In purchasing the Centennial Communications’ cable systems in Puerto Rico, private-equity firm Hicks, Muse, Tate & Furst is betting it can grow the cable company’s digital video and high-speed data services amid stiffening competition from satellite operators.
“What attracted us to Centennial was that it had very well built-out networks,” said Peter Brodsky, a Hicks Muse partner who oversees the private-equity firm’s cable investments. “The systems do not have the latest and greatest in technology, but the systems have been invested in enough to offer expanded digital services. They just have not broadly penetrated the market yet.”
Hicks Muse last week paid nearly $155 million in cash to buy Centennial’s Puerto Rican operation, Centennial Puerto Rico Cable TV Corp. The cable operator passes nearly 305,000 households and serves the island’s second- and third-largest cities, Ponce and Mayaguez, respectively. Centennial presently serves 73,000 cable customers and 5,000 high-speed data customers. Hicks Muse expects to close on the transaction in early 2005.
The deal marked the 11th cable transaction for the Dallas-based private-equity firm, which also owns a controlling stake in television broadcaster LIN TV Corp. Hicks Muse’s first cable investment came in 1995, when it acquired Marcus Cable, and since then the company has invested in a series of operators in Latin America, Canada and Europe. In addition to owning Centennial, the firm presently holds stakes in Argentine operator Cablevision and Canada’s Persona.
“It’s very valuable to own a network of wires that goes into people’s homes,” Mr. Brodsky said. “What’s been proven over the past couple of years is that there are more services you can sell over those wires,” referring to telephony and video-on-demand, to name a few.
Like most private-equity firms, Hicks Muse generally holds on to assets for a few years, during which time the assets are buffed and polished before being sold. Mr. Brodsky declined to say how long Hicks Muse plans to hold on to Centennial.
In the meantime, however, Mr. Brodsky sees tremendous opportunity awaiting Centennial. He noted that the cable operator has a lower household penetration rate than other cable companies in Puerto Rico, and that even with fierce competition from satellite companies, Centennial is well positioned to boost its subscriber numbers.
“We do think we have a very competitive product offering,” said Mr. Brodsky, who added that Centennial systems on the island offer digital cable. “We think there is a fundamental advantage cable has with satellite with the ability to bundle with the data offering.”