AT&T, COMCAST, ADELPHIA COMPLETE CABLE SYSTEM SWAPS
Four major MSOs swapped or purchased cable systems from one another as new year began, furthering trend toward industry consolidation that has snowballed in last 3 years. Adelphia, AT&T Broadband, Comcast and Mediacom all announced system exchanges or acquisitions that would result in 2.4 million subscribers, or more than 3% of all U.S. cable customers, changing corporate hands overnight. Transactions will create even bigger cable clusters in such large markets as N.Y.C., L.A., Washington, Chicago, Detroit, Philadelphia, Atlanta, southeastern Fla. But some industry observers said deals, concluded as FCC continued to weigh final govt. approval of AOL’s pending purchase of Time Warner (TW), would lead to even more as scale became ever more important. “Cable consolidation is not over,” ABN AMRO analyst John Martin said.
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In biggest cable trade, AT&T and Comcast completed transfer of systems serving total of nearly 1.5 million subscribers. Negotiated as part of May 1999 settlement allowing AT&T to buy MediaOne instead of Comcast, swap moved 773,000 AT&T subscribers to Comcast and 700,000 Comcast customers to AT&T, enabling both MSOs to boost their control of prominent markets. AT&T gains cable systems in such areas as Chicago, Atlanta, northern Cal. and southeastern Fla., while Comcast picks up systems in N.Y./N.J., Washington, Detroit and southwestern Fla., among others. In brief news release, companies said “transaction is designed to better cluster the territories” served by each.
Comcast and Adelphia concluded major trade that exchanged cable systems serving 440,000 Comcast subscribers for others serving 470,000 Adelphia customers. Most notably, Adelphia adds systems in 4 southern Cal. counties that will enlarge its L.A. area cluster by 375,000 subscribers, giving it total of nearly 1.3 million there. Comcast gains cable systems serving 103,000 subscribers in 63 Mich. communities, giving it more than one million customers in greater Detroit area. Comcast already has cable clusters serving million or more subscribers in N.Y./N.J., Philadelphia, Baltimore and Washington areas, among others.
In 3rd deal, Mediacom completed purchase of several small cable systems in Ala. from AT&T. These largely upgraded systems, with 14,000 subscribers in Fairhope area, cost Mediacom $34 million. With Dec. 28 transaction, Mediacom said it ended 2000 with 9 system acquisitions, paying $109.2 million for total of 53,000 customers.
Cable analysts and other industry observers debated whether AOL-TW deal, expected to be approved any day by FCC with possible additional regulatory conditions, would prompt yet another wave of consolidation. Despite slumping stock prices that make purchases more difficult, Martin and others predicted that AOL-TW union would lead to similar deals between big content and distribution companies such as News Corp. and DirecTV or Yahoo and somebody. Douglas Shapiro, analyst with Banc of America Securities, said next wave was likely to see major cable operators taking equity positions in interactive TV providers, just as they did previously in programming suppliers. But former Viacom CEO Frank Biondi, now managing dir. of Waterview Advisers, said it was hard to imagine other deals on scale of AOL-TW. “I don’t think it’s [cable industry is] going to consolidate much more than it is today,” he said.