UnitedGlobalCom (United), the cable group that already controls one of the fastest growing broadband networks in Europe, will become the most important cable TV and high-speed internet player in Latin America. It is acquiring most of the international distribution and programming assets belonging to John Malone's Liberty Media.
Under the terms of a complex $3.5bn deal announced today, Liberty will sell its broadband interests - including a 25% interest in the UK's number two cable network Telewest - to United in return for shares. These will lift Liberty's stake in United to a powerful 45% equity stake and 82% of voting rights.
Given the power of the super-voting rights, company insiders are reported as valuing the deal at closer to $5.5bn.
"We have made clear our plans to create a Latin American broadband platform similar to our successful operations in Europe and Australia," said Mike Fries, United's president and chief operating offier. "With the acquisition of Liberty's distribution and programming interests we will be the largest operator in the region."
Ending weeks of speculation that delayed the flotation of broadband company chello, the Telewest stake will be transferred to United subsidiary and chello parent United Pan-Europe Communications (UPC) under an arrangement that would increase United's ownership position in UPC from 51% to 61% (Screendaily June 7).
While UPC would not say how chello and Telewest will work together, UPC boss Mark Schneider said: "we look forward to exploring strategic relationships between our two companies."
But it is in Latin America, where this powerful combination of assets will have the most immediate impact. Following the deal, United stands to pass 5.8m Latin American homes and count 2.2m subscribers, enough of a critical mass for it group these assets into a regional holding company that may then be floated.
Programming interests include 100% of Pramer, which owns or operates 18 channels in Argentina, 40% of Torneos Y Competencias, a leading sports and entertainment group also based in Argentina and the Latin American activities of the Gems network.
Distribution interests transferring to United include 28% (with a right to increase to 50% ) of Cablevision, Argentina's largest cable company; 49% of Liberty Cablevision of Peurto Rico; 41% of Mexican wireless broadband firm Grupo Portatel; and 43% of Digital Latin America, a satellite distribution project with Hicks Muse Tate & Furst and Motorola. United already owns VTR GlobalCom, the largest Chilean cable and telephone operator.
In other territories United gets a 15% stake in Crown Media Holdings, distributor of Odyssey and the Hallmark Channel; 20% of Australian pay-movie channel Premium Movie Channel; right of first offer on Liberty's Japanese assets and broadband operations elsewhere. United already owns 72% of Austar United Communications, a fast growing cable, satellite and telephones operator in Australia and New Zealand.
United and Liberty have known each other for years. United a pioneer of cable TV sold its US networks to Tele-Communications Inc (TCI) which Malone last year sold on to AT&T. Liberty is itself an AT&T "tracking stock", but is controlled independently by Malone.