Century Communications Corp.
Century Communications Corp.
50 Locust Ave.
New Canaan, Connecticut 06840
Fax: (203) 972-2036
Sales: $350 million
Stock Exchanges: American
SICs: 8330 Broadcasting and Telecommunications
Century Communications Corp. is a major provider of cable television services in the United States. Through its subsidiary, Century Cable, the corporation served more than 900,000 subscribers in the United States and Puerto Rico in 1993. Centennial Cellular Corp., the company’s publicly traded cellular telephone venture, served 76,000 subscribers across the nation and generated about 12 percent of Century Communications’ 1993 sales.
Century Communications was founded by Leonard Tow, the company’s majority owner, chief executive officer, and chief financial officer. Tow got his start in the industry in 1964, when he went to work for cable industry pioneer Teleprompter Corp. Still in its infancy, the subscriber television industry during that era primarily supplied nonurban areas with regular television broadcasting via antennae. Tow quickly worked his way up to vice-president of corporate development and planning. He played an important role in developing Teleprompter’s subscriber base from 50,000 to more than one million by 1972, making it the largest cable television service in the nation.
Tow became frustrated with the management at Teleprompter in the early 1970s. Satellite broadcasting had emerged in 1972 as a promising technology for the future, and the cable industry was undergoing a pivotal transition from rural, network programming to urban, non-network services. Eager to capitalize on dawning opportunities and his knowledge of the business, Tow set out on his own in 1973 and formed Century Communications Corp. With $22,000 in capital and a $5 million line of credit—backed by his venture partner, Sentry Insurance Company—Tow attacked the cable market, buying up “dogs,” or poorly managed cable companies.
Century Communication’s first acquisition was four lagging cable TV markets in California, which were owned by Cablecom General. Tow and his innovative team, many members of which Tow had hired away from Teleprompter, quickly turned the markets into highly successful profit centers. These early successes gave Tow the credibility he needed to continue financing and improving new acquisitions throughout the 1970s and 1980s. In 1973, the company had just 15,000 subscribers, each of which paid $275 annually for service. By 1983, however, Century was generating more than $30 million in revenues per year from a subscriber base of nearly 200,000 households.
Part of Century Communication’s recipe for success was its unique corporate culture. Disheartened by what he viewed as a traditional and oppressive corporate culture at Teleprompter, Tow decided early to structure his company as an extended family. Although workers had titles, they were allowed access to all levels of management and were told that at Century “everyone is viewed as a whole human being as good as anyone else.” Some members of Tow’s immediate family were involved in Century’s management; son Andrew, for example, was president of the company’s cable TV division in 1994, while Tow’s wife, Claire, served as senior vice-president of human resources.
In addition to his unique management style and corporate philosophy, Tow credited his own initiative as a vital factor in the company’s rampant growth. ’The company grew as a function of my drive to build, through acquisition, a company,” Tow asserted in the July 12, 1993 issue of Fairfield County Business Journal article, adding that “if every employee is devoted to giving their all and to giving their all to the customer base, you have all the ingredients for a successful business.”
Century Communications’s team continued to show strong results during the mid-1980s, as cable TV subscribership swelled to almost 250,000 in 1984 and to about 300,000 by 1986. Similarly, sales reached an impressive $40 million in 1984 and increased to approximately $55 million just one year later. By 1986, the company boasted 365,000 cable subscribers on 36 cable TV systems in 20 states. Seeking further growth, Tow took the company public on the NASDAQ exchange in February of 1986 in an effort to generate investment capital. Century effectively doubled its current (liquid) assets during that year to $16 billion.
Although Century managed its cable acquisitions from central and regional offices, it allowed each separate cable system to retain responsibility for its own operations and market strategies. In its 1986 annual report, Century described its cable network as a “mosaic of profitable and free-standing independent cable television service suppliers who are in tune with local markets and can customize the service for those local markets.” Centralized management was primarily responsible for establishing and enforcing price and quality controls throughout the network.
