Following collapse of the proposed merger of Bell Atlantic Corp with Tele-Communications Inc, a second major deal between a Baby Bell and a cable company has foundered in the wake of regulators’ desire to see cable television tariffs fall. Southwestern Bell Corp has cancelled its plans to form a $4,900m cable television partnership with Cox Cable Communications Inc, saying the new government regulations on cable rates made the deal untenable since the industry could no longer generate the earnings it had expected. Under the deal, announced on December 7, the San Antonio, Texas phone company was to commit $1,600m in capital to the partnership and the cable arm of Cox Enterprises Inc, Atlanta was to contribute 21 cable systems. Southwestern Bell said in March that it was renegotiating terms of the deal, because the new rules substantially reduced the cash flow forecasts for the cable business. The one big deal that has gone through is US West Inc’s investment of $2,500m for a 25% shareholding in Time Warner Inc’s Time Warner Entertainment cable subsidiary.
