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related:
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This
page considers the Adelphia cable television and internet
service provision group.
It covers -
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
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