Adelphia Snags Pricey Cleveland

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One down, two to go: Cablevision Systems Corp. completed
the first of three systems sales it is hoping to wrap up by the end of the year, agreeing
last week to sell its 306,000-subscriber Cleveland system to Adelphia Communications Corp.
for $990 million in cash and $540 million in stock.

Cablevision put its Cleveland operation -- along with those
in Boston and Kalamazoo, Mich. -- on the block in September. AT&T Broadband &
Internet Services is considered the leading candidate for the 354,000-subscriber Boston
hub.

The bidding on Cleveland was heated, drawing Charter
Communications Inc., Time Warner Cable, Cox Communications Inc. and AT&T Broadband,
along with Adelphia, sources said. But apparently, only John Rigas and company were
willing to pay $5,000 per subscriber -- at the high end of recent cable sales.

Adelphia gets to boast about its own
"supercluster" -- 1.3 million subscribers in what it calls the Great Lakes
region, ranging from the Cleveland area to western Pennsylvania and Buffalo, N.Y.

The price tag was high at least partly because the
Cleveland systems are in good shape, with about 90 percent at 550 megahertz or better and
70 percent at 750 MHz or better.

Cablevision, which is focusing on its New York-area cable
systems and programming assets, will pay down debt with the proceeds.

"Our relationships and history in Ohio will always be
an important part of Cablevision's heritage," Cablevision president and CEO James
Dolan said in a prepared statement. "Moving forward, Cablevision's targeted growth
strategy is to focus on the New York market, where we have built a unique concentration of
assets, including live sports and entertainment, backed by a state-of-the-art
broadband-distribution network."

Banc of America Securities LLC principal and senior
research analyst Doug Shapiro said the price was about what Wall Street expected, adding
that the Boston system could sell for even more.

Adelphia, meanwhile, may take on more debt to finance the
nonstock portion of the deal. That could be a problem, as Adelphia has a history of being
one of the most leveraged companies in the industry.

Adelphia's share price dipped on the news, dropping $1.81
per share to $56.81 last Wednesday. Cablevision bounced up $2.69 to $78.19 that same day.

Shapiro wasn't troubled by the Adelphia deal. "The
reality is, if you are a cable operator trading at $3,000 per subscriber and you want to
buy assets, you're going to have to dilute yourself," Shapiro said. "From that
standpoint, a little dilution equals strategic value. It bulks up their whole Great Lakes
cluster."

Other analysts said the deal would hike Adelphia's
debt-to-cash-flow ratio from 6.8 times to about 7.2 times -- still within a comfort zone
and substantially below the company's past ratio of 10 times in 1996.

Shapiro said if Adelphia were to increase its debt, it
shouldn't have a detrimental effect on the company's stock.

"The thing with leverage, in a perverse way, is that
it cuts both ways," he added. "In the environment of rising cable stocks, the
companies with the most leverage have been the ones with the highest [stock prices]. It's
not definitionally a bad thing."

Merrill Lynch & Co. and Bear Stearns & Co. advised
Cablevision.

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