Just when Wall Street thought the market for big cable deals had all but
dried up, Mediacom Communications Corp. agreed to buy systems in four states
from AT&T Broadband for $2.125 billion -- a move that will more than double
the MSO's size to 1.6 million subscribers.
According to the deal, Mediacom will receive 840,000 subscribers in Georgia,
Iowa, Illinois and Missouri. The all-cash deal works out to about $2,600 per
subscriber, or 12 times 2001 cash flow.
Mediacom chairman Rocco Commisso told a group of analysts this morning that
although the deal is a little pricier than past acquisitions -- Mediacom's
average price for acquisitions was $1,734 per subscriber before this transaction
was announced -- the condition of the systems was factored into the higher
price.
About one-half of the AT&T Broadband systems are 550 megahertz to 860
MHz, and 71 percent of the systems' total subscribers are served by just five
headends.
According to Commisso, cash-flow margins at the AT&T systems are about 40
percent, compared with the 48 percent to 49 percent of Mediacom systems.
'I don't think we're going to be able to take these assets to Mediacom
margins the next day,' Commisso said. 'We've analyzed everything. We would not
be doing this acquisition if we didn't think we could do a better job.'
Daniels & Associates represented AT&T Broadband in the sale of the
Illinois, Iowa and Missouri systems. Waller Capital Corp. represented the MSO in
the sale of the Georgia systems.
Commisso said he expects the deal to close in June or July.
