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TCI faces big challenges
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August 15, 1996: 1:43 a.m. ET
Firm hopes PrimeStar sale, new technology will boost bottom line
From Correspondent Greg Clarkin
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NEW YORK (CNNfn) - Tele-Communications Inc. faced its investors Thursday, holding its annual shareholders' meeting one day after posting a $193 million second-quarter loss.
TCI announced that its board had reaffirmed its intent to spin off Satellite Entertainment Inc. to shareholders.
"We have great hopes that the enterprise will be a stand-alone public company, will be able to capitalize itself well and will grow aggressively," Malone told shareholders.
He also said the time for talking about TCI's planned launch of digital television had ended.
"It's time for results," Malone declared.
With 13 million subscribers, TCI is the largest cable operator in the country, so there's a great deal riding on the company's success or failure.
"As goes TCI, so goes the cable industry," said Stevyn Shutzman, an analyst at Salomon Brothers. "I equate TCI to being the Microsoft of the cable industry, so no one should think this compnay is going to go away."
Still, TCI's balance sheet has worried Wall Street.
Moody's Investors Service downgraded TCI's $12 billion of debt to junk status this spring after the company failed to hit financial goals.
However, previously approved cable rate hikes set for this fall should help boost the company's cash flow by 10 percent to $600 million.
In addition, TCI will generate additional revenue through the sale of its satellite division, PrimeStar.
TCI will have pumped about $700 million into PrimeStar by the time it spins off the unit.
Wall Street views PrimeStar as a drain on TCI's balance sheet, and hopes the sale will help boost the company's bottom line.
According to Stuart Rossmiller, an analyst at Deutsche Morgan Grenfell, TCI is also betting heavily on the new technologies to jump start growth. (207K WAV) or (207K AIFF)
TCI is currently testing digital television, and plans to try out cable computer modems this fall.
In addition, the company intends to launch local telephone service toward the end of the year.
Nevertheless, the promise of technology has not impressed everyone.
Shares of TCI are off 30 percent from their 52-week high of 22-3/8, closing Thursday at 15-5/8.
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TCI
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