Let's try to estimate the value of Adelphia's customer base. Think of Adelphia's customers as being in three tiers:
Tier 1: S. California (1.1 million subs)
Tier 2: South Florida (0.75 million subs)
Tier 3: Everywhere else (3.45 million subs)
Tier 1 is most likely to have a bidding war. El Lay is the most fragmented major cable market. Several companies see Adelphia's subscribers as key to achieving market dominance. At $4,500/subscriber, Tier 1 is worth $4.95 billion.
Tier 2 is considered an excellent asset. Adelphia appears to control the most affluent areas in the Miami-Dade-Palm Beach area. At $4,000/subscriber, Tier 2 is worth $3.00 billion.
Tier 3 has several fine properties, but they're in smaller markets, fragmented, or deep in the exurban zones of major metropolises. Tier 3 should still be worth more than Adelphia's $3,300/sub. Let's say $3,500/subscriber, worth $12.01 billion.
Add their tier values up, and you get $19.96 billion, averaging $3,766/subscriber. Unless an AWE-style bidding war breaks out, this may be where the valuation ends up. Perhaps Tier 3 goes to $3,800/sub. That increases the overall value by $1.04 billion.
For common stockholders, the valuation of this company is firmly wedged between "toilet-paper" and "pot-o-gold." There are 255 million shares outstanding (including, I believe, 50 million controlled by the Rigas family). Say total liabilities are $20 billion. In my first scenario (Tier 3 at $3,500), common is worth... NOTHING!. In the second scenario (Tier 3 at $3,800), common is worth $3.92 (close to a five-bagger from current levels. |
