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Technology Stocks : COX Communications(COX) with @HOME(ATHM) -- Ignore unavailable to you. Want to Upgrade?

To: pass pass who wrote (46)	8/1/1999 1:17:00 PM
From: Robert Florin	Read Replies (2) \| Respond to of 51

How do you value the purchase of infrastructure and in place cable contracts? I think it is a difficult thing to do because there are a multiplicity of intangibles which need to be considered. Obviously, the first consideration is the cost of the infrastructure. Deduct that from the cost of the purchase. Then the value of the current contracts, Multiply the current monthly costs by some reasonable figure and value those. The next calculations are more difficult. How much of a monopoly, in each of these areas, does the current operator have? If it is a complete one, or a significant percentage, use that number in a projection of the likely built out increase in the subscriber base. For example, in RI where I live, Cox owns all the cable. Cox is just starting to compete in the business tel market here. They also have a monopoly on the cable internet access. There are probably 300,000 homes and 100,000 businesses. (This is a very rough guess. I would estimate they are cable ready across 90% of that market, but cable usage has only saturated, for TV 30-40% of the market, for broadband ISP maybe 3%, for Tel probably <1%. The infrastructure is in place, there is no competition. The closest is Bel Atl which is an inherently inefficient and expensive provider with an inferior competitive broadband technology (DSL), and no TV cable connections. My imagination is that in the next ten years these three technologies (with a lesser emphasis on telephone) will coalesce around simple set top and other electronic devices. If someone can get a package deal from Cox on all of these services, will they buy Bel Atl, an independent ISP and over the air TV. Not when two way digital (for those with just TV's, HDTV) communication, entertainment, information provision can be packaged by just one provider. I anticipate that the demand will be enormous, it will supplant two or three other services, and it will be essentially a monopoly given the cost and time it takes to cable ready a geographic area. It just looks like the pure play cable operator is just going to be a good investment. That is why it is meaningless to just base the value of the purchase on the current number of subscribers. In the RI case, if you increase the users and the uses dramatically, you can easily imagine significant revenue enhancement with no significant infrastructure costs. Pure gravy. The calculations to this demographic: "The acquisition of Gannett's Multimedia Cablevision Inc. gives it 303,000 customers in Kansas, 122,000 in Oklahoma and 97,000 in North Carolina, making it the fifth largest U.S. cable operator once this and other pending deals are completed." requires an understanding of the competition in the market, the penetration and saturation of the the TV, ISP, and tel markets in the area, and the possibility for revenue projections based on these calculations turning up a profit in a reasonably short period of time. I can't do this projection but I certainly hope and assume COX did.