European Cable Giant to Buy @Entertainment

United Pan-Europe Communications, Europe’s No. 2 cable television company, agreed to buy @Entertainment Inc., owner of Poland’s largest cable network, for $1.15 billion, extending its push into the Eastern European pay-TV market.

UPC, 62% owned by Denver-based United International Holdings and 8% owned by Microsoft Corp., will pay $19 for each @Entertainment share, a 52% premium to Tuesday’s close of $12.50. The price includes $400 million in assumed debt.

U.S. companies are pushing into the relatively untapped Eastern and Central European markets for cable television and new services such as high-speed Internet access, digital TV and phone service. Microsoft has invested in several European cable and telecom companies as it tries to position itself as the chief software provider for the next generation of services.

“After the U.S. and [Western] Europe, it’s the next to be checked off,” said Morgan Stanley Dean Witter analyst Sarah Simon. “It’s a massive market that hasn’t been tapped.”

Eastern Europe’s cable-TV market is forecast to grow to $1.98 billion in 2003 from $964 million in 1998, according to Kagan World Media Ltd.

@Entertainment, based in Hartford, Conn., was formed in 1990 by Holocaust survivor David Chase to provide cable TV in his native country. Its Polska Telewizja Kablowa has about 950,000 subscribers and owns rights to Polish sports events and programming such as Discovery Network and CNN. It put itself up for sale last month.

@Entertainment shares rose $5.56 to $18.06 on Nasdaq. American depositary receipts of Amsterdam-based UPC fell $1.13 to close at $58.88, also on Nasdaq.

UPC, the second-largest European cable company after Deutsche Telekom, owns or has stakes in networks in the Czech Republic, Hungary, Romania and Slovakia as well as in western European countries such as France, Belgium and the Netherlands.

Since its initial public offering in February, UPC has been seeking to acquire more networks and upgrade them to offer a combination of television, telephone and high-speed Internet services.

The purchase is the first major acquisition for UPC after it recently lost out in attempts to buy Ireland’s leading cable network, Cablelink, and Germany’s second-biggest cable network, Telecolumbus.

Microsoft is taking equity stakes aggressively as it seeks access to new markets for products such as the Windows NT and CE operating systems, WebTV and others, Banc of America Securities analyst Paul Dravis said.

In May it agreed to take a 29.9% stake in Telewest Communications, Britain’s largest cable-TV company. In March, the Redmond, Wash.-based company took a $38.6 million stake in TV Cabo, Portugal Telecom’s cable and satellite television company. In January, Microsoft invested $500 million to develop broadband services in England and Ireland with cable company NTL Inc.

United International Holdings also owns cable businesses in Chile, Australia and New Zealand and is trying to become a leading global provider of television, telephone and Internet services.