During the late 1980s, the company acquired new markets and improved its existing operations. Its cable subscribership ballooned to 721 million in 1988 as company revenues soared past $160 million. Although the company lost money in 1987 and 1988, these losses were attributed to investments and expansions made to garner future profits. In 1987, the company absorbed several poorly performing cable companies which it planned to return to profitability, and, the following year, Century began purchasing cellular licenses, which would allow it to provide cellular telephone service to the regions it “owned.”
Century was listed on the American Stock Exchange beginning in 1988, providing a new route to capital that would help continue its strategy of expansion into the cable TV industry over the next few years. Importantly, Century determined that its foray into cellular communications would become a major component of its long term growth strategy. Toward that end, Century purchased a cellular license in Yuma, Arizona, in 1989, and acquired cellular service providers in Nebraska and Texas during 1990. The company also arranged extensive lines of investment credit for cellular (and cable) expansion. Century’s revenues from its cellular interests, which were about $3 million in 1989, shot up to nearly $12 million during 1990.
Century promoted and initiated numerous charitable and community development programs in the early 1990s. Paramount among such endeavors was the company’s “Century Cares” program, which was started in 1988 to benefit nonprofit service organizations in the communities in which it operated. In 1990, for example, Century’s 55 cable companies raised over $700,000 for programs ranging from battered spouse and children’s shelters to senior day care and rehabilitation centers— customers that donated enjoyed reduced fees and free services.
As it entered the 1990s, Century continued to boost sales and expand its scope, despite a nagging U.S. economic recession. Company revenues in 1990 were over $275 million as its base of cable subscribers increased to nearly 900 million households. In 1991, Tow organized Century’s cellular operations into a subsidiary called Centennial Cellular, intending to develop the wireless service provider into a major competitor in that burgeoning industry.
Tow also broadened his personal interests and activities in the early 1990s. In 1989, he served on the board of directors of Citizens Utilities, a provider of telecommunications and other utility services in 13 states. The following year, Tow served as the company’s chief executive officer and chairperson before also assuming duties as CFO in 1991. Tow’s affiliation with Citizens exemplified his knack for seizing an opportunity; denied a position at Citizens in the early 1960s, Tow had stayed in touch with the people he met at the company, eventually securing a seat on its board.
Tow’s relationship with Citizens blossomed in 1992, when Century and Citizens joined forces in the Centennial Cellular venture. Citizens’s subsidiary, Citizens Cellular Company, was absorbed by Centennial late in 1991, significantly expanding Centennial’s market base. As a result of the merger, Century’s revenues from Centennial increased to $31.3 million in 1992 from 57,300 subscribers. In 1993, moreover, cellular revenues jumped 38 percent to $43.2 million as subscribership surged to 76,000. By 1993, in fact, Centennial Cellular had become the ninth largest cellular service provider in the United States. Century retained more than 50 percent ownership of Centennial in 1994.
While Tow had gained a favorable reputation for leading Century to healthy growth during the 1970s and 1980s, he also had come under fire by some shareholders. Tow had been criticized, for instance, for his unusual role as both CEO and CFO of the company—most publicly traded companies separated the two spheres of responsibility as a means of insuring checks and balances regarding corporate operations. His wife’s position on the company board as well as his son’s role as senior vice president had also come into question.
The primary source of criticism surrounding Tow, however, was his high level of compensation. In Century’s fiscal year ending in 1993, Tow received a hefty $2.95 million in pay, not including stock options and bonuses. Critics pointed out that this sum exceeded the salaries of CEOs running much larger companies in the industry; the head of AT&T, for example, received only $2.25 million in 1993. Furthermore, Century Communications had consistently lost money; its $37.8 million loss in 1993 capped a five-year string of losses resulting from beefy investments in the capital-intensive Centennial venture. Many shareholders were concerned by the fact that the company’s combined debt and loss record had earned it a “C” ranking from Standard & Poors, indicating that Century was a risky investment.
