NTL's attempt to buy the consumer division of Cable & Wireless ran into problems Tuesday with the DTI questioning whether the deal is anti-competitive.
Secretary of State for Trade and Industry Stephen Byers is concerned the acquisition could damage competition in the emerging cable market and has referred the deal to the Competition Commission. The NTL deal is worth £70m and the only other cable operator in the UK is Telewest.
"Effective competition in these growing markets is of central importance to the consumer," Mr Byers said in a statement. "I am concerned about the possible effects on this developing market of the reduction in the number of cable operators from three to two."
In a statement, chief executive of NTL Barclay Knapp hit back at Byers. "We continue to believe that the combination of the companies will provide significant new services, choice and competition for the consumer and business telephone market in the United Kingdom," he said.
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