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City Cable's Value Is Between $23.7M and $40M

Mar 16, 2014

After six weeks of assuring city employees that City Cable wasn’t selling as previously blogged in January, City Manager Bagby finally announced in Sunday’s paper they’ve been working on selling City Cable since November.

On the agenda for Monday night’s City Council is both a workshop and voting session item to sell City Cable. But Bagby gives no explanation as to why the sale of this asset is being fast-tracked on Monday night, why the details of the sale are being kept from the public, or why the city lied to their employees for six weeks.

I asked Fred Goldstein from InterIsle Consulting about the value of a cable subscriber in today’s market and he responded with, “Last year, TDS bought Baja Broadband, a smaller operation from New Mexico, paying $267M for approximately 71,000 subscribers: about $4400 per subscriber. Comcast is offering $45.2B for Time Warner Cable, which reportedly has 11.4M subscribers: that’s over $3950 per subscriber.”

Most people in the industry believe that Comcast’s CEO Brian Roberts is always the smartest guy in the room and they would certainly agree that Comcast never overpays. For that reason you can be assured that a “buyer’s” value per subscriber is $3950.

In April 2013, NewWave, who provides cable services in Dexter and other surrounding areas, is speculated to have sold for more than $4000 per subscriber. According to “Investment Points” in WhereverTV’s presentation from Feb 2013, the value is between $4000 and as high as $5000 per subscriber.

It has been rumored that city leaders are calling this a “deal of a lifetime” opportunity and a “too good to be true” offer; so be ready to hear those phrases bantered about during Monday night’s meeting. But if that is the case, we should expect the offer to be closer to a “seller’s” price of $5000 per subscriber.

According to City Manager Bagby, the network currently has 6000 subscribers making the “too good to be true” value of our 6000-subscriber City Cable network around $30,000,000. Alternatively, a good “buyer’s” price would be $23.7M.

But here’s the problem: the offer being voted on to sell City Cable is reportedly less than $18M that’s less than $3000 per subscriber. No wonder the city leaders haven’t released any details of the sale.

I’m also very leery of Bagby’s “6000 subscribers” quote in today’s paper. Three years ago, the city claimed to have over 8000 subscribers. Has City Cable actually lost more than 2000 customers in 36 months? Or is it because the lower the number of subscribers you report, the higher the per-subscriber valuation looks?

    $18M / 6000 = $3000 per subscriber
    but
    $18M / 8000 = $2250 per subscriber
     

If City Cable actually still has 8000 subscribers then the high-end seller’s value of the network is closer to $40M. Honestly, I would encourage the city to sell City Cable if the offer was between $27M and $40M.

Bagby “emphasized” in today’s paper that a citizen vote is not required to sell the network, however that doesn’t mean the city leaders have the right to sell it without public discourse. And it’s certainly hard to claim “public discourse” with no details provided and only 36 hour notice.

When city leaders say this is a “once in a lifetime” opportunity, I wish someone would ask, “For whom?” Only city leaders in Poplar Bluff can lose between $7M and $20M on the sale of an asset and brag to the citizens it is the deal of a lifetime.