UPC, Europe's troubled cable giant is to combine its German operations with those of PrimaCom, creating the third largest cable player in the country.

At the end of 2000, PrimaCom had 1.01 million German cable subscribers chiefly in the Berlin Brandenburg and Saxony Anhalt areas, and a further 297,000 in the Netherlands. UPC, which already owns 25% of PrimaCom, separately has 530,000 subscribers in Germany.

Mark Schneider, Chairman and CEO of UPC said: "We are delighted to form this partnership with PrimaCom, The fit with our German operations is excellent and this transaction significantly speeds up the delivery of the triple play of television, Internet and telephony to our German customers."

The deal will see the two businesses combined into a new company (New PrimaCom) which will be 52% controlled by UPC and is expected to be listed on the Frankfurt and NASDAQ stock exchanges. PrimaCom will also pay Euros 50m for a small Dutch cable business, Alkmaar.

The combined entity will have pro forma revenues of Euros203m and earnings before interest, tax and depreciation charges of Euros88m. It will start life with Euros880m of net debt.

The new company could become the second largest cable player in the German cable market if UPC exercises an option which runs until August to acquire Deutsche Bank's TeleColumbus operation with its 530,000 subscribers.

UPC, which is 51% owned by UnitedGlobalCom and 8% by Microsoft, has over the last year been hit by mounting debts and issues of broadband competition regulation in its Dutch home market. With its shares at Euros7.16 UPC is currently valued at Euros2.8bn.