Charter seeks $1.9B in system sales

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Debt-laden Charter Communications Inc. is shopping a package of small-town
cable systems, hoping to raise around $1.9 billion.

The systems serve about 600,000 subscribers and are all outside of Charter's
major cluster areas, in states like Utah, Arizona (a state in which Charter has
just one, small system.) Colorado, Kansas, Nebraska, New Mexico, Oklahoma, Texas
and Nevada.

The packages come to about 10% of Charter's subscriber base.

Cable investment banker Daniels & Associates has the assignment.

The deal is likely to disappoint investors looking for guidance on the
private market value of cable systems amidst the recent financial mayhem.

These properties are small, scattered and some in need of rebuilds.

Industry executives said that Charter's asking price is a mere $3,200 or so
per subscriber, a price dismissed as too high.

(Bresnan Communications is paying just $2,700 per sub for similar systems
being sold by AT&T Broadband.)

Two years ago, strong suburban and urban clusters were selling for
$5,000-$6,000 per sub.

If a couple of low-priced rural deals convince investors that all systems are
really only worth $3,000, it could hurt already-battered cable stocks even
further.

Charter wouldn't comment in detail on the expected sale price or which
properties were up for auction.

However a spokesman said that the company has long said it would consider the
sale of 'non-strategic' assets to improve its balance sheet.

But the company has no looming debt repayments.

'If the right deal doesn't com through, we're under no pressure to divest
assets,' the spokesman said.

Charter isn't selling systems in it most significant markets.

In his rush to amass a giant system portfolio, chairman Paul Allen wasn't as
interested in clustering as he was in just grabbing systems.

As a result, Charter's clusters aren't as attractive as those of companies
like Comcast, Time Warner Cable or Insight.

The only big market Charter dominates is St. Louis. The other markets in
which it owns most of the DMA's cable systems are places like Madison, Wi. and
Greenville, SC.

Now, Charter executives are trying to prune a lot of the stray
properties.

The company's debt is running almost nine times cash flow and comes to $2,800
per subscriber.

'They need to get more than $2,800 or its not worth selling,' said one
securities analyst. Charter's stock has sunk to a woeful $3.50 per
share.

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