Group 5 - Tele Communications Inc - Final Report Section C

Organizational Structure and Design
n Case study
Tele Communications Inc:
Accelerating Digital
Deployment
Submitted By:
Abhijoy Dasgupta (U109101)
Anuj Das (U109107)
Dipanwita Mahapatra (U109114)
Rakesh Das (U109126
26)
Sushma M Rao (U109145)
(U1091
Zarine Ali (U109151))
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Tele Communications Inc: Accelerating Digital Deployment
Organizational Structure and Design Case study
Tele communications Inc: A Brief Background

Principally, TCI is a cable company. More specifically, TCI is a diversified corporation that holds a variety
of interests through its subsidiaries, TCI Communications ("TCI-C"), Liberty Media Group("Liberty
Media"), and TCI Ventures Group. TCI-C is one of the largest providers of cable television service in the
United States. Through its subsidiaries, TCI-C delivers a wide range of video programming, including
local broadcast stations; national, regional, and local cable programming services; premium movie and
pay-per-view channels; and sports programming services to homes and businesses nationwide. TCI-C
controls a number of subsidiaries that together provide cable television service to approximately 12.7
million customers, passing approximately 20.9 million homes. TCI-C also holds minority interests in, or
has joint ventures with, other cable television operators. These operators collectively provide cable
television service to approximately 7.5 million additional customers, and pass approximately 13.2 million
additional homes. In 1997, revenues from TCI-C's cable services operations totaled approximately $5.8
billion, which constituted 76% of TCI's total annual revenue.
TCI's Liberty Media Group subsidiary is an investor in, and manager of, entities engaged in the
production, acquisition, and distribution of entertainment and informational programming and
software, including multimedia products. The various business interests fall into four categories: movie
services; general entertainment and information services; electronic retailing (which includes direct
marketing, advertising sales relating to programming services, infomercials, and transaction processing);
and sports programming services.
TCI's third subsidiary is TCI Ventures Group, a wholly owned subsidiary that is composed of an array of
telecommunications investments. Through this business unit, TCI holds its non-cable, non-programming
and international assets, including, of particular relevance to this proceeding, its investments in @Home
and Sprint Corporation ("Sprint"). TCI Ventures Group holds a 39% equity interest and a 71% voting
interest in @Home, which provides content-enriched, high-speed Internet services over cable television
infrastructure. @Home began its commercial operation in September of 1996. Its primary offering
allows residential subscribers to connect their personal computers via cable modems to their cable
operator's hybrid fiber-coaxial cable ("HFC") network and receive data at higher speeds than are
available with typical dial-up access services offered over standard analog lines of local exchange
carriers. @Home transmits data between the cable plant and the public Internet using a proprietary
backbone network that enhances the speed of transmission. @Home has reached affiliate agreements
with 18 cable companies worldwide to deliver its high-speed Internet services. Considering other
current and pending affiliations, @Home has potential access to more than 50 million homes, or
approximately 50% of all homes passed by cable television plant in North America. As of December 31,
1998, @Home served more than 330,000 cable modem subscribers across North America.
Through TCI Ventures Group, TCI currently holds approximately 23.8% of the equity and approximately
2.38% of the voting interest in a class of Sprint stock that tracks the value of Sprint's personal
communications service operating group ("Sprint PCS tracking stock"). On August 31, 1998, after a
public notice period, the Commission approved Sprint's unopposed application for re-organization,
whereby Sprint issued shares of this newly-created Sprint PCS tracking stock to TCI in exchange for TCI's
partnership interest. This re-organization includes an initial public offering of additional shares of the
Sprint PCS tracking stock.
