Threat to £5bn cable merger

THE rationale for the long-awaited £5bn merger between cable groups NTL and Telewest could be swept away by a regulatory review of the telecommunications industry.

The cable companies may have to open their networks to competitors wanting to offer voice calls and broadband internet access, ending what are, in effect, local monopolies.

A merger has been expected for years and City banks have been hoping for lucrative mandates to advise the pair since they completed massive debt restructuring in 2003 and 2004.

Speculation about the deal has become intense because NTL has completed a £1.23bn deal to sell its broadcast masts business, while Telewest chief executive Barry Elson is back from sick leave.

But last week BT signalled it would fully open its network and grant competitors equal treatment with its retail arm. The move follows regulator Ofcom's strategic review of the sector.

City sources believe the same pressure will now inevitably fall on NTL and Telewest. One said: 'The deal awould have to be referred to the Office of Fair Trading and it would seek advice from Ofcom.'

Ofcom sources said its board, led by director-general Stephen Carter, would look at the market segments the groups were involved in.