The feverish pace of cable/telephone company alliances got hotter Thursday with the announcement that Canadian-based BCE Telecom International will buy a 30% stake in Jones Intercable, the seventh largest cable operator in the U.S.
The $ 400 million investment is the latest example of telco/cable joint ventures that are reshaping the telecommunications universe.
BCETI is owned by BCE, Canada’s largest publicly held company, which also serves as the parent of Bell Canada, Northern Telecom, and Bell Northern Research.
Under terms of the letter of intent signed by the two companies, BCETI will buy $ 275 million of Jones Intercable’s Class A common stock at $ 27.50 per share. BCETI will pay another $ 125 million at a later date to retain its 30% stake in Jones. The Canadian firm also retains the right to increase its ownership stake beyond the $ 400 million investment.
Jones currently has cable systems in 20 states serving 1.56 million subscribers — including parts of Southern California. The firm will use the cash infusion to buy additional cable systems or companies and may buy out Jones’ own cable/TV limited partnerships.
Jones and BCETI may also team up to expand and “wireline local exchange communications” and other telecommunications services, according to a statement from the companies.
Glenn R. Jones, founder and chief of the Englewood, Colo.-based cabler, called BCE “an ideal strategic partner.” He said the deal will allow his company to “take full advantage of the future of cable TV telecommunications services and multimedia delivery systems in many of our present and future markets.”
BCETI topper Derek Burney said the Jones investment offers his firm “solid entry in the world’s most dynamic telecommunications market and is a major step in BCE’s global strategy.”
The joint venture represents the latest in a dizzying array of Telco/cable partnerships that culminated with Bell Atlantic’s whopping $ 32 billion merger with TeleCommunications, Inc.
Other deals have included US West’s $ 2.5 billion investment in Time/Warner entertainment; Nynex’s $ 600 million investment in Viacom (with an option to go to $ 1.2 billion if Viacom emerges the victor in its fight for Paramount Communications); and BellSouth’s $ 500 million to $ 1.5 billion investment in QVC Network, depending on the outcome of the Paramount fight.
In addition, BellSouth recently invested $ 250 million in Prime Cable, the 25 th largest cable operator in the U.S., while Southwestern Bell shelled out $ 650 million to acquire two Hauser Communications cable systems in suburban Washington, D.C.
Glenn Jones will become a vice chairman of BCETI’s Board of Directors under terms of the deal, and BCETI’s Burney gets a comparable slot on Jones Intercable’s board.
BCETI and Jones are currently partners in a cable/telephone venture in London.
The transaction is subject to certain conditions, including the purchase by Jones of the assets of Jones Spacelink by mid-1994.
The deal is not expected to pose regulatory problems, since Jones operates no cable systems in areas where BCE offers phone service.
Jones also owns Mind Extension University, a cable network that offers “distance education” programming.