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Cable TV Buyer Predicts Quick Group W Purchase

March 09, 1986|JULIO MORAN | Times Staff Writer

The chairman of the cable company seeking to buy the five Group W Cable systems in the South Bay said he expects a quick, smooth transfer of ownership despite talk by some city officials about public ownership of the systems.

While city officials now say joint public ownership is becoming less likely because of financing problems, El Segundo is still pursuing the idea of buying its system. Officials in the other cities say they will carefully analyze Century Communication's Corp.'s financial and technical ability to operate the systems Group W Cable is trying to sell. If the cities find that Century is financially or technically incapable of fulfilling current franchise agreements, the cities would have a legal basis to stop the transfer.

No price has been announced for any of the cable systems but an accepted industry formula places the value of a system at about $1,000 per subscriber. Group W has a total of about 43,500 subscribers in the five South Bay systems.

At a daylong seminar held by the Southern California chapter of the National Assn. of Telecommunication Officers and Administrators--a group of city officials who oversee cable operations--on Feb. 20 in Torrance, Nicholas P. Miller, an attorney specializing in cable television matters, encouraged city officials not to be "buffaloed" into approving franchise transfers, but also not to "unnecessarily" obstruct the deals.

Miller said cities can legally reject a transfer only if the proposed new owner does not have the financial or technical ability to operate the system under existing franchise requirements.

Because of the legal limits, officials in Torrance, Gardena, Hawthorne, Lawndale and El Segundo are going through the transfer process, even though they have said privately that they fear they may lose some of the services provided by Group W if Century takes over the system.

Torrance Cable Administrator Warren Carter said his city will hire an independent accounting firm to analyze Century's finances, particularly because of the company's recent public offering of stock. "We want to be assured that Century has secure and firm financing to operate and maintain the system," Carter said.

Paula Cone, Lawndale assistant city manager who oversees the cable operation, said Group W is completing construction of the year-old system there to allow schools and City Hall to communicate with each other through cable.

Cone said the city has not decided whether it will conduct its own audit of Century or be part of a joint study with another city.

To Hire a Consultant

Larry Bender, who oversees the cable system in Hawthorne, said the city will hire a consultant to look over Century's ability to fulfill the requirements of the current franchise. He said Group W has not provided the staff and facilities to handle community and public access programming as required in the agreement.

Gardena City Manager Kenneth Landau said his audit of Century will be to make sure the company can fulfill the requirements of the current franchise. Gardena last year agreed to modify its franchise agreement with Group W to reduce channel capacity from 120 to 60 and reduce the annual fee paid to the city for community programming. Landau said the city will not make any more concessions to Century.

Landau was directed by his City Council on Jan. 14 to explore with the other cities the possibility of joint public ownership of the five systems. But Landau said last week that may not be financially feasible. However, a decision has not yet been made to reject the idea.

Of the five existing Group W systems, the one in El Segundo is the oldest and all sides agree it is in dire need of upgrading.

Plans to Rebuild

Leonard Tow, chairman of Century, said he plans to immediately rebuild that system, but El Segundo Councilman Jack Siadek said it would be in the best interest of the city and Century if the city took it over.

"I am pretty convinced that Century is not the best way to go," Siadek said. "I'm sure Mr. Tow is an honorable man, but our town is small peanuts for him. We can afford the expenditure to rebuild and operate the system. We have at least $13 million in reserves, or we could use bond financing."

Siadek said his meeting with Tow last month was cordial and that he left with the feeling that Tow would not oppose the city if it seeks to acquire the cable system.

"My overall reaction is that he appears to be very cooperative," Siadek said, "and I especially liked him saying that if we wanted to buy the system we were welcome to it."

Crazy to Do So

Although Tow said that he has told each of the cities that they are welcome to buy the cable systems, he has also told them they would be "crazy" to do so.

"They wouldn't make the money they make now," he said. "It would not be a good public use of money. Besides, in my judgment they already own the systems. They already get as much as 30% of the gross revenues."

The five South Bay cities receive 5% of each system's annual gross revenues as a franchise fee, but Tow said that when additional costs for services required by the franchise agreements, such as public access, studios, equipment and personnel are added, the total approaches 30% of the gross of each system.

Tow said he expects the transfers to be approved by June.

'I don't sense a flavor of something other than working together," he said. "I spent two weeks meeting with city officials and did not find a single unpleasantry fully expressed about my owning these systems. I encountered graciousness, kindness and enthusiasm. . . .

"I'm happy. There's no heat on this side and I haven't detected it on their side."

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