News

Adelphia Buys Verizon's Overbuilds

3/10/2002 7:00 PM Eastern

About 18 months after putting them on the block, Verizon Communications has sold its overbuilt systems in Florida and California to Adelphia Communications Corp., in a deal that pits the No. 6 U.S. MSO against one of its large cable peers.

The systems — in Ventura County, Calif. and Pinellas County, Fla. — serve a combined 116,000 subscribers and were marketed under the Americast brand name.

The Florida systems make up the largest block of customers, with 59,000 subscribers in St. Petersburg and Clearwater. Adelphia would compete against Time Warner Cable, the incumbent cable provider for those areas.

With the Florida deal, Adelphia becomes one of the few large MSOs to compete head-to-head against a large incumbent cable operator.

But spokesman Michael Luftman noted that Time Warner competes against Cox Communications Inc. in Bakersfield, Calif.

"It doesn't make any difference to us," Luftman said. "A competitor is a competitor."

Tampa Bay, which includes Pinellas County, is Time Warner's second-largest cluster, with about 900,000 subscribers.

The deal lets Adelphia boost its presence in central Florida, where it already offers service in Plant City, Dover and Brandon in nearby Hillsborough County. Adelphia has larger clusters in Florida, including 744,000 subscribers in greater Miami, greater Fort Lauderdale, the Florida Keys, Pompano, Vero Beach, Fort Pierce and Stuart. The MSO also has about 266,000 subscribers in Palm Beach County.

GTE BUILT GOOD ONES

GTE Corp., which merged with Bell Atlantic Corp. to form Verizon, built a state-of-the-art system in Florida, offering digital cable and high-speed cable-modem service.

Spokesman Bill Kula said Verizon continues to actively market the cable service, but Luftman said the competition hasn't seemed as intense as it was before the merger.

Dan Hebert, Adelphia's regional vice president for Florida, did not return phone calls seeking comment.

The California acquisition will add about 49,000 new subscribers in Ventura County, including the cities of Thousand Oaks and Oxnard.

Adelphia regional vice president for Southern California Lee Perron last week said existing Adelphia customers would migrate to the Americast network.

The current Adelphia system in Ventura County — with about 63,000 customers — is a mixture of 330-megahertz and 450 MHz one-way plant, while the Verizon network consists of 750-MHz, two-way plant.

"The beauty of acquiring the network, it allows us to have a network for all of that 450 and 330 dual plant, which all would have needed to be upgraded."

Perron said some current Adelphia customers would receive as many as 70 additional new channels as a result of the Verizon acquisition.

Verizon also was offering WorldWind-branded cable-modem service in Ventura County.

CABLE'S OUT OF FOCUS

Kula said the cable operations were sold because they no longer fit into Verizon's strategy of focusing on its local and long-distance telephone service, wireless telephony and digital subscriber line service.

"The networks we operate in Florida and California are in good shape; they're great systems," Kula said. "We chose to exit the business a year and a half ago to focus our attention on our core growth businesses. In mid-2000, we decided that operating a cable TV operation of this type was not the best strategy for Verizon."

Terms of the transactions were not disclosed, although some observers put the value of the systems at between $1,100 and $1,200 per subscriber, making both deals worth between $127.6 million and $139.2 million.

In December, Verizon sold wireless cable systems in Honolulu to Canadian company Craig Broadcasting Systems Inc., Kula said. The Honolulu system had under 10,000 subscribers.

Kula said the Ventura County deal has closed, the Cerritos sale should close this summer and the Florida properties should close by mid-year, pending local franchise approvals.

Adelphia would not need a franchise transfer in Ventura County, because it already owns licenses for many of the cities there, Kula said. In Cerritos, Adelphia is buying Verizon's franchise, so that will be subject to government approval.

But Thousand Oaks deputy city manager Jim Friedl said he has some concerns regarding the transaction, and that the city has hired attorneys to look into its options.

"Our major concern is that we are losing, in one quick transaction and that we've been given no opportunity to review, the benefits of competition," Friedl said.

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