Adelphia Outcome Looms

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In a sweeping interview with Fulcrum Global Partners director Rich Greenfield, the firm’s cable analyst, I got a pretty good idea of what Wall Street expects to happen in a sector that’s beset with change.

Think about all of the moving pieces: Soon we’ll know the outcome of the Adelphia Communications Corp. auction and its impact, depending on who wins. For now, the joint bid from Comcast Corp. and Time Warner Cable seems most likely, largely because that combo is the most likely to hustle up $17 billion.

Is this a good move? No, according to Greenfield, who thinks that Comcast already has the scale it needs, and that it would make far more sense for Time Warner, given its footprint, to go after Cablevision Systems Corp.

Cablevision could find itself in play someday, given the Dolan father-son family feud over its ill-fated Voom satellite service. Chairman Chuck Dolan lost a rare battle to his son, CEO Jim, and the board, and was forced to sell Voom to EchoStar Communications Corp. That very public battle makes Cablevision more vulnerable to a takeover, says Greenfield.

He would like to see Time Warner — which has 1 million subscribers in Manhattan and its environs — pursue acquiring Cablevision and its surrounding donut of 3 million New York City-area households. If that were to happen, Time Warner would become the gatekeeper of New York, if you will.

Greenfield also thinks Time Warner stubbed its toe by announcing its corporate restructuring. That move resulted in the departure of three key executives, with no word on their replacements, at a time when the MSO was ready to bid for Adelphia.

In essence, Greenfield is asking: How big do you have to be to become a successful MSO — to generate enough free cash flow and attract future investors? That’s an especially valid question as more competition from the telcos looms, which could result in price wars.

Greenfield likes Cox Communications Inc. and its 6 million subscribers. But he sees problems ahead for Charter Communications Inc., which just let CEO Carl Vogel walk the plank.

The problem with Charter is that owner Paul Allen has stopped making little investments in the cable company, which is losing subscribers and is fraught with accounting scandals. Given all that, Charter could also be in play.

But Greenfield doesn’t see a buyer for Charter as a whole. Some might find a deal to cherry-pick the MSO attractive, if they have contiguous clusters.

Asked who’ll be left standing a year from now, Greenfield cites Comcast, Time Warner, Cox and a handful of independents or smaller MSOs who run their businesses well. But all of that depends largely on the outcome of the Adelphia auction.

To get Greenfield’s take on cable’s future, log on to our Web site (www.multichannel.com/multivision). It’s a two-part interview, with installments on Monday and Wednesday.

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