Arkansas Operator May Sell Out

On display: One Arkansas cable operation. Upgraded to 750-megahertz capacity. Two-way ready. Nearly 15,000 customers, with a 15 percent high-speed Internet penetration rate.

Potential buyers are encouraged to contact Conway Corp., because the system may be up for sale.

Richard Arnold, chief executive of the namesake electric and water utility in Conway, Ark., confirmed that the utility has retained investment bank Morgan Keegan & Co. to gauge interest in its cable property.

"We're helping the company to evaluate its options for the cable system, doing an analysis of the plausible options," said Jeff Meskin of Morgan Keegan. His firm has already talked to "people in the marketplace" to gain market intelligence, he said.

The state's dominant operators are no strangers to making acquisitions. Conway is just 30 miles from Little Rock, where acquisitive Comcast Corp. is the dominant MSO. TCA Cable, now owned by Cox Communications Inc., serves Bentonville, Fort Smith and several other towns. Many independents also operate in the state.

The utility has signed a non-disclosure agreement with those it might talk to about a sale.

An incumbent system, Conway is bucking middle America's trend toward municipally owned overbuilds. Elsewhere in Arkansas, Little Rock and three suburban neighbors seriously considered an overbuild two years ago.

City fathers were angered when Comcast and Falcon Cable passed through several rate increases that weren't backed up with service improvements. The city hired a consultant, which found the consortium could build a competitive system serving 80,000 cable homes-and the 140,000 households passed by the incumbent operators-for about $97 million.

But interest in the proposal has apparently waned, and Falcon was since sold to Charter Communications Inc.

Conway Corp. is no cable newcomer. It launched its system in 1980 and has invested in an upgrade. It has also signed up a respectable 2,000 broadband-Internet customers. Given those dynamics, why consider selling?

Arnold deferred questions to his banker, who rebuffed them. But in comments to the local newspaper, the Log Cabin Democrat, Arnold said the cable system was $12 million in debt to the electric operation.

The city is expanding, and the cost to extend plant to potential new subscribers exceeds revenue generated from new homes passed.

State law prevents Conway Corp. from selling bonds to retire the debt, so it has only two options: take out more loans from the electric utility or raise cable rates. Operators generally find rate hikes increase migration to direct-broadcast-satellite competitors.

Unless a buyer surfaces quickly, the sale effort could be abandoned, officials said.