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Tele Communications Inc: A Chronology

1956 Cattle-rancher Bob Magness builds cable television system in Memphis, Texas
1957 Expands system to Plainview, Texas
1957 AT&T sells Canadian Northern Electric (later Nortel)
1958 Magness sells Texas holdings
1958 Magness, Jack Gallivan, George Hatch and Brian Glasmann establish Western Microwave network
in Montana
1962 Magness buys Collier Electric cable group
1968 Western Microwave merges with Community Television cable system and becomes American Tele-
Communications, with Western Tele-Communications (WTCI) and Community Tele-Communications
(CTCI) subsidiaries
1968 Parent company's name changed to Tele-Communications Inc. (TCI). Headquarters moved to
Denver, Colorado
1968 FCC allows non-Bell equipment to be conected to AT&T network
1969 Microwave Communications International (MCI) establishes private long distance network
1970 TCI listed on stock exchange and is 10th largest US cable network operator
1972 John Malone joins TCI from electronics manufacturer General Instrument
1973 TCI buys Foote Cone & Belding cable operations
1974 WTCI becomes second-largest US microwave common carrier
1975 CTCI becomes second-largest US cable operator, with 149 systems
1976 Time lends TCI money for terrestrial stations to receive HBO satellite transmissions
1982 TCI becomes largest US cable operator with 2 million subscribers
1982 AT&T has one million employees
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1983 Bell Canada becomes Bell Canada Enterprises (BCE)
1983 AT&T buys 25% of Olivetti for US$260m
1984 AT&T local operations spun off as seven Regional Bell Operating Companies (RBOCs), aka 'Baby
Bells'
1985 Forms Rogers Cantel with Rogers
1987 TCI takes major stake in Turner Broadcasting System
1987 Buys much of Westinghouse's Group W cable operations
1988 Buys part of Storer cable group from KKR
1990 McCaw Cellular Communications acquires 52% interest in LIN Broadcasting
1990 Liberty Media formed as TCI's programming arm
1991 TCI buys Cooke Cablevision
1991 AT&T buys NCR for US$7.4bn
1991 Liberty Media floated, with Malone having 22% of equity (41% of votes)
1991 Liberty becomes partner in SportsChannel Chicago and SportsChannel Pacific
1992 Malone forecasts 500 channel universe in speech as Anaheim
1993 TCI subsidiary QVC makes unsuccessful bid for Paramount, subsequently acquired by Viacom
1993 TCI US$35 billion merger with Bell Atlantic abandoned
1994 TCI and Guinness Peat Group (GPG) pay $117m for Australian satellite tv licence and $216m for
microwave tv licences across Australia
1994 McCaw acquired by AT&T for US$11.5bn
1994 LIN broadcasting stations spun off as LIN TV
1995 TCI swaps stake in Turner for 7.5% of Time Warner
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1996 Death of Magness, succeeded by John Malone
1996 Liberty Satellite established to sell satellite dishes
1996 TCI, Packer and Lenfest (later Comcast subsidiary) participate in unsuccessful rescue of Australis
pay TV in Australia
1996 AT&T spins off Bell Laboratories as basis of Lucent Technologies
1996 Sells NCR
1996 Sells AT&T Capital Corporation (leasing unit) for US$1.8bn
1997 TCI buys newspaper and cable group Kearns-Tribune (which had 7% stake in TCI)
1997 AT&T sells Submarine Systems unit to Tyco for US$850m
1997 Liberty sells Southern Satellite Systems to Time Warner for US$213m
1999 Buys 31% stake in Astrolink (promoted as the "first global wireless broadband venture") for
US$425m
1999 Liberty Media takes stake in News Corporation
1999 AT&T buys cable group MediaOne (which had absorbed the Providence Journal Co's cable
operations) for US$62bn
1999 TCI bought by AT&T for US$54 billion, with Liberty Media combined with TCI Ventures Group
(technology investment unit) under effective control by Malone
1999 Liberty Media gains control of TCI Music (renamed Liberty Digital) through share swap of minor
internet businesses
2000 Liberty takes stake in Cendant
2000 Liberty sells stake in BET to Viacom for US2 billion
2000 Liberty sells 21% stake in Gemstar-TV Guide International to News, increasing News' holding to
43%
2000 Liberty and Paul Allen's Vulcan Ventures take US$190m stake in priceline.com
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2000 Liberty buys Video Services Corporation for US$125m
2000 Buys 9% stake in IDT
2000 Pays US$200m for 5% of Primedia
2000 Buys Ascent Entertainment Group
2000 Sells Ascent's Denver Nuggets NBA team, Colorado Avalanche team and Denver Pepsi Center for
US$450m
2000 Liberty takes direct stake in United Pan-Europe Communications NV, subsidiary of Amsterdam-
based UnitedGlobalCom
2000 Liberty buys film processor Todd-AO, renamed Liberty Livewire
2001 Liberty Media spun off by AT&T
2001 Liberty takes US$1.4bn stake in UnitedGlobalCom/United Pan-Europe Communications cable

group
2001 Liberty buys nine German regional cable networks from Deutsche Telekom for US$5bn
2001 Buys Deutsche Bank's Tele Columbus and SMATcom AG cable subsidiaries for US$1bn
2001 Agrees to sell its 20% of USA Networks and 27% stake in EU-based Multithematiques tv group for
3.6% of Vivendi
2001 AT&T spins off AT&T Wireless
2002 AT&T sells AT&T Broadband (ie cable tv assets) to Comcast for value US$47.5bn
2002 Liberty takes controlling stake in OpenTV, buys interest from Naspers' MIH
2002 Sells stake in Telemundo to NBC
2003 Buys 8% of Japanese cable company Jupiter Telecommunications (J-Com) from Sumitomo for
$142m, taking stake to 44%
2003 Sells Corus Entertainment shares for US$100m
2003 Buys outstanding shares of Ascent Media Group
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2003 Buys remaining 57% of QVC from Comcast for US$7.9bn
2004 AT&T Wireless acquired by Cingular (joint venture of RBOCs SBC and BellSouth) for US$41bn
2004 Liberty completes acquisition of controlling interest in UnitedGlobalCom
2004 Increases voting stake in News to 9%, economic interest to 17%, becomes the largest shareholder
in News
2004 AT&T announces that it is no longer seeking residential customers
2004 Liberty sells stake in UK cable network TeleWest for £119m
2004 Increases voting stake in News to 17%
2005 AT&T agrees to US$16bn takeover by SBC Communications
2005 Liberty Media spins off 50% in cable channel group Discovery Communications to shareholders
2005 agrees to acquisition of SBS by KKR and Permira
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John Malone: An overview

John C. Malone (born March 7, 1941) is the current chairman of Liberty Media and CEO of Discovery
Holding Company. He was the interim CEO of Liberty Media until succeeded by former Oracle CFO Greg
Maffei.
