Coaxial Communications, needing capital to compete against
Ameritech New Media, said last week that it agreed to sell a 75 percent stake in its
hometown Columbus, Ohio, system to Insight Communications Co.
Coaxial, which had been talking to potential buyers for
about a year, found a way to keep a stake in the 91,000-subscriber system that it has
owned for more than 20 years, while finding a partner that can afford the upgrade that is
necessary to compete against ANM, Coaxial CEO W. Edward Wood said.
Coaxial's owners retain 35,000 subscribers in the
Cincinnati area, along with 10,000 subscribers scattered among systems in Georgia,
Kentucky and Virginia. Wood said Coaxial is looking to buy other rural systems to add to
that total.
Wood would not disclose the sale price for the Columbus
stake. Insight is applying for franchise transfers, and it hopes to close the deal by
August.
Insight, based in New York, adds another stand-alone market
bigger than its previous centerpiece -- the 67,000-subscriber system in Rockford, Ill.,
that it bought from Cablevision Systems Corp. Insight also has a pending
325,000-subscriber joint venture with Tele-Communications Inc. in Indiana.
In all, Insight will have about 550,000 subscribers after the Coaxial deal closes, up from
170,000 a year ago.
Insight president Michael Willner said he was "very
excited" about the deal, which was brokered by Waller Capital Corp. and which was put
together in about a month.
"This is exactly the kind of system that we were
looking for," Willner said.
Because the deal came together so quickly, decisions still
have to be made on issues such as upgrading plant and introducing high-speed-data services
as part of Insight's recent @Home Network affiliation deal, Willner said.
Columbus will be part of Insight's overall
network-upgrade strategy, and the market probably rates a 750-megahertz system, Willner
said.
Coaxial's competitor, ANM, already has a 750-MHz
system. Wood said the system needed an upgrade -- he wouldn't say how much it would
cost -- and Coaxial was having trouble raising the cash that was needed for the task.
Lenders weren't keen when asked "to finance a
small MSO that has one-half of its subscriber base overbuilt by an aggressive phone
company with seemingly endless pockets," Wood said.
Willner said the fact that Columbus was overbuilt was
obviously taken into account in doing the deal. He added, "The world is
competitive," and direct-broadcast satellite competitors lurk in every market.
ANM parent Ameritech Corp.'s long-term standing in the
wireline cable business is somewhat in doubt, given the fact that it has agreed to be
acquired by SBC Communications Inc., which scrapped Pacific Telesis Group's nascent
cable build-out after buying PacTel.
Wood said he was confident that Coaxial would prevail
against ANM, but only with the capital that it needs to upgrade its 69-channel system. ANM
offers 60 channels of expanded basic, 11 premium channels and 18 pay-per-view channels, a
spokesman said, adding that his company focuses on its customers, and not on its
competitors, so it had no comment on the deal.
Should Ameritech abandon cable, Insight might end up with a
bargain.
Coaxial shares Columbus with Time Warner Cable, which has
about 200,000 subscribers in the area.
