U S West has agreed to purchase Continental Cablevision, the nation's third largest cable operator, for $10.8 billion. The deal is the third-largest media merger in U.S. history behind the purchase of Capital Cities/ABC by Walt Disney Co. and the Time Inc./Warner Bros. merger.
About $1 billion to $1.5 billion of the purchase will be in cash; the rest will be in stock and debt. Continental's 4.7 million cable subscribers will be added to the 500,000 cable subscribers U S West owns. U S West also has a 50% stake in most of Time Warner's cable systems, which have 11.5 million subscribers.
The U S West/Time Warner relationship is on the rocks, and insiders say Time Warner was blindsided by the U S West move. Nonetheless, Gerald Levin, Time Warner's chairman-CEO, issued a statement saying that "The strategies of U S West's Media Group's cable systems, those of Continental Cablevision and Time Warner Cable are virtually identical."