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from: Reed Business Information

FCC Approves Adelphia Merger

By Ted Hearn & Mike Farrell

7/13/2006 3:26:00 PM

The Federal Communications Commission voted 4-1 Thursday to approve the $16.9 billion acquisition of Adelphia Communications by Time Warner Inc. and Comcast, removing the last regulatory hurdle facing the deal.

Democratic commissioner Jonathan Adelstein partially dissented, but the agency counts the split vote as a vote in favor of the deal.

The vote culminates one of the longest cable-system transactions in recent FCC history, taking 404 days. In contrast, the Federal Trade Commission approved the deal without conditions in late January.

Adelphia currently has about 5 million subscribers. Time Warner Cable and Comcast intend to divide Adelphia’s assets and some of their own properties in a series of cable-system trades designed to bolster their regional footprints in several large markets, including Los Angeles, Dallas and Minneapolis-St. Paul.

Time Warner Cable would emerge with a net gain of 3.5 million subscribers and Comcast with about 1.8 million. Those figures were announced last year, when Adelphia had about 5.4 million subscribers.

Time Warner will emerge from the deal with about 14.5 million subscribers and Comcast with 23.3 million. Comcast is the largest U.S. cable operator and Time Warner is the second-largest. With more that 15 million subscribers, direct-broadcast satellite provider DirecTV is the second-largest pay TV provider in the United States.

The commission attached a number of program-access conditions to its approval of the transaction.

Any regional sports network affiliated with Comcast or Time Warner must go to arbitration in the event of a pricing dispute.

However, Comcast SportsNet in Philadelphia is grandfathered, meaning that Comcast can retain exclusivity over the RSN.

And Mid-Atlantic Sports Network and Comcast will go to arbitration over that RSN’s attempt to gain carriage on the MSO. MASN carries Washington Nationals Major League Baseball games.

Adelphia filed for Chapter 11 bankruptcy protection in June 2002 in the wake of a massive accounting scandal that resulted in four of its top executives being charged in federal court with fraud and conspiracy.

Two of those executives -- former chairman John Rigas and his son, former chief financial officer Timothy Rigas -- were convicted and sentenced to 15 years and 20 years in prison, respectively. The Rigases are appealing their convictions.

On June 28, U.S. Bankruptcy Judge Robert Gerber approved a reorganization plan that effectively removed legal obstacles in the way of the Adelphia sale.

Adelphia is to receive $12.7 billion in cash and 16% equity in Time Warner Cable when the company becomes publicly traded.