Weed Wants to Pluck Cable Systems10/20/2002 8:00 PM Eastern
Former Millennium Digital Media executive Steven Weed has joined the growing list of former cable executives re-entering the industry, and he's hunting for cable systems in the Northwest.
Weed is close to a deal for Northland Cable Inc.'s 20,000-subscriber system in the Seattle area, sources said. While a deal has yet to be finalized — and could still fall through — sources in the financial community said it could be worth more than $2,000 per subscriber, or about $40 million.
Weed declined to comment on any potential acquisitions.
In December, Weed formed Wave Division Networks LLC to acquire cable systems in the Northwest, particularly in the Seattle and Portland, Ore., areas.
A 14-year cable-industry veteran, Weed ran Millennium Digital Media's 70,000-subscriber Seattle cable system for four years. Prior to that, he served for about 10 years as chief operating officer and CEO of Summit Communications, which had owned that system. Weed sold Summit to Millennium in 1999.
Focus on data
Weed left Millennium in February to devote his full attention to Wave Division.
"It was time to move on," Weed said.
Wave Division is concentrating on markets in the greater Seattle and Portland areas that do not have access to broadband data services. He's focusing on cable operations because he believes that cable is the best technology for delivering high-speed Internet service, he said.
Although Weed conceded that the deal market has been quite slow for systems, he said there are plenty of opportunities in and around Seattle and Portland — including Northland, Cedar Communications and Millennium.
"We've been looking hard to put stuff together," Weed said. "We've had good success in raising money."
The markets Weed is targeting are essentially controlled by AT&T Broadband. And though Weed said he is no stranger to competition, he's also not looking to become an overbuilder.
"I competed with them [AT&T] for the last 10 years," Weed said. "But I'm not trying to compete with them on the video side. If a cable operator near us doesn't offer broadband, we may offer broadband in that market.
"But we're not about overbuilding for video. There's already enough competition for the video business, but we may be a competitor for the video business."
Though still important, video will essentially be offered as an afterthought, he said.
"I see the growth in this business as broadband data as opposed to video," Weed said.
Weed also is encouraged by today's lower system valuations. The 12 cable deals completed this year averaged about $2,100 per subscriber. Last year, cable valuations ranged from $4,500 to $5,000 per subscriber.
"It's a good time to buy," Weed said. "Look through what's out there, and if you're selective at what you buy, I think it's a good opportunity. It's certainly better than it was two years ago."
But quality systems still go for relatively high prices, as proven by the $3,600 per subscriber — including upgrade costs — that Steve Simmons' Patriot Media & Communications will pay for about 80,000 RCN Corp. subscribers in Princeton, N.J.
Although those Princeton systems were not upgraded, they are located in a highly affluent area with a high demand for advanced services like high-speed data.
"The difference now versus three years ago is that the valuations vary dramatically based on the kind of subscribers you have," Weed said. "Are they upgraded, are they in small headends, big headends, does it have two-way plant or not?
"We're looking at subscribers that could be in that high valuation, because you can convert all of them to two-way and offer broadband Internet. Those subscribers have a much greater value than systems where that's difficult."
Weed would not identify his backers or say how much money he has raised so far. But he has plenty of money to do deals, he said.
"We are very well-funded," Weed said.
Weed said his focus is on the Northwest because that's where he has spent most of his career. While that may limit his acquisition opportunities, Weed said the focus is not on becoming a large player.
"The goal is to stay focused on the region where we already have good cable experience, along with local knowledge and local political and business ties," Weed said. "That is more the objective than to get big. We will get big enough to have the economies of scale we need."
Weed also likes the Seattle and Portland areas because there is a high percentage of customers who telecommute, a workforce that makes for a high degree of demand for broadband services.
"The West Coast companies tend to be more progressive at [telecommuting]," Weed said. "That helps the broadband business. Telecommuters will happily pay $100 a month. It's a great service if they can work from home."
When he was at Millennium, Weed offered a tiered broadband service, a practice he intends to continue at Wave Division.
"We developed some great packaging and pricing plans," Weed said. "Broadband cable ought to own Internet connectivity."
While the name of his company implies that Weed will use wave-division multiplexing technology, Weed said that is not the case.
"We named it after [wave-division multiplexing]," Weed said. "In the early 1990s, we built the first CLEC [competitive local-exchange carrier] loop around Seattle. As part of the deal, we got a couple of strands of fiber for ourselves."
But those fiber strands are now owned by Millennium, not Weed's company.
Weed has not yet assembled a management team, but said he plans to do so once he lands his first deal. It would most likely consist of former Summit executives, he added.