Time Warner Enters Cable Joint Venture

Time Warner Inc. will combine more than one-third of its cable operations into a new venture with Advance Publications and Newhouse Broadcasting Corp. in a deal that will give the media giant an additional 1.4 million subscribers.

The agreement in effect allows Time Warner to gain control--without putting out any cash--over the Advance and Newhouse cable operations. The new venture will have 4.2 million subscribers, including 2.8 million from Time Warner. It also adds to the company’s cluster of cable subscribers in Charlotte, N.C.; Albany, N.Y., and Central Florida, a development that could boost chances that the company will soon move toward developing telephone services in those areas.

Time Warner will own two-thirds of the new venture, with Newhouse and Advance, both affiliated with New York’s Newhouse family, holding the other third. Time Warner officials said that if one values each subscriber’s worth to the company at about $2,000, the new venture would be valued at more than $8 billion.

Seidler Cos. analyst Jeffrey Logsden said that the deal is unlikely to have a major financial impact on Time Warner for now but that it may help give it “a bigger beachhead” when establishing its new technologies and services through its cable systems.

Time Warner remains the second-largest cable operator, behind industry leader Tele-Communications Inc.

Affected are cable systems largely in Upstate New York, North Carolina and Florida, although cable systems in a small number of California communities--including South Pasadena, Canyon Country, Bakersfield and Orange--will be included in the new area.

Separately, Time Warner said it will buy three cable systems owned by Summit Communications Group in North Carolina and Georgia.

In a statement, Time Warner Chairman Gerald M. Levin said the deal will “improve the growth prospects not only for our core cable business and in advertising sales, but in the telephone business and future interactive services.”

Time Warner closed at $36.375 on the New York Stock Exchange, down 12.5 cents.