THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, November 10, 1994 TAG: 9411100605
SECTION: BUSINESS PAGE: D01 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 79 lines
Cox Cable Communications Inc. said Wednesday that it plans to buy the Newport News cable operation, creating the state's largest cable-TV system. Sources close to the deal said that Atlanta-based Cox will pay more than $100 million for the operation.
The move will increase Cox's dominance of the Hampton Roads cable-TV market and continues a trend of mergers and buyouts in the cable industry - one in which Cox has been busily engaged.
Local cable executives insisted that the deal will be good for Hampton Roads consumers because it will strengthen Cox's ability to compete against a better-heeled future entrant in the local video marketplace, Bell Atlantic Corp.
``We're real happy to have it,'' said Franklin R. Bowers, vice president and general manager of Cox Cable Hampton Roads. ``It just gives us more of a presence . . . more economies of scale.''
Newport News Cablevision Ltd. was put on the block last summer by the two Denver-based partnerships that have owned it for the past eight years. The system, which has 48,000 subscribers, is managed for its partnership owners by Tele-Communications Inc., the nation's largest cable operator.
TCI and at least one other cable giant, Continental Cablevision Inc., were outbid by Cox for the operation.
With the addition of the Newport News operation, Cox's Hampton Roads system would have about 245,000 subscribers. That would make it one of the 10 largest individual cable systems in the country. It would be bigger than all other Hampton Roads cable systems combined.
As competition from phone companies looms closer and as cable operators simultaneously edge into the phone business, cable companies will concentrate more on acquiring a dominant position in individual metropolitan areas like Hampton Roads, industry executives say.
Cable ownership is fragmented in most large metro areas. For example, while Cox is by far the largest operator in Hampton Roads, there are about a half-dozen other cable companies doing business locally.
Against a marketwide competitor like Bell Atlantic, which plans to begin offering video services locally by 1996, existing cable operators could find themselves at a marketing disadvantage.
After completing its purchase of the Newport News system sometime next year, Cox will immediately enjoy greater efficiencies, Bowers said. One example, he said, is Cox's advertising on local broadcast stations. Until now, its TV and radio promotions have been wasted on Newport News viewers and listeners because it has no interests there.
Cox would like to buy other Hampton Roads cable operations, Bowers said, but there aren't any on the market now.
Cox has been among the most aggressive acquirers in the cable industry in recent months. It is in the process of a $2.3 billion buyout of Times Mirror Co.'s cable operations. But TCI prevailed in the bidding for another industry leader, Norfolk-based TeleCable Corp. TCI is hoping to close its $1.5 billion purchase of TeleCable by year's end.
John Margeson, TCI's state manager, said executives of his company were surprised to have lost out to Cox in the bidding for the Newport News system. ``We really wanted that property and we were disappointed we didn't get it,'' he said. ``But Cox is a good company. It will serve consumers well.''
Like Cox's Bowers, Margeson raised the specter of Bell Atlantic's future entry into the cable market and said Cox's landing of the Newport News system ``gets them in a better position to compete.''
Since acquiring the Newport News system for $70 million from Chicago-based Tribune Co. in 1986, the partnership owners - American Cable TV Investors 4 Ltd. and American Cable TV Investors 5 Ltd. - have added about 10,000 subscribers. The system posted revenues of about $20.2 million and a net loss of about $700,000 in 1993. It has about 80 employees.
Cox doesn't disclose financial information for its individual systems. But the Hampton Roads operation, which serves Norfolk, Portsmouth, Virginia Beach and Knotts Island, N.C., is estimated to bring in annual revenues of more than $85 million and reportedly is profitable. Cox has about 500 local employees.
Bowers said it's too early to predict what changes will be made in the Newport News operation after Cox takes over.
TCI said it will continue to own and operate its system in Chesapeake. by CNB