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Joshua Cho
In the shadows of the giant telecommunications battle for territory last week, a handful of deals were closed or cut by smaller operators who have been caught up in the heat of the latest system feeding frenzy.
Millennium Digital Media said May 4 that it had acquired the cable systems of two companies, Summit Communications Inc. and Horizon Cable I Ltd., which netted Millennium some 86,000 new subscribers.
The company said that these two acquisitions will bring its subscriber count up to more than 140,000 customers in the metropolitan markets of Baltimore, Detroit and Seattle. Terms of that private deal were not disclosed.
Millennium CEO/president Kelvin Westbrook said in a prepared statement, "The acquisitions of Summit and Horizon mark a pivotal step in Millennium's strategic plans to become a superior provider of advanced technology services to highly populated metropolitan markets throughout the United States."
Also last week, Microsoft co-founder Paul Allen and his St. Louis, Mo.-based Charter Communications announced that it had closed its transaction to acquire Renaissance Media, LLC. That deal, which was first announced Feb. 24, netted Allen some 130,000 subscribers near New Orleans, in western Mississippi and in Jackson, Tenn. Renaissance, based in Ferndale, N.Y., was formed in 1997 by Morgan Stanley Dean Witter Capital Partners and a group of former cable television industry execs. Terms of that deal were not announced but was reported to be around $459 million.
On April 30, Benchmark Communications said it closed on its deal to acquire Genesis Cable Communications. The systems will contribute roughly 50,000 customers in Georgia, North Carolina, South Carolina, Mississippi, Oklahoma and Florida. Terms of that private deal were not announced.
According to analysts, like PaineWebber's Tom Eagan, there will be more deals like these in the coming months.
"There's going to be a lot of activity in the smaller private companies," Eagan said, while taking a break from speaking on a panel at Kagan Seminars Inc.'s "The Cable Broadband Future" held in New York. "It's a lot easier to buy a private company than a public one," he added.
Indeed, smaller, private cable operators are committed to thriving in their markets. At that same Kagan conference, Classic Cable chairman and CEO Merritt Belisle said, "It doesn't matter how big and strong you are. It does matter that you be strong where you are."
In other merger news, AT&T Corp., besides winning a bid for MediaOne Group Inc., last week said it would buy the remaining 50% of Lenfest Communications Inc. that it didn't already own. AT&T said it will issue roughly 43 million shares of AT&T common stock to the Lenfest family as part of that transaction. Based on the price of AT&T's stock when the deal was announced, those shares are worth over $2 billion.
Lenfest systems serve some 1.5 million customers located in the Philadelphia area. As part of an agreement with Comcast tied to the MediaOne deal, Comcast will manage the Lenfest systems for AT&T.
EARNINGS REPORT: In quarterly earnings news, media megaliths News Corp. and USA Networks Inc. both made their respective annoucements.
Rupert Murdoch's News Corp. managed to beat Wall Street's expectations by a penny, according to First Call Corp.'s estimates based on an average of analysts projections.
After tax profit before abnormal items was $168 million, or 17 cents per American Depository Receipts (ADR), compared to the year-ago third quarter results of $319 million, or 32 cents per ADR.
The company said that in its third quarter ended March 31, 1999, it took an abnormal loss, net of tax, of approximately $71 million, which primarily included News' share of Net Sat's foreign exchange losses associated with the devaluation of the Brazilian Real in January, according to a statement issued by the company.
Fox Entertainment Group-which includes the operations of News' cable and broadcast networks, the 50% interest in Fox/Liberty Networks and 20th Century Fox studios, among others businesses-also met Wall Street expectations with net income of one cent per share versus 14 cents per share in the year-ago third quarter.
In a written statement, company chairman and CEO Murdoch said, "While our overall revenue numbers were slightly below last year's quarter, the comparison is somewhat skewed, given the unprecedented success of our blockbuster movie, Titanic, in the third quarter of last year."
Indeed, operating income at the company's filmed entertainment segment were down to $38 million compared to $145 million, which was recorded in the prior year's third quarter, due primarily, the company said, to the contribution from Titanic, "the most successful film in history," according to the company.
The Fox/Liberty Networks 50/50 joint venture saw its revenues and EBITDA increase in the quarter while its net loss blossomed to $10 million from $5 million in last year's third quarter.
The increased loss was attributed to the impact from the delayed NBA season, adverse results from the Pittsburgh Penguins bankruptcy and start up losses at CTV, a Canadian venture.
Last April, News said it was acquiring substantially all of Liberty Media Corp.'s 50% interest in the joint venture, which will be transferred to the entertainment group.
USA Networks Inc. said it had a first quarter loss of 2 cents per share, beating First Call Corp.'s expectations of 16 cents per share. The loss was an improvement also over the loss of 14 cents per share posted by the company in the first quarter of the previous year.
Revenues were up 8.5% to $728.9 million compared to $671.7 million on a year-over-year basis. USA also posted EBITDA increases of 20.5% for the quarter to $137.5 million compared to $114.1 million on a year-over-year basis. Indeed, all of the company's operating businesses-which include the cable networks Sci-Fi Channel, USA and Home Shopping Network-grew EBITDA by more than 25% in the first quarter of last year.
And High Speed Access Corp. said its increasing the number of shares it will offer in an IPO to 13 million at an estimated price range of $11 to $13 per share. HSA also signed an umbrella deal with the National Cable Television Cooperative to offer its service to the cooperative's 900 cable operators.
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