Malone was born in Milford, Connecticut. He graduated with the class of 1959 from Hopkins School in
New Haven, Connecticut. He was a Phi Beta Kappa and merit scholar at Yale University where he
obtained a B.A. in Electrical Engineering and Economics in 1963. He also received a Master of Science in
Industrial Management from Johns Hopkins University in 1964 and a Ph.D. in Operations Research from
Johns Hopkins in 1967. Malone was also Chairman and Chief Executive Officer of TCI. Previous to that,
from 1973 to 1996, Dr. Malone served as President and CEO of Tele-Communications Inc. He currently
serves on the Board of Directors for the Bank of New York, the Cato Institute, Expedia and the Colorado
Chapter of The Nature Conservancy. Additionally, Dr. Malone is Chairman Emeritus of the Board for
Cable Television Laboratories, Inc. and Chairman of Liberty Global, Inc., and the DirecTV Group.
Malone began his career in 1963 at Bell Telephone Laboratories/AT&T in economic planning and
research and development. In 1968, he joined McKinsey & Company and in 1970 he became Group Vice
President at General Instrument Corporation (GI). He was later named President of Jerrold Electronics, a
GI subsidiary.
He served as Director of the National Cable & Telecommunications Association (NCTA) from 1974 to
1977 and again from 1980 to 1993. During the 1977-1978term, Dr. Malone was the NCTA's Treasurer.
Malone has overseen TCI's phenomenal growth from the time of his arrival at the company in 1972, and
in the process has come to be regarded as among the most powerful people in the television industry.
He has been praised by many for his outstanding business acumen and his technological foresight, but at
the same time, he has also acquired a less flattering reputation for his hardball style of business
practice. Among those who have been openly critical of Malone in this latter vein was then Tennessee
Senator Albert Gore, who dubbed Malone the "Darth Vader" of the cable industry.
Malone began his career at AT&T Bell Labs in the mid-1960s, before moving on to become a
management consultant for McKinsey & Company in 1968. He received his Ph.D. in Industrial
Engineering from Johns Hopkins in 1969, and soon joined the General Instrument Corporation, where he
became president of its Jerrold cable equipment division. It was here that he first established ties to
many of the cable industry's pioneers. In 1972, he turned down an offer from Steve Ross of Warner
Communications to head its fledgling cable division, opting instead to leave the East Coast to accept an
offer from TCI founder Bob Magness to run the small cable company from its Denver headquarters.
Malone joined TCI just before it fell into very difficult times. Malone's first major success at TCI was in
negotiating a restructuring of the company's heavy debt load. Once freed from the burden of this debt,
Malone embarked on a conservative growth strategy for TCI. Rather than attempting to expand its
holdings by building large urban cable systems at great expense, as many other cable companies did in
the late 1970s, Malone focused TCI's growth efforts on gaining franchise rights in smaller communities,
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where the costs to build the systems would be far less onerous. The wisdom of Malone's strategy soon
became evident. TCI was able to grow without encountering the exceedingly high costs associated with
building capital intensive urban cable systems, and in the early 1980s, it was able to purchase several
existing large market systems, such as those in Pittsburgh and St. Louis, at bargain prices from
companies that had financially overextended themselves in the construction process.
As TCI grew throughout the 1980s, so did its power within the television industry. The company invested
heavily in programming services, and currently holds stakes in more than 25 different cable networks.
But TCI's success has been sometimes overshadowed by the public's perception of it as a heavy-handed
company that occasionally resorts to bullying tactics to achieve its desired ends. For instance, in TCI's
earlier days, some of its systems were known to replace entire channels of programming for days at a
time, leaving these channels blank except for the names and home phone numbers of local franchising
officials. The strategy aimed to gain leverage in franchise negotiations. Fairly or not, Malone came to
personify TCI and its negative public image.
