Simmons Wraps RCN Buy, Taps Talent2/23/2003 7:00 PM Eastern
Former Simmons Communications founder Steve Simmons joined the roster of former cable executives inching back into the business last week, when he closed his $245 million acquisition of about 80,000 subscribers from RCN Corp.
Simmons announced the deal to buy the former RCN systems, located in Princeton, N.J., back in September. In an interview last week he said his company, Patriot Media & Communications, is gearing up to provide high-speed data, video-on-demand and high definition television service by next year.
The purchase will end up costing $289 million, including about $44 million for upgrades. Not including upgrade expenses, the deal works out to about $3,060 per subscriber, or 11 times system cash flow.
Simmons said about 25 percent of the systems have already been upgraded. The plan is to upgrade the rest of the properties to 870 Megahertz capacity by mid-2004.
Simmons said he sees huge potential in the Princeton systems, perhaps the most from high-speed data service. Simmons looks forward to cable-modem penetration rates of 30 percent to 35 percent in the next few years.
Princeton is one of the more affluent areas of the country, home to Princeton University and several deep-pocketed corporations, including Johnson & Johnson.
That, coupled with the fact that high-speed Internet service has only been available sporadically — RCN had offered a cable modem with a telephone return path on a limited basis — gives Simmons high hopes for his brand of high-speed data.
Simmons said Patriot Media has already hired about 35 workers for a new call center it's establishing in Somerset, N.J. In addition, the 25,000 square-foot leased facility will house a new studio, administrative offices and technical support facilities.
Simmons also has been assembling a management team to deal with the growth.
He recently hired former Charter Communications Inc. operating executive Jim Holanda as president and general manager of Patriot's Central New Jersey operation.
Holanda had previously served as regional vice president of operations for Charter, overseeing its St. Louis systems and properties with 750,000 customers in four states.
Other recent hires:
John Gdovin, former executive vice president of C-TEC Corp., as assistant general manager and director of operations.
James Warner, former engineering vice president at Mediacom Communications Corp., as vice president of engineering.
Bill Shelley, former director of customer relations at Cablevision Systems Corp., as director of customer relations.
Joanne Guerriero, former regional marketing director at Comcast Corp. in New Jersey, as director of marketing.
Matthew Petersen, former regional support engineer at Adelphia Communications Corp., as director of high-speed data.
John Flanagan, former chief financial officer at Simmons Communications, as CFO.
Jonathan Cahill, former director of business operations for Comcast in New Jersey, as controller.
Simmons will need the help as he plans to use the Princeton systems as the launching pad for further acquisitions.
He would not spell out his hoped-for end game, but said he is actively looking at properties in California, New York and Pennsylvania.
Patriot's main backer in the Princeton deal is Spectrum Equity Investors, a $3 billion New York private firm.
Simmons's bankers were GE Capital Corp., Societe Generale and National City Bank.
Morgan Stanley and Communications Equity Associates advised RCN.
Getting back in
Former Bresnan Communications Inc. president Bill Bresnan recently wrapped up the purchase of 317,000 subscribers in Montana, Colorado, Wyoming and Utah from Comcast.
Earlier this month, former Charter CEO Jerry Kent announced that his investment company — Cequel III — will invest in and manage Classic Communications Inc., which has about 325,000 subscribers in 13 states.
Others looking for systems include Neil McHugh, Ben Hooks and Steven Weed. Despite those other bargain hunters, Simmons said hunting for acquisitions won't be any more difficult.
"There were nine players going after the acquisition in New Jersey," Simmons said. "I think it's great. With all of this consolidation, the industry could use entrepreneurs who can try things differently. I welcome all of these folks."
He sold Simmons Communications in the late 1990s, but Simmons hasn't been totally away from the scene. He said that he served as chairman of the Cable Entrepreneurs Club, a group of cable executives that meets twice a year, and kept on top of industry issues.
"It's great to be back," Simmons said.