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Cable Operators

Centennial Exploring P.R. Sale Again

5/26/2004 9:34 AM Eastern

Centennial Communications Corp. has hired a New York-based cable investment banker to advise it on strategic opportunities for its cable system in Puerto Rico, including a sale -- a move that could signal further consolidation in the market.

The company announced Wednesday that it has hired Waller Capital Corp. as its strategic advisor.

Centennial acquired the Puerto Rico systems in two separate deals, purchasing 55,000 subscribers from Pegasus Communications Corp. for $170 million in cash in 2000 and 37,000 from Teleponce Cable TV Inc. for $107 million in 2001.

The Puerto Rico systems currently have about 73,500 subscribers and pass more than 300,000 homes in resort communities like Ponce, Aguadilla and Mayaguez. Centennial has fully upgraded the systems -- they are currently at 450-megahertz capacity and are two-way and digital- and high-speed-data capable.

This is the second time in two years Centennial has considered selling the Puerto Rico cable systems. In April 2002, the telecommunications carrier hired Morgan Stanley Dean Witter & Co. to seek out a buyer, but it pulled the systems off the block after receiving few attractive offers.

That seems to have changed in April, when a group of private-equity investors led by former FrontierVision Partners CEO James Vaughn made an unsolicited bid for Adelphia Communications Corp.’s 140,000-subscriber systems in San Juan and the surrounding area.

Vaughn had bid $625 million for the Adelphia systems, or about $4,500 per subscriber -- a huge valuation, given the fact that recent cable sales were valued at $3,200-$4,000 per subscriber. Using the Vaughn bid as a benchmark, Centennial could receive as much as $330 million for its properties.

Centennial’s Puerto Rico systems are considered to be in good shape -- they launched high-speed Internet service earlier this year and have about 3% penetration of high-speed-data-ready homes. Their 73,500 customers are all consolidated on one headend, which could also make them attractive to a potential suitor.

But the cable unit has been losing subscribers. According to Centennial’s 10-Q quarterly report for the period ended Feb. 29, basic subscribers fell 6.2% in the fiscal third quarter. Since 2001, Centennial has lost about 20,000 subscribers in Puerto Rico.

Possible suitors for the systems include the Vaughn group -- which includes private equity firms M/C Venture Partners and Wachovia Capital Partners -- and Liberty Media Corp.

Liberty owns Liberty Cablevision of Puerto Rico, which has about 120,000 subscribers in 37 municipalities in the eastern, central and northern regions of the island.

Liberty also plans to spin off its Puerto Rico cable systems -- along with its interests in Jupiter Telecommunications Co. Ltd., Jupiter Programming Co. Ltd. and UnitedGlobalCom Inc. -- to its shareholders June 7 into a separate publicly traded entity called Liberty Media International Inc.

Once that spinoff is complete, Liberty could use the LMI shares as deal currency to roll up the Puerto Rico market.

 

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April