SAN FRANCISCO (07/18/2000) - Excite@Home Inc. said it plans to merge its international operations with European Internet service provider Chello Broadband NV, creating what the companies say will be the largest broadband company outside of North America.
To be called Excite Chello, the new company will operate initially in 15 countries in Europe, Latin America and Asia Pacific. It will serve more than 300,000 broadband subscribers and receive about 8 million unique portal visitors a month, company officials said in a press conference Tuesday.
Through its relationship with cable operator United Pan-Europe Communications NV (UPC), the parent company of Chello, the new firm will have exclusive rights to offer cable Internet access services to more than 30 million homes, and to deliver set-top box services to more than 10.5 million homes, the officials said.
"It does, in a single stroke, change the Internet broadband landscape outside the US. There's no question about that," said George Bell, chairman and chief executive officer of Excite@Home, during a conference call for the press Tuesday.
Liberty Media Corp. -- the cable television unit of AT&T Corp.-- will invest US$187 million (200 million euros) in the new company in the form of a note convertible into Excite Cello shares. In addition, Excite@Home and UnitedGlobalCom, the parent company of UPC, will invest $93.8 million dollars (100 million Euros) each in Excite Chello.
The new company plans to launch an IPO late this year or early in 2001, market conditions permitting, Bell said. Because of the merger, Chello Broadband has cancelled its own plans for an IPO, which were announced in March.
Today's announcement didn't come entirely out of the blue; Excite@Home and Chello were rumored to have been courting each other for several weeks. In the event, the deal proved a tough one to negotiate, and executives from each side pulled "a lot of consecutive all-nighters" putting it together, John O'Farrell, an Excite@Home executive vice-president, said during the teleconference.
The merger is expected to close by the end of September, officials said. Bell declined to place a dollar value on the deal, calling it a "merger of two equals." The combined company would have annual revenues of about $50 million, he said.
One of Excite Chello's main goals will be to expand its base of broadband subscribers, possibly reaching 500,000 by the end of the year, Bell said. The company will deliver content to a range of devices, including PCs, set-top boxes and mobile phones, and distribute services using cable modem, DSL, satellite and other platforms. The company will use the Excite brand for its media and portal services, while the Chello brand will be used for its broadband access services, officials said.
The merger will allow the companies to marry their strategies for delivering content via televisions, combining Excite@Home's set-top box technologies with Chello's right to roll out television set-top box services to current UPC customers.
Combined assets of the company will include the 10 localized versions of the Excite Web portal that exist outside of North America; the Excite@Home and Chello Broadband high-speed Internet services, which are available in 10 countries; and various Internet backbone and satellite assets belonging to Chello. Excite plans to increase the number of localized Web portals to 20 over the next 12 months, Bell said.
As for management and ownership, the new company will be equally owned and jointly controlled by Excite@Home and the United Group. Roger Lynch, currently President and CEO of Chello Broadband, will serve as president & CEO of Excite Chello. Bell and Mark Schneider, chairman and CEO of UPC, will be co-chairmen of the new firm's supervisory board of directors. Other board members will include three representatives each from Excite@Home and the United Group, as well as three independent members, one of which will be Liberty group Chairman John Malone.
Excite Chello will employ about 1,000 staff and have joint headquarters in Amsterdam and London.
Excite@Home, in Redwood City, California, can be reached at +1-650-556-5000 or at http://www.excite.com/. Chello Broadband, in Schipol Rijk, the Netherlands, can be contacted at +31-20-778-8200 or at http://www.chello.com/.