Consensus: MediaOnes Buying

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Seller or buyer? That's the question that cable
executives and Wall Street analysts are batting around about MediaOne Group. Since the 5.1
million-subscriber MSO split from U S West, it would fit nicely into, say, Paul
Allen's cable portfolio.

But chairman and CEO Charles Lillis has said that the
company is not for sale, and the industry consensus appears to be: We believe him.

In fact, since a story earlier this month in the Los
Angeles Times
thatsaid Allen was circling MediaOne (and buying its stock on
the open market), the hottest MediaOne rumor on Wall Street involved possible talks with
Cable & Wireless plc, the giant British telecommunications concern and MediaOne's
50 percent partner in U.K. wireless operator Mercury One 2 One.

That's just on the rumor level, and analysts
don't really know what to make of it. MediaOne won't comment. But a huge
acquisition -- especially of a company that's not a domestic cable operator -- would
be "the ultimate defensive play," said an executive at another U.S. MSO.

A senior executive at another MSO said another scenario
might see Allen -- who is accumulating about 3 million subscribers from Marcus Cable Co.
L.P. and Charter Communications Inc. -- merge his cable assets into MediaOne. That way,
Allen would still have access to broadband distribution for his "wired-world"
scenarios, and he would have MediaOne stock as deal currency.

"I don't see them selling at all," the MSO
executive said of MediaOne.

A MediaOne takeover would be hugely expensive. One analyst
last week pegged a purchase price at about $42 billion, excluding debt.

There are numerous other obstacles, as have been reported
widely. MediaOne has more than $20 billion in noncable assets, which, for tax purposes,
would be hard to sell.

One of those assets is its 21.6 percent stake in Telewest
Communications plc. Last week, MediaOne said it agreed to buy part of SBC Communications
Inc.'s 9.7 percent Telewest stake, ramping up to nearly 30 percent ownership of the
British cable operator.

MediaOne has also said that it's interested in bidding
on Deutsche Telekom's cable operations in Germany.

"I think that the company is going to be a huge
acquisition machine," one Wall Street cable analyst, who asked not to be identified,
said last week

MediaOne's 25.5 percent stake in Time Warner
Entertainment is another complication, since Time Warner Inc. chairman Gerald Levin has
claimed rights to block any MediaOne takeover that Time Warner doesn't like.

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