U S West Buys Continental Cablevision in $10.8 Billion Deal
NEW YORK (AP) _ The regional phone company U S West said today its media group has reached an agreement to buy the nation’s third-biggest cable television system operator, Continental Cablevision, in a $10.8 billion deal.
The deal vastly increases U S West’s clout in the telecommunications field where phone and cable companies are scrambling to become one-stop providers of phone service, TV programming and other services like home shopping.
``This is a defining day for the U S West Media Group,″ Chuck Lillis, president and chief executive of U S West Media Group, told a news conference.
He said the companies are ``a terrfic fit both domestically and internationally″ and said Continental gives U S West a premium set of cable properties and a top-flight management team for its domestic cable business.
It is the biggest deal since the Feb. 8 enactment of a law that gives local- and long-distance telephone companies and cable system owners greater authority to get into each other’s businesses.
U S West is already a major investor in the cable systems controlled by Time Warner Inc., the nation’s second-biggest cable system owner with about 11.5 cable subscribers. The new deal would give U S West direct ownership of systems with about 4.7 million subscribers.
That combined total of 16.2 million subscribers rivals the number that industry leader Tele-Communications Inc. reaches through systems it owns, manages or has a minority stake in.
But U S West’s relationship with Time Warner has been rocky. It is currently fighting Time Warner’s proposed acquisition of Turner Broadcasting System Inc., the Atlanta-based cable TV company.
A Delaware Court has scheduled a hearing for mid-March on U S West’s request that it block the Time-Turner deal on grounds it violates the partnership pact between Time Warner and U S West.
Talks are under way to resolve that case before it goes to trial, however, and a settlement could involve a change in the ownership of the Time Warner-controlled cable systems.
Under terms of the Continental deal, the U S West Media Group will pay $5.3 billion in cash and stock for all of privately-held Continental’s shares. It will also assume Continental’s debt, currently at about $5.5 billion.
In afternoon trading today on the New York Stock Exchange, U S West stock dropped 50 cents a share to $33.37 1/2 while U S West Media Group was off $1.25 a share at $20.87 1/2.
Continental Cablevision, based in Boston, has 4.2 million cable subscribers with most of them concentrated in five large markets _ New England, California, Chicago, Florida and the Michigan-Ohio area.
U S West is based in Englewood, Colo., and was one of the regional phone companies created in the breakup of AT&T’s Bell System more than a decade ago.
Its communications division serves more than 25 million customers in 14 Western and Midwestern states, while its media group has interest in cable TV systems both domestically and abroad.
It owns a 25 percent stake in the joint venture with Time Warner which has cable TV systems reaching 11.5 million subscribers.
It also acquired systems on its own last year that serve more than 500,000 subscribers mainly in the Atlanta area.
The deal is subject to regulatory clearance and approval by Continental’s owners but is expected to be completed by the end of the year.
Privately-held Continental and its founder Amos Hostetter had indicated last fall they were considering selling stock to the public for the first time.
The company needed to reduce debt accumulated as it made acquisitions of its own including the $1.4 billion purchase of the Providence Journal’s cable systems last year.
Hostetter will oversee all of U S West’s wholly-owned cable properties after the deal is completed. He will report to Lillis/, the president an chief executive of U S West Media Group..
``I look forward to working with U S West to lead the next wave of growth and expansion in the cable industry,″ Hostetter said in a statement.