Buy-up strategy covers all exits

Flextech is buying up stakes in the pay-TV market to cover itself against any eventuality, says Meg Carter

A consolidation of the UK’s pay-TV market is underway, and Flextech is at the forefront. Two weeks ago, the cable and satellite programmer purchased the remaining 61 per cent of The Family Channel it did not already own.

Meanwhile, negotiations continue over whether to buy Cox Communications’ 35 per cent stake in UK Gold and UK Living – a move that would give Flextech a controlling stake in each. The company is also discussing a potential merger of pay-TV interests with BSkyB and with Viacom, which operates Nickelodeon and the Paramount Channel.

Its strategy has been to build up a collection of channels, usually in partnership with other broadcasters. Flextech now manages the UK interests of Discovery Channel, runs its own Bravo channel and has stakes in other channels, such as Playboy. All in all, its interests span 13 channels including UK Gold and UK Living, in which it already has stakes.

Not bad for a company that first floated as an energy investment company just over a decade ago and made its first media investment – a 20 per cent stake in programme producer/distributor HIT Communications – in 1990.

Within two years, Flextech had shed all non-media interests, having built up stakes in local cable operators and children’s channel TCC.

It also attracted backing from Tele-Communications Inc, the Denver-based US cable TV giant which now has a controlling interest in the company.

Today, Flextech’ s European programming interests are bundled into United Artists European Programming, which manages a portfolio of channels in the UK including Bravo, TCC, Discovery Channel, TLC, The Family Channel and The Parliamentary channel. Flextech also has interests in UK Gold, UK Living and European Business News. And it is linked with others, including Hallmark, the media and greetings card group, which holds a stake in Flextech.

Another deal struck in the past fortnight promises the launch of a home-shopping service later this year. Flextech has acquired a controlling interest in US-based Home Shopping Network’s infomercials business – a new Flextech subsidiary now holds worldwide rights.

This, along with ITV investments – a 20 per cent stake in STV and 20 per cent in HTV – underlines the fact that the former oil services group has become a major force in British broadcasting.

Future growth will be ensured if it can stand its ground against larger players such as Rupert Murdoch’s News Corporation and Disney ABC.

To do this, Flextech is developing tightly-targeted, niche products. Its current strategy is to take the majority control of channels in which it already has an interest and sell advertising through its own sales operation. This means it can hedge its bets – ensuring it is in a good position whatever the technology of the future.

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