News

Bids Come In for Princeton, N.J., System

6/16/2002 8:00 PM Eastern

RCN Corp.'s moves to sell its 80,000-subscriber Princeton, N.J., cable system got a push forward last week as final bids for the properties began to roll in.

According to sources, bidders for the systems include Cablevision Systems Corp., Washington D.C.-based private equity firm The Carlyle Group and another undisclosed private equity firm. AT&T Broadband has also expressed interest.

Sources said that RCN could make a decision on the winners as early as this week (June 17).

Bids were in the range of $3,500 to $3,600 per subscriber, sources said, which values the deal at a total of $280 million to $288 million. The winning bidder would also have to spend another $600 per subscriber, or $48 million, to upgrade the systems, mostly at about 450-megahertz capacity, sources said.

Comcast Corp. — the partner in AT&T Broadband's pending merger — has systems near to Princeton, as does Cablevision. That makes their interest in the properties a logical move.

Sources said Carlyle — which had been involved in the cable industry in the past — is looking to get back into the business. It made its bid with Rod Royse, formerly a partner and senior executive director of new business development for InterMedia Partners, a Nashville-based cable operator that sold out in a complicated three-way deal with Tele-Communications Inc., Charter Communications Inc. and Insight Communications Co. in 1999.

RCN officials did not return calls for comment. AT&T Broadband and Cablevision declined comment.

FORMERLY C-TEC'S

The RCN systems are located in the Princeton, Mendham and Chatham areas and are former C-TEC Corp. properties RCN received after C-TEC completed a restructuring that split it into three separate companies (RCN, Cable Michigan Inc. and Commonwealth Telephone Enterprises) in 1997.

The Princeton market also is an affluent one, with the Ivy League's Princeton University and several high-end neighborhoods.

The average annual median household income in Princeton, according to the 2000 U.S. census, was $60,927 — double the national average of $30,056.

"It's a high-end community," said one source in the financial community who asked not to be named. "You've got to spend a lot of money to get this."

AT&T Broadband, which is in the process of merging with Comcast by the end of the year, has been looking to spend money to offset a possible capital-gains tax hit from a $735 million system sale to Bresnan Communications in April. That Bresnan deal is expected to close in the third quarter.

For the most part, RCN has held back on providing advanced services in the Princeton area, mainly because of the cost, sources said.

RCN, which was riding high during the overbuilder craze a few years ago, has found itself in cash-conservation mode as its stock has plummeted. Last week, RCN asked the NASDAQ stock exchange to move its stock listing to the Small Cap Market from the National Market System. The Small Cap exchange has less stringent listing requirements.

RCN stock, which had traded as high as $72 per share in 2000, closed at $1.38 on June 12.