TCI and digital cable rollout..........
65% of TCI homes will have access to digital cable by year's end.
TCI Staying Course On Joint Ventures, Digital Cable Rollout
By Kim Mitchell
Crafting more joint ventures and launching digital cable service will help keep Tele-Communications Inc.
competitive and on the path to financial recovery, top executives said during the MSO's Aug. 28
shareholders meeting in Denver.
While the cable industry and Wall Street wait for TCI's cable division to stop the subscriber drain that
has plagued the company for the last two quarters, TCI chairman-CEO John Malone focused last week
on the positive, noting that the MSO reported second-quarter free cash flow of $282 million.
What's more, he said, TCI's joint ventures and subscriber-swap deals with other cable operators
promise to restore the beleaguered company to fighting trim.
The architect of TCI's comeback attempt, president-COO Leo Hindery, took a back seat to Malone
during the crowded, tightly choreographed meeting at TCI's suburban Denver Digital Center. Still,
Malone made sure Hindery got credit for the company's improved financial picture, calling him a
"dynamo."
TCI, the nation's largest MSO, started this year with 14.3 million subscribers. Since Jan. 1, it has moved
about 2 million of them into joint ventures or exchanged them with other cable operators. Another 2.3
million are scheduled to be swapped out, according to Hindery. That, in turn, would push TCI's
transaction total for the year to 21.
Deals are expected to be announced soon with Time Warner Cable and MediaOne. Sources at TCI said
the MSO is trying to get Time Warner to pay off some TCI debt as part of the first swap. The
MediaOne deal would give TCI a large number of Chicago-area subscribers.
Malone said the MSO is keen on using joint ventures to consolidate and dominate such markets as
Chicago and San Francisco. He noted that a recent agreement in which TCI swapped subscribers for a
33% stake in Cablevision Systems Corp. indirectly gave TCI a presence in the New York market.
Malone also discussed the need for digital set-top boxes to evolve into an intelligent network that
communicates with computers and the Internet, as well as the TV.
Saying that published open standards and uniform protocols were "critical" to the success of such
platforms, Malone criticized Microsoft Corp. chairman Bill Gates for wanting to control that aspect of the
market: "We would be very foolish to let this happen. We can't have [Gates] dominate this industry the
way he does his own."
Hindery said TCI plans to step up its marketing efforts and that he should "be back with my peers by the
end of the year in terms of subscriber growth."
TCI's $10-per-month digital cable offering, which will include video and audio product, will be marketed
to 65% of TCI customers by year's end, executives said. While the network's packaging and
promotional efforts are still a mystery, Malone did say that a "special deal" was being developed for
Starz!, Encore and Disney Channel customers.
He downplayed speculation that TCI would be split into various divisions and sold off. Malone also said
the MSO isn't seeking new partners.
"We don't need an injection of equity or capital," he said, adding that a "powerful technology partner that
could help exploit the market positions TCI's already staked out" would be more intriguing.
In other business:
Shareholders approved a stock swap that'll set up TCI Ventures Group as a separate division run
by Barney Schotters, the senior VP-finance/treasurer at TCI Communications Inc.
This week, the MSO will kick off a multi-city road show to educate investors about TCI
Ventures, which will track the company's interests in Teleport Communications Group, Sprint
PCS, @Home, Tele-Communications International Inc. and United Video Satellite Group, among
others.
Malone expressed concern about Primestar's proposed merger with Rupert Murdoch's ASkyB
DBS effort. Although he said he expected "serious" review by the U.S. Justice Department, he
added that he was "optimistic" the deal would get done.
The future of executive VP-CFO Brendan Clouston remained unclear. TCI insiders have said that
Clouston, who was replaced as TCI Communications Inc. president-CEO earlier this year, would
be the next in a long line of executives to leave the MSO since Hindery took over. Malone told
reporters last week that Clouston's future with the company would be "disclosed shortly."
(September 1, 1997) |