But despite its poor public relations record, few would deny that Malone and TCI are among the most
powerful forces shaping the television industry as it moves into the next century. Like Paley and Sarnoff
of an earlier era, Malone exercises great control over what America's television viewers will or will not
see. Nearly one in four cable subscribers in the United States is served by a TCI system, and these
viewers are directly affected by the decisions Malone makes. Even those who are not TCI subscribers
feel Malone's influence, because access to the critical mass of viewers represented by TCI's cable
systems is crucial to any programmer's success. Programmers often must seek to gain positions on TCI
systems in order to gather the audience numbers that provide solid financial status. John Malone is
therefore in the position of a gatekeeper who wields enormous influence over the entire television
marketplace, which helps to explain another nickname sometimes applied to him--"The Godfather" of
cable television.
Malone's most ambitious undertaking was an attempted merger between TCI and regional telephone
company Bell Atlantic. Announced in October 1993, the deal was scuttled four months later after
financial and philosophical concerns left the two companies unable to reach a final accord. Despite the
merger's failure, the venture is indicative of Malone's vision and resolve to secure TCI's place in the
future television marketplace. TCI continues to expand its empire by purchasing more cable systems,
forging alliances with other cable companies and telephone service providers, and strengthening its
non-U.S. holdings in cable and telecommunications. These connections position the company for a
central role in an emerging full-service communications marketplace. But whatever the future holds for
TCI, John Malone already has cemented his place as one of the key shapers of the American television
landscape over the last quarter of the 20th century.
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Queries to be answered:
How did TCI create value for its shareholders through 1995?
Through the strategy of diversification TCI tried to create value for its shareholders through 1995.
Decentralized in 1986 to facilitate restructuring, if and when it becomes necessary, TCI is currently
organized into six divisions, each with its own marketing, accounting, and engineering departments. Ten
senior executives run the day-to-day business, sharing the responsibility of supervising a total of only
250 corporate employees. TCI had diversified beyond its core US cable systems business by investing in
programming, telecommunications services , and direct to home satellite broadcasting along with
international cable television business.
For John C. Malone, to whom a day without a deal is like a day without sunshine, creating value through
diversification was the key. Slicing and dicing his way through the assets of Tele-Communications Inc.,
the giant cable company that he controls as chairman, Mr. Malone spinned off a clutch of noncore
businesses into a separate company.
The new company, TCI Ventures, was an oddball, if high-profile collection of investments that Tele-
Communications Inc. had made over the years in cable-related businesses. They had no obvious
strategic fit, including as they do 85 percent of the stock of Tele-Communications International; 30
percent of the Teleport Communications Group; 39 percent of the At Home Corporation, an Internet
access provider, and 30 percent of Sprint PCS, a privately held wireless communications company.
But for Mr. Malone, the spinoff was a way to get more value from assets that he believes have been
neglected by investors and overshadowed by Tele-Communications' prime business, the ownership of
cable systems with 14 million customers. That was the goal of his spinoff of Liberty Media in 1995.
Shareholders in Tele-Communications were able to swap up to one-third of their shares for an equal
number of shares of TCI Ventures. Both Mr. Malone and the company's president, Leo J. Hindery Jr., had
indicated that they intend to swap the maximum number of shares. If the exchange was fully
subscribed, Mr. Malone would end up with 25 percent of the voting shares of TCI Ventures, comparable
to his voting stake in Tele-Communications.
But the deal was complex. The company is making the offer attractive by pricing TCI Ventures at
somewhat of a discount to its value, much of which can be easily calculated because it has stakes in
public companies. Dennis Leibowitz, a media industry analyst at Donaldson, Lufkin & Jenrette, estimates
that an investor who exchanges three shares of Tele-Comunications for three TCI Ventures shares is
essentially getting an interest in TCI Ventures that is really worth four shares of Tele-Communications
stock.
Some analysts expected Tele-Communications stock to decline in value partly because the company is
spinning off assets. Indeed, Tele-Communications' stock closed at $17.50 on Friday, down from
$18.9375 on Aug. 13 when the TCI Ventures plan was disclosed.
Moreover, TCI Ventures was a tracking stock, an arcane security in which the shareholders do not
actually own the underlying assets, but simply have an economic interest in those assets. In this case,
the assets themselves were actually owned by Tele-Communications Inc., the parent company of the
operations.
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One reason for such a structure was that it permitted Mr. Malone to run Tele-Communications, TCI
Ventures and a third company, Liberty Media, also a tracking stock company that was created to hold
the company's cable programming interests, as a single entity for tax purposes. For example, the
combined entity could use its losses at TCI Group, the company that officially owns the cable systems
serving 14 million subscribers, to offset gains at TCI Ventures or at Liberty Media.
But despite the wheeling and dealing that a tracking stock permits, some investors are wary of buying a
stock when it is not clear just what they may end up owning. At least two analysts noted privately that
tracking stocks often trade at a discount.
