The clock is ticking on Cablevision Systems Corp.'s
plans to sell off three of its largest markets outside of New York -- Boston, Cleveland
and Kalamazoo, Mich. -- with preliminary bids arriving earlier this month.
Cablevision said in late September that it would seek out a
strategic alliance for the systems -- which could either be a sale or joint venture with a
third party -- by mid-November. The systems in total have about 714,000 subscribers.
Most industry observers believe the deal will involve
either an outright sale or a combination of cash and systems.
Although the size of the preliminary bids could not be
determined, the systems are expected to attract a hefty price. Given current cable
valuations of between $4,500 and $5,000 per subscriber, the three systems could fetch a
total of $3.2 billion to $3.6 billion.
But those same observers believe Cablevision already has
its potential suitors for the systems picked out, primarily because the company planned to
have a deal done so quickly.
According to several sources, the front-runners for the
Boston system are MediaOne Group Inc. -- which already has about 1 million customers in
that area -- and Time Warner Cable.
In Cleveland, the leading candidates are Time Warner and
Cox Communications Inc. Comcast Corp. and Charter Communications are the leaders for
One source familiar with the negotiations said the systems
are expected to "set a precedent" as far as price, possibly topping the more
than $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 than
four companies have expressed interest in each of the three cable systems, so bidding
should heat up in the next couple of weeks.
The source said the bidders are conducting their due
diligence, and Cablevision should be able to identify a buyer by its mid-November
"The fortunate thing is that you don't see these
quality assets on the market often," the source added. "It has stirred what many
thought have been sleeping giants."
Cablevision declined to comment. "It is
Cablevision's long-standing policy not to comment on speculation in the media,"
a company spokesman said.
MediaOne had been taken out of consideration by some
industry analysts because of fears that the Federal Communications Commission's
ownership-cap rules would put its future parent, AT&T Corp., over the federal limit.
But when the FCC came out with new ownership rules two
weeks ago -- essentially keeping the ownership cap at 30 percent of homes, but including
satellite homes in the total cable-household mix -- those fears were alleviated.
AT&T chairman C. Michael Armstrong all but confirmed
MediaOne's interest in the Boston market in a conference call with reporters
regarding the FCC ruling.
Armstrong spoke of the company's clustering strategy
to 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 president
Leo J. Hindery Jr.
Armstrong said there are a number of cable properties
throughout 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 the
offering: a major metropolitan market with a highly educated and technically savvy
population ripe for advanced services, especially high-speed Internet access.
Cleveland, with about 311,000 subscribers, could be a
lucrative market for Time Warner and Cox, which both have fairly large clusters in that
area. Cox has about 74,000 customers in 10 communities surrounding Cleveland, while Time
Warner 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 more
from AT&T after the MediaOne deal closes.
Charter, through its acquisitions of Bresnan Communications
and Avalon Cable Inc., will have about 460,000 customers in Michigan once those deals