CENTURY ON THE BLOCKL. A. Curb Appeal Is the Lure


After saying that it wouldn't lock its front door,Century Communications Corp. has now flung the door wide open and hung the for-sale sign.

Century -- the ninth-largest domestic MSO, with 1.3 millionsubscribers -- said last week that it has hired investment bank Donaldson, Lufkin &Jenrette Inc. to help "explore strategic alternatives."

Such a move had been rumored for weeks, but companyofficials previously denied any such plans.

Century president Bernard Gallagher said last week that DLJwill help the company to determine whether it should look for a partner or a buyer, orwhether it should stay the way it is.

"This is the beginning of the process, so I can'ttell you which road we end up on," he said. "It could be any one of those."He added that a decision could be reached in about three months.

A sale is clearly an option. In April, Centennial CellularCorp., which is controlled by Century, hired DLJ to explore options, and it then agreed tosell out in a pending $2 billion merger.

Salomon Smith Barney Inc. analyst Spencer Grimes said lastweek that he thinks that Century could command $34 to $36 per share in an auction, oraround 14 times its projected 1999 cash flow.

That works out to $2.6 billion to $2.8 billion, or aboutwhat Microsoft Corp. cofounder Paul Allen paid for 1.1 million-subscriber Marcus Cable.

Century would also come with about $1.7 billion inlong-term debt, according to the company, moving a total deal value up to about $4.5billion.

An MSO buyer could bump up Century's cash flow withconsolidation savings that would make the acquisition multiple lower than 14 times, Grimesnoted.

Allen paid an estimated 13.5 times cash flow for CharterCommunications Inc. in a $4.5 billion deal announced in July.

Century's share price rose by $3.13, to $29, onrelatively high volume last Wednesday. That works out to about 12 times next year'scash flow.

Analysts think that most interest would come from operatorswith holdings in Southern California, where Century has a pending 750,000-subscriber jointventure that will be 25 percent-owned by Tele-Communications Inc. That deal is expected toclose in the first quarter of 1999, after franchises are transferred.

Possible bidders would include Allen's CharterCommunications LLC, which has about 300,000 subscribers in the Los Angeles area; AT&TCorp., after it closes its $48 billion merger with TCI; and Comcast Corp. MediaOne GroupInc., which has about 500,000 subscribers in and around Los Angeles, could also beinterested.

Century's other big markets are Puerto Rico, with125,000 subscribers; and Colorado Springs, Colo., with 100,000. Three-quarters of thecompany's cash flow comes from those three clusters, according to Schneider.

Century's formerly stalled stock has risen steadilyfrom $9 per share at the start of the year, largely on takeover speculation. It spikedlate this summer, when many industry analysts thought that chairman and controllingshareholder Leonard Tow was close to a deal to sell out to Allen.

Those talks broke off, reportedly after Allen refused topay Tow's asking price of $35 per share.

Century executives in recent months had taken to activelytouting the company's and the industry's prospects more than usual. At a KaganSeminars Inc. panel in September, Tow talked up telephone and data services, saying thatthey could account for one-half of the industry's revenue in a decade.

Schneider, who spoke at the PaineWebber Media ConferenceDec. 8, talked up the company's plant-upgrade plans, saying that its minimum capacitytarget in rebuilds is now 750 megahertz, and not 550 MHz, and adding that the MSO isconsidering a future baseline of 860 MHz to 1 gigahertz.

Aggressive modem and digital set-top deployments areplanned for next year, especially in Los Angeles, where Century also hopes to offerbundled wireless and wired telephone services, Schneider said.

Century has telephony resources -- its cable system inPuerto Rico is the backbone for a wired and wireless phone operation with $100 million inannual revenue -- but it seems to be looking to AT&T as a partner for otherresidential phone deployments.

On the high-speed-data front, Century offers the RoadRunner cable-modem service on a small scale in Norwich, N.Y., and it plans to launch the@Home Network service under its affiliation agreement in Colorado Springs early next year,and in other markets later.