Goldman 'out of Telewest float'

GOLDMAN SACHS has been dropped as lead adviser for the planned flotation of Telewest, one of the largest cable television companies in the UK, because of what Telewest sees as a serious conflict of interest.

Telewest is hoping to get the issue away by Christmas, having already once this year been forced by uncertain market conditions to abandon the float. The original plan was to raise about pounds 400m in a sale that would have valued the company at about pounds 1.8bn. Telewest was being advised jointly by Goldman and Kleinwort Benson.

Telewest believes Goldman Sachs has a conflict of interest because of its recently-won role as joint adviser on the forthcoming flotation of British Sky Broadcasting, the satellite television network in which News Corporation has a 50 per cent stake.

There have also been rumours of a disagreement between Telewest and Goldman Sachs over valuations. In May, Telewest blamed market conditions for the decision to postpone the issue, but some analysts questioned whether the company was asking too high a price.

Telewest would neither confirm nor deny changes in its chosen advisers. Goldman Sachs refused to comment. Telewest will now be advised by Kleinwort Benson and Morgan Stanley.

If Telewest does push ahead before the end of the year the float will coincide with the BSkyB share issue, which analysts say could value the satellite firm at more than pounds 4bn. Telewest will also be running up against the Government's planned sale of all or part of its remaining 40 per cent stake in National Power and PowerGen, which will raise up to pounds 4bn. In addition RJB Mining is planning to raise pounds 400m in new share capital to finance its purchase of assets from British Coal.

Telewest is jointly owned by Tele-Communications, one of the biggest cable companies in the US, and US West, a US regional telephone company. It plans to use the money raised to help to finance the completion of its cable television and telephone networks in Britain. The company has a total investment plan of pounds 1.25bn, of which more than pounds 500m has already been spent.

Telewest also wants to raise its profile and to be seen as a UK company. It is likely that the shares will be listed primarily in London.

The company is one of several UK cable operators expected to come to the market or to dust off plans previously shelved. French- owned General Cable is believed to be looking at a flotation, and Diamond, a cable company in the Nottingham area, is also expected to seek a listing.

There has been speculation that Telewest will have to be less ambitious on price this time. However, cable companies are hugely encouraged by the success of Comcast, which pulled out of a flotation earlier this year but has recently made a successful listing on Nasdaq in the US. The Comcast share price has risen from around dollars 17 in the middle of September to more than dollars 20 last week.

In July, Bell Cablemedia, one of the top three cable operators in Britain, raised almost dollars 500m in equity and debt on the New York Stock Exchange. Shares in the company were placed at dollars 17 and have since risen to about dollars 25. Bell Cablemedia, in which Cable & Wireless has a stake, is expected to seek a listing in London in 1995.

Cable companies in the UK have completed networks taking in 3 million homes. Investment in the industry is expected to reach about pounds 10bn by the end of the decade.

The UK cable market is exceptional because the companies can offer telephone services in their franchise areas. They are seen as the main threat to BT in local telephony.