Bresnan, Avalon, GCI Bid in AT&T Auction


At least three companies have submitted bids for roughly 340,000 AT&T Broadband subscribers in Montana, Wyoming and parts of Colorado: cable legend Bill Bresnan, Alaskan cable and telecommunications company General Communications Inc. and private investor Avalon Equity Partners, sources close to the process said last week.

AT&T Broadband put the systems on the block last month, telling interested bidders that proposals were due June 25. According to sources familiar with the situation, AT&T expects to make a decision on the systems by mid-July.

Sources said Charter Communications Inc. and Mediacom Communications Corp. have also looked at the systems, but a Charter spokesman said the MSO was not interested in the properties because they are not located near its existing clusters.

Mediacom chairman Rocco Commisso did not return calls for comment.

Bresnan was out of town last week and was unavailable for comment. Officials at Avalon declined comment.

GCI spokesman David Morris said the company does not comment on specific deals. But he said GCI, which has about 130,000 cable and telephone customers in Alaska, has been looking to expand.

"What I can confirm is that we have expressed an interest in expanding into the lower 48 states," Morris said. "That would be an area that would be attractive to us."

Earlier this month, GCI reached an agreement to buy systems with about 7,300 customers in Palmer and Wasilla, Alaska, for $19 million in cash from Canada-based cable operator Rogers Cable Inc.

Denver cable-investment banker Daniels & Associates Inc. is handling the potential sale for AT&T.

Both Bresnan and GCI were expected to bid on all of the AT&T properties, which some observers believe could fetch a price of between $2,000 and $3,000 per subscriber, making a deal for all the systems worth between $680 million and $1.02 billion.

According to sources, Avalon — which has about 7,000 subscribers in Colorado — is only interested in the AT&T systems in that state. AT&T's Colorado systems have about 110,000 subscribers.

According to sources, the bids on those systems are in the mid-$2,000-per-subscriber range, which pegs their total value at about $275 million.

In a previous life, Avalon Partners bought out the former Cable Michigan Inc. and then sold it to Charter Communications Inc. for $845 million in 1999. In the past year, Avalon has made some small acquisitions, including Ice Cable Holdings in Colorado, with about 7,000 subscribers, and of US Cable of Paramus operations in Paramus, N.J., with about 5,500 customers.

The AT&T Colorado systems that are up for sale are located throughout the state — except for those in the Denver metropolitan area and in larger cities such as Boulder.

"They [AT&T] are keeping all of the Front Range," said one source familiar with the deal.

Whoever ends up with the systems will have to spend a substantial amount of money to upgrade them. While the Colorado properties offer digital service through AT&T Broadband's Headend In The Sky, system capacity in that state ranges from 330 megahertz to between 400 and 450 MHz, according to sources.

"It will probably take one year's cash flow [to upgrade]," said the source of the Colorado systems.

The Montana and Wyoming properties will likely need even more investment. But some sources said the systems, although in rural areas, are near universities like the University of Montana and the University of Wyoming and could be profitable, given the right operator.

The systems appear to be well-suited for Bresnan, who started Bresnan Communications Inc. in 1984 in Minnesota with a string of rural properties. By the time he sold his cable operations to Charter Communications Inc. in 1999 for $3.1 billion in stock and debt, Bresnan had built his company into a 690,000-subscriber MSO that offered digital cable and high-speed data services.

In the past, Bresnan also has liked to build systems near universities and hospitals. He provided a high-speed virtual private network to the Mayo Clinic in Rochester, Minn. when he operated a system there.

Among the towns included in the Montana and Wyoming systems are Missoula and Laramie, the homes of the University of Montana and the University of Wyoming, respectively.

According to sources, Bresnan is the front-runner at least for the Montana and Wyoming properties. But who ultimately ends up with the systems will most likely be determined by price.

"I think AT&T is going to try to figure out a way to sell to Bill Bresnan," said one source that asked not to be named. "Bill is itching to get back into this business."

Bresnan unsuccessfully bid for other AT&T systems. Mediacom bought those systems — with about 840,000 subscribers in Iowa, Illinois, Georgia and Missouri — in February, for $2.2 billion in cash.

In March, AT&T struck another systems deal with Charter, selling operations in St. Louis, Nevada and Alabama to Charter for $1.8 billion in cash, stock and systems.