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TCI remobilizing

Cable giant Tele-Communications Inc. on Thursday outlined plans for major restructuring that analysts said could pave the way for creation of separate, stand-alone, public companies down the road.

The company also gave a preview of its fourth-quarter earnings — which won’t be filed at the SEC until March 31 — including a $ 44 million loss in revenue dur-ing the four-month period starting Sept. 1, 1993, because of the Federal Communication Commission’s rate regulations.

TCI also weathered a $ 21 million loss in one-time expenses from compliance with FCC regulations. Total revenue was up 16% over 1992.

TCI prexy John Malone detailed the restructuring plans at the company’s annual analysts and investors meeting, held Thursday in New York.

TCI, Malone said, will become a holding company with four separate subsidiaries. Those divisions would contain (1) cable and telco holdings; (2) programming; (3) international interests, and (4) business ventures and investments.

Analysts at the meeting praised the idea, saying it is similar to the way TCI rival Time Warner isstructured.

“It provides flexibility to capitalize the individual units and create on-balance finance opportunities which are non-recourse to the parent company,” said Chris Dixon, analyst at PaineWebber.

“By doing this, TCI will ultimately get to a much higher value,” added Jessica Reif, analyst, Oppenheimer & Co. TCI, Reif said, has off balance sheet assets of $ 9.1 billion. To the extent that they can take any of this public, they will get that value.

TCI also used the meeting to announce its latest joint venture: An interactive TV test with Microsoft. The two companies have agreed to test interactive cable TV based on Microsoft’s new software for interactive broadband networking and TCI’s upgraded interactive networks.

The first phase starts during the fourth quarter of this year with a test of the architecture and pre-production operating system software among Microsoft employees in the Seattle area. The second part will roll the test out to cable customers in Seattle and Denver starting in 1995.

The purpose of the test, Malone said, is to “refine the technology and to learn what our customers want from interactive television — what types of services they prefer, how they use them and what features they find helpful.”

House telecommunications subcommittee chairman Ed Markey (D-Mass.) warned that the partnership “could raise problems for both consumers and competitors.” Markey said the FCC must keep a close eye on the emerging market of set-top boxes.

“The converter box could be used to create bottleneck control over interactive systems, shutting out independent programmers and software developers and forcing higher prices on consumers,” Markey said.

This was the first TCI meeting with analysts since the break-up of its merger effort with Bell Atlantic and attendees were impressed with Malone’s remarks.

“It was very clear that the breakdown of TCI-Bell Atlantic has galvanized the company and given them a better perspective. They are re-focusing their energy to implement strategy for new sources of cash flow in a regulated environment,” said Dixon.

Investment strategy

TCI, analysts said, will continue its strategy of minority investments in various programming and telephone businesses similar to its venture with Microsoft.

That could include investments in studios such as MCA and Sony, but attendees ruled out an outright acquisition.

For the year ended Dec. 31, 1993, revenue was $ 4.153 billion — up 16.2% from 1992’s $ 3.574 billion. Operating cash flow went up 13% to $ 1.858 billion from $ 1.637 billion in 1992, according to unaudited year-end results.

TCI attributed the growth to increases in both basic and pay subscriber numbers (4.0% and 8.3%, respectively), and the consolidation of TCI’s equity interest in Storer Communications.

“Overall the results were below street expectations,” said one analyst, adding that the company had to spend some $ 26 million just to notify customers about FCC regulations.

At the meeting Malone expressed more concern about the FCC’s latest rate regulations and vowed to challenge them in court.

TCI’s growth in unregulated areas was impressive. According to Oppenheimer’s Reif, non-regulated services are growing at a “torrid” pace. Advertising was up 35%, pay-per-view 44% and TCI’s satellite biz was up 53%.

As for reports TCI was looking at Blockbuster, Malone praised chairman Wayne Huizenga but reiterated that in his opinion Blockbuster’s long-term prospects were not good.

TCI also said it has spent $ 90 million to upgrade its internal infrastructure in hopes of improving customer relations.

By 1996, Dixon said, the company hopes to develop internal operating systems that give TCI the capacity to service customers in the re-tooled cable marketplace.

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