Times Mirror Cancels Cable Properties Deal

Times Mirror Co. said Thursday that it won’t trade its Arizona cable television properties for cable systems owned by Tele-Communications Inc. and United Artists Communications, as proposed in a March agreement.

Times Mirror, which publishes the Los Angeles Times, said the decision to call off the deal “was a mutual agreement between all three parties.” Also terminated was a separate agreement for Times Mirror to buy Tele-Communications’ Rock Island, Ill., cable system.

As proposed, Times Mirror was to have traded its Arizona franchises--including Phoenix, Bullhead City, Casa Grande, Lake Havasu and Nogales--for United Artists properties in Brookhaven, N.Y.; Decatur, Ill., and Taunton and North Attleboro, Mass.; and for Tele-Communications systems in Reno and Carson City, Nev.; South Lake Tahoe, Calif., and Zanesville, Ohio.

The Arizona franchises would have been operated by a partnership of United Artists and Tele-Communications.

Analysts had estimated the value of the deal at $740 million.

It was no surprise that the parties couldn’t come to terms on a final deal, said Paul S. Napper, an analyst with the investment firm Crowell, Weedon & Co. in Los Angeles. “They had been working on it for so many months. It was obvious they were having trouble. They simply couldn’t agree on an exchange that would please everyone,” he said.

Posed Vexing Questions

It is often difficult to carry out a trade of cable television systems, said analyst Mary L. Kukowski of Bear, Stearns & Co. in New York. “Generally, when you’re swapping properties, it is very unclear that the properties are of precisely the same values because you are dealing with abstracts. Even if you have the same number of subscribers, it is subject to interpretation what the values are--what the level of growth is and what kind of returns you will get. It is sometimes difficult to reach agreement on those interpretations,” she noted.

This particular transaction may have posed more vexing questions because so many cities were involved, said Michael A. Kupinski of A. G. Edwards & Sons in St. Louis. “Not only were you talking about different cities but about many different types of cities,” he added.

Analysts said Times Mirror wanted to trade the Arizona system because it is “more of an earnings-driven company.” While the Phoenix area has excellent long-term potential for growth and profits, they said, the profits aren’t there now because the system is incomplete--requiring big capital outlays and a greater effort to boost subscriptions among households that can be wired for cable.

Times Mirror was attracted to United Artists’ and Tele-Communications’ more established markets, said analyst Kenneth Goldman of Hanifen Imhoff Inc. in Denver. “They wanted something more mature and more of a cash cow,” he added.

Long-Term Goals

Times Mirror and Denver-based United Artists declined to elaborate on their announcement. Officials of Tele-Communications, which owns 66% of United Artists and is also based in Denver, couldn’t be reached.

Times Mirror now intends to operate the Arizona system, which serves about 210,000 subscribers, “for the long term,” said a company spokeswoman. In addition to the Arizona system, Times Mirror owns cable systems in 11 other states, serving a total of some 935,000 subscribers. Southern California franchises include Palos Verdes, Laguna Beach, certain unincorporated areas of Orange County and north San Diego County.

In 1987, Times Mirror reported pretax operating profits from cable television of $28.8 million on cable revenue of $239.8 million. Though the company’s second-quarter profits overall declined 4.8%, compared to the same period last year, the company reported a 47.3% increase in operating profits from cable television.