LodgeNet Entertainment Corp. said last week that it signed
a letter of intent to merge its ResNet Communications LLC unit with two other private
telecommunications firms to provide video, voice and data services to
ResNet -- in which PrimeStar Inc. owns a minority stake --
would combine with Interactive Cable Systems Inc. and Shared Technologies Communications
LLC to form a new company.
The three operations combined currently serve 673
properties, pass 125,000 units and have 56,000 subscribers in 28 states, according to
LodgeNet did not disclose financial terms, other than to
say that it will end up with 30 percent of the venture. PaineWebber Inc. media analyst
Christopher Dixon said LodgeNet officials told him that PrimeStar would own about 5
percent; that ICS, mostly owned by Nomura Securities, would hold 40 percent; and that the
remainder (about 25 percent) would go to STC.
ResNet started out in 1996 with high hopes, based on an
alliance with GE Capital, which was supposed to deliver some 200,000 residential units to
the fledgling interactive-video and cable provider. According to Dixon and other analysts,
GE Capital failed to deliver the expected units.
In its last quarterly report, LodgeNet said ResNet passed
just 31,369 MDU units.
Dixon said ResNet's per-unit installation costs were
up to around $700 to $750, compared with the $500 figure that LodgeNet planned to build
the business around. He added that LodgeNet is confident that combining the three firms
can drive costs down to $500 per unit.
The deal also lets LodgeNet -- the primary business of
which is providing television and other entertainment services to hotels -- get the ResNet
losses off its books by treating it as a minority interest.
"LodgeNet will no longer be the source of growth
capital for ResNet's expansion plans," LodgeNet CEO Scott Peterson said in a
It was unclear which properties the venture would get from
ICS, a Richardson, Texas-based firm that already agreed to sell 90,000 phone and cable
units to OpTel Inc. Calls placed to ICS did not connect Monday, and ResNet chief operating
officer Doug Truckenmiller did not return a telephone call last week.
LodgeNet said the new venture would be based in Richardson,
with other operations in Tampa, Fla., and Sioux Falls, S.D.