Posted on Mon, Jan. 02, 2006
Adelphia struggles to transfer franchises in cable merger mess
By Joyzelle Davis
Scripps Howard News Servicehttp://www.fortwayne.com/mld/journal...printstory.jsp
Some days, the screaming doll says it all.
Maria Arias, in charge of seeing that Adelphia Communications' cable-TV franchises get transferred to proposed new owners Comcast and Time Warner, has a palm-sized, fright-wigged doll in her neatly organized office.
The doll, a gift from her staff, emits a curdling shriek when throttled.
It is the most complicated transfer ever, and I think Time Warner and Comcast would say the same, said Arias, 44, Adelphia's vice president of law and government affairs.
Based in Greenwood Village, Colo., Adelphia - the nation's fifth-largest cable operator - filed for bankruptcy in 2002 after revelations of an accounting fraud orchestrated by company founder John Rigas and his son, Timothy.
The transfer of Adelphia's franchises is just one part of the complicated choreography of its planned $17.6 billion sale to Time Warner and Comcast, which also requires approval from the Federal Trade Commission, Federal Communications Commission and the bankruptcy court.
If everything falls into place, Adelphia's sale is expected to close before July.
Further complicating things, Comcast and Time Warner in several markets are swapping their own franchises - on top of the Adelphia purchase - in an attempt to consolidate their operations.
In Southern California, for example, Time Warner subscribers will go from 200,000 to 3 million after it takes over franchises held by both Adelphia and Comcast.
What they are really trying to do is cram 10 elephants into a 5-pound bag, said Carl Pilnick, president of Telecommunications Management Corp., which has consulted several local governments including the county of Los Angeles on the Adelphia franchise transfer.
Most cities and counties require a cable company to sign a franchise agreement before it can use public rights of way such as streets and alleys to lay its network of cables.
In exchange, the cable carrier pays a franchise fee and agrees to provide community services such as public-access TV channels.
More than 30 percent of Adelphia's 2,731 cable franchises have clauses in their agreements that give the municipalities the right to approve any change in control. It's Arias' job to get local officials to agree to a change.
Under FCC rules, a municipality can reject a new owner if the city determines the owner lacks the financial, legal or technical ability to operate the cable system - something that wouldn't seem to be a concern in the case of Time Warner and Comcast, two of the nation's largest cable operators.
But some cities are frustrated that Time Warner and Comcast haven't provided adequate information about what their local cable operations will look like after the merger is complete, Pilnick said.
From the point of view of the cities, this is a very complicated transaction, he said. Even though the cities know that their authority is very limited, they're not happy about the information they're not being provided.
Adelphia declines to say what percentage of communities has agreed to transfer franchises.
If the number that refuse transfer becomes material - a threshold that Arias says isn't defined in the merger agreement - it could thwart the buyout.
Industry observers say most cities are agreeing to the transfers.
I think the vast, vast majority are, said John Howell, who runs Telecommunications Consulting Associates, which has consulted areas including Cherokee County, Ga., and Laurinberg, N.C., on the transfer.
If a city denies, they have to have grounds to deny and, at that point, a very good attorney.
Timeline of Adelphia events heading into and through bankruptcy:
May 15, 2002: John Rigas resigns as chairman and CEO.
May 16, 2002: Timothy Rigas resigns as executive vice president, chief financial officer, chief accounting officer and treasurer.
June 25, 2002: Adelphia and certain of its affiliates and subsidiaries file for Chapter 11 bankruptcy protection.
March 7, 2003: Employment of William Schleyer as CEO and Ron Cooper as chief operating officer approved.
March 31, 2003: Bankruptcy court approves relocation of Adelphia corporate headquarters from Coudersport, Pa., to Greenwood Village, Colo.
April 22, 2004: Adelphia announces it will explore possible sale of the company as part of the Chapter 11 process.
Feb. 4, 2005: Adelphia files amended Plan of Reorganization and amended disclosure statement.
April 21, 2005: Adelphia reaches definitive agreements for Time Warner Inc. and Comcast Corp. to acquire substantially all of the U.S. assets of Adelphia.
April 25, 2005: Adelphia agrees to settle pending and potential claims by SEC and U.S. attorney's office related to conduct of the company's prior management.
Nov. 8, 2005: Adelphia files fourth amended plan of reorganization.
Source: Adelphia Communications