Mediacom Communications Corporation History
Middleton, New York 10941
Telephone: (845) 695-2600
Fax: (845) 695-2699
Incorporated: 1995 as Mediacom LLC
Sales: $1.0 billion (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: MCCC
NAIC: 517510 Cable and Other Program Distribution
Our objective is to be the dominant provider of entertainment, information and telecommunications services in the markets we serve.
- Company is formed.
- First cable TV system is acquired.
- Triax Midwest Associates is acquired.
- Company makes initial public offering of stock.
- Subscriber base doubles with acquisition of AT&T Broadband assets.
Mediacom Communications Corporation is a cable television multiple system operator (MSO), the eighth largest in the United States. Based in Middletown, New York, the company concentrates on smaller markets that the larger MSOs avoid. All told, Mediacom serves more than 1.5 million subscribers in 23 states. In addition to providing basic cable television channels, Mediacom also offers digital television, video-on-demand, high-definition television, broadband Internet access, and telephone service. The latter is an important part of Mediacom's effort to fend off competition from satellite television providers, which have enjoyed a great deal of success in taking away customers by offering an increasing number of local channels. Although Mediacom is a public company trading on the NASDAQ, it is majority owned by its chairman and chief executive officer, Rocco B. Commisso, who controls nearly three-quarters of the voting stock.
The Bronx and Beyond: 1960s-70s
As a 13-year-old boy, Commisso moved with his family from Italy to the Bronx in 1962. The son of a carpenter, he had greater ambitions than to lead a life of manual labor, although he retained a strong work ethic. Early on he decided he wanted to attend Columbia University, despite his inability at the time to speak English. In 1971 he earned a degree in industrial engineering at Columbia. He then took a job as a production manager for Pfizer Pharmaceutical and after four years resumed his studies at Columbia, receiving an M.B.A. in 1975, at which point he began a successful, and somewhat hectic, business career. Not only did he take a job at Chase Manhattan Bank, he and his brother opened a Bronx disco where he learned some practical lessons about marketing and running a business. The young entrepreneurs quickly realized that patrons were prone to move on to the next trendy night spot. As Commisso told Multichannel News in a 1996 interview, "We segmented the market and set aside different nights for different clients. We had a Spanish night, an Italian night, and so on. It worked." At the bank, in the meantime, Commisso was initially put to work in the transportation unit, but in short order his superiors transferred him to the media group, realizing that his flamboyant personality was better suited to the entertainment industry. It was here that Commisso became involved in his first cable television loan, a deal that whetted his appetite for greater involvement in the field and led him to become a cable specialist.
Working at the bank during the day and the disco at night proved exhausting and he sold his share of the club to his brother in 1981. In that same year he took a position with the Royal Bank of Canada's U.S. subsidiary in New York, establishing the Media Industries Lending Group and becoming a senior vice-president. His five-year stint in this role then prepared him to become the chief financial officer for Liberty, New York-based Cablevision Industries Corporation, a position he would hold from 1986 to 1995. During his tenure at CVI, Commisso played a pivotal role in growing the company from the 25th largest MSO with 223,000 subscribers to the eighth largest with 1.3 million subscribers. He developed an innovative loan agreement, an industry first, that allowed CVI to borrow money on the number of homes the company served rather than cash flow. Altogether Commisso was able to assemble $5 billion in financing for CVI. But after nine years of service he became the victim of his own success when CVI's owner, Alan Gerry, decided to cash in, selling the company to Time Warner, Inc. for nearly $2.8 billion. Despite disagreeing with the decision, Commisso emerged a wealthy man.
Formation of Mediacom: 1985
Commisso could have easily retired at the age of 46, but instead the self-described workaholic decided to launch his own MSO, to become the captain of his own destiny. Thus, in July 1995 he formed Mediacom, LLC in Middleton, New York, to acquire undervalued cable television systems located in non-metropolitan markets, a plan out of keeping with the prevailing opinion that the days of the small companies were long past. He spent the first few months working out of his home and putting together his business plan. "The hardest part," he told Multichannel News, "was dealing with all kinds of details, from personnel to accounting to answering your own phones." Commisso was able to take advantage of his contacts and reputation to attract financial backers, including Waller Capital Corporation, First Union Bank's Communication and Media Finance Group, and his old boss at Chase, Tom Reifenheiser, group executive of the bank's global media, telecom, and technology group. In March 1996 Mediacom became operational following the acquisition of a 10,300-subscriber cable system located in Ridgecrest, California, a deal that was soon followed by the purchase of a 7,000-subscriber system in nearby Kern Valley. The company completed another four acquisitions by the end of 1997, at which point Mediacom had more than 60,000 basic subscribers in systems located in Arizona, California, Delaware, and Maryland.
