Cablevision Ups Adelphia Bid?
Outdone in round one by Time Warner and Comcast, the smaller provider plans to revise $16.5-billion offer, say reports.
April 14, 2005
Cablevision Systems is reportedly planning to raise its unsuccessful $16.5-billion bid for bankrupt cable operator Adelphia Communications, although a bankruptcy court last week received an almost $18-billion offer for the company from Time Warner and Comcast (see Cable Rivals to Buy Adelphia).
The agreement between the court and the two largest cable operators is far from complete since it still has to be approved by Adelphia’s board, its creditors, the bankruptcy judge, and the Federal Communications Commission. So Cablevision still has time to amend its enigmatic, eleventh-hour, mostly cash, lower bid, which, not surprisingly, was rejected by the court.
Cablevision last week ended an ongoing internal dispute between Charles Dolan, the company’s chairman, and the rest of the board over the future of Voom, the firm’s satellite TV service. The Cablevision board voted unanimously to shut Voom down and sell the satellite rather than hand the business over to the chairman as he had sought. Oddly, Mr. Dolan voted with the board this time around. But with the internal squabble seemingly over, some analysts expect Cablevision to up its offer for Adelphia.
“I have heard the rumors that Cablevision is considering another bid, but I am not sure that it will make sense for Cablevision,” said Craig Moffett, a senior analyst with research firm Sanford C. Bernstein & Co. “At this stage Cablevision may already be too small to compete. As Time Warner and Comcast get more leverage nationwide, the question of whether Cablevision should be a buyer or a seller arises. The presumption among investors is that they may be better off as a seller.”
According to Mr. Moffett, there are more synergies between Adelphia’s 5.2 million, far-flung subscriber base and that of both Time Warner and Comcast, while the New York-bound Cablevision has little financial leverage to gain in purchasing what would be, for it, a fragmented market.
“If you look at the cable map, you would see that Adelphia shares a host of contiguous markets with both Time Warner and Comcast. Gaining certain Adelphia markets will streamline the Ohio and Los Angeles markets for Time Warner, while Adelphia’s and Comcast’s Florida markets match up well,” said Mr. Moffett. “Better clustering of the cable map will mean more efficiency nationally, better profitability and better valuations across the board for cable subscribers. That works to Cablevision’s best interest but as a seller not a buyer.”
According to Mr. Moffett, Time Warner, with its strong presence in the North East will be the company in the best position to benefit from the purchase of Cablevision.
With only 3 million subscribers, albeit in the lucrative North East, Cablevision has been lagging behind Comcast with 22 million and Time Warner with 11 million at a time when cable operators are feeling the heat from turf encroachments by much larger telecommunications companies. In fact Cablevision faces competition from Verizon, perhaps the most aggressive of the large telephone operators. With the encroachment of telephone companies, size has suddenly become quite attractive to cable operators, Mr. Moffett said.
If the current Time Warner/Comcast deal gets past the bankruptcy court and the Adelphia board, it could still run into problems with the FCC, which has a cap of 30 percent market share in the cable industry. Comcast currently serves about 29 percent of all U.S. homes paying for cable TV and adding 10 percent to its base could give the company too much control of what American’s see on their television sets in the eyes of the FCC. To slap down the deal, the FCC would have to resuscitate a national ownership cap, which was thrown out by federal courts four years ago.
“Because of the mood in Washington and the fact that the cable market now has more companies competing for market share, it is unlikely that the FCC will apply the cap,” said Nancy Kaplan, vice president of Adventis, a Boston-based consultancy.
Outdone in round one by Time Warner and Comcast, the smaller provider plans to revise $16.5-billion offer, say reports.
April 14, 2005
Cablevision Systems is reportedly planning to raise its unsuccessful $16.5-billion bid for bankrupt cable operator Adelphia Communications, although a bankruptcy court last week received an almost $18-billion offer for the company from Time Warner and Comcast (see Cable Rivals to Buy Adelphia).
The agreement between the court and the two largest cable operators is far from complete since it still has to be approved by Adelphia’s board, its creditors, the bankruptcy judge, and the Federal Communications Commission. So Cablevision still has time to amend its enigmatic, eleventh-hour, mostly cash, lower bid, which, not surprisingly, was rejected by the court.
Cablevision last week ended an ongoing internal dispute between Charles Dolan, the company’s chairman, and the rest of the board over the future of Voom, the firm’s satellite TV service. The Cablevision board voted unanimously to shut Voom down and sell the satellite rather than hand the business over to the chairman as he had sought. Oddly, Mr. Dolan voted with the board this time around. But with the internal squabble seemingly over, some analysts expect Cablevision to up its offer for Adelphia.
“I have heard the rumors that Cablevision is considering another bid, but I am not sure that it will make sense for Cablevision,” said Craig Moffett, a senior analyst with research firm Sanford C. Bernstein & Co. “At this stage Cablevision may already be too small to compete. As Time Warner and Comcast get more leverage nationwide, the question of whether Cablevision should be a buyer or a seller arises. The presumption among investors is that they may be better off as a seller.”
According to Mr. Moffett, there are more synergies between Adelphia’s 5.2 million, far-flung subscriber base and that of both Time Warner and Comcast, while the New York-bound Cablevision has little financial leverage to gain in purchasing what would be, for it, a fragmented market.
“If you look at the cable map, you would see that Adelphia shares a host of contiguous markets with both Time Warner and Comcast. Gaining certain Adelphia markets will streamline the Ohio and Los Angeles markets for Time Warner, while Adelphia’s and Comcast’s Florida markets match up well,” said Mr. Moffett. “Better clustering of the cable map will mean more efficiency nationally, better profitability and better valuations across the board for cable subscribers. That works to Cablevision’s best interest but as a seller not a buyer.”
According to Mr. Moffett, Time Warner, with its strong presence in the North East will be the company in the best position to benefit from the purchase of Cablevision.
With only 3 million subscribers, albeit in the lucrative North East, Cablevision has been lagging behind Comcast with 22 million and Time Warner with 11 million at a time when cable operators are feeling the heat from turf encroachments by much larger telecommunications companies. In fact Cablevision faces competition from Verizon, perhaps the most aggressive of the large telephone operators. With the encroachment of telephone companies, size has suddenly become quite attractive to cable operators, Mr. Moffett said.
If the current Time Warner/Comcast deal gets past the bankruptcy court and the Adelphia board, it could still run into problems with the FCC, which has a cap of 30 percent market share in the cable industry. Comcast currently serves about 29 percent of all U.S. homes paying for cable TV and adding 10 percent to its base could give the company too much control of what American’s see on their television sets in the eyes of the FCC. To slap down the deal, the FCC would have to resuscitate a national ownership cap, which was thrown out by federal courts four years ago.
“Because of the mood in Washington and the fact that the cable market now has more companies competing for market share, it is unlikely that the FCC will apply the cap,” said Nancy Kaplan, vice president of Adventis, a Boston-based consultancy.
