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Charter to go public

The fourth largest U.S. cable television operator on Wednesday filed to go public.

St. Louis-based Charter Communications Inc., principally owned by Microsoft co-founder Paul Allen, hopes to raise $3.45 billion in an IPO during the third quarter. Charter did not give details of the IPO in a preliminary filing with the Securities and Exchange Commission, such as the proposed stock symbol, number of shares to be offered or the estimated price range.

The IPO has several underwriters, including Goldman Sachs, Bear Stearns, Morgan Stanley, Donaldson Lufkin & Jenrette and others

Charter now has 2.7 million customers, although it will have 6.2 million when pending acquisitions are closed. The cable company is part of Allen's network of communications and Internet properties. He has agreed to invest more than $2 billion in a Charter subsidiary, Charter Communications Holding Co. LLC, the company said. Allen has been rolling out high speed Internet service at an aggressive clip to Charter's cable customers and his high speed ISP, High Speed Access (Nasdaq: HASC), which recently went public. The company began operations in 1994 and has been acquiring cable systems ever since.

The company reported net losses before extraordinary items of $157 million for 1997, $200 million for 1998 and $94.9 million for the three months ended March 31, 1999. Including recent and pending acquisitions, net loss was $1.4 billion for 1998, and $322 million in the three months ended March 31, 1999, according to the company's regulatory filings.

Risk factors cited in the filings include significant debt, and the possibility Charter won't come up with the financial backing to upgrade its cable systems. From January 1, 2000 to December 31, 2002, the company plans to spend about $2.9 billion to upgrade current systems, and another $2.6 billion to maintain and expand.

Charter also has to consider the escalating cost of programming, the company's largest single expense item. Current borrowings from Paul Allen might not be enough to consummate pending acquisitions.

Direct competition comes from satellite broadcasting -- whose growth has outpaced the cable TV industry in recent years -- and digital subscriber line technology. The two primary direct broadcast satellite providers are the DirecTV subsidiary of Hughes Electronics (NYSE: GMH), and EchoStar Communications Corp. (Nasdaq: DISH).

America Online could soon bump into cable companies as well. AOL recently announced a plan to invest $1.5 billion in Hughes Electronics to jointly market America Online's prospective Internet television service to DirecTV's customers.