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Allen buys second cable firm

Billionaire investor Paul Allen confirms plans to buy Charter Communications, the nation's tenth-largest cable operator, for $4.5 billion.

Billionaire investor Paul Allen today got some more connections for his "wired world."

Allen confirmed that he has agreed to buy Charter Communications, the nation's tenth-largest cable operator, for $4.5 billion--joining fellow Microsoft cofounder Bill Gates in making cable investments.

Despite skepticism among many on Wall Street, the move is another concrete sign of support for high-speed Internet service through cable lines, as well as the convergence of computing and television in general.

The deal, which was rumored yesterday, marks Allen's second cable TV acquisition in only three months. In April, Allen bought Marcus Cable, another top ten cable operator, for $2.775 billion. The two companies will be combined to become the nation's seventh largest cable operator serving 2.4 million customers.

"This investment marks another step forward in my wired world strategy, which is a connected future marked by the merger of high-bandwidth data channels, the power of the personal computer, and the availability of valuable content," Allen said in a statement. "As I said when I invested in Marcus Cable earlier this year, cable companies are uniquely positioned to deliver the next generation of advanced data and transactional services."

Allen said the price represents about 14 times the company's projected 1999 operating cash flow. Marcus founder Jeffrey Marcus will become chairman of the combined company, and Charter chief executive Jerald Kent will be the CEO. The deal is expected to close by year's end.

"Paul's acquisition of Charter Communications is further affirmation of the power of the cable pipe," Marcus said. Charter serves more than 1.2 million customers in 19 states.

As reported, Microsoft invested $1 billion in Comcast last year and has indicated it might make more cable investments.

Allen paid 11 times Marcus's annualized cash flow at closing. The Marcus deal had represented Allen's largest personal investment to date. Terms of both of his cable acquisitions were not disclosed.

(Allen is an investor in CNET: The Computer Network, which publishes News.com.)