Pepco Communications said yesterday that it sold its stake in Starpower Communications LLC to RCN Corp., its partner in Starpower, for $29 million.
Pepco has written off much of its $141 million investment in the Lanham provider of cable television, Internet and telephone phone service. Launched in the summer of 1999, the service competes against Comcast Corp. and Verizon Communications Inc. It has about 48,000 customers in the Washington area.
RCN agreed to buy Pepco's 50 percent stake after exercising its right to match a rival bid for the company. Pepco Communications, a subsidiary of Pepco Holdings Inc., parent of the Washington area power company, has never publicly identified any company that has an interest in the stake.
Pepco spokeswoman Debbi Jarvis declined to comment on the sale.
RCN's bid comes as the Princeton, N.J.-based cable company is working its way through the bankruptcy reorganization. It filed for Chapter 11 protection in May. It hopes to emerge and close its deal for Starpower by year-end.
RCN officials said the deal will not its affect service and it is intended to help the company introduce improvements faster because it will no longer have to share administrative responsibilities with a partner.
"We believe in the operational and financial opportunities in the market," said Barak Bar-Cohen, a spokesman for RCN.
During the Chapter 11 process, Starpower's customer base in Washington has grown by 7 to 10 percent because it started offering more high-definition channels and faster Internet service, he said.
RCN operates cable systems in Boston, New York, eastern Pennsylvania, Chicago, San Francisco and Los Angeles. Like many start-up telecommunications providers that built their own networks in the 1990s, RCN racked up a lot of debt and faced stiff competition from older, more established service providers. In its Chapter 11 filing, it listed $1.6 billion of debt. At the time, it had about 405,000 television subscribers and 175,000 high-speed data users around the country, according to estimates from the Yankee Group, a market research firm. The company would not say how many customers it has now.
As RCN continues to seek opportunities to expand, it will compete against much larger companies, many with bigger marketing budgets, said Patrick Mahoney, an analyst with the Yankee Group.
"Unfortunately for the smaller providers, it's a very tough uphill battle they'll have to fight," he said.