News

PrimeOne Buys PacBell Video

10/11/1998 8:00 PM Eastern

In what some saw as a vote of confidence for
digital-wireless-cable technology, PrimeOne acquired a majority ownership of Pacific Bell
Video Services, the Los Angeles-based wireless cable arm of SBC Communications Inc.

The deal had been rumored for months.

SBC will maintain a minority interest in the business,
which will be renamed PrimeOne Tele-TV. As part of the assets in the transaction, Austin,
Texas-based PrimeOne acquired the rights to market the Tele-TV brand.

PrimeOne is affiliated with Prime Cable, an MSO with about
530,000 subscribers and a history of dealings with SBC.

PBVS had used the Tele-TV brand on-air on its
digital-wireless-video service in Los Angeles and Orange counties. The name was created
several years ago as a joint venture by several telephone companies -- including Pacific
Bell, Nynex Corp. and Bell Atlantic Corp. -- which were looking to expand into video
services.

Last year, PacBell became the only telco to actually launch
a Tele-TV-branded service, using digital MMDS boxes made by Thomson Consumer Electronics.
After SBC bought PacBell, it was widely believed that SBC would seek to sell off its
wireless cable assets.

PrimeOne also purchased a majority stake in PacBell's
analog-wireless-video operation in Riverside, Calif., pending government approval. The
digital and analog systems combined serve about 60,000 subscribers. Just under one-half of
those are digital customers, according to Julie Dodd-Thomas, who had been executive
director at PBVS until last week and who is now a SBC employee.

PrimeOne president and chief operating officer Mark
Greenberg said the company will study the Riverside analog operation to see whether it
makes sense to upgrade the system to digital technology.

Andrew Kreig, president of the Wireless Communications
Association International (WCA), said he welcomed the deal as an endorsement of the
digital-wireless-cable spectrum, adding that it "puts into highly capable hands a
world-class system in one of the country's best markets."

Greenberg said PrimeOne has no immediate plans to buy
wireless cable operations in other parts of the country. It saw the deal with SBC as
"an opportunity to acquire an operation that's already 100 percent digital and
fully deployed, from a technological standpoint."

Los Angeles is probably the most attractive market in the
country for wireless cable because it has such good line-of-sight, Greenberg added.

The new owners plan to add new blood into the business, and
they expect to drive market penetration beyond the limited distribution that the
digital-video service currently has.

PrimeOne and SBC may develop co-marketing campaigns for the
service, although nothing official is in the works yet.

Last week, PBVS and PrimeOne sent a joint announcement to
subscribers, informing them of the new ownership. The letter was designed to assure
subscribers that PrimeOne has no plans to change the service or to raise rates in the near
future.

Greenberg said nearly all of the senior managers from PBVS
have elected to stay on with the new company, and they're highly motivated to seeing
the business move forward.

"Through no fault of their own, they've never had
an opportunity to get this product properly launched," Greenberg said. He will serve
as president of the new company from his offices in Texas.

Greenberg also plans to hire a handful of executives -- out
of the MMDS or cable industries -- for the California operations, including a new senior
vice president/general manager.

"We're looking for someone who is not averse to
risk," because there's plenty of risk involved in a wireless-video venture
today, Greenberg said.

Kreig said the deal should "raise eyebrows and
interest" on Wall Street for what has been an undervalued part of the spectrum for
some time.

Last year, with financial backing from Washington,
D.C.-based investment bank The Carlyle Group, Prime bought SBC's cable systems in
Arlington, Va., and Montgomery County, Md., with about 275,000 subscribers. Prime had been
managing those former Hauser Communications properties. As part of that deal, Prime also
bought SBC's option on Prime Cable of Chicago.

Prime recently sold its stake in the Las Vegas cable system
to Cox Communications Inc.

Greenberg said the Las Vegas and Los Angeles transactions
were unrelated from a financing standpoint, adding that it was just "ironic"
that both deals closed within a week.

Executives at SBC did not return calls seeking comment.

Kent Gibbons contributed to this story.

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