Line Forming for Embattled Adelphia’s OC Operation
By ANDREW SIMONS
A wide swath of Orange County’s cable market is up for grabs, and cable operators are lining up to grab it.
Analysts and industry sources say Coudersport, Pa.-based Adelphia Communications Corp., the county’s second-largest cable operator with some 200,000 subscribers in North County, has been taking bids for its local network of coaxial cables that carry everything from television to voice and data.
But internal bickering at Adelphia over whether to sell some of its assets or the whole company,as $45 million in interest payments come due this month,is keeping offers at bay. So are federal probes and shareholder lawsuits over off-balance-sheet deals.
A bankruptcy filing by the nation’s No. 6 U.S. cable TV operator,which some observers say is imminent,could be the next step.
“It’s a mess, frankly,” said David Lee Smith, an analyst with RBC Capital Markets who covers St. Louis-based Charter Communications Inc., the cable operator owned by Paul Allen that pulled out of talks to buy some of Adelphia’s Southland network. “It’s going to be very interesting and difficult to predict what happens.”
Adelphia came to OC in 1999 when it bought New York-based Century Communications Corp.,a deal that give the company a Southern California foothold, including in Anaheim, La Habra, Brea and Yorba Linda. The Century deal also made Adelphia the operator of the Orange County NewsChannel, the now defunct 24-hour local news channel in Santa Ana.
In 2000, Adelphia took over some 110,000 subscribers from Philadelphia-based Comcast Corp. in a swap that gave Adelphia a total of 350,000 new subscribers in Fullerton, Santa Ana and other parts of Southern California.
Adelphia, with the second biggest cable network in OC after that of Atlanta-based Cox Communications Inc., had big plans to sell everything from digital cable and speedy Internet access to telephone service.
Adelphia’s strategy reflected trends playing out in the cable industry. AT & T; Corp., Comcast, Cox, Charter and AOL Time Warner Inc.’s cable arm have clustered operations by buying and swapping subscribers in billion-dollar deals.
“That’s the way it works with cable,” Smith said. “It’s better to have all your cable operations in clusters. It makes it better for advertising.”
That has many eyes looking to Cox, with 235,000 South County subscribers, as a possible buyer of Adelphia’s OC operation. Stamford, Conn.-based Time Warner Cable, which counts 135,000 subscribers mostly in Huntington Beach, also is seen as being in the running.
Charter, which serves parts of Los Angeles, still is a possible buyer, despite its earlier failed bid to take over Adelphia’s Southland operations.
But messes at Adelphia may have to be cleaned up first. The company’s buying and major digital upgrades shouldered it with $14.7 billion in debt. In March, the company revealed it had $2.3 billion in debt not on its balance sheet.
As of last week, Adelphia appeared in disarray.
John Rigas, Adelphia’s founder and former chairman, and his son Timothy, the company’s chief financial officer, resigned last month.
Leonard Tow, an Adelphia director and one of its largest shareholders, and Erland Kalibourne, the company’s interim chief executive, recently exchanged vitriolic letters in which Tow proposed he be named chairman. Tow criticized the company’s efforts to sell off Adelphia’s assets individually as opposed to an outright sale of the company.
