Verizon cancels cable system sales to Adelphia

Verizon has terminated agreements to sell cable systems in Cerritos, Calif., and Pinellas County, Fla., to financially troubled cable operator Adelphia Communications. The sales were expected to close later this summer.

Both top-of-the-line cable operations were built by GTE and were part of the americast video venture. Pinellas County, which is embroiled in marketing warfare with competing cable provider Time Warner Cable, has 59,000 subscribers; Cerritos, within the city limits of that community north of Los Angeles, has about 8,000. Both will now be re-marketed by Verizon in an effort to attract another buyer.

Verizon’s decision, predicated by an ongoing financial scandal that has Adelphia teetering on bankruptcy, had been initiated a week ago. Yesterday, franchising officials in both areas and employees were told that the sale was null.

“We withdrew the 394 application today,” a Verizon spokesman said. “This termination of our agreement with Adelphia is effective immediately; it doesn’t require any regulatory approval.”

The action did not affect Verizon's earlier decision to sell a cable system in Ventura County, Calif., to Adelphia. That deal has gone through, said the spokesman.

Verizon, for now, will continue to run the systems, but has no long-term plans to stay in the video business, the spokesman said because the company wants to “more keenly focus on our core growth businesses such as local and long-distance, wireless and high-speed data services.”

In part, that seems like a contradiction because the systems being sold include high-speed data subscribers who use cable modems.

“We have previously declared that we did not want to, long term, be the managing provider of such video operations,” the spokesman said. “It was not as core to our high-growth businesses.”

Adelphia, he said, did not react to notification of the sales cancellations, probably because that was only a minor itch in what has become a rash of problems. The sixth largest cable operator was expected to file for Chapter 11 bankruptcy protection this week but, according to published reports, delayed after reaching agreement with banks for a $1.5 billion loan to continue operating while it negotiates details of bankruptcy.

Adelphia continues to miss payments, including a $96 million bond interest and preferred stock dividend last week as it unravels a financial scandal that began in March when it was discovered that the company had paid more than $3 billion in off-the-books loans to the family of founder and former chairman/CEO John Rigas. Those transactions, and others, are under investigation by the Securities & Exchange Commission and grand juries in New York and Pennsylvania.

Meanwhile, Adelphia tried to promote at least a semblance of business as usual by telling the National Cable & Telecommunications Association that Chairman and Interim CEO Erland Kailbourne would assume the company’s seat on the cable industry’s leading lobbying organization. John Rigas, former chairman and CEO, previously held the seat before resigning both those posts.