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Thursday, May 16, 2002 |
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• Paradyne snatches up Jetstream assets • McLeodUSA lightens its asset load • XO offers new reorganization plan • Small ops can go digital, too • CED Broadband Direct news briefs The hits keep coming at Adelphia Communications Corp. The day after founder, chairman and CEO John Rigas resigned, his son, Timothy, stepped down as executive vice president and chief financial office, chief accounting office and treasurer. Adelphia added that a special committee of the board consisting of three independent directors will conduct an investigation of accounting issues surrounding, "including ones regarding transactions between the company and certain entities controlled by the Rigas family." That committee will be chaired by Leslie Gelber, chief operating officer of Caithness Corp., and joined by Dennis Coyle, general counsel and secretary of FPL Group Inc. and Florida Power & Light Company, and Adelphia's new chairman and interim CEO Erland Kailbourne. Adelphia said it's in the process of finding a successor for Timothy Rigas, who will retain his seat on the MSO's board of directors, but added that CFO responsibilities will be managed by the new committee and other "outside" financial advisors. The Nasdaq has scheduled a hearing today to decide whether Adelphia's stock should be delisted because of a delayed 10-K filing. The Nasdaq halted trading of Adelphia stock early yesterday morning. The U.S. Securities and Exchange Commission has already launched a formal probe to investigate business dealings between the MSO and the Rigas family. Yesterday, Leonard Tow, who owns 12 percent of Adelphia's outstanding shares of class A common stock, said he intends to exercise certain rights to appoint three members to the MSO's board of directors. "Since the end of March, my family's investment
in Adelphia has lost approximately 70 percent of its value. I
am deeply concerned that the value of our investment could be
further eroded," Tow wrote. In addition to himself, Tow has
requested that Scott Schneider and Rudy Graf be appointed to Adelphia's
board. Related stories:
Paradyne snatches up Jetstream assets The voice-over-DSL equipment market is expected to generate $646 million in revenue by 2004, according to RHK Consulting. And, Paradyne Networks is looking to snatch up a big piece of that pie with the acquisition of Jetstream's assets and intellectual property. On Friday, April 12, Jetstream ceased operations, saying the financial climate in the telecommunications industry forced the shutdown. At the time, most of the company's staff was dismissed. Under the terms of the deal with Paradyne, however, 30 former Jetstream employees will join the newly formed Broadband Voice Solutions group in Raleigh, N.C. Ken Hood, Jetstream's former vice president of international business development, will head the unit. The goal of the new group will be to continue Jetstream's research and development projects. The purchase enables the continued support of existing Jetstream customers, including AT&T Corp., Network Telephone, Versatel and Hanaro. News of the purchase gave Paradyne's stock price a much-need shot in the arm today. Shares were up nearly 18 percent to $3.24 as of 11:12 a.m. EDT. Related story:
High Speed Access Corp. said Nasdaq notified the company that it intends to delist HSA's common stock on May 21. HSA, which is appealing the decision, said it received notice on Monday, May 13. In the notice, Nasdaq said HSA has not owned or managed any revenue-generating business since Feb. 28, when HSA closed the sale of substantially of its assets to Charter Communications for about $81.1 million. At the time, Charter held back about $3.4 million to "secure certain purchase price adjustments and indemnity claims" against HSA. Charter paid $1.4 million of that to HSA on April 30. The remaining $2 million is payable to HSA on or about Feb. 28, 2003, HSA disclosed in a 10-Q document filed on Wednesday. In the filing, HSA reported it had cash and cash equivalents of $38.4 million, total assets of $74.3 million and total liabilities of $7.5 million as of March 31. HSA stock was up 8 cents to $1.10 per share in early trading Thursday. Related story:
