Tele-Communications Inc. is embracing digital TV as a step toward fixing financial woes, but execs called the technology not simply the “flavor of the month” but a longterm solution.
Responding to questions at the PaineWebber media conference in New York, exec VP of finance Barney Schotters distanced the company’s digital interest, aimed at competing with sat-TV services, from earlier enthusiasm about the telephony and cable-modem businesses.
Unlike those ventures, with more uncertain futures and more intense competition, “this does not require capital,” Schotters said. “We have the infrastructure, we have the product and we have the technology, and this does not impact our leverage.”
“Things are still fairly fluid in terms of our planning for ’97,” Schotters said. “Obviously we intend to increase cash flow,” in part through “modest” $1-per-month rate increases, anticipated 2%-to-3% subscriber growth, lower capital spending and reduced programming costs, as the operator is expected to cut low-demand channels that refuse to negotiate lower carriage rates.
“We’re doing our damnedest” on that front, Schotters said, “but none of the discussions have culminated in signed contracts.”
2,567 laid off
TCI last week also announced layoffs of 2,567 employees, representing about 6% of the workforce, a move expected to shave $100 million in annual overhead costs.
Much of TCI’s presentation, however, was given over to a detailed discussion of its ALL TV digital service, now testing in 550 nonpaying Hartford, Conn., households, and due to expand next month to two additional markets before a more aggressive rollout targeting five million current TCI subscribers in ’97 and most of its customers within two years.
The company has access to 500,000 new digital set-top boxes by early next year, and has the capacity to deliver more than a million by next fall to customers who sign up. (Time Warner on Tuesday said it plans to spend $400 million on new set-top boxes for its own Pegasus digital TV service, to be deployed beginning next year.)
The TCI service, ranging from $34.99 to $64.99 a month, includes 60 existing analog cable channels but adds as many as 37 pay-per-view channels, 25 pay TV multiplex channels, 18 additional special-interest channels and 40 Digital Music Express channels, which senior VP-digital TV Camille Jayne called competitive with satcasters, including TCI’s part-owned PrimeStar.
Some analysts seemed encouraged by prospects for ALL TV. “Not only does it allow them to defend themselves from satellite services moving into pay TV, but it allows TCI to attack satellites’ current dominance in pay-per-view movies,” said Tom Wolzien, a Sanford C. Bernstein & Co. analyst.