MCI WorldCom is in negotiations with PrimeOne -- the
wireless cable arm of Austin, Texas-based Prime Management Group -- to purchase
PrimeOne's wireless cable television operations in California for about $300 million,
sources said last week.
This would be the second foray into the wireless cable
market for MCI, which bought Albany, N.Y.-based wireless cable company CAI Wireless
Systems Inc. for about $408 million last month.
MCI has also reportedly been buying up debt from several
wireless cable companies over the past several months.
According to some sources, a $300 million sale price would
represent about 10 times what PrimeOne paid for the systems last year.
Sprint Corp., the No. 3 long-distance carrier, has also
been buying into wireless cable, purchasing People's Choice TV Corp. of Shelton,
Conn., and Englewood, Colo.-based American Telecasting Inc. earlier this year.
"It's not a question of which market is best --
these guys are going after every market," Paul Kagan & Associates Inc.
private-cable analyst John Mansell said.
PrimeOne purchased the California wireless system late last
year from SBC Communications Inc. PrimeOne chairman Mark Greenberg declined to comment.
MCI will likely use the California systems to provide a
"last-mile" connection between its own long-distance and high-speed Internet
services and the customer premises. PrimeOne has about 65,000 subscribers in Los Angeles,
Orange County and Riverside.
The company offers a fully digital service in Los Angeles
and Orange County, with 160 channels, including 40 channels of pay-per-view. Its basic
service consists of 13 local channels, 47 satellite channels and 31 music channels.
The company has also been aggressively marketing the
service over the past few months.
PrimeOne has wireless channel licenses to reach about 4
million homes in San Diego, parts of San Francisco, Palm Springs and Seattle. The company
also has systems in Bellingham, Olympia and Spokane, Wash.; Greenville/Spartanburg, S.C.;
Tampa, Fla.; and Lewiston, Idaho.
Because Sprint also owns most of the wireless channel
licenses in San Francisco, San Diego and San Jose, Calif., Mansell said, MCI could use its
San Francisco licenses as deal currency with Sprint.
MCI spokesman Frank Walter declined to comment on PrimeOne,
but he said wireless spectrum is a part of MCI's overall strategy to provide
high-speed-data services.
MMDS (multichannel multipoint distribution service) has run
into problems in the past, mainly because it is a radio-based technology that requires a
clear path, or line of sight, from the transmission tower to the customer premises.
Although this has been a problem for some wireless
operators, PrimeOne has claimed that its system can reach 90 percent of the Los Angeles
market.
"I think this is just consistent with MCI's
recent activity in buying cable assets," CIBC Oppenheimer Corp. cable and
telecommunications analyst Aryeh Bourkoff said. "Los Angeles has favorable topography
for line-of-sight. It is an attractive market, given the disparate cable market
[there]."
