NEW YORK — The new president of John Malone’s Tele-Communications Inc., Leo Hindery, persuaded a number of Wall Street cable analysts in meetings here Monday that stringent cost-cutting and wide-scale decentralization will turn the company around over the next few years.
“The message from Hindery is that TCI is reducing overhead, attacking its programming costs and upgrading its plant with the much cheaper compression technology,” said Jessica Reif, cable analyst for Merrill Lynch. Shares of TCI, the largest cable operator in the U.S., have performed badly over the last year or so.
Chris Dixon, an analyst for Paine Webber, said that instead of running the entire cable operation of more than 13 million subscribers out of Denver, “TCI is going to focus on local dynamics as the best way to drive subscriber growth. Denver will still be the hub and still deal with things like marketing, programming, billing and technology. But TCI will beef up 10 or 12 regional operations to deal more directly with the local cable TV user.”
$36 million charge
The occasion for the meeting between Hindery and the analysts was the publication of TCI’s fourth-quarter numbers, which reported operating cash flow of $598 million before a $36 million restructuring charge to cover the costs of reducing its work force by 2,500 and of consolidating its accounting systems.
The job cuts, announced in December, consumed $27 million of the restructuring charge, while the accounting changes ate up the remaining $7 million, the company said during conference calls with analysts and the media Monday morning.
Excluding the charge, operating cash flow was up 19% from the 1996 fourth quarter’s $502 million.
23% rise in revenues
Revenues rose 23% in the latest quarter to $1.62 billion from $1.32 billion. The results reflect the company’s cable, wireline telephony and microwave operations and two months of TCI’s satellite business, and was distributed to shareholders Dec. 4.
“The fourth quarter was largely a period of transition,” John Malone, TCI chairman and CEO, said in a statement.
During the conference call, senior VP of finance Barney Schotters stressed that the fourth-quarter numbers released by the company were preliminary. He said TCI is still calculating net income and earnings-per-share numbers. The company decided to release operating cash flow since this measure of profitability is closely watched by Wall Street, Schotters said.
While TCI Communications prexy and CEO Brendan Clouston spoke with analysts, he was unable to talk to the media because he was called into a technical meeting.
The main message Schotters sought to convey during his remarks was that TCI’s capital spending will drop dramatically this year. Including maintenance costs, capital expenditures will run less than $750 million this year, compared with $1.7 billion in 1996, he said. The introduction of digital technology has helped pave the way for the reduction in costs, he added.
TCI is rolling out its digital television product in three markets — Hartford, the Chicago suburbs and the San Francisco Bay Area — and expects to have it in front of 5 million homes, or about 20% of its customer base, by the end of the year, Schotters said.
“We look forward to 1997,” Schotters told the press. “This isn’t a year of being in the bunker and trying to hunker down.”
“TCI is upbeat in a way that seems reasonable,” said Jay Nelson, analyst for Brown Bros. Harriman. “I’m feeling a lot better about the company.”