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Adelphia to Buy Cable Systems From Cablevision

December 09, 1999|JONATHAN MAKE | BLOOMBERG NEWS

Adelphia Communications Corp. agreed to buy Cleveland-area cable-TV systems from rival Cablevision Systems Corp. for $1.53 billion in cash and stock, in a move that would add 306,000 customers to Adelphia's total of about 5 million.

Adelphia, which is the sixth-largest cable company, said it will pay $990 million in cash and $540 million in Class A shares for the systems. With the acquisition, it would have about 1.3 million customers in Ohio, Pennsylvania and New York.

Adelphia, which is based in Coudersport, Pa., would be paying about $5,000 per subscriber in the deal. The company, like its competitors, has been acquiring smaller cable systems to expand in geographic areas where it already has operations, such as Buffalo, N.Y., and Pittsburgh. The remaining few large U.S. cable firms are buying and swapping local franchises to build more cost-efficient geographic clusters of cable systems so they can offer Internet, phone and cable service over one line.

Tele-Communications Inc. was acquired for $59.4 billion in March by AT&T Corp., which also is buying MediaOne Group Inc. for $62.5 billion. TCI and MediaOne are based in the Denver area.

Adelphia operates the Empire Sports TV network and sells phone service in the Cleveland area through Adelphia Business Solutions Inc., its long-distance unit. That unit is building a 30,000-mile fiber-optic network connecting 200 cities.

Besides letting cable operators sell a package of data and Internet services using cable lines, so-called clustering, in which an operator is the dominant provider in an area, offers advertisers one-stop shopping.

"You want to get greater density in your markets," said Richard Read, an analyst with Credit Lyonnais Securities. "The denser you are, the more advertising streams you can develop."

In Cleveland, Adelphia could use that network to sell phone service over standard coaxial cable lines. Adelphia and Time Warner Inc. are the biggest cable operators in the state. Adelphia also has clusters in other cities, including Los Angeles, where it has about 1 million customers, Read said.

Cablevision is the No. 7 U.S. cable operator, and it is based in Bethpage, N.Y. The company said in September that it would "consider strategic alternatives" for its cable systems so it can focus on the New York area, where it's the leading cable operator. The company also owns a host of entertainment assets there, such as Wiz electronic stores, a chain of movie theaters, Madison Square Garden, Radio City Music Hall, the Knicks basketball team and the Rangers hockey team.

Cablevision said it will use proceeds from the sale to Adelphia to pay down debt. Cablevision had about $7.5 billion in debt as of Sept. 30.

Adelphia shares slipped $1.81 to close at $56.81 on Nasdaq, and Cablevision shares gained $2.69 to close at $78.19 on the New York Stock Exchange.

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