For one thing, Mr. Malone has already been successful with such exchanges. In 1991, he orchestrated an
exchange offer that created Liberty Media, a company that owned cable programming services and
other businesses. At the time, Mr. Malone swapped roughly half his own shares in Tele-Communications
for shares in Liberty, a move for which he was widely criticized. But that stock went up seventeenfold
before the company bought it back three years later.
In 1991, TCI spun off much of its programming assets and 14 cable systems, due in part to antitrust
pressure from government regulators. The result was Liberty Media Corporation, with Malone as
chairman and principal shareholder. During the first two years in operation, Liberty Media launched
Court TV, introduced the film channel, Encore, and acquired an interest in the Home Shopping Network.
Another home-shopping network and competitor of the Home Shopping Network, QVC, partnered with
Liberty Media and the Comcast Corporation, giving Liberty Media an 80-percent voting stake in QVC.
In 1994, Liberty Media was reacquired by TCI. The following, year it joined forces with Rupert Murdoch's
News Corporation to create FOX/Liberty Networks, a national sports network. When Turner
Broadcasting was acquired by Time Warner in 1996, control of TCI's stake in Turner Broadcasting was
passed on to Liberty Media, giving them a 9 percent holding in Time Warner. The same year John
Malone became chairman of TCI following the death of Robert Magness.
Such moves had contributed substantially to its shareholders’ wealth. Liberty Media’s equity in
programming services was worth about 7 billion in late 1996 and TCI equity in telecommunications
ventures was worth $3.5 billion.
TCI’s diversification had contributed substantially to its shareholders wealth. It had diversified beyond its
core US cable system business by investing in programming, telecommunication services, direct-to-
home satellite broadcasting and international cable television business. Through Liberty Media TCI
owned equity in a large number of programming services, including Discovery Channel, QVC and Black
Entertainment Television. Some of the major acquisitions made by TCI in this direction have been
enumerated below:
• A new preferred stock issue was created by Tele-Communications Inc.'s cable subsidiary which
was targeted for use in some small system acquisitions planned by the company. But the real
goal of the issue was to facilitate TCI's planned $2.3 billion deal to acquire Viacom Inc.'s cable
unit. (Jan 1995)
• Tele-Communications Inc. paid more than $1 billion to acquire TeleCable.
• It acquired a minority stake in Acclaim Entertainment Inc (Feb ’95)
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• The company had put up about $170 million in stock for superstation distributor United Video
Satellite Group and closed in on a $580 million purchase of multiple system cable operator
Western Communications.(June 1995)
• Tele-Communications Inc. bought the cable systems owned by The Chronicle Publishing Co. for
an estimated $580 million in stock.(Jul 1995)
• In fall of 1995, Time Warner agreed to exchange $8 billion in stock for 82 percent of Turner
Broadcasting. TCI traded its 21 percent interest in Turner for the third largest stake in Time
Warner of 9 percent.
• Tele-Communications Inc gained control of Viacom Inc.'s cable systems in a deal valued at $2.25
billion. (Nov 1995)
• Liberty, the programming arm of cable giant Tele-Communications Inc., swapped its 41% stake
and voting control of Home Shopping for an interest in BarryDiller's television station group,
Silver King Communications Inc. Tele-Communications, which owned an option to buy control of
the television company, transferred the option to Diller in exchange for Liberty Media's
receiving a 20% equity stake in Silver King. (Nov ’95)
• Media moguls Rupert Murdoch and John Malone joined forces to form a new sports network
that would rival ESPN. (Dec 1995)
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Why did the company’s financial performance deteriorate so rapidly during 1996?
Table 1: TCI Communications Financial Performance 1994 – 1996
% change from % change from

1994 1995 1996 '94 to '95 '95 to '96
Basic Subscribers (million) 11.7 12.5 13.9 7% 11%
Revenue $4,116 $4,878 $5,954 19% 22%
Operating Cash Flow (EBITDA) 1801 2043 2230 13% 9%
Depreciation & Amortization 988 1223 1453
Interest Expense 777 962 1041 24% 8%
Capital Expenditure 1235 1665 1920 35% 15%
Cash Income Taxes 4 8 8
Free Cash Flow
(EBITDA-Interest Expense-
Capital Expenditure-Cash
Income Taxes) (215.00) (592.00) (739.00) -175% -25%
Total Assets $15,880 $20,364 $23,136
Property & Equipment (Net of

Accumulated Depreciation)
5579 6988 7192
Franchise Cost (Net of
Accumulated Amortization) 9297 11563 14794 24% 28%
Debt 10712 12635 14318 18% 13%
EBITDA/Subscriber $153.93 $163.44 $160.43 6% -2%
EBITDA as % of revenue 43.70% 41.88% 37.45%
Capital
Expenditure/Subscriber $105.50 $133.20 $138.10 26% 4%
Debt/Subscriber $915.50 $1,010.80 $1,030.07 10% 2%
Table 2: US Cable Industry Financial Performance 1994 - 1996
1994 1995 1996

EBITDA/Subscriber $170 $180 $191
EBITDA as % of
revenue 43.60% 43.80% 43.00%
Capital
Expenditure/Subscriber
$64 $89 $95
Debt/Subscriber $874 $903 $926
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From Table 1 & Table 2, we can observe that the EBITDA per subscriber for TCI stood at $160.43 as
compared to an industry average of $191. The EBITDA as percentage of revenue for TCI was 37.45% for
the year 1996, as compared to an industry average of 43%. The EBITDA per subscriber for TCI decreased
from $163.44 in 1995 to $160.43 in 1996, while the EBITDA as percentage of revenue decreased from
41.88% in 1995 to 37.45% in 1996. The EBITDA per subscriber decreased by 2% from 1995 to 1996 as
compared to a 6% growth from 1994 to 1995. The capital expenditure per subscriber increased from
$133.2 in 1995 to $138.1 in 1996, while the industry average stood at only $95 for the year 1996. The
debt per subscriber increased from $1010.8 in 1995 to $1030.07 in 1996, while the industry average
stood at only $926 for the year 1996.