In January 1998 Commisso added another 17,200 subscribers to the California operation by acquiring the Lake County business of Jones Intercable, Inc., and a deal he completed later in the month elevated Mediacom to the next level. At a cost of $308.7 million he acquired the U.S. Cable unit of Cablevision Systems Corporation, adding about 265,000 basic subscribers located in markets in such southeastern states as Alabama, Florida, Kentucky, North Carolina, as well as Missouri. Commisso was able to acquire the system at a very low price, just under $1,200 per subscriber, at a time when rural systems were priced as high as $1,600 per subscriber. Mediacom's bid, in fact, was the third highest, but Commisso won out because his deal was fully financed, with $100 million in equity and $215 million in bank loans. Cablevision was eager to divest itself of the properties to focus on its core clusters of New York City, Boston, and Cleveland, and was confident that it would have no problem in closing the deal with Mediacom. Commisso called it "the defining acquisition" for Mediacom, which he believed had now achieved the scale to become the kind of company he had envisioned when he founded it in 1995.
Mediacom completed a pair of acquisitions in 1999 similar to the ones in 1998, with a small purchase followed by a major, strategic transaction. The first was the $19.5 million addition of Zylstra Communications and its 14,000 cable subscribers in Iowa, Minnesota, and South Dakota. The second, costing more than $750 million, was the acquisition of Triax Midwest Associates L.P., the largest deal in Commisso's life--although that was due to change a year later. Triax brought 342,000 subscribers located in Arizona, Illinois, Indiana, Iowa, Michigan, Minnesota, and Wisconsin communities. The cost per subscriber was about $2,100, but it was the last available acquisition of this size available in a market where prices as high as $4,500 per subscriber were not surprising. In contrast to the Cablevision deal, the main advantage of which was simply its cheap price, the Triax deal provided scale. In one stroke, Mediacom doubled in size to about 700,000 subscribers and was now large enough to consolidate in some markets. The company used fiber optic lines to connect the small systems, reducing the number of headends (where satellite signals are prepared for distribution), and management functions for an area could be consolidated.
Not only was Mediacom growing in size, Commisso was investing to rebuild and upgrade his systems, in keeping with a strategy to squeeze further profit out of his assets by gaining the ability to offer digital cable and highspeed Internet access, and keeping open the possibility of offering telephony in the future. To pay down the debt incurred in growing the business and upgrades, Mediacom prepared to make an initial public offering (IPO) of stock. In a preliminary step, the business was reincorporated in Delaware in November 1999, assuming a new name: Mediacom Communications Corporation. With Credit Suisse First Boston acting as underwriter, Mediacom raised about $380 million when the IPO was completed in February 2000. The company had a market capitalization of more than $1.6 billion, with Commisso owning a stake worth around $550 million.
With cash from the offering and a $640 million line of credit, Mediacom returned to the acquisition trail in 2000, completing several deals before the end of the year. First, it paid $8 million for Rapid Communications Partners, L.P., adding 6,000 subscribers in Illinois and Kentucky, followed two weeks later by the $8 million purchase of MidAmerican Cable Systems, L.P., picking up another 5,000 customers in the Midwest. In May 2000 Mediacom completed the $1.8 million acquisition of Tri Cable, Inc., serving communities in Illinois and Wisconsin. A month later Mediacom paid $10.8 million for Spirit Lake Cable TV, Inc., adding more than 5,000 subscribers in Iowa. Mediacom then spent $2.1 million for the cable television assets of South Kentucky Services Corporation, followed by the $1.2 million purchase of Dowden Midwest Cable Partners, L.P., which bolstered Mediacom's Illinois subscriber base. In October 2000, Mediacom completed a pair of acquisitions, paying $15.6 million for the cable television systems, and their 8,000 subscribers, owned by Illinet Communications of Central Illinois, LLC for $15.6 million, and $27.5 million for the cable assets of Satellite Cable Services, Inc., adding 12,000 subscribers in South Dakota. Then, to cap off 2000, Mediacom spent $34 million to acquire the cable television systems of an AT&T Broadband subsidiary, adding 14,000 subscribers in the Fairhope, Alabama, area.
