Telewest to delay start of digital television service

The cable industry's plans for an early launch of a digital television service were left in disarray last night after Telewest Communications, the second biggest cable group, said it was postponing the start-date until the spring.

Revealing the outcome of its cost-cutting review, Telewest pledged to halve its annual investment budget from more than pounds 500m to around pounds 250m. Stephen Davidson, chief executive, insisted the cuts reflected what he claimed was Telewest's two-year lead over other cable companies in completing its networks, with 75 per cent due to be constructed by the end of this year.

Pledging to deliver a "quantum leap forward in performance of the company", Mr Davidson said the construction programme would plunge from 40,000 homes a month to just 5,000. He said Oftel, the industry watchdog which sets construction targets, had been consulted. "We've had a very constructive and understanding response."

Telewest also confirmed plans to cut 1,400 jobs, a quarter of its 5,500- strong workforce, a move which would save pounds 40m a year. Telewest will make a pounds 5m charge to cover the cuts in its third-quarter results.

Mr Davidson said the digital cable service, which had been planned to start towards the end of this year, will not begin operations until the second quarter of 1998. The delay would save pounds 7m out of a pounds 25m launch budget.

The start will now coincide with the launch of British Sky Broadcasting's digital satellite joint venture with British Telecom, called British Interactive Broadcasting (BIB). Mr Davidson denied Telewest had lost the opportunity to steal a lead from BSkyB. "We always said it was good to keep our options open but there are benefits of going first and there are benefits of going together."

He said technological changes could cut the cost of set-top-boxes, which decode programmes for customers, by a third. Another reason claimed was the move by Microsoft, the computer software giant, into the cable market which could set a lower cost-operating standard across the industry.

Telewest would not comment on whether it was renegotiating a deal with General Instrument of the US for an initial order of around 10,000 boxes. "We may have an opportunity to buy the same set-top boxes at prices significantly lower than three months ago," Mr Davidson said.

Last night Cable & Wireless Communications (CWC), the merged cable group which had been developing a joint service with Telewest, declined to comment on the announcement. CWC has also cut back on cable spending recently, though no announcement has so far been made.

Telewest yesterday revealed losses of pounds 142.3m for the first six months of the year, up from pounds 117.5m during the same period in 1996. Its phone customer base grew by 100,131, compared with 31,821 television subscribers. The penetration rate, which measures the number of households which take up the service, rose from 26.4 per cent to 28.9 per cent for telephony and by 1 per cent, to 22 per cent, for television.