TCI will have a "second partner" that is a consumer electronics manufacturer (see end of article)............
zdii.com
TCI to use creative financing for set-top box purchase
Thursday December 18 12:38pm
Peter Lambert
Tele-Communications Inc. will share creative financing
with as-yet unnamed strategic partners to pull together
the purchase order of 6.5 million to 11.9 million
interactive digital set-top boxes from NextLevel
Systems Inc.
TCI and eight other cable operators have agreed to buy
at least 15 million of the boxes from NextLevel, which
is changing its name back to General Instrument Corp.
(GI).
Time Warner Cable will purchase 500,000 units. The
remainder of the 15 million will be split among smaller
operators that are affiliates of TCI's existing Headend in
the Sky (HITS) one-way digital TV broadcast service.
To be delivered between 1999 and 2002 at an
estimated $300 each, the Internet- and digital
video-capable boxes could reap $4.5 billion for
NextLevel and a soon-to-be-named consumer
electronics manufacturer partner.
NextLevel's stock, which surged 17.5 percent
yesterday, was down almost 2 percent, to 17-3/8, in
midday trading.
TCI Chairman John Malone said in a press conference
today TCI expects to be "probably half owner" of a
separate "financing vehicle" shared with "strategic
partners" to bankroll the boxes off TCI's balance
sheets. "We have broad support of the Silicon Valley
industry to make this happen," financially and
technologically, Malone said.
The creative financing also will extend to GI. As part of
the box deal, the operator-buyers will gain
$15-per-share warrants to purchase an aggregate 16
percent interest in GI. On news of the deal Dec. 17,
NextLevel stock closed at 17-7/8, up 2-7/8 on 4.9
million shares traded.
Added to another 10 percent equity trade, through
which GI will take over management of TCI's HITS
digital TV distribution service, TCI now has warrants for
about $400 million in GI stock.
TCI retains the right to approve GI's choice of a
consumer electronics partner, which Malone said will
gain for TCI not only a second box supplier, but a
second provider of innovation as well as an entree into
retail distribution. Through silicon chip integration, he
said, the set-top box eventually "could find its way into
a DVD [digital video disc] player or the TV set itself." |
