CABLE TV: TCI AND FALCON PLAN PARTNERSHIP

Sometime this fall, TCI Cablevision could turn over operation of Cape Girardeau's and Jackson's cable television systems to Falcon Cable.

In a potential $300 million deal involving more than 1 million cable subscribers in five states, Tele-Communications Inc. and Falcon Holding Group L.P. announced that they have signed a letter of intent to establish a partnership.

Falcon has long been interested in Cape Girardeau, said Mike Menerey, chief financial officer of Falcon, in a telephone interview from his office in Los Angeles.

"We have a number of other smaller cities that geographically Cape Girardeau is right in the middle of," Menerey said. "In our business, whenever you can consolidate more subscribers in one area, it's just more efficient to operate."

Falcon currently owns cable systems in Perryville, Sikeston, Scott City, Chaffee, Charleston, Benton, Oran, East Prairie, St. Genevieve, Morehouse, Poplar Bluff, Dexter and Malden.

Ron Hall, divisional vice president of Falcon, said from his office in Washington, Mo., that, for example, service personnel wouldn't have to drive so far between calls.

TCI's current franchise agreement with Cape Girardeau calls for it to install fiber-optic cable throughout the city. TCI wants to renegotiate the agreement to allow it to use digital compression technology instead.

The city and TCI have discussed making the change.

TCI's local manager, Roger Harms, said he had met with city officials two or three times in the last month about the change. "We were going along pretty well until this came up," Harms said.

Harms said he didn't know what effect the merger would have on the negotiations.

Menerey said other cities involved have the same issues. He said Falcon's policy is to replace existing coaxial cable with fiber optics when it needs to be replaced. He said Falcon decides whether to upgrade to digital or fiber optic would be based on the existing channel capacity.

In addition, details like individual franchise agreements still need to be worked out before the merger can go through, Menerey said. Every city council involved, including Cape Girardeau's, must approve transfer of the franchise before it can take place.

Negotiators still have to work out whether the deal would mean changes in channel lineups, staffing levels and other details.

Under the partnership, TCI would turn over the majority interest and the operating authority of 16 cable systems in Missouri, Oregon, Washington, California and Alabama to Falcon, Menerey said. Falcon, in turn would give TCI a minority interest in all its cable systems.

Menerey said Falcon and TCI would trade cash and equity worth about $300 million. In turn, TCI would own "40-something" percent of Falcon Cable, the operating arm of Falcon. Its parent company, Falcon Holding Group L.P., would own the rest.

Only three TCI franchises in Missouri systems are affected: Cape Girardeau-Jackson, Nevada-Clinton and Knob Knoster.

Joann Dobbs, a spokeswoman for TCI, said the cable giant was negotiating with "eight or 10" other cable companies trying to reach similar deals as a way of obtaining cash and reducing debt. Among those is Charter Communications and its extensive holdings in the St. Louis area.