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Suddenlink announces rates going up Dec. 2

CHARLESTON, W.Va. - Suddenlink Communications is raising rates by an average of 3.26 percent on Dec. 2, company spokesman Michael Kelemen told members of Charleston City Council's Committee on Cable Television.

A Nov. 1 letter from Kelemen to Charleston Mayor Danny Jones was released at a committee hearing held at City Hall Wednesday.

Kelemen's letter said, "While we pledge to hold prices as low as possible, we continue to face the rising costs of TV programming, equipment, insurance, and other expenses."

"Programming expenses represent an 8.5 percent increase annually in costs, with sports programming being the most expensive services we carry," Kelemen said after the hearing.

The hearing was held to consider Suddenlink's application for a change in ownership. The city has a say in the deal because state law says that for a change of ownership to occur, written application and approval is required from all of the appropriate franchising authorities. Charleston City Council unanimously approved a five-year cable television franchise deal with Suddenlink on Nov. 21, 2011.

Kelemen told committee members that the rate increase would have happened whether or not the company was changing hands.

Attorney Robert Rodecker, who was hired by the city as a special counsel in the matter, told committee members that rates were outside the scope of issues they could consider.

When Committee Chairman Jack Harrison asked if there were any public comments on the proposed transfer of ownership, only one person spoke: City Treasurer Victor Grigoraci.

Grigoraci said he was unopposed to the transfer but is concerned about the company's finances.

Suddenlink's corporate parent, Cequel Communications Holdings, had a negative net worth of $127 million at the end of 2011 and $490 million as of March 31, he said.

Furthermore, the company had an operating loss of $17 million in the first three months of last year and a $26 million loss in the first three months of 2012.

Also, "the original filing said there was no intent to raise rates but the financials cast this in a different light," he said. "Then I'm told tonight we have a letter to the mayor indicating there will be a rate increase effective Dec. 2. So it does concern me when we say in July there will be no rate increase and we all of a sudden have a request for a rate increase."

Kelemen said, "I'm the first to admit I am not a financial wizard. I can tell you the cable industry is very cash flow driven as opposed to net assets or other financial indicators. From a cash flow perspective, our company is doing very well.

Grigoraci asked, "If the company is doing so well, why do we need a rate increase?"

Kelemen replied, "To increase cash flow. We need to continue to perform well."

Rodecker said that in his opinion, the rate issue "is outside the authority of this committee."

Grigoraci also expressed concern about the way the city's business and occupation tax is listed on the bills Suddenlink sends its customers. At Harrison's suggestion, Kelemen and Grigoraci agreed to meet next week to discuss the matter.

Regarding the transfer, Kelemen said Suddenlink is a private company with private equity investor partners. Two are Quadrangle and Oaktree Capital Management, and Goldman Sachs Capital Partners.

"These two are exiting and two new private equity partners are coming in," he said.

"The top Suddenlink management is also investing," he said. "As a result, the management of the company won't change, the name of the company won't change, and there will be no change in the way we operate. So from a customer and employee standpoint it will be a seamless transaction."

Kelemen said the two new private equity partners are BC Partners, a company headquartered in Britain, and the Canada Pension Plan's CPP Investment Board. Both entities already have other investments in the United States, he said.

Rodecker noted that the committee has very limited authority to oversee the transfer.

The committee unanimously approved the transfer with a voice vote. Suddenlink's application will go before the city's Finance Committee at 6:30 p.m. Monday and to the full City Council immediately afterward.

Suddenlink offers television, Internet, phone, security and other services to more than 220,000 residential households and 9,500 businesses in West Virginia, making it the largest cable broadband company in the state.

Contact writer George Hohmann at business@dailymail.com or 304-348-4836.


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