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LANDMARK CABLE DEAL : Reshaping the Industries

February 28, 1996|KAREN KAPLAN

In agreeing to acquire Continental Cablevision Inc. for $10.8 billion, US West Inc. is taking advantage of the Telecommunications Reform Act that President Clinton signed into law Feb. 8. The law allows phone and cable companies to combine and compete in each other's turf, and this is only the first of many deals that are expected to consolidate and reshape the industries.

The Impact

On consumers:

The 4.7 million customers of Continental Cablevision and cable companies owned directly by US West will not see any immediate changes. At some point, the cable properties will be brought under the same management, and US West plans to offer "one-stop shopping for cable, telephone, wireless and interactive services," spokeswoman Lois Leach says.

On the cable industry:

In addition to getting 4.7 million subscribers to cable systems it will directly own, US West is a major investor in cable companies controlled by Time Warner Inc., which claims another 11.5 million customers. The combined total of 16.2 million subscribers rivals industry leader Tele-Communications Inc. Other cable companies are expected to merge to achieve greater geographic density and compete with the major operators.

On the telephone industry:

Analysts say phone companies have already been mulling decisions to get into the cable business through acquisitions or to expand their own networks so they can deliver cable services. The US West-Continental deal probably won't cause the phone companies to change their strategies, but it may encourage them to move faster.

What will happen next:

Before the deal can be completed, the Federal Communications Commission must grant a waiver to give US West time to sell properties in areas where its phone service overlaps with Continental's cable service. US West's Leach estimated there is overlap in less than 5% of its phone markets. No regulatory obstacles are expected.

The Market

Cable industry market share:

TCI: 24.0%

Time Warner: 17.5%

US West*: 8.6%

Comcast: 6.8%

Cox: 5.6%

Other: 32.5%

* Including Continental Cablevision

The Companies

US West Inc.

* Businesses: US West comprises two major companies: US West Media Group and US West Communications. The latter provides telecommunications services to more than 25 million customers in 14 Western and Midwestern states. US West Media Group has interests in cable TV systems domestically and abroad, including in Britain, the Netherlands, France and Japan.

* Cable subscribers: With the addition of Continental Cablevision subscribers, US West would have direct ownership of systems with about 4.7 million subscribers.

Continental Cablevision Inc.

* Cable subscribers: 4.2 million nationwide, primarily in New England, California, Chicago, Florida and the Michigan-Ohio area. Continental also owns cable assets in Australia, Argentina and Singapore.

* Programming assets: Continental has investments in Turner Broadcasting, the Home Shopping Network, E! Entertainment Television, Viewers Choice, the Golf Channel, the TV Food Network, Music Choice, Outdoor Life, Speedvision, New England Cable News and the Sunshine Network.

Sources: Richard Read, Arnhold & S. Bleichroeder Inc.; Times and wire reports. Researched by JENNIFER OLDHAM / Los Angeles Times

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