Suburban, Rural System Values Remain Apart


Mallard Cablevision LLC's upcoming system liquidation in U.S. Bankruptcy
Court in Delaware, slated for Friday, is a glaring example of the valuation gap
between suburban cable systems and those in rural areas.

Mallard, which filed for Chapter 11 protection earlier this year, said it is
seeking to sell its systems, with about 70,000 subscribers in 11 states.
According to Bankruptcy Court documents, those systems are valued at between
$225 and $1,466 per subscriber.

That's a long way from the $3,300 per subscriber Charter Communications Inc.
is set to receive for its 235,000 subscribers in Florida, Maryland, Pennsylvania
and New York. And it is even further off the mark of the $4,000 per subscriber
Susquehanna Communications Inc. agreed to pay for about 30,000 subscribers in
Carmel, N.Y., earlier this year.

According to the Bankruptcy Court documents, Mallard received a bid of $1,466
per subscriber for its system in Perry, Ga., with about 8,000 customers. The
remaining 62,000 subscribers -- scattered among 150 headends in Alabama,
Florida, Georgia, South Carolina, California, Oregon, Idaho, Montana, Utah and
Wyoming -- are valued at $225 per subscriber.

According to the documents, ComSouth Corp. has agreed to purchase the Perry
system for $11,732,600, or $1,466 per subscriber. LB Cable LLC, an affiliate of
Woodside Capital Partners III LLC, has agreed to purchase the remaining systems
for $13,975,000, or about $225 per customer.

The hearing is scheduled for Sept. 19 at 9 a.m. in Delaware bankruptcy

The Perry systems appear to have been fairly upgraded and are selling for
between 12.5 times and 12.7 times cash flow, according to Vista III Media
president and CEO Neil McHugh.

McHugh -- who is not a bidder on the systems -- pointed out the Mallard
valuation to show the disparity between values for rural and suburban systems in
a presentation at the Kagan Broadband Summit in New York Tuesday.

"[Mallard] is a clear example of the prices per headend," McHugh said, adding
that the low valuation is probably also a function of the bankruptcy process. He
said if an operator took the time to split up the Mallard properties, the price
could be higher.

DH Capital LLC principal Mark Thorsheim, speaking at the same conference,
agreed. Thorsheim said that in systems with multiple headends, many buyers
ignore the tiny systems, focusing more on the properties that can be tied

"If you're looking at a company with 20 headends, you're probably not
focusing on 10 of these," Thorsheim said. "Within the Mallard basket, you may
find systems that are valued at $1,000 per subscriber."