Fitch: UK Communications Bill To Trigger Industry Consolidation

Business Wire, June 27, 2002

Business Editors

The first signs of increased media liberalisation in Europe were evidenced with the unveiling of the long awaited draft Communications Bill by the UK government in May 2002. The barriers that have stood in the way of cross-media ownership and consolidation in the United Kingdom will be removed according to a feature article in the latest edition of Fitch's Global Telecom, Media & Technology (TMT) Credit Quarterly. While the Bill, which is only in its draft form and likely to take 18 months to become law, came as little surprise, while the extent of the deregulation announced did, being far wider than anticipated.

"The UK Communications Bill is set to bring about some major changes to a sector that had suffered under a complex regulatory framework and is likely to act as a catalyst for merger and acquisition activity driven by cross-media ownership and consolidation plays," says Stuart Wheeler, Fitch Ratings.

Lifting the non-European ownership restriction opens the doors to the largest English-speaking market outside of the United States to the major (English-speaking) diversified media companies, AOL Time-Warner, Viacom and Walt Disney Corp. The combination of the lifting of non-European ownership restriction and the demise of ITV's PayTV poison pill-ITV Digital, makes both Carlton and Granada, individually or combined a far more attractive proposition, worthy of both European and U.S. interest.

The article highlights that the acquisition of the ITV companies, either singularly or as a combined entity, by one of the 'Big Three' US diversified media operators, could offer synergistic and operational benefits to the UK companies, as well as providing them with access to far greater financial resources than they have at present. However, according to the article by Fitch, while the UK market will undoubtedly provide a number of attractive media assets for the major US operators, their participation in any consolidation moves are from certain due to weakened balance sheets and strategic issues at home that require management focus.

'The UK Prepares Itself For Broadcasting Consolidation' is included in the latest Global Telecom, Media & Technology (TMT) Credit Quarterly. The newsletter also includes trends in the wireless industry, prospects for European telecom equipment manufacturers, the outlook for the US newspaper industry, the deterioration of credit quality in the US long distance markets, whether vertical consolidation can rescue the US telecom market and many other relevant topics.

The 'Global TMT Credit Quarterly' is available on Fitch's Web site 'www.fitchratings.com' in the newsletters section corresponding with the corporates sector.