Nathanson Sees New Life in Falcon


Falcon Holding Group L.P. chairman and CEO Marc Nathanson
sees a "renaissance" after he closes his pending combination with
Tele-Communications Inc., which will leave TCI with 47 percent of Falcon.

The deal -- which Falcon and TCI said should close by Sept.
30 -- will swell Falcon Cable TV Corp.'s subscriber base to more than 1 million from
700,000. And Nathanson will have exchanged financial investors who were likely to press
for a sale of the company in two years for TCI and, later, AT&T Corp.

After raising $810 million through high-yield debt sales
over the summer and renegotiating $1.15 billion in bank loans and credit, Nathanson also
has the money that he will need to rebuild his cable base. Falcon's systems average
only about 35 channels, and he plans to have 70 percent of the company at 70-channel
capacity within three years.

"We're behind the eight ball" on rebuilds,
Nathanson said, "because the financial investors were naturally reluctant to make a
long-term investment when they had a short-term horizon."

The new Falcon Communications L.P. will spend $100 million
on capital improvements during its first year, compared with $37 million during the past
12 months, he said.

Some of the junk-bond cash went toward buying out about 70
percent of the interest of limited partners, including the AT&T Pension Fund, Boston
Ventures, Butler Capital and the government of Singapore. Those investors' remaining
stakes will be nonvoting equity, Nathanson said.

Falcon's debt-to-cash flow ratio will rise to about
seven times as a result of the high-yield offering and the TCI transaction -- a steep
level that Nathanson said he hopes to reduce over time.

Nathanson added that he would also like to try an initial
public offering of stock, for currency to make system acquisitions in its target
"nonurban" markets and to double his subscriber base.

TCI and AT&T support that IPO goal, he said.

"However, the market conditions aren't
right," he added, understating the market turbulence that has shelved many a
non-Internet-related IPO.

While he's gained some breathing room from the
prospect of seeing his company sold out from under him -- see Marcus Cable Co. L.P. or
Charter Communications Inc. -- Nathanson now couches talk of long-term goals with a phrase
like, "What Marc Nathanson would like -- maybe not what Leo Hindery would like or
Mike Armstrong would like."

As president and chief operating officer of TCI and
eventual president of AT&T Consumer Services, Leo J. Hindery Jr. and his boss,
AT&T chairman C. Michael Armstrong, will have a voice in Falcon's future

But, Nathanson said, AT&T's say will be "much
less than people would perceive." Hindery and TCI executive vice president William
Fitzgerald will have two of six seats on Falcon's board, and TCI-AT&T can veto
some strategic moves, such as a possible sale to billionaire Paul Allen, who bought Marcus
and who is buying Charter.

TCI won't have a say in Falcon's budget, though.
And Hindery and Nathanson are longtime friends, so they wouldn't have struck the deal
in June if they envisioned trouble. "I think that we will be very much in
synch," Nathanson added.