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Charter Buys Kalamazoo for $172.5M

In a deal that strengthens its growing cluster in Michigan,
Charter Communications Inc. agreed to buy Cablevision Systems Corp.'s
48,500-subscriber Kalamazoo system for $172.5 million in stock.

Charter said the acquisition will push its subscriber base
in Michigan to about 600,000. The MSO has about 6.2 million pro forma subscribers across
the country.

Waller Capital Corp. advised Cablevision.

Cablevision put the Kalamazoo system -- along with its
Boston and Cleveland properties -- on the block last year in an effort to concentrate on
its New York metropolitan-area systems.

The MSO sold its Cleveland system to Adelphia
Communications Corp. in December for $1.5 billion in cash and stock. The Boston system
will likely be sold before the end of the second quarter.

Charter appears to have won the Kalamazoo system at a
bargain price -- roughly $3,555 per subscriber -- compared with the Cleveland system sale.
Adelphia paid about $5,000 per subscriber for the Cleveland property.

PaineWebber Inc. vice president of research Tom Eagan said
that although the price is lower than the industry average of between $4,500 and $5,500
per subscriber, Charter will have to spend about $11 million to upgrade the Kalamazoo

Eagan based that figure on spending about $150 per home
passed. He estimated that the Kalamazoo system passes a total of 70,000 homes.

"It's a little lower than previous deals, but it
wasn't a great plant," Eagan said. "They have about 50 analog

Charter spokeswoman Anita Lamont said the Kalamazoo system
had been at 330 megahertz, but Cablevision began an upgrade in the third quarter to boost
the plant to 750-MHz, two-way capacity.

Lamont said Charter will continue with the upgrade plan,
and it could possibly go higher. By the end of the first quarter, she added, 38 percent of
the Kalamazoo plant should be at 750 MHz, with the upgrade scheduled to be completed by
the end of the year.

Charter president Jerald Kent said in a prepared statement
that the company also plans to consolidate its Michigan headends in Kalamazoo, making that
system its "master headend location."

Lamont said the decision to consolidate headends in
Kalamazoo was due to its central location compared with other Charter systems in the
state. "They really are the hole in the doughnut," she added.

Cablevision president and CEO James Dolan said in a
prepared statement that the sale is part of Cablevision's strategy to focus on its
properties in the New York metropolitan area. He added that he was confident that Charter
would continue with Cablevision's upgrade plans for the Kalamazoo system.

"We are confident that Charter's commitment to
the wired future ensures that Kalamazoo customers will be able to take full advantage of
the new generation of broadband capability," Dolan said in the statement.

Charter entered the Michigan market in November with its
$845 million purchase of Avalon Cable Inc. The company also acquired cable properties in
Michigan and several other states through its purchases of Bresnan Communications and
Fanch Communications Inc. Those deals were for $3.1 billion and $2.4 billion,

Michigan has the third-largest concentration of Charter
subscribers in the nearly 40 states where the MSO operates.

Cablevision still has one more system on the block -- its
354,000-subscriber Boston system. Although Cablevision has not yet announced a buyer for
that property, MediaOne Group Inc. is expected to emerge as the winner.