Atlanta -- Cox Communications Inc. said last Thursday that
it would buy Media General Inc.'s cable systems in northern Virginia, with 260,000
subscribers, for $1.4 billion in cash.
The price works out to a hefty $5,400 per subscriber, but
the company's flagship Fairfax County system is one of the most tightly clustered
operations in the country, in a wealthy suburb of Washington, D.C.
The system was generating more than $50 in monthly revenue
per subscriber, before a recently announced 7 percent increase in expanded-basic cable
rates.
Fairfax also has a high personal-computer penetration,
making it ripe for a Cox high-speed-data-service launch after a planned rebuild. (Media
General Cable is a Road Runner affiliate, but Cox is affiliated with @Home Network.)
Cox said it expects to close the deal later this year. The
other affected systems are in the city of Fredericksburg and parts of Stafford and
Spotsylvania counties.
Despite Media General executives' past insistence that
the company -- which also owns the Richmond Times-Dispatch newspaper and several
broadcast-television stations -- wanted to hang onto the cable systems, the sale is not a
surprise.
Employees at the system, though, thought that Comcast Corp.
would be the buyer. Comcast owns or is in the process of buying most other systems in the
Washington, D.C., suburbs, through its acquisition of Jones Intercable Inc. and an
alliance with Prime Management L.P.
But a cable executive familiar with the process said the
final bidding for the Media General systems came down to Cox and Charter Communications.
Cox has been acquisitive, and its $1.3 billion purchase of
the 319,000-subscriber cable system in Las Vegas last year showed that the company is
willing to pay top dollar for a good system outside of its clusters. Cox does have about
450,000 subscribers in the Hampton Roads and Roanoake, Va., areas.
The Fairfax County system was one of the most advanced in
the country when it was built in the early 1980s, with a dual-coaxial-cable, 120-channel
capacity. But it is in need of a $180 million rebuild to install fiber and to otherwise
upgrade aging plant, under terms of a 15-year franchise that was awarded last fall.
Cox spokeswoman Ellen East said the company would carry
through with a rebuild in order to offer digital television, telephony and high-speed
data.
Separately, Cox said last Friday that it would sell its
40.8 percent stake in a wireless-phone operation in the Los Angeles and San Diego area to
Sprint Corp., which already owned the rest of the operation.
Sprint will pay Cox 24.3 million shares of Sprint PCS
stock, 5.3 million of which go to minority shareholder Cox Enterprises Inc.
