Cox swaps AT&T shares for more systems, cash

No. 5 U.S. operator gains 495,000 customers in seven states

Cable systems

July 08, 1999|By BLOOMBERG NEWS

ATLANTA -- Cox Communications Inc., the No. 5 U.S. cable operator, said yesterday that it will swap $2.85 billion in AT&T Corp. stock for some AT&T cable systems and $750 million in cash, to become the dominant provider in Louisiana and Oklahoma.

Cox will swap 50.3 million AT&T shares for systems serving 495,000 customers in Louisiana, Oklahoma, Texas, New Mexico, Arkansas, Utah and Nevada. That and other pending acquisitions will give Cox a total of 5.5 million customers.

AT&T, the No. 2 cable TV operator, is selling systems to concentrate on major markets and head off regulatory concern that its pending acquisition of MediaOne Group Inc. might make it too big.

Cable companies such as Cox are building large regional groupings, or clusters, to market and deliver new services such as digital cable and high-speed Internet access more efficiently.

"AT&T is going to self-regulate, and we're likely to see several more of these sales in the future," said SG Cowen analyst Gary Farber, who has a "buy" rating on Cox.

The swap with Cox is valued at about $4,230 per subscriber, which analysts said is at the upper end of the range for nonurban systems. As the number of available systems dwindle, their acquisition prices have soared.

Cox is getting systems that add to those it acquired when it agreed to buy TCA Cable TV Inc. in May. Atlanta-based Cox will have more than 1.7 million customers in Louisiana, Oklahoma, Arkansas, and Texas after pending acquisitions close.

"This will create a major, heavily concentrated regional cluster," Cox chief executive James Robbins said in a statement. The company expects $3.3 billion in revenue and $1.3 billion in cash flow next year, after it completes acquisitions and swaps.

AT&T shares rose $1.625 to $58.25 yesterday. Cox shares rose $1.6875 to $38.25.

AT&T, the largest U.S. phone company, has positioned itself this year to pass Time Warner Inc. as the largest cable provider. It bought No. 2 cable operator Tele-Communications Inc. for $59.4 billion in March, outbid Comcast Corp. for No. 4 operator MediaOne in April and agreed to buy Lenfest Communications Inc. for $2.2 billion in May.

Pub Date: 7/08/99

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