Excite@Home, Chello call off merger

(Telephony) - The $5.1 billion merger of Dutch cable operator UPC's Chello broadband unit and high-speed ISP Excite@Home into Excite Chello is kaput. The deal fell apart when UPC's parent, Denver-based UnitedGlobalCom (United Group) told Excite@Home that "market conditions" kept it from moving forward.

Announced in June, the merger would have combined Excite@Home's Asia-Pacific and European media and broadband subscriber businesses with assets and distributions from United Group in an exclusive worldwide joint venture that pointedly did not include Excite@Home's North American businesses.

Mark McEachen, Excite@Home's executive VP/chief financial officer said the United Group warning was enough to tear asunder a relatively tenuous agreement.

"We have become concerned that the complexity of the proposed venture, including the participation of multiple shareholders with potentially different interests, would be an impediment to its success and would risk slowing down our international expansion," he said.

UPC, he continued, "asked us to consider other alternative market proposals. We did not find these alternatives satisfactory."

McEachen, who did not elaborate on the proposed alternatives, said that Excite@Home incurs no breakup fees or other obligations and is "free to pursue other partnerships without restriction."

Excite@Home's international business, without Chello, totals more than 175,000 subscribers in Japan, Australia and the Benelux region.

"On the media side, we now have 15 international versions of Excite and generated 25 million average daily page views internationally in September, which was up more than 20% from the prior quarter," McEachen continued. "We are confident we can continue this growth in the absence of the Chello deal and do not feel any pressure whatsoever to run out and do another deal."

The breakup marked the second setback for UPC's broadband unit. In May, UPC cancelled an initial public offer for Chello.

McEachen deferred more detailed explanations to UPC, reiterating, "our international business continues to perform well. We remain cognizant of the opportunity overseas and we were certainly prepared to go ahead."

Chello officials were, at least initially, unavailable for comment. In a company statement, UPC chairman/CEO Mark Schneider called the negotiations "a complex transaction with a number of difficult business issues to resolve."

He reiterated UPC's intention "to focus on our core broadband Internet subscriber business and the tremendous interactive TV opportunity that exists in the extensive United Group footprint of cable TV, satellite and broadband wireless operations."