Table 3: Cable System Financial Performance: TCI Vs Other Large MSOs, 1996
Media
TCI One Comcast Cox
Basic subscribers as % of homes passed 59.10% 59% 61.20% 65%
Monthly Revenue per Basic Subscriber $36.17 $36.88 $37.38 $35.33
Programming (% Revenue) 18% 20.20% 21.70% 25.50%
Plant Operations (% Revenue) 13.1 12.8 9.8 10.3
Marketing (% Revenue) 4 4 3.5 3.4
General & Administrative (% Revenue) 26.7 21.2 15.1 20.9
Operating Cash Flow (% Revenue) 37.5 41.7 49.9 39.9
Capital Expenditures per Basic Subscriber $138 $129 $103 $129
It is observed from Table 3 that the Operating Cash Flow (EBITDA as percentage of revenue) for TCI for
the year 1996 stood at $37.5, which is the lowest when compared to the industry competitors of TCI,
namely Media One, Comcast and Cox. On the other hand, the capital expenditure per basic subscriber
stood at $138, which was the highest when compared to its closest industry rivals.
The technology strategy adopted by TCI was completely out of sync with its top priority, which was to
address the threat posed by satellite channels’ capacity. To address that, TCI wanted to deploy digital
video as a mass market offering. But they had positioned digital rollout as a high end service. TCI also
spent heavily on fiber upgrades, to roll out data and voice communications, at the expense of protecting
its traditional video business. The company needed to upgrade the plant and set up new call centers
before rolling out new services. It needed a massive software program before setting up new call
centers. All these compelled TCI to adopt a very aggressive capital expenditure program, and this
explains the 35% growth in capital expenditure from 1994 to 1995, followed by a 15% growth from 1995
to 1996, which can be observed from the financial statements of TCI’s cable systems and its Technology
Ventures unit for the years 1994, 1995 & 1996.
Decentralized in 1986 to facilitate restructuring, if and when it becomes necessary, TCI was organized
into six divisions, each with its own marketing, accounting, and engineering departments. Ten senior
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executives run the day-to-day business, sharing the responsibility of supervising a total of only 250
corporate employees.
Since 1985, Malone had spent more than $3 billion acquiring interests in more than 150 cable
companies, representing three million subscribers. As TCI led the cable television industry into the
1990s, perhaps the most serious threat facing the company was that of reregulation. TCI had reached its
number one position through numerous mergers, acquisitions, and partnerships; it was not anonymous.
The company also faced serious challenges from technology, especially direct satellite transmission.
However, in anticipation of growth in the television-receive-only marketplace, TCI acquired TEMPO
Enterprises, a satellite communications company. While TCI had based its growth on maintaining a
highly leveraged financial position, the size of the company's debt made it vulnerable to a rise in interest
rates or to a recession, which jeopardized pay cable revenues. The decision making was centralized at
the HQ. This was a result of the confusion created by the company that was still trying to integrate the
various cable companies that it had acquired. No one had clear profit accountability.
The following steps were taken by the company throughout the year:
1. Company diversified into sports apparel stores in October 1995, though it had around $20 billion
in assets. It also acquired a minority stake in TSX Corporation. It also bought Prime Cable’s
system in suburban Houston for approximately $225 million. It acquired Portland, Oregon and
Nevada cable systems of Columbia International.
2. Liberty the programming arm of TCI, swapped 41% of its stake and voting control of Home
Shopping for an interest in Diller’s television station group, Silver King Communications in the
month of November 1995.
