Billionaire Paul Allen has finally become a cable TV mogul.
Allen’s latest two deals announced yesterday give him Los Angeles cable group Falcon Communications for $3.6 billion, and Denver-based TW Fanch for $1.9 billion.
It pushes his burgeoning cable empire into fourth place, behind AT&T, Time Warner, and Comcast.
And he’s not stopping there. Allen’s likely to snap up several more cable properties around the U.S. Targets include subscribers of the Washington Post Co.’s CableOne System, and Chicago-based PrimeCable.
“There’s not much left out there for sale and cable prices are at an all time high,” said Rich Siderman of Standard & Poor’s.
Major cable systems have sold for as much as $5,300 per subscriber. Falcon’s subscribers are being sold for about $2,500 each, while Fanch is fetching $3,600 per subscriber. Allen will also have to spend plenty to upgrade the systems.
“Allen is focused on the Los Angeles area and we’ll see a number of deals and swaps there,” said Sharon Armbrust of Paul Kagan Associates.
Allen has been building his privately held Charter Communications over the past year with a string of more than $15 billion in acquisitions.
The deals – eight so far this year – have turned the once small St. Louis operator into a giant that will boast 6 million subscribers. It will still trail No. 3 Comcast, which will have 8 million subscribers after completing pending deals.
Allen also has invested many more billions into more than 50 technology and media companies with dreams to achieve a major spot in what Allen frequently refers to as “a wired world.”
His cable empire puts him a step closer to bundling services – including video, telephone, e-commerce and data – and distributing them to homes and businesses over his cable TV wires.
Allen has also been rapidly upgrading his growing cable group with fiber optic upgrades. “There’s a race on as to who can upgrade the fastest with fiber,” said Price Colman, an editor and Broadcasting & Cable.
Allen can afford his dreams. Two months ago he floated the decade’s biggest junk-bond offering of $3.6 billion and has nearly $22 billion in stock in Microsoft, which he co-founded. Last year he cashed in on about $3.7 billion of his Microsoft stock to bankroll his cable empire.
And he is expected to go public in the fall.
Ironically, Allen is expected to use software other than Microsoft’s CE software in the new convergence scheme he envisions.
For the privately held Falcon, the deal with Charter gives the company the financial backing and technological expertise to upgrade its cable lines, which are concentrated in California, the Pacific Northwest and the Southeast.
Falcon’s founder Marc B. Nathanson, who owns 54 percent of the company, will become vice chairman of Charter. The other 46 percent of Falcon is owned by AT&T Broadband & Internet Services, which has approved the transaction. Fanch, founded by Robert Fanch, gives Allen’s empire 547,000 subscribers in West Virginia, Pennsylvania and Michigan.