The clock is ticking on Cablevision Systems Corp.'splans to sell off three of its largest markets outside of New York -- Boston, Clevelandand Kalamazoo, Mich. -- with preliminary bids arriving earlier this month.
Cablevision said in late September that it would seek out astrategic alliance for the systems -- which could either be a sale or joint venture with athird party -- by mid-November. The systems in total have about 714,000 subscribers.
Most industry observers believe the deal will involveeither an outright sale or a combination of cash and systems.
Although the size of the preliminary bids could not bedetermined, the systems are expected to attract a hefty price. Given current cablevaluations of between $4,500 and $5,000 per subscriber, the three systems could fetch atotal of $3.2 billion to $3.6 billion.
But those same observers believe Cablevision already hasits potential suitors for the systems picked out, primarily because the company planned tohave a deal done so quickly.
According to several sources, the front-runners for theBoston system are MediaOne Group Inc. -- which already has about 1 million customers inthat area -- and Time Warner Cable.
In Cleveland, the leading candidates are Time Warner andCox Communications Inc. Comcast Corp. and Charter Communications are the leaders forKalamazoo.
One source familiar with the negotiations said the systemsare expected to "set a precedent" as far as price, possibly topping the morethan $5,300 per subscriber that Cox paid for Media General Inc. systems in Fairfax County,Va., earlier this year.
That source, who requested anonymity, added that more thanfour companies have expressed interest in each of the three cable systems, so biddingshould heat up in the next couple of weeks.
The source said the bidders are conducting their duediligence, and Cablevision should be able to identify a buyer by its mid-Novemberdeadline.
"The fortunate thing is that you don't see thesequality assets on the market often," the source added. "It has stirred what manythought have been sleeping giants."
Cablevision declined to comment. "It isCablevision's long-standing policy not to comment on speculation in the media,"a company spokesman said.
MediaOne had been taken out of consideration by someindustry analysts because of fears that the Federal Communications Commission'sownership-cap rules would put its future parent, AT&T Corp., over the federal limit.
But when the FCC came out with new ownership rules twoweeks ago -- essentially keeping the ownership cap at 30 percent of homes, but includingsatellite homes in the total cable-household mix -- those fears were alleviated.
AT&T chairman C. Michael Armstrong all but confirmedMediaOne's interest in the Boston market in a conference call with reportersregarding the FCC ruling.
Armstrong spoke of the company's clustering strategyto assemble large markets instead of a creating a patchwork of systems across the country-- a strategy he credited to former AT&T Broadband & Internet Services presidentLeo J. Hindery Jr.
Armstrong said there are a number of cable propertiesthroughout the country that could fit into AT&T's clustering strategy, including,but not limited to, Boston.
Boston, with 354,000 customers, looks like the jewel in theoffering: a major metropolitan market with a highly educated and technically savvypopulation ripe for advanced services, especially high-speed Internet access.
Cleveland, with about 311,000 subscribers, could be alucrative market for Time Warner and Cox, which both have fairly large clusters in thatarea. Cox has about 74,000 customers in 10 communities surrounding Cleveland, while TimeWarner has about 377,000 subscribers in northeastern Ohio.
Both Charter and Comcast have large clusters in Michigan,with Comcast boasting more than 760,000 subscribers in Detroit and expecting to buy morefrom AT&T after the MediaOne deal closes.
Charter, through its acquisitions of Bresnan Communicationsand Avalon Cable Inc., will have about 460,000 customers in Michigan once those dealsclose.