R&A Management LP, the surviving entity of Denver-based
MSO Rifkin & Associates Inc., has shifted its focus from adding rural-market cable
systems to potential deals with Internet companies and competitive local-exchange
R&A retained small-market cable systems with about
100,000 customers owned by Rifkin after the latter sold the bulk of its cable holdings to
Charter Communications for an estimated $1.5 billion. Charter bought about 460,000
subscribers from two Rifkin partnerships that had systems in Miami Beach, Fla.; suburban
Atlanta; Illinois; and Tennessee.
The final stage in closing that deal was Charter's
$125 million tender offer for Rifkin bonds Sept. 20.
R&A, the remaining company, had said that it planned to
expand its rural base aggressively. But president and chief operating officer Jeffrey
Bennis said last week that the high prices for even small operations forced the company to
rethink that approach.
"We're looking at other opportunities in the
telecommunications space," he said. "Some are in cable, but more likely, they
will be out of cable -- in the Internet, most likely."
R&A will likely focus on the distribution side of the
Internet -- acquiring, investing in or partnering with Internet-service providers. The
focus would be to market smaller businesses, and not necessarily where R&A has cable
Another idea is providing electronic-commerce opportunities
to small businesses. R&A would target companies with 10 to 100 employees, providing
help in setting up e-commerce outlets. "We think there is a huge opportunity for
people who know what needs to be done, but who can't do their own sites," Bennis
He added that R&A isn't exiting cable, but he
wouldn't rule out possibly selling out.
"I'm the operations guy -- I'm not on the
board [of directors]," Bennis said. "When they decide to sell, they decide to
sell. There are always opportunities to sell unclustered properties, and we're not
turning a deaf ear. But the partnership we're running is only a year old; we're
not compelled to sell at this point in time."
R&A will keep its rural systems -- the company has
spent $20 million on upgrades this year, and it plans to spend the same in 2000 -- but
high cable valuations are keeping it out of the deal market at this point.
"We're a small MSO, we're not public and we
don't have the ability to look at a 20-year time horizon," Bennis said.
"Our investors are looking for a strong return. It isn't a very strong
buyers' market right now."
R&A and Charter have also scrapped a joint venture that
would have bought and run small cable systems in noncore Charter markets. Charter planned
to back R&A with cash and cable properties.
"Economically, we could never get on the same sheet of
music," Bennis said. "The economics just weren't there. Two or three months
ago, we stopped looking really aggressively with that."
Charter spokeswoman Anita Lamont confirmed that the venture
was off. "We worked on it a little bit," she said. "We aren't going to
be involved with them."
Hoak, Breedlove, Wesneski & Co. analyst Murray Arenson
said small-market operators have a tough time justifying valuations. "The economics
are more in question in those markets," he added.
Still, Arenson said, there are some buying opportunities in
"There are still some acquirers out there, like
Mediacom [LLC] and Classic Cable," he noted, adding that ISPs and CLECs have their
own problems. "Certainly, that is a more competitive environment," he said.