Hey, Time Warner: Walk Away From Adelphia

HEY, TIME WARNER: WALK AWAY FROM ADELPHIA
[SOURCE: Broadcasting&Cable, AUTHOR: John M. Higgins]
[Commentary] The sale of Adelphia Communications to Time Warner Cable has dragged on for months. The deal breezed through antitrust review long ago, but bickering among Adelphia's many creditors and gridlock at the Federal Communications Commission threaten to push the deal perilously close to its July 31 drop-dead date. The cancellation deadline gives Time Warner Cable a chance to do something that makes a lot of sense and would make many people on Wall Street happy: Walk away. Time Warner does not need this deal. One major justification -- Time Warner Cable's need to get bigger to compete with giant telephone companies -- is overblown. The financial gains from bringing Adelphia's relatively weak properties up to Time Warner Cable's standards could be far smaller than expected, a problem best demonstrated by Time Warner's partner in the Adelphia bid, Comcast. Comcast bought AT&T Broadband in 2002, orchestrated a remarkable turnaround yet got no apparent reward in its stock price. If Time Warner scuttles the deal now, breach-of-contract lawsuits will commence. But if the creditor mess extends past the drop-dead date, Time Warner could walk without penalty and -- under some circumstances -- even pocket a breakup fee. Time Warner should keep its powder dry. There will be other, more valuable deals down the road.
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