Adelphia Communications Corp. stock took a pounding Friday afternoon after
the company reported a wider third-quarter loss and said it would spin off its
troubled Adelphia Business Solutions Inc. unit.
Adelphia stock closed down 10.4 percent, or $2.35 per share, to $20.98 each
Spinning off the Adelphia Business Solutions unit, also known as ABIZ, has
been expected for weeks and was considered by many analysts to be a positive
because it would effectively remove about $1.4 billion in debt from the MSO's
Spinning off the unit would also remove the cable parent's obligation to fund
ABIZ, which has put downward pressure on the stock in the past.
But in announcing that it would spin off the unit, Adelphia added that it may
provide up to another $100 million in credit support for it.
Adelphia owns about 79 percent of ABIZ. Adelphia said it would distribute the
shares no later than March 31.
Late last month, as part of a public filing for about $500 million in debt,
Adelphia hinted that it would spin off the ABIZ unit. According to that Oct. 24
Securities and Exchange Commission filing, Adelphia said if it did not
'deconsolidate' ABIZ within 180 days of the debt offering, it would pay a higher
interest rate on the debt.
ABIZ has been a drain on Adelphia's stock price for the past year as the
bottom has dropped out of the competitive-local-exchange-carrier market and
investors have worried about future funding commitments for its CLEC
Adelphia has already substantially reduced its funding commitments for the
ABIZ unit. In 2000, the company said it would reduce ABIZ funding from $675
million to between $450 million and $500 million.
In February, Adelphia bought some network and telecommunications assets of
ABIZ for $88.5 million and purchased rights for 63 million shares of ABIZ stock
for $461 million.
The telecommunications unit also scaled down its expansion plans. It
projected that it would be in 80 markets by the end of the year, up from its
existing 75. ABIZhad earlier planned to be in between
175 and 200 markets by the end of 2001.
For the third quarter, Adelphia's
net loss widened to $267.2 million, or $1.54 per share, from its year-ago
deficit of $145.4 million ($1.06). Revenue at Adelphia rose 11.3 percent and
cash flow was up 11.2 percent, in line with expectations.
The gains were fueled mainly by growth in digital and data subscribers.
The company added 178,000 digital-cable subscriber in the period, ending with
1.7 million. Adelphia said it is on track to reach its goal of 1.8 million
digital customers by year-end.
High-speed-data subscribers rose by 60,000 in the period to 315,000
customers. Adelphia retstated its target of 375,000 data customers by the close
Basic subscribers increased 0.8 percent to some 5.6