Charter Sues MediaOne Parent Over Minn. Sale2/22/1998 7:00 PM Eastern
Charter Communications Inc. sued U S West Media Group (UMG)
last week, after UMG's video arm, MediaOne, allegedly refused to close on the $600
million sale of its Twin Cities cable properties.
In a lawsuit filed in the Circuit Court for St. Louis
County, Charter asked for an order compelling MediaOne's parent company, regional
Bell operating company U S West Inc., to live up to the terms of the contract that it
entered into last summer, when it agreed to sell its Minneapolis cable assets.
That included an agreement to close on the sale 10 days
after Charter met all conditions of the contract.
Charter also informed the Federal Communications Commission
of the lawsuit in a petition in which it alleged, 'U S West refused to close without
Observers said refusing to close would technically put U S
West in violation of an FCC divestiture order that remains in effect pending the
RBOC's request for an extension of an agency waiver allowing it to own the
MediaOne declined to comment directly because it
hadn't been served with the lawsuit.
Instead, it issued the following, pointed statement:
'There was no agreement to close. And if they sued us, they're in breach of the
In response, Charter president Jerry Kent reiterated what
the company told the FCC -- that the contract 'is very specific about the closing
date. And further, U S West refused to close.'
'In addition, as we also told the FCC, we filed a
lawsuit to protect our legal rights.'
Now, the question becomes: What will happen when the FCC
finally does rule? Even agency insiders weren't sure last week.
Morgan Broman, public information officer with the
FCC's Cable Services Bureau, said a decision on U S West's extension request had
been expected no later than this Friday -- the deadline for the agency to issue its
'This might affect the process, but I don't
know,' Broman said. 'I really don't know what we might do now.'
Charter's lawsuit alleged that it informed MediaOne
Feb. 9 that the MSO had met the contract terms, and that closing would take place Feb. 19.
But when Charter officials arrived at the Boston law
offices of Sullivan & Worcester -- the contractually agreed location for closing --
along with the MSO's lawyers, bankers and equity partners, MediaOne allegedly balked.
At first, MediaOne reportedly claimed that the deal could
not close because the Minnesota Public Utilities Commission had not signed off on the
transfer of the systems to Charter.
However, when a Charter lawyer said she had been present
last Tuesday -- along with a U S West representative -- when the PUC voted unanimously to
approve the transfer, U S West simply declined to close, said a source close to the
In asking for a court order, Charter said it would suffer
'irreparable damage' because of lost 'opportunities' to expand in the
cable industry if MediaOne is not forced to sell the Minneapolis properties, which consist
of about 300,000 subscribers.
Meanwhile, MediaOne's actions are also not likely to
sit well with certain members of Congress, who have been pushing the FCC to deny U S
West's request for a waiver extension.
U S West has been waiting for the FCC to act on its request
for an extension of an agency waiver that allowed the telco to own the Minneapolis systems
while it sought a qualified buyer.
Since then, however, it has announced a plan to divide
phone subsidiary U S West Communications and broadband subsidiary UMG into separate
companies, hoping to obviate federal cross-ownership rules requiring the sale.
In a related development, two local franchising authorities
in the Minneapolis area recently threw their support behind MediaOne's efforts to
hang on to its Twin Cities properties.
The Northwest Suburbs Cable Communications Commission,
which had approved the transfer of its franchises to Charter, informed the FCC that it
believed that MediaOne 'is more committed than Charter to offering telephony
services' to its affected municipalities.'
In its own FCC filing, the Northern Dakota County Cable
Commission endorsed MediaOne and took issue with Charter's claims that MediaOne was
seeking support among franchising authorities by promising upgrades and other concessions.
MediaOne completed the rebuild of its system 'on time and as promised,' it said.