Time Warner Cable will sell a 60 percent stake in
Philadelphia-based Wade Communications to New York-based Inner City Cable Television
Systems.
The deal, worth more than $100 million, makes Inner City
the only minority-owned company to own a majority interest in a big-market cable system.
Inner City -- which owns a 50 percent interest in the New
York-based, 100,000-subscriber Queens Inner Unity cable system (QUICS) -- will now own a
60 percent interest in the 61,000-subscriber Wade system. A group of local investors will
hold a minority interest in Inner City's share, the company said.
Time Warner will continue to manage the system.
While terms of the deal were not disclosed, sources close
to the situation said the combination of the system's sale price -- valued at between
$2,200 and $2,500 per subscriber -- and its debt put the price tag at more than $100
million.
Mike Luftman, Time Warner's vice president of public
affairs, said the MSO agreed to increase minority-ownership participation in the system as
part its acquisition of original system owner Cablevision Industries in 1996.
"Because of the system's large minority
population, the local authorities wanted some minority-ownership participation,"
Luftman said.
The transaction is subject to the city of
Philadelphia's franchise approval.
Traditionally, minority-owned companies have had difficulty
securing the necessary financial resources to bid for cable franchises.
"This is a major financial deal, so it's an
indication that we can do these types of large transactions," said Lois Wright,
president of Inner City. "We're very interested in expanding into other
markets."
Inner City is a subsidiary of Inner City Broadcasting
Corp., which owns and operates several urban-radio stations around the country. Headed by
civil-rights activist and lawyer Percy Sutton, the organization teamed up with Time Warner
in 1989 to form the QUICS partnership.
But Sutton said it's very difficult for minorities to
receive the necessary financing to buy systems outright. For now, the most effective way
is to create partnerships with MSOs such as Time Warner to gain access into cable-system
ownership.
"It requires so much capital to first purchase and
then operate a system -- the kind of capital that's not readily available to
minorities," said Larry Jarrett, general manager of QUICS.
Minority-owned systems were more prevalent in the late
1980s and early 1990s, with the advent of a minority-tax certificate that permitted
capital-gains deferral on the sale of media properties to a minority buyer. Congress,
however, eliminated the certificate in 1995. Since then, minority system ownership has
been on the decline.
