Sugar daddy with merger in mind makes sense for NTL

NTL has not had a good 2002 so far. Crushed by £12bn of debt, the cable company has been forced into a humiliating financial reconstruction. Out go shareholders, in come bondholders. Equity investments have been rendered virtually worthless and investors in NTL bonds are to take over.

These hapless new owners, shareholders by default, have agreed to inject fresh cash into the business to help fund future development. NTL sorely needs the money.

Its basic proposition is sound. Cable provides high-speed internet access and cheap phone lines. It should also provide state-of-the-art TV imagery, a host of attractive channels and good programming.

All this costs billions of pounds. One way or another, NTL's business model failed to make the right calculations. The refinancing provides a breathing space but it does not solve the more fundamental problem - a lack of cash.

The bondholders' money is not enough. NTL needs a sugar daddy. John Malone of LibertyMedia was poised to take on the role by buying a large stake but the bond investors decided his price was too low.

They may well have been right but NTL stands a far greater chance of making a permanent imprint on the British media scene if it is bolstered by a wealthy backer.

LibertyMedia owns a quarter of NTL's biggest British rival, Telewest. A merger between the two, orchestrated by Malone, makes increasingly good sense.

Saving grace
SCOTTISH Power's fall from grace has been dramatic. Once considered a shining example of the utility sector-it has been forced to retrench, rethink and reduce its dividend.

The strategic about-turns and cut in the payout have been delivered by chief executive Ian Russell. Many investors are now calling for his head and demands have become particularly vocal ahead of today's meeting to vote on the sale of Southern Water.

Russell has been in his post for only a year. His predecessor was Sir Ian Robinson, who steered Scottish Power for six years and was responsible for most of the deals Russell has since had to unravel.

Robinson now chairs the hotel chain Hilton Group and Amey, which last month had to rewrite profits for the past three years after criticism of the way it accounted for Government private finance initiative projects.

Scottish Power is chaired by Charles Miller-Smith, whose tenure at ICI was not entirely successful. He will be keen to get Scottish Power right.

Power play
THE PKF survey of small business attitudes in 2002 reveals that the use of pension schemes as a tax-efficient way of rewarding staff has shot up from 50% to 81% in just one year.

What this means is that companies are increasingly inclined to put pay rises or bonuses into an employee's pension pot, where it is not subject to income tax.

The trend is particularly reassuring as more and more large corporates are turning their backs on defined benefit schemes, where workers are guaranteed to receive a proportion of their final salary as an annual pension.

Defined contribution schemes, favoured by most small companies, are inherently more risky. At least, however, the debate over pension plans has pushed the issue to the forefront of employers' minds. They are now doing their bit to turn us into a nation of savers.