3. TCI bought the cable television systems of Viacom Inc. in November 1995 for around $2.25
billion. This unusually structured sale (a spin-off the cable unit and selling it to TCI) was a coup
for Viacom. The deal eliminated $1.7 billion of Viacom's $10.9 billion in outstanding debt.
Moreover, because of the structure of the deal, Viacom was able to avoid a tax bill that could
have reached $650 million. In return, Malone gained 1.2 million subscribers without having to
give up control of his company to a new group of shareholders.
4. In January 1996, TCI raised its stake in DMX Corp by buying a few million shares.
5. Tele-Communications acquired United Video Satellite Group in a stock-reorganization plan. UV
shareholders could receive one newly created TCI convertible preferred share for each class A or
class B share held.
6. In February, TCI declared that it would subsidize the computers as well as training programs
transmitted over cable wires and satellite systems to public schools. This was because, the TCI
officials predicted that it would be years before the venture will break-even and finally turn a
profit. Hence they wanted to nurture interest in the public school students and teachers.
7. TCI filed a shelf registration statement with the Securities and Exchange Commission (SEC), to
sell up to $1 billion of debt or equity securities. This filing has given TCI more financial flexibility
than before.
8. TCI bought Knight-Ridder’s 50% stake in TKR Cables for cash around $400 million to $420 million
in cash and common stock, and another $400 more in debt. It already owned the other 50%. TCI
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is paying roughly $2000 per subscriber. The company is also buying Knight-Ridder’s 15 percent
stake in cable systems in five southern states of US. In effect, the cash portion of the deal
includes paying back of $71 million in subordinated debt. In addition, the company will assume
$423 million in debt and liabilities related to the purchase.
9. TCI reported a loss of $79 million (16 cents a share) for the quarter ending Mar 1996, as
compared to its loss in the financial year ending Mar 1995, when it reported a loss of only $1
million. This loss was mainly due to investments in its satellite and cable businesses and
equipment upgrades, as well as preparation for launching new products, and also due to the
spin-off of its Liberty Media unit. 89% of this loss came from a loss of $70.31 million at TCI
Communications Inc., its domestic cable unit. Revenue for Tele-Communication Inc. rose by
about 26 percent to $1.91 billion from $1.51 billion. 72% of the revenue came from TCI
Communications.
10. TCI’s stock performance was up for criticism. In a raging bull market, when the industry average
has seen a rise of nearly 52%, an investor of TCI’s stock saw an increase of just 24%. No one
believed that TCI was capable of introducing a new product. By harnessing digital technology,
TCI promised its viewers everything from 500 channels of television, to phone service, to
lightning-fast internet access. Because it was Malone who promised it, and it did not happen,
people were disappointed.
11. TCI provided $25 million in bonuses to its employees. This amount was paid to its front-line
employees who were involved in customer-retention programs.
12. Continental Cablevision Inc. and Tele-Communications Inc. filed for authorization to compete for
local phone customers against entrenched regional Bell operating companies in four states. The
telephone arm of TCI, TCI Telephony Services, filed in Illinois, Connecticut, and the San Francisco
Bay in California, whereas Continental Cablevision applied for entry in Michigan.
13. In May 1996, Malone sold approximately 450,000 of his shares of TCI International for $21.75
per share i.e. $9.7 million.
14. TCI won a concession by the Mexican Government to provide direct-to-home television to
Mexico. It paved way for Grupo Televisa SA and its partners – TCI, News Corp of Australia and
Brazil’s Globo and Telecommunications Inc. – to move ahead with plans to provide DTH across
Latin America.
15. TCI agreed to buy 300,000 (costing around $595) modems from Lancity Corp. for the cable
television company’s allowing customers to access internet over its cable lines. The terms of the
deal were not disclosed. This deal was signed because TCI was gearing up to launch its Home
Online Service (which would provide access to the Internet thousands of times faster than over
ordinary copper telephone lines).
16. A company called SDI ad insertion systems (StarNet Development Inc.). This new deal brings
TCI’s total investment in SDI to more than $10 million.
17. TCI’s plan was to spin-off its satellite unit into a separate company. This move put the hidden
value of its direct-broadcast satellite operation into spotlight. But, it also helped the MSO to
solve the MSO’s recent debt problems. This breaking off helped TCI to reduce the debt, improve
shareholder value and it made it easier to raise the capital for expanding into the high-power
digital satellite market.
16 | P a g e
In August 1996, Tele-Communications Inc. reported that its second quarter loss had nearly doubled
compared with the previous year, because of higher costs for refinancing debt and losses from
investments in other cable companies, but that cash flow had improved. The owner of the programming
spin-off Liberty Media Corp, and TCI Communications Inc. reported a loss of $184 million compared with
a loss of $95 million in the corresponding quarter the previous year. Revenues for the largest United
States cable operator rose nearly 23 percent, to $2.02 billion from $1.65 billion. The results included a
$66 million charge for paying off debt early and for canceling bank credit lines. TCI's loss on investments
in other cable companies widened to $96 million, from $43 million in the 1995 quarter.
