News

Venezuelas Intercable Announces Overbuild Plans

10/31/1999 7:00 PM Eastern

Caracas, Venezuela -- Venezuelan cable operator
Intercable's aggressive expansion plan will pit it against two incumbents here next
year.

Backed by a $100 million investment budget, Intercable has
licenses to build in 123 Venezuelan cities, including Caracas, where it plans to establish
operations by the second quarter of 2000, Intercable spokesman Mario Seijas said.

Although the company has not said which Caracas
neighborhoods it will target, it has staked a claim to both the eastern and western sides
of the capital. These areas are currently served by two of Venezuela's other large
MSOs: SuperCable in the east and Cabletel in the west. The arrival of a third player only
exacerbates an existing overbuild situation.

Intercable's planned expansion confirms its voracious
appetite for acquisitions, which have been bankrolled in part by minority shareholder
Hicks, Muse, Tate & Furst Inc., the Dallas-based private-investment fund. Last year,
the company almost swept the western part of the country clean of mom-and-pop operations
while establishing a presence in 35 towns and cities. In the process, it has almost
doubled its customer base to 190,000 subscribers.

The MSO's goal is to increase its subscriber base by
at least 30 percent in both 2000 and 2001. The strategy in Caracas is to compete against
entrenched cable operators in high-density areas and to delve into less densely populated
neighborhoods usually deemed unworthy of coverage.

However, those plans are on hold until Intercable completes
its infrastructure build in the central-west states of Aragua and Carabobo. Electric
utilities in that region have objected to Intercable's plans to use their power-line
poles and underground conduits for its overhead lines, delaying that project.

At present, the utilities either prohibit the use of their
posts or ask too high a price for the privilege, according to Intercable. Seijas sees the
sticking point as no more than a glitch, however, since the existing Telecommunications
Law states that electric and telephone utilities are obliged to provide pole space for the
fiber-optic cable of third parties.

Intercable also plans to add new services. It has solicited
a license from the National Telecommunications Commission to become a full-fledged
communications company to provide telephony, Internet access and data transmission.
However, in many ways its hands are tied until the Venezuelan Congress implements a new
Telecommunications Law. That legislation is now making sluggish progress.

Venezuela is set to deregulate its telephone industry in
November of 2000. However, until a Telecommunications Law is passed providing a legal
framework for the sector, Intercable will not be able to allocate any funds toward its
telephony plans.

The new Telecommunications Law would also eliminate the
present 20 percent cap on foreign investment in companies such as Intercable, which could
enable Hicks, Muse to throw further weight behind the operator.

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