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For Dolan, Adelphia is bonanza
by Peter Lauria
Updated 07:15 PM EST, Apr-6-2005
Those looking to make sense of Cablevision System Corp.'s sudden emergence in the Adelphia Communications Corp. auction need only consider four letters: HDTV.
Still in its infancy, high-definition television, or HDTV, will be to distributors what high-speed access is to Internet service providers — a boon for their subscriber base. Plasma screens that present programming to viewers with pristine clarity is the future of television. That's why Cablevision chairman Charles Dolan appended HDTV to the end of his Voom satellite venture — as a marketing ploy to attract customers and differentiate it from other satellite and cable providers.
"Customers don't care how content gets delivered, as long as it's good and they can get it how they want it," said Carmel Group analyst Jimmy Schaeffler. "The delivery vehicle is less important than the content itself."
It's no coincidence then that, despite being at loggerheads with CEO son Jim Dolan, the elder Dolan is said by sources to support Cablevision's Adelphia run. With his aspirations to establish Voom as a viable third competitor to DirecTV Inc. and EchoStar Communications Corp. all but extinguished, merging with Adelphia would give Cablevision sufficient scale to deploy the 21 HDTV channels he created for the fledgling satellite venture. Among the 21 HDTV channels Voom operates are the sports-focused World Sports, animalcentric Animania, Western-themed Gunslingers, the Rave music channel, and gay and lesbian network Divine.
"Chuck needs systems to roll out his high-definition vision of the television world," said one source. "Whether he expands his footprint through satellite or cable is inconsequential."
Cablevision shareholders don't see it that way. However promising HDTV's potential may be, investors don't seem to think it's enough to justify spending $16 billion to acquire Adelphia, especially since all previous indicators pointed to an eventual Cablevision sale. And without economies of scale or even a private equity partner — which is how sources said the bid currently stands — they may see no reason to dilute the value of Cablevision's geographically focused, demographically rich system cluster with Adelphia's scandal-tarnished, widely dispersed assets.
Shares of Cablevision shed 98 cents, or 3.5%, to close trading Wednesday at $26.85. On March 28, the day before news of Cablevision's possible participation in the Adelphia auction emerged, its shares closed at $29. A month before that, on Feb. 28, the company's stock hit a 52-week high of $31.64.
Luckily for Cablevision investors, despite the company's aggressive bid, analyst and industry observers still view the Adelphia auction as Time Warner Inc. and Comcast Corp.'s to lose.
"It's still an uphill battle for them," said a second source of Cablevision's chances at success. "Time Warner and Comcast are bigger, can pay more and can sort out a host of their own issues by acquiring Adelphia."
Not to mention that the duo's bid of $17.6 billion in cash and stock is $1 billion more than Cablevision's offer. That could change, however, with the possible addition of private equity firms Kohlberg Kravis Roberts & Co. and Providence Equity Partners Inc. to Cablevision's bid. Talks between the three parties are ongoing, according to a source familiar with the discussions, but as of press time Wednesday, no decision about KKR's or Providence's participation had been made.
For Dolan, Adelphia is bonanza
by Peter Lauria
Updated 07:15 PM EST, Apr-6-2005
Those looking to make sense of Cablevision System Corp.'s sudden emergence in the Adelphia Communications Corp. auction need only consider four letters: HDTV.
Still in its infancy, high-definition television, or HDTV, will be to distributors what high-speed access is to Internet service providers — a boon for their subscriber base. Plasma screens that present programming to viewers with pristine clarity is the future of television. That's why Cablevision chairman Charles Dolan appended HDTV to the end of his Voom satellite venture — as a marketing ploy to attract customers and differentiate it from other satellite and cable providers.
"Customers don't care how content gets delivered, as long as it's good and they can get it how they want it," said Carmel Group analyst Jimmy Schaeffler. "The delivery vehicle is less important than the content itself."
It's no coincidence then that, despite being at loggerheads with CEO son Jim Dolan, the elder Dolan is said by sources to support Cablevision's Adelphia run. With his aspirations to establish Voom as a viable third competitor to DirecTV Inc. and EchoStar Communications Corp. all but extinguished, merging with Adelphia would give Cablevision sufficient scale to deploy the 21 HDTV channels he created for the fledgling satellite venture. Among the 21 HDTV channels Voom operates are the sports-focused World Sports, animalcentric Animania, Western-themed Gunslingers, the Rave music channel, and gay and lesbian network Divine.
"Chuck needs systems to roll out his high-definition vision of the television world," said one source. "Whether he expands his footprint through satellite or cable is inconsequential."
Cablevision shareholders don't see it that way. However promising HDTV's potential may be, investors don't seem to think it's enough to justify spending $16 billion to acquire Adelphia, especially since all previous indicators pointed to an eventual Cablevision sale. And without economies of scale or even a private equity partner — which is how sources said the bid currently stands — they may see no reason to dilute the value of Cablevision's geographically focused, demographically rich system cluster with Adelphia's scandal-tarnished, widely dispersed assets.
Shares of Cablevision shed 98 cents, or 3.5%, to close trading Wednesday at $26.85. On March 28, the day before news of Cablevision's possible participation in the Adelphia auction emerged, its shares closed at $29. A month before that, on Feb. 28, the company's stock hit a 52-week high of $31.64.
Luckily for Cablevision investors, despite the company's aggressive bid, analyst and industry observers still view the Adelphia auction as Time Warner Inc. and Comcast Corp.'s to lose.
"It's still an uphill battle for them," said a second source of Cablevision's chances at success. "Time Warner and Comcast are bigger, can pay more and can sort out a host of their own issues by acquiring Adelphia."
Not to mention that the duo's bid of $17.6 billion in cash and stock is $1 billion more than Cablevision's offer. That could change, however, with the possible addition of private equity firms Kohlberg Kravis Roberts & Co. and Providence Equity Partners Inc. to Cablevision's bid. Talks between the three parties are ongoing, according to a source familiar with the discussions, but as of press time Wednesday, no decision about KKR's or Providence's participation had been made.
