Adelphia Communications Corporation

Adelphia Communications Corporation

Do you think the company's financial strategy is appropriate given its business?

The nature of the cable industry requires high levels of expansion; therefore, Adelphia’s growth strategy focuses on aggressive acquisitions (75% of growth) and debt financing rather than internal growth (25% of growth).

In 1995, approximately 90% of revenue growth was generated from acquisitions. The remaining was from subscriber expansion and advertising. On the other hand, the rate of revenue growth from subscriber expansion and advertising accounted for 50% of total growth in 1996.

Porter’s forces of Industry Analysis

1) Rivalry

• Industry is highly competitive. Growth is necessary in order to remain competitive. Companies in the industry are able to eliminate expenses related to expansion through the acquisition of existing cable networks.

• By mid 1990’s, growth rate of the industry began to flatten out, hence minimizing market opportunities

2) Threat of New Entrants

• Government Policy- the Company faces a risk of continuous changes in regulations in regards to awarding franchises.

• Prospect of competition from telephone companies in the future

• High barriers to entry- due to high costs related to initial system outlays

3) Threat of Substitutes- Alternative products such as direct-to home satellite and Internet cables has created an increased threat to the services that the Company is currently offering

Financial Strategy

Adelphia is