Jan 11, 2001 12:00 PM,

Adelphia Business Solutions to cut 200

Glenn Bischoff

(Telephony) Adelphia Business Solutions will reduce its national work force of 2400 employees by 8%.

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The job cuts come as a direct result of the company’s decision last month to downsize its network expansion plan for 2001. This plan originally called for the company to expand from the approximately 50 markets it currently serves to as many as 200 cities by the end of this year.

The downsizing means that Adelphia will shelve plans to enter approximately 125 new markets this year. The new target calls for Adelphia to be in 75-80 markets by the end of 2001. The job cuts will be in markets that previously had been targeted for expansion.

The business solutions unit is a wholly owned subsidiary of Adelphia Communications Corporation. It provides integrated communications services—including voice, messaging and high-speed data—via its fiber-optic network.

Adelphia may have been the victim of bad timing, according to Andy McCormick, a senior analyst with the Aberdeen Group.

“It doesn’t surprise me that Adelphia has run into this situation,” he said. “It’s really a case of them being overly aggressive when the times were good and money was cheap and easy to get. All of sudden the well just dried up in a heartbeat; when that happened they were stuck holding the bag.”

The size of the buildout may have scared off creditors and investors, suggests McCormick, who estimates that the type of build-out originally planned by Adelphia could cost as much as $1 billion in today’s dollars. “If it’s a Sonet network where they have to build ring onto ring onto ring, it could be substantially more,” he said.

Another likely factor is that the telecommunications sector is being viewed warily by creditors and investors right now.

“There’s been a pall cast over the telecommunications sector as a whole,” McCormick explained. “Creditors are looking at these types of infrastructure costs very carefully and asking, ‘What is it really going to cost to build out this network … and what will be the return on that investment.’