News

Pagon: Small Ops Will Fold

2/15/2001 9:47 AM Eastern

Pegasus Communications Corp. chairman Mark Pagon predicted that a vast
majority of rural cable operators serving fewer than 5,000 customers will go
dark within the next 10 years.

In an earnings call with analysts Thursday afternoon, Pagon said rural
cable's losses could lead to significant growth for the direct-broadcast
satellite company, which resells DirecTV Inc. service.

Smaller, independent cable companies typically don't have the access to
capital markets needed to upgrade their systems for digital-video and
broadband-data services, Pagon said. And even if the money were available, the
financial returns would not be there for systems smaller than 5,000 subscribers,
he added.

He estimated that there were 7.5 million cable customers in the types of
smaller systems likely to go out of business within the next decade. Pagon
called the state of the rural cable market in the United States 'dire and
getting worse.'

Some analysts have recently predicted that Pegasus would become an
acquisition target if and when News Corp. announces a deal to acquire DirecTV
parent Hughes Electronics Corp. from General Motors Corp.

DBS revenues for Pegasus increased 118 percent for the fourth quarter ending
Dec. 31 compared with the same quarter in 1999. The average gross acquisition
cost increased to $462 per subscriber in the fourth quarter due to increased
payments to DirecTV and heavier advertising expenditures, the company said.

Pegasus ended the quarter with more than 1.4 million DBS
subscribers.

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