Triax Acquisition in 2001
Another defining moment in the history of Mediacom took place in June 2001, when Mediacom completed an acquisition
Mediacom embarked on a period of digestion as it incorporated all of the new assets into its system. By the end of 2001 the company was generating revenues of $923 million, a significant increase over the $585.2 million achieved in 2001. The company was still unprofitable, although the net losses dropped from $190.9 million in 2001 to $161.7 million in 2002. Aside from integration issues, Mediacom was also facing increased pressure from satellite television providers DirecTV and EchoStar. Previously, small market cable operators, despite their inability to offer as robust a package of cable networks and sports packages, had an advantage because the satellite services did not offer local channels. But with changes in laws and technology the situation changed, as local stations in smaller and smaller markets became available to satellite television customers. In 2002 satellite providers offered local channels in just 15 percent of Mediacom's markets, but by June 2003 that number increased to 34 percent and by the end of the year reached about 60 percent. Moreover, the satellite providers were extremely active in their efforts to drum up new business, saturating markets with discounts and aggressive price promotions. As a result, Mediacom experienced some deterioration in its subscriber base and was forced to take steps to protect its market share.
Like the larger MSOs who had to deal with satellite competition earlier, Mediacom began offering digital cable, which not only featured a comparable lineup of cable television channels and sports packages (minus Sunday Ticket, DirecTV's exclusive National Football League programming) but also video-on-demand and high-speed Internet access. The company was also hopeful that many basic customers, who far outweighed the number willing to pay for digital cable, would come back once the temporary satellite offers expired. Another area that Mediacom hoped would provide a competitive edge was telephony services, taking advantage of high-speed Internet access to offer voice-over-Internet Protocol (VOIP) to provide unlimited local and long distance telephone calls at a set price. With cable television encroaching on the business of the telephone companies, new alliances began to emerge. As described by the Wall Street Journal in 2004, cable and telephone companies each lacked one vitally important offering: "Cable companies don't have wireless networks, while phone companies can't easily offer television on their networks. To make up for this, phone companies are forging deals with satellite providers to offer video services and deploying high-speed fiber-optic lines. However, cable operators generally have a cost advantage, since it is relatively cheap to offer voice service over a cable network, particularly for cable companies that use Internet-based technology to send the calls." In 2004 Mediacom struck a deal with Sprint to offer phone service using VOIP to all of its customers by the end of 2006. Sprint was also looking to make its cellular system available to cable operators to offer cellular service under their brand name to fill in another gap. Mediacom was a likely partner for this venture as well. In the meantime, Mediacom still had to contend with the loss of subscribers to satellite providers, even as it began to post the first profitable quarters in its history as revenues topped $1 billion in 2003. How the company would fare in the coming years was very much an open question.
Principal Subsidiaries: Mediacom LLC; Mediacom Broadband Corporation; Mediacom Capital Corporation.
Principal Competitors: The DirecTV Group. Inc.; EchoStar Communications Corporation.
- Farrell, Mike, "Rocco Moves on Up," Multichannel News, March 5, 2001, p. 1.
- Gardyasz, Joe, "Mediacom Begins to See Fruits of Investments," Des Moines Business Record, February 16, 2004, p. 1.
- McAdams, Deborah A., "All in the Family," Broadcasting & Cable, September 20, 1999, p. 77.
- Paikert, Charles, "CVI's Commisso Starts Over," Multichannel News, April 22, 1996, p. 6.
- Sherman, Jay, "Satellite Growth Bigger Threat for Small Cablers," TelevisionWeek, January 12, 2004, p. 24.
- Willoughby, Jack, "Offerings in the Offing: Rockin' Rocco," Barron's, January 31, 2000, p. 47.
Source: International Directory of Company Histories, Vol.69. St. James Press, 2005.