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NTL announces link-up with Orange

Mixing up your mobiles and cables

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Updated NTL is to announce an alliance with Orange that will see Orange routing calls through NTL's cable network and NTL offer a mobile phone service. Both will benefit from lower costs.

The deal is mostly thanks to the fact that France Telecom owns Orange and 25 per cent of NTL.

Orange is likely to act as an operator for an NTL-branded mobile phone service, which will hope to entice customers from its cable service by offering a cheaper all-in-one deal. As well as running the service and getting at NTL's customer base, Orange will gain access to NTL cable network to route calls - at a lower price than using mobile rivals' networks.

The announcement comes after an interesting week for NTL. Having been singled out as a company facing bankruptcy, it leaked details of its future plans before its annual results, posted an unexciting set of results and announced a huge convertible bond issue.

The company may well be weighed under by debt - £9 billion on a Q1 revenue of £630 million - but its plans to raise £500 million in a convertible bond took off and it ended up with around £1 billion.

With confidence not exactly high in the telecoms market, it may seem surprising that NTL has got away with what it has. But then it has an ace in its pocket - an extensive and extremely useful network. It says it is in line with plans to get 100,000 cable modem customers by the end of the year.

It has cost it a fortune to build the network and many remain concerned about the debt but this deal with Orange - and another that is currently being discussed with AOL/Time Warner - may have demonstrated that the gamble has paid off.

The company has promised big cost reductions, so we can look at job losses, and it has also upped its prices to get more money in. Has it taken the right approach to grabbing the market? At the moment, investors and shareholders think it has.

Update

We have yet to receive formal notification of the announcement although we do have a copy of the internal memo sent to staff this morning. This confirms that Orange will supply tailored mobile services to three million NTL customers. The contract confirming the situation is due to be signed at the end of this month.

Stephen Carter, the MD and COO of NTL had this to say: "NTL and Orange is a great example of
1+1=3. Working with Orange as our mobile partner means that we will be able to offer our customers a very convenient on-stop shop solution for all their communications needs. We will also work with Orange to explore and develop ways of enhancing mobile products and services, which will in turn, generate increased revenues for both companies and result in new services which will delight our customers."

As several people have pointed out, this 1+1=3 approach to accounting may explain how NTL has managed to build such a huge amount of debt. ®

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