Cablevision May Sell Stake to Ameritech or US West

Cablevision Systems Corp., the nation’s fifth-largest cable TV operator, is talking to Ameritech and US West about a deal that could give either of the two Baby Bells a stake in one of the nation’s most attractive video operations.

A wide range of potential arrangements is said to be under discussion, although sources stressed that no deal with the Woodbury, N.Y.-based cable operator is on the immediate horizon. Sources said Cablevision founder and Chairman Charles F. Dolan might be loath to part with the entire company, because he wants to pass control to his children. The Dolan family owns about 33% of the company equity.

As for which of the two Bells is likelier to connect with Cablevision, analysts gave the edge to US West because of its investment in Time Warner. Cablevision’s largest franchise is on Long Island, near Time Warner’s giant Manhattan cable TV system. If combined, the Time Warner and Cablevision operations in New York would qualify as one of the nation’s 10 largest cable systems, with more than 1 million subscribers.

If a transaction occurs, Cablevision will join a growing list of cable companies aligning themselves with phone companies to deliver a range of new video entertainment and services.

Last week, cable giant Tele-Communications Inc. agreed to merge with Bell Atlantic Corp. in a $30-billion deal. Previously, US West acquired a 25% stake in Time Warner’s entertainment division, and Southwestern Bell is buying the suburban Washington cable systems owned by Hauser Communications.

In coming months, analysts expect many more cable operators to align with Baby Bells.

Cablevision, which last year had revenue of $572 million and cash flow of $248 million, is also a partner with NBC in the cable networks American Movie Classics and Bravo, a local news channel called News 12 Long Island and 12 regional sports channels. In addition, the partners will launch a new cable TV network, Romance Classics, in February.

According to one potential scenario, Dolan would retain Cablevision’s Rainbow Programming subsidiary, which operates most of its program holdings in a joint venture with NBC. The rest of Cablevision could fetch as much as $75 to $85 a share, according to one Wall Street banker. Cablevision closed Wednesday at $64.625, up $3.375 on the American Stock Exchange.

Kathryn Harris contributed to this report.