Cable giant spinning off telephony business
NEW YORK – Cable giant Tele-Communications Inc. will spin off its telephone business through an initial public offering, it said Thursday, in the latest step toward improving its strained balance sheet.The new stock issues add to a growing list of separate stocks created by TCI to reflect its various businesses, which so far include programming arm Liberty Media, satellite arm TCI Satellite Entertainment and its international business. TCI also plans to spin off in a separate company the Time Warner stock owned by Liberty. TCI’s Telephony Group includes a 31% stake in phone services company Teleport, worth about $1.3 billion at Teleport’s current market price, and its 31% stake in the Sprint PCS wireless phone consortium that analysts value at about $2.3 billion. TCI did not specify how much it plans to raise from the public offering, which is dependent on market conditions. TCI chairman John Malone said the main purpose of the offering is to “raise money to continue to develop” TCI’s phone businesses. TCI invested $700 million in the Sprint joint venture to acquire the licenses, and the joint venture has arranged $10 billion in various forms of financing to begin construction of the network over the next couple of years. But TCI is also building a residential telephone business, which won’t be included in the spinoff. Reaction from Wall Streeters was cautious. One analyst, who did not want to be named, said investors can already directly invest in Teleport, so a stock that represents part of Teleport may not be too attractive. TCI plans to retain legal ownership of the telephone business, issuing “targeted” stock as it did with Liberty, and that has proved to be not as attractive as completely independent stock, analysts said. TCI treasurer Barney Schotters said this structure was “chosen because it preserves the advantages of continued ownership by TCI of its telephony and cable businesses.” The Sprint PCS joint venture is in a start-up phase now, so its value is likely to rise significantly in the future, which TCI would miss out on if it spins off the businesses completely now.