The two companies are to merge their global operations into a single entity under the name Excite Chello.
Chello broadband has been providing access and content via Telstra Saturn's existing cable network in New Zealand. Telstra Saturn has committed itself to the rollout of a $1 billion national broadband network.
Chello, which shares a US parent company, UnitedGlobalCom, with Saturn, is billed as one of the world's leading broadband Internet companies, with a base in Europe and commercial activities on three continents. Excite@Home is a dominant player in the US, where 75 million of the 105 million homes within its cable and DSL footprint lie.
Philip Alexander, the managing director of chello broadband Australia and New Zealand, says the merger announced this week forms "the world's largest broadband access and content operator. So that increases the scale and scope of the company so we can grow faster and develop more content and services.
"In the strategic sense it's really the scale and scope and the finance behind it to be able to do this, because obviously it's a pretty expensive business. To be able to do it on a worldwide basis you need to be the number one or two player."
In Australia, chello delivers services via Saturn's immediate owner, Austar, which has developed a niche based on high-speed wireless and satellite services somewhat similar to those of Ihug. In New Zealand, the delivery vehicle is Telstra Saturn's cable.
Alexander says that while the deal won't directly impact the Telstra Saturn rollout and investment, "I suppose what this deal does is underlines the value of that network and their plans. It just confirms how valuable that network will become for Telstra Saturn."
Alexander says Chello is likely to pick up on Excite's personalisation, messaging and calendaring utilities: "We'll be taking the best of the Excite portal and the @Home content with the best of the Chello portal and combining them."
The combined audience of the two companies' content portals adds up to eight million users a month. On the access side, the new company will have its own global IP backbone network, as well as operations in 15 countries on four continents and the exclusive rights to deliver broadband internet services to more than 30 million cable homes. It will also exclusively deliver set-top box services to 10.5 million cable homes.
The venture's consumer media offerings will be grouped under the Excite brand and the chello brand will be the new company's broadband access service.
The two companies will also marry their television device and platform strategies, combining Excite@Home's set-top platform technologies and expertise with chello's exclusive rights to roll out television set-top box services to the current UPC footprint.