Cox Cable and Southwestern Bell are going back to the negotiating table to rethink their $ 4.9 billion partnership in wake of the FCC’s new cable rate regulations.
At issue is the $ 1.6 billion Southwestern Bell said it would pay Cox to expand the latter’s programming interests and double its current subscriber base of 1.6 million.
In return, the telco is to get a 40% ownership stake in Cox Cable with an option to increase the stake to 50%. Cox Cable’s subscriber base — the sixth largest in the country — has an estimated value of $ 3.3 billion.
The deal is not dead, sources on both sides say. A Cox Cable spokeswoman said the merger is not in any danger and will proceed as planned.
The two companies hope to have a new price hammered out after the commission releases the text of the rate regulations. Cox is confident the deal will close in the third quarter of this year. Originally the deal was to be closed by the end of this month.
Since the FCC said last month it was cutting cable rates 7%, cable values have shifted, influencing both mergers and the day-to-day business of cable operators.
Bell Atlantic and Tele-Communications Inc. cited the new regulations as the primary reason their megamerger collapsed.
The National Cable Television Assn. has already vowed to challenge the Federal Communication Commission’s new rules in court.
While TCI and Bell Atlantic called their marriage off, and Cox and Southwestern Bell are renegotiating, other telco cable ventures appear to still be solid. Those include BellSouth with cable operator Prime Management, and BCE Telecom Intl. with Jones Intl.