Denver -- In another sign of a potentially mounting rift,
Jones Intercable Inc.'s largest shareholder is suing to block any full-scale launch
of the Jones Internet Channel.
BCI Telecom Holding Inc., which owns 30 percent of Jones
Intercable, last week said the Colorado-based operator engaged in 'self-dealing'
when it agreed to launch the Internet-access service owned by Jones International Ltd.
In a U.S. District Court filing, BTH, which is owned by
Bell Canada's parent company, BCE Inc., sought an injunction preventing any further
launch of the channel. BTH claimed its $290 million investment in Jones Intercable
includes an agreement prohibiting such a move without BTH's approval.
It claimed that the Jones Intercable board of directors
chose to ignore a 19-page legal opinion supporting that position.
The Jones Internet Channel, a service owned by Glenn Jones
through his control of Jones International, is already being sold to about 3,000
subscribers served by Jones Intercable in its Washington, D.C., cluster.
BTH claimed that launching the channel on other Jones
systems would enrich 'Jones International at the expense of Jones Intercable and all
its shareholders.'
'By diverting this valuable Internet-access business
and placing it under Jones International's umbrella, [Glenn] Jones and Jones
International can keep the benefits of the business for themselves and deprive BTH --
which owns approximately 30 percent of Jones Intercable and has an option to acquire
control -- of a key business opportunity,' the lawsuit alleged.
BTH claimed that Jones Intercable could have agreed to
launch competitive services like *Home or Road Runner, thereby producing significant
'fees or even equity stakes' for itself and its shareholders. Instead, it
entered into a long-term agreement under which it would offer the Jones Internet Channel
to 350,000 Jones Intercable subscribers by the end of this year.
Jones Intercable issued a statement claiming to be
surprised by BTH's action. It said a 'committee of independent board members is
still in the process of reviewing the proposal and no final decision has yet been
made.'
'We believe that when all the facts are presented, the
company will be found to have acted properly,' the company said.
Reaction to the lawsuit was mixed.
Ted Henderson, an analyst with Denver-based Janco Partners,
said BTH may be looking to exit its investment in Jones Intercable, which saw the company
pay $27.50 a share for stock that is now trading in the range of $16.
'I think clearly they have to be frustrated with their
investment, because it has never performed based on the price they paid,' Henderson
said.
However, an industry executive familiar with the situation
said BTH appears to be trying to pressure Glenn Jones into folding the Jones Internet
Channel into Jones Intercable. That would increase the value of the company should BTH
elect to exercise its option to buy out Glenn Jones.
In that case, with BTH obligated to buy Glenn Jones'
piece of Jones Intercable at a price well in excess of $50 a share, Henderson said BTH may
be trying to pressure Jones into dropping his price when it exercises its option.
The lawsuit was the latest indication that the Jones
Intercable partnership with BTH may be going sour.
BTH last year objected to a secondary stock offering by
Jones Intercable designed to buy out the limited partners in an Independence, Mo., cable
system. BTH was forced to acquire shares in order to maintain its 30 percent stake in
Jones Intercable.