Tow defended his compensation by pointing to Century’s strong future profit potential, as well as healthy growth in revenues and operating profits. Indeed, revenues increased more than ten percent in 1993, to $345 million, and its operating income swelled 15.5 percent. Backing Tow’s promise of future rewards was growth in Century Cable’s subscriber base to about 950,000 in 1993 and extremely positive projections for increases in cellular revenues throughout the mid-1990s.
Also under criticism was another member of Century’ s management team, Bill Rosendahl, senior vice-president of Century Cable. Rosendahl achieved celebrity status in central and southern California during the late 1980s and early 1990s through his television talk show, The Week in Review. Because of Century’s lock on the cable market in Los Angeles, Beverly Hills, West Hollywood, and surrounding regions, Rosendahl enjoyed a captive audience, and he used his forum to interview local celebrities and politicians.
Some industry observers maintained that the show represented a conflict of interest, providing a platform for politicians that ultimately voted on cable issues. However, in the July 1993 issue of the Los Angeles Magazine, Rosendahl maintained: “I’m a cable executive. I’m a TV journalist. I can do both things. Hey, it’s the 1990s.” Besides management experience in the cable industry, Rosendahl had also served in the State Department under the Carter administration. His half-hour show increased in popularity during the early 1990s, reaching 1.5 million households in 24 states by 1993.
Despite robust expansion of its cable operations, Century, like many other cable industry participants, suffered in the wake of federal legislation passed by Congress in 1992 and 1993. The legislation, which effectively restricted the rates that cable companies could charge, represented a serious blow to companies that were trying to raise money to develop more technologically advanced cable systems. “These changes are expected to slow dramatically revenue and cash flow growth in the coming year, and, absent new offerings, may indeed cause a reduction in fiscal 1994 cable television revenues and operating cash flow,” wrote Bernard P. Gallagher, president and chief operating officer of Century Communications Corp., in the company’s 1993 annual report.
Nevertheless, Tow forecasted continued growth for Century’s cable division throughout the 1990s. In addition to many un-exploited territories, Tow noted that only 60 percent of the potential customers in his existing markets had cable TV in 1993, a figure which he predicted would jump to 70 percent by the end of the century and 80 percent by 2010. “Cable television will eventually be as universal as electric light and universal gas,” Tow speculated in the July 12, 1993 issue of F’airfield County Business Journal. Advances in digital and data compression technologies would boost growth, according to Tow, as the capacity of cable TV service expanded to 500 stations or more.
In 1993, Tow expected revenues from Centennial Cellular to expand at a rate of 40 percent annually at least throughout the mid-1990s. Going into 1994, Centennial was planning vast capital investments in new cellular systems and was concentrating on cultivating several large markets in the Midwest, South, and Southwest. Of import to Century was the gradual integration of cellular, cable TV, and other communications technologies into a streamlined, interactive, multimedia network. Century was planning to capitalize on this transition through Electric Lightwave, a subsidiary of Citizens Utilities engaged in developing non-wire voice and data systems that could be offered as add-on services to cable customers.
Century Cable; Centennial Cellular Corp. (53%).
Gallagher, Bernard P., and Scott N. Schneider, “Century Offers $200 Million 93/4 Senior Notes Due 2002,” Business Wire, February 13, 1992.
Jefferson, David, “The King of Cable: Why You’re Seeing the Once-Maligned Century Cable’s Bill Rosendahl All Over Your TV,” Los Angeles Magazine, July 1993, p. 40.
Marshall, Cynthia, “Tow Takes Century Communications to Forefront of Technology,” Fairfield County Business Journal, July 12, 1993, p. 6.
Stepankowsky, Paula LaBeck, “Century’s CEO Earns Millions; Firm in Red Ink,” The Daily News (Longview, WA), October 29, 1993.