WOW Now
Cable challenger jumps ahead with Americast acquisition
By Karen Brown
from the June 4, 2001 issue of Broadband Week
Wide Open West LLC plans to vault from startup cable competitor to the 13th -largest U.S. cable operator thanks to its deal to buy Ameritech New Media, the cable television subsidiary of SBC Communications Inc.
The cable systems operated under the americast brand include 310,000 subscribers in Chicago, Detroit, Columbus and Cleveland.
|
Top 15 MSOs
| 1. AT&T Broadband |
16,090,000 |
| 2. Time Warner Cable |
12,751,000 |
| 3. Comcast Cable Communications |
7,606,800 |
| 4. Charter Communications, Inc. |
6,350,900 |
| 5. Cox Communications |
6,193,300 |
| 6. Adelphia Communications |
5,292,000 |
| 7. Cablevision Systems |
2,830,800 |
| 8. Insight Communications |
919,300 |
| 9. Mediacom LLC* |
779,000 |
| 10. CableOne |
734,900 |
| 11. RCN Corporation |
413,000 |
| 12. Classic Communications |
402,000 |
| 13. Wide Open West** |
300,000 |
| 14. Service Electric |
299,700 |
| 15. Tele-Media Corporation |
279,800 |
* A Feb. 2001 agreement with AT&T Broadband will mean the transfer of approx. 840,000 basic subscribers to Mediacom.
** Pending completion of WOW's acquisition of Ameritech Corporation's cable subscribers.
Source: Based on NCTA estimates and Paul Kagan Associates
|
"It really solidifies our company as a whole. It takes us out of the pure startup class and moves us up to the 13th largest company in the country in this space," says WOW CEO and president Mark Haverkate.
Financial terms are not being released, but some sources have put the price tag in the $200 million to $300 million range--roughly $1,000 per subscriber. If so, that's a far cry from the prices paid during 1999's cable buyout spree, which saw AT&T buy MediaOne for $4,637 per subscriber and Charter Communications shell out $4,000 per sub for Fanch Communications Inc.
WOW will get financing for the acquisitions primarily from two of its original backers, the private equity firms Oak Hill Capital Partners and ABRY Broadcast Partners, which jointly will kick in more than 90 percent of the funding. The rest comes from MKMB Corp., a Chicago-based investment firm that recently sold its cellular phone subsidiary and came forward when it heard of WOW's bid, Haverkate says.
"Our management team has a lot of experience in the Midwest market, especially in Michigan, but we didn't have a lot of experience in Chicago so we thought it would be a good idea to hook up with them," he said.
While he won't comment on the price, Haverkate says the deal is something of a windfall for WOW. "When we became aware of the fact that SBC was putting their Ameritech systems up for sale we thought we were kind of a small company to be looking at buying such a big thing," he says. "But hey, you never know what could happen. So we went out and looked at it, and found an exceptional high-quality network that they built. They spared no expense and cut no corners on building it."
The cable systems originally were built by Baby Bell Ameritech before its acquisition by SBC. With 750 megahertz capacity it offers an analog service, but upgrades for digital and high-speed cable modem service were shelved after SBC took over. The RBOC has begun jettisoning various traditional cable systems in its expanded territory.
Castle Rock, Colo.-based WOW recently launched service on its first cable system--a hybrid fiber-coax system in suburban Denver--but like the other competitive cable providers (known as overbuilders), they faced a tough business and financing environment.
The ready-made, cash generating Ameritech systems could help ease some of that pressure. Although the plant is analog, "it is also very high fiber count, very small node sizes, top-of-the line equipment across the board," Haverkate says. "So we're going to come in and buy it and do a nice transition and make sure the existing 300,000 customers are taken care of and we aren't dropping any balls. But once that is done we are going to start offering these other services on a network that is already built. In contrast to building everything from scratch like we are doing in Denver, we'll be, boom, two years ahead."
WOW expects to close the deal in the fourth quarter. Franchise transfers required from each city will take about 120 days. Haverkate says WOW also will maintain its open-access philosophy with its new systems.
"We are definitely sticking by our open access policy, and as we launch our own brand of Internet service, we'll also make bandwidth and facilities available for any number of ISPs that want to use our network on a wholesale basis to upgrade their customers," he says. "So we are hopeful we can make deals with all of the top ISPs and even some regional ISPs."
|