For sale ... an extensive, yet only partially completed rich fiber network in the city of Sacramento. Buyer beware, though, as city residents have expressed a certain level of disdain for former owner. The bankruptcy saga of competitive overbuilder WINfirst continues, and potential buyers for the WIN fiber network are going public. SureWest Communications, a communications provider with facilities near the WINfirst network in Northern California, has expressed preliminary interest in possibly acquiring some or all of the WINfirst businesses. SureWest operates multiple telecommunications businesses, the largest being subsidiary Roseville Telephone Company, California's third largest telecommunications company. SureWest president and CEO Brian Strom cited proximity
between current WINfirst customers to SureWest fiber infrastructure
already up and running. An acquisition of the WINfirst business
would help SureWest achieve its aim of becoming the dominant communications
provider in the Sacramento area. Related stories:
McLeodUSA lightens its asset load Less than a month after emerging from bankruptcy proceeding McLeodUSA Inc. continues to eye profitability. To get one step closer to its goal, the CLEC is selling some non-core assets to PrairieWave Communications Inc. The $88 million deal calls for McLeodUSA to sell its non-core ILEC operations in South Dakota, certain overbuild CLEC and cable television operations in South Dakota, southwestern Minnesota and northwestern Iowa. The transaction, which is subject to regulatory and other customary approvals, is expected to close in the third quarter. For the quarter ended March 31, McLeodUSA posted a loss of $186.3 million, or 30 cents a share. Revenue dipped 10 percent from $433.1 million in Q1 2001 to $388.9 million. The company says results were in line with expectations and it is continuing to focus on ways make its revenue growth profitable. To emerge from Chapter 11, the CLEC's security holders approved an amended reorganization plan, calling for McLeodUSA to distribute $670 million in cash to its senior noteholders. These noteholders will receive new preferred series A stock and warrants. As part of the deal, McLeodUSA also agreed to distribute new common stock to its old preferred shareholders. Now the largest McLeodUSA shareholder, buyout firm Fortsmann Little & Co. upped its equity investment commitment to $175 million in exchange for a 23 percent stake of the reorganized CLEC. Including the preferred stock stake it already holds, Fortsmann increased its stake in the company to 58 percent. This is not the first asset sale McLeodUSA has agreed to this year. Earlier this year, the CLEC agreed to sell its directories business to Yell Group for $600 million. It also closed a deal with Level 3 Communications to shed some of its non-core assets. Under the terms, Level 3 purchased 350 points of presence across the United States and the related facilities, equipment and underlying circuits. Related stories:
The DSL vs. cable modem race is in full swing, but reported numbers for new DSL subscriber adds from the major U.S. providers reflects slower growth as compared to the first quarter of last year. Verizon Communications recently reported that its sub numbers were up to 1.35 million, and that 55 percent of their 61.2 million access lines are DSL ready. But for the first quarter, Verizon added just 150,000 new subs, down as compared to the first quarter of last year. To gain back some of that momentum, Verizon announced that it is again offering a DSL service promotion to new subscribers -- three months of service for $29.95 per month. On a more positive note, Verizon did announce some improvements in customer service. Verizon will offer new customers a brand new self-installation kit, and the company has reduced hoodup time from ten days to five. The company also released some new customer service figures that show 90 percent of Verizon customers were "satisfied to highly satisfied" with the service during installation, and that 80 percent were "satisfied to highly satisfied" with maintenance if required later. Verizon's reduced growth in new subscriber adds reflects
a greater trend within the DSL industry. SBC Communications' 183,000
new adds for the first quarter were also down from last year.
BellSouth reported 108,000, and Qwest reported an abysmal 36,000.
