tie us in any way. There are no specifics in the deal on our extending the use of their software at this stage. But obviously it gives us even more of a close contact with them. They're making a huge investment into the sort of technology that's very relevant to our business." He said there was no arrangement with Microsoft for the supply of set-top boxes, for example. However, he said Microsoft's WebTV was obviously "relevant to a number of things we are doing", including NTL's off-franchise Internet via TV offer, for which the company is using software provided by NCI, and its yet-to-be-specified plans for UK digital terrestrial, with interactive services delivered via the public telephone system. The off-franchise service developed out of NTL's purchase of the now defunct NetChannel's subscriber base last year. The service was initially planned to launch last autumn, with a purchase of some 30,000 boxes supplied by Acer. However, the service has been in 'test mode' until now, and will not actually be live till the end of March. "In rolling out this sort of service, one takes a lot of the technology for granted but it's still actually pretty difficult to do this sort of stuff," said Thorp. "Obviously there's a question of timing in relation to the marketplace. Christmas is quite a significant period and you've got to get that one right." The Microsoft deal also gives NTL a significant injection of cash, which could be used for further acquisitions.