Don't look now, but there may be some bite to the dog
days of August -- the first week of the month marks the end of Amos Hostetter's
one-year noncompete clause with MediaOne.
Hostetter, the founder and former CEO of Continental
Cablevision Inc., sold his company to U S West Media Group (UMG) for $10.8 billion in late
1996, only to resign angrily as CEO of the MSO -- which was rechristened MediaOne -- on
Aug. 6, 1997.
For now, the 61-year-old Hostetter is laying low in
Nantucket Island, Mass., and he won't comment publicly on his next move.
But those who know him doubted that the much-admired
Hostetter will stay away from the cable business, and some associates said he's been
champing at the bit for the green light that the completion of the noncompete clause gives
"He's looking forward to having it end," one
old Continental hand said.
The big question, of course, is whether he'll make a
run at MediaOne Group -- the new name for UMG -- to regain control of what is now the
nation's third-largest MSO, with more than 5 million subscribers.
It's no secret that Hostetter is no fan of Chuck
Lillis, president and CEO of MediaOne Group, who, in Hostetter's opinion, reneged on
a promise to keep the cable company (known only as MediaOne) headquartered in Boston.
After Lillis switched gears and announced that corporate
headquarters was moving to Denver, Hostetter abruptly resigned, citing
"irreconcilable differences" with UMG executives over the move, and he pointedly
refused to endorse Lillis.
As recently as this May, at the Cable Hall of Fame dinner
at the National Show in Atlanta, Hostetter derisively referred to his former company as
"whatever it's called now."
However much resentment Hostetter may harbor toward
MediaOne, most financial analysts and industry observers said it makes no economic sense
for him to pursue a bid for the company.
They noted that in addition to the cash that he received
from the sale of the company, he remains MediaOne's single-largest shareholder,
holding approximately 8 percent of outstanding shares. What's more, the shares have
more than doubled in value since he sold the company, hovering near an all-time high of
$50 -- not only making Hostetter wealthier, but making a takeover bid that much more
"It's highly unlikely," said Richard Read,
senior media and entertainment analyst for Lazard Freres. "He'd have to pay 13
to 14 times EBIDTA [cash flow]. I don't see it."
"My question is: Why would he do it?" said Bruce
Leichtman, analyst for The Yankee Group in Boston. "He cashed out. He did pretty
well. He'd have to pay more than twice what he sold it for. The equation doesn't
make sense. At what cost revenge?"
But at least one cable-industry CEO who knows Hostetter
said the former Continental chief is "perfectly capable of getting even" if he
feels that he was wronged. Nor did the executive believe that a run at MediaOne was out of
the question if Hostetter "feels that he can run it better."
And one Wall Street analyst pointed to "persistent
rumors" about Hostetter's intentions toward MediaOne Group, adding, "There
are some who believe that the company is being readied to be sold."
"MediaOne Group doesn't have an A-B stock
structure," the analyst noted, "with supervoting shares that would force Amos to
go through a certain door. So he could try to put together a financing package to buy back
Associates of Hostetter in Boston said it is much more
likely that Hostetter's re-entry into the business will be more low-key. They pointed
to the fact that he's devoting a lot of his time to philanthropic efforts, including
establishing The Hostetter Foundation and raising money for Amherst College. What's
more, they noted that Hostetter is enjoying spending time with his three children -- the
oldest of whom is barely a teen-ager -- and that he has no intention of moving from
"I don't think that he has a burning desire to
get back into the cable-operating business," one former Continental executive said.
"There are other ways to torment Chuck Lillis."