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St. Louis Post-Dispatch

By Jerri Stroud, St. Louis Post-Dispatch

Mar. 1--Charter Communications Inc. has agreed to sell cable systems with 316,000 subscribers for $896 million to two companies, including Cebridge Connections Inc. of St. Louis County.

Charter will use the money to reduce short-term borrowing. But it also could use the money to make selective acquisitions in key markets, said Neil Smit, Charter's chief executive and president. The deals are expected to close in the third quarter.

Charter had been seeking buyers for the systems for several months. Last week, word leaked that Cebridge was buying systems in West Virginia and Virginia.

Cebridge, which is run by Jerald Kent's Cequel III LLC, will buy about 240,000 subscribers from Charter. Cebridge earlier had agreed to buy systems with 955,000 customers from Cox Communications Inc. After the deals are completed it will rank eighth among the nation's cable companies.

Kent, who is a co-founder of Charter, said the purchase "will further advance our goals of building a major U.S. cable operator and diversifying the mix of systems we own and operate." A Cebridge manager formerly ran the systems, which fit well with Cebridge's other properties in West Virginia.

The second buyer is New Wave Communications LLC of Sikeston, Mo. New Wave is buying systems with 76,000 cable customers in Southern Illinois and Kentucky. Included in the purchase are systems in Sparta, Vandalia and Chester. New Wave has about 20,000 customers now, mostly in rural areas, said Jim Gleason, New Wave's president.

Neither Charter nor the buyers would say how the $896 million is divided among the two deals, but Aryeh Bourkoff, a media analyst for UBS Securities Inc. estimated that Cebridge is paying about $3,100 per subscriber, or about $744 million, and New Wave is paying about $2,000 per subscriber, or $152 million.

Smit said Charter could sell more systems in the future, but the company also could buy properties that enhance its clusters of cable systems. The company also will consider swaps with other cable companies.

In an unrelated announcement, Charter said it trimmed losses and saw its revenue increase 6 percent for the year and 5 percent for the fourth quarter. Its loss of $1.12 a share in the fourth quarter was larger than analysts had expected.

Smit said he believes Charter has removed obstacles to its growth by filling key management jobs, settling a shareholder lawsuit and exchanging some debt to extend maturities and to enhance liquidity.

"I wanted everyone focused on the core mission," Smit said. He didn't want them worried about paying the interest on Charter's $19.4 billion in debt.

Going forward, Smit said, he expects to focus on four priorities:

--Improving customer service.

--Increasing sales and customer retention.

--Investing as needed to grow profitably.

--Improving the balance sheet.

Smit said Charter has invested in technology designed to improve customer service. Work-force management systems will better match staffing to customer needs.

The mechanics of ordering and delivering service "should all be a smooth end-to-end experience," Smit said in an interview. But, he added, "These things don't happen overnight."

Charter also will target marketing to customers in a way that meets their needs, Smit said.

"Customers who have a single service should be offered multiple services" at a savings, for example, and those with slower Internet connections should be offered higher speeds, he said.

"We will make sure that all of our marketing spend is very closely measured," Smit said. That should drive growth.

Charter also will step up marketing of telephone service. Customers who take telephone service bundled with other Charter services are less likely to switch providers, Smit said.

Telephone service currently is available to about a quarter of the 12 million homes passed by Charter's cable. Telephone service could be available to 6 million or 7 million homes by year's end.

"My job for our constituents ... is to grow the business," Smit said. "That's good for Charter, good for business and good for Missouri."

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