Adelphia

This page considers the Adelphia cable television and internet service provision group.

Sponsored links

It covers -

• introduction
• evolution
• studies
• landmarks

Introduction

Adelphia Communications Corporation was the sixth largest cable tv company in the US before its collapse in 2002 amid claims, subsequently accepted by the courts, that it had been looted by the Rigas family. Adelphia's rise and fall offers a perspective on peers such as Liberty, Comcast, Cox and Cablevision.

Evolution

Adelphia was founded in 1952 in Coudersport, Pennsylvania, by John J. Rigas (1924 - ).

In 1951 Rigas, at that time an electronics engineer, bought a cinema in Coudersport. During the following year he acquired the local cable company for US$300, apparently as a hedge against lost movie sales. With his brother Gus he then formed Adelphia ('brothers'), borrowing heavily to buy suburban cable companies across the US. Many of the family interests were reorganised as Adelphia Communications Corporation in 1972. In the late 1990s it purchased Century Communications for US$5.2 billion. Operations include telephony (Adelphia Business Solutions), a sports radio station (WNSA-FM), the Empire Network sports cable channel, property development and NHL Buffalo Sabres.

In 2002 Adelphia's share price plummeted after it was delisted from the NASDAQ for failure to file returns. It went into bankruptcy shortly afterwards.

Adelphia at that time was the sixth largest cable tv provider in the United States and through various subsidiaries provided cable television and local telephone service to customers in 32 US states and Puerto Rico.

In 2002 the Securities & Exchange Commission charged the company, its founder, his three sons (Timothy, Michael and James Rigas) and two senior executives with "one of the most extensive financial frauds ever to take place at a public company".

The SEC argued that Adelphia, at the direction of the individual defendants, fraudulently excluded billions of dollars in liabilities by hiding them on the books of off-balance sheet affiliates, falsified operations statistics and inflated earnings to meet Wall Street expectations and "concealed rampant self-dealing by the Rigas Family", including undisclosed use of corporate funds for Rigas Family stock purchases, purchase of timber rights, construction of a golf course for US$12.8 million and the acquisition of luxury condominiums in New York and elsewhere.

In 2005 John Rigas was sentenced to 15 years in prison; son Timothy (the company's former CFO) was sentenced to 20 years. The Rigases had settled civil charge agreeing to forfeit 95% of their assets (including privately owned cable systems worth up to US$900 million, at least US$570 million worth of Adelphia securities and real estate valued at around US$10 million).

Adelphia's assets were acquired by Time Warner Cable and Comcast in July 2006. The combined purchase price was US$12.5 billion in cash and Time Warner Cable common stock representing approximately 16% of Time Warner Cable's total common equity.

The deal saw Time Warner Cable gain cable systems passing approximately 7.6 million homes (roughly 3.3 million basic subscribers), increasing its subscriptions to some 14.4 million basic subscribers (with 27.6 million homes passed). Comcast added 1.7 million additional basic subscribers, increasing its total base to approximately 23.3 million owned-&-operated customers, with a further 3.5 million subscribers through different partnerships.

Under agreements entered into in connection with the acquisition, Adelphia is required to sell at least a third of Time Warner Cable common stock received in the transaction or distribute those shares to Adelphia's creditors. Time Warner Cable concurrently redeemed Comcast's 17.9% interest in Time Warner Cable Inc.; Time Warner Entertainment (TWE) redeemed Comcast's 4.7% interest in TWE. In aggregate those interests represented an effective 21% economic interest in Time Warner Cable.

Studies

There are no major studies of Adelphia or the Rigas family. A brief account is provided in Pioneers of Cable Television: The Pennsylvania Founders of an Industry (Jefferson: McFarland 2005) by Brian Lockman & Don Sarvey and Dirty Rotten CEOs: How Business Leaders are Fleecing America (Sydney: Simon & Schuster 2004) by William Flanagan

The cable business is discussed in Stephen Keating's Cutthroat: High Stakes and Killer Moves on the Electronic Frontier (Boulder: Johnson 1999) and L J Davis' The Billionaire Shell Game: How Cable Baron John Malone and Assorted Corporate Titans Invented A Future Nobody Wanted (New York: Doubleday 1998).

Landmarks

1951 John Rigas buys cinema in Coudersport for US$72,000

1952 acquires local cable company for US$300

1972 family interests reorganised as Adelphia Communications Corporation

1980 IPO

1982 John Rigas buys out Gus

1988 pays US$22m for stake in Buffalo Sabres

1999 Adelphia buys FrontierVision Partners for US$2.1bn

1999 purchases Century Communications for US$5.2bn

1999 buys Harron Communications

2000 buys remainder of Buffalo Sabres

2000 Comcast completes cable system swap with Adelphia, gaining Adelphia customers in Florida, Indiana, Michigan, New Jersey, New Mexico and Pennsylvania

2000 Rigas family buys cable systems in Carlsbad from estate of Bill Daniels

2001 family buys systems in Desert Hot Springs, California, from Daniels estate

2001 Cablevision sells Ohio cable systems to Adelphia for US$1.4bn

2001 CFO Tim Rigas steps down from company's auditing committee in response to requests from Nasdaq

2002 Adelphia announces that it cannot meet some commitments, goes into receivership

2003 bankruptcy and sale of Niagara Frontier Hockey, L.P. (Buffalo Sabres)

2005 Puerto Rico cable assets sold for US$520m to MidOcean Partners LLP and Crestview Partners

2006 Comcast and Time Warner Cable complete acquisition of major Adelphia assets