Alcatel continues to push forward in the DSL equipment market, the telco gear maker has shipped 740,000 remote combo ports on its Litespan next-generation digital loop carrier platform in the North American market. Each remote port provides integrated DSL and voice service. The ports enable carriers to turn-up DSL service for customers without a truck roll, Alcatel says. Simultaneously, the company announced it will demonstration Litespan Release 11 at the SUPERCOMM show in Atlanta next month. The last version offers a four-port remote combo card for integrated DSL and POTS; power management designed to shut down non-essential services during power outages and switch to a battery backup to provide basic dial-up service; and a symmetrical high-bitrate DSL service card for ATM communication over copper wire, with data rates of up to 2.304 Mbps. In March, Infonetics estimated Paris-based Alcatel accounted for 42 percent of the DSL port shipments at the end of 2001. So far, the company has shipped some 15.7 million DSL lines worldwide, 8.7 million of which have been shipped to the United States. Related stories:
XO offers new reorganization plan
Though Theodore Forstmann and Carl Icahn have made initial plays for control of beleaguered XO Communications Inc., the company's senior bankers could end up playing a significant role in the company's reorganization. In its quarterly report filed earlier this week, the Reston, Va.-based broadband provider outlined a "stand-alone" business plan under which it would conduct an equity rights offering for its unsecured creditors and current shareholders in case other reorganization proposals fail. The senior bankers would then "backstop" the offering by acquiring additional equity or secured debt in the reorganized company if the earlier offer does not yield the capital needed to implement the reorganization. "We've said all along that we are trying to get a deal done that would stabilize the company financially," an XO press officer said. He added that this third reorganization plan is very much in the "preliminary stages." In January, XO reached an agreement with Forstmann Little & Co. and Telefonos de Mexico S.A. de C.V. to inject $800 million into XO in exchange for a 78 percent stake in the reorganized company. Under this plan, bondholders would receive $220 million in cash and a 20 percent stake in the reorganized company, while management would get the remaining 2 percent stake. New York-based Forstmann owns a 24 percent stake in XO. Icahn, meanwhile, has accumulated nearly one-third of XO's bonds over the past few months, so he could potentially block the Forstmann-backed proposal if XO files for bankruptcy. If XO filed, it would need two-thirds of its bondholders to approve Forstmann's plan. In a competing offer to Forstmann's, Icahn is offering to inject $550 million in cash in exchange for a 55 percent equity stake in XO, with non-Icahn noteholders getting the remaining 45 percent. Also, the Icahn plan calls for a stock option plan covering 14 percent of the reorganized XO's stock for management and employees of the company. The plan would dilute the stake of both Icahn and non-Icahn bondholders in the new company. Representatives for Icahn and Forstmann did not return calls for comment. The reorganization plan involving XO's senior bankers could provide a backstop for the company if XO files for bankruptcy and the Forstmann plan is vetoed, or if Icahn withdraws his offer. The XO spokesman would not say which banks are interested in this plan. XO's bank group has been fairly generous with the company. Formerly known as Nextlink Communications Inc., XO entered a $ 1 billion credit facility in February 2000 that is administered by a branch of Toronto-Dominion Bank Inc. and syndicated by a Goldman Sachs & Co. affiliate. J.P. Morgan Chase & Co. and Barclays Bank plc are were also part of the original syndicate, according to Securities and Exchange Commission filings. Though XO breached certain covenants against the facility and a forbearance agreements expired late last month, the bank group has so far cut the company some slack. The banks technically could have exercised remedies that would have placed XO in bankruptcy by now. Related stories:
For the vast number of small-scale operators out there, the road to digital is too cost-prohibitive. Many of these operators are channel-locked, and to add digital means shelling out shrinking capital for costly headend upgrades. But a new programming delivery and back office support system just announced from WSNet aims to help this cost-constrained set of operators get there without going bankrupt. The new WSNet DigitalFlex enables small operators to expand their lineup despite their inherent limitations on bandwidth and operational capabilities. With a minimal headend upgrade, small ops can offer over 180 digital channels through DigitalFlex, and can still have the freedom of purchasing programming directly through their existing agreements. The DigitalFlex system is aimed at cable systems
with 450 MHz or less, and is compatible with Motorola DSR and
DCT series set-top receivers. Customers still can receive analog
channels on sets that don't have a set-top box, while customers
that do will have access to an expanded digital lineup. In the
back office, DigitalFlex includes billing interfaces with major
vendors, and includes set-top authorizations, deauthorizations,
and pay-per-view billing. Related Story:
CED Broadband Direct news briefs: • Black Box unveils new router • ISG hits milestone, eyes larger markets "We expect to play a leading role in these markets with our new, low power technology, which is scheduled to be released this year," said Vice President of Marketing Richard Bay-Ramyon. ISG projects sales to top $30 million this fiscal year and reach $75 million by 2004. • C-COR.net notches win in Indonesia
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