News

GS Communications Goes on Sale Block

4/16/2000 8:00 PM Eastern

GS Communications Inc., a 118,000-subscriber MSO in the Baltimore area, said it has hired Waller Capital Corp. to explore "strategic alternatives for the future capital structure, organization and ownership of the company," including a possible sale.

The operator is owned by The Great Southern Printing and Manufacturing Co., which publishes the Frederick (Md.) News-Post newspaper. Great Southern also is investigating strategic alternatives for the newspaper.

GS Communications has systems in Virginia, West Virginia, Pennsylvania and Maryland. Its largest market is Frederick, Md., near Baltimore, an area dominated by Comcast Corp.

All of the GS Communications systems, except for one in Virginia, offer digital service via AT & T Broadband's Headend In The Sky.

GS Communications has spent about $43 million to increase plant capacity to 550 megahertz on a 750-MHz frame, which means a future upgrade to 750 MHz will be easier to complete, spokesman Jake Tamse said.

"We are taking a look out into the future," Tamse said. "The shareholders decided it was time to take a look at the market and see what kind of opportunities are out there."

Great Southern's newspaper and printing operations have been in business for about 116 years. On the cable side, GSC has operated its Maryland, West Virginia and Pennsylvania systems for more than 30 years. The Virginia systems, in Culpeper and Madison counties, were acquired about three years ago.

Those systems-especially in the Baltimore area-are also in lucrative in terms of demographics. For example, Tamse said the Frederick system is located within Maryland's biotechnology corridor and boasts a higher-than-average percentage of home-computer users.

That could lead to a greater price for the systems, given the higher median income in Frederick County-$51,220 annually in 1995, per the latest figures available from the U.S. Census Bureau, versus the national average of $34,076-and higher computer usage, which could help high-speed data sales.

The record $5,400 per subscriber that Media General Inc.-another newspaper-owning independent cable operator-received from Cox Communications Inc. for its Northern Virginia system in 1999 may have also raised GSC's hopes. This time, Comcast appears to be the most logical buyer.

Given that cable systems have recently fetched prices of $4,000 to $5,000 per subscriber, the GSC properties could net GS Communications between $560 million and $660 million.

In a press release, GS Communications president and CEO George Delaplaine said that the company will continue to operate as usual.

"We are unable to say whether any change or transaction will occur, but management's commitment to high-quality service to readers, subscribers and advertisers will continue," Delaplaine said. "No material changes in the company's operations or staff base are expected."

September