Tele-Communications Inc.'s cable operations posted a minuscule cash flow increase during the second
quarter of 1996 as the MSO waited for a recent round of rate hikes to kick in. On the top line, TCI
Communications boosted revenues 15 percent during the quarter, to $1.5 billion, while cash flow rose 6
percent to $549 million. However, that growth was generated primarily by acquisitions, such as the
takeover of Chronicle Publishing Inc.'s cable unit. Without those new revenues, TCI's cable sales
increased 9 percent and cash flow increased just 1 percent. Growth was held back by the timing of
aggressive rate hikes TCI had passed through to the bulk of its 11 million subscribers. From June, TCI
customers were hit with rate increases averaging 13 percent, but reaching as high as 28 percent. Basic
subscriber growth slipped. TCI added 43,000 basic units during the second quarter, up a meager 1.3
percent annualized.
As per the third quarter results, TCI reported a 3% growth in operating cash flow (before the impact of
acquisitions), compared to an expected double-digit growth in cash flow. This major drop in growth was
attributed to the unexpected loss of 70000 subscribers, largely due to severe competition from DTH
satellite services. Margins in the core cable business were down to 38% in 1996, from a peak of 50% in
1992. Such downfall in the growth rate was attributed to the following reasons:
Deterioration in the spread between pricing and programming costs

SG&A growth related to corporate projects
The SG&A growth was mostly related to the corporate projects which included setting up of new call
centers for customer service representatives, new billing system and the addition of staff to develop
digital, data & phone business.
TCI reported a fourth quarter loss of $29 million. The loss was mainly attributed to the lack of gains
posted the previous year from stock sales. The loss, compared with net earnings of $95 million for the
last three months of 1995, also resulted from higher costs at its programming subsidiary, Flextech. The
losses on revenues of $95 million were partly offset by gains at Cablevision, which was acquired in April
1995. The company also reported a loss of 102,000 premium customers as quarterly financial results
reflect the cable giant's retrenchment. The cable operator's fourth quarter was marked by a 2,500-
worker layoff, a decision to scale back capital spending to cut debt and preparations for the launch of
digital services in 1997. TCI reported operating cash flow growth of $28 million, or 5.9 %, for the fourth
quarter, not accounting for acquisitions and sales. That measurement of core cable growth compares to
growth rates of 12 % to 15 %. It was reported by the company that expenses for launching digital
17 | P a g e
service, customer service and information systems were relatively high. After the fourth quarter and
year-end results for the financial year 1996, John Malone, chairman and CEO of Tele-Communications,
Inc. was quoted saying,
“The fourth quarter was a time of transition during which we implemented a number of programs to
improve TCI's operating efficiencies. During the quarter, we negotiated a number of programming
contracts, improved the quality of our programming line-up and took steps to reduce operating
expenses. These actions and others currently underway should enable the Company to more fully use its
strengths in today's exciting environment.”
18 | P a g e
Should TCI proceed with the ubiquitous deployment of digital converters?
SWOT Analysis:
Strengths
TCI operational strategy was already gaining momentum

Support from many electronics vendor to create digital converter
Malone heading Cablelabs had the discretion to make decisions
By 1997 debt ratio would come down from 5 to 3.8
TCI stock performance had improved when it almost doubled in value
Weakness
TCI managers still undecided on the portfolio of services to be offered even after esting in
certain markets
Free cash flow will suffer
Major upfront investment required
Some applications that were thought to be provided were already available
Many applications have to be developed from scratch
Opportunities
Create a option against Microsoft WebTV

Majors like At&T and Madison Avenue could be Partners in services
Interactive deals from interactive marketers
1998 already called for a major rush for the presence in the internet-“first mover advantage”
Might be able to negotiate for equity stakes in new digital services
New trading stocks may not affect the credentials so much.
Threats
First generation digital converters were working beautifully

Microsoft aggressive stance on creating a space in cable internet
Thinking that companies will help in subsidizing the box
Present high speed internet services offered much faster pace than DSL
Wallstreet and media had other views on ubiquitous deployment
No point in installing devices where people have not shown interest
Rating agencies cutting down as they use free cash flow as a scale of measure
Opinion that the public will rate newco and oldco on complete different financial theory
Interactive marketers may not be interested without any sure assurance
Market trials will not be of value without critical mass of applications
New trading stocks may or may not attract Capital for ubiquitous deployment.
19 | P a g e
Financial overview
1998 scenario
total homes passed (us) in 1996 94,000,000.00
Total Basic subscribers 63,732,000.00
TCI basic subscribers 14,000,000.00
TCI home passed 23,688,663.28
TCI subscribers (us) in 1998 15,000,000.00
TCI home passed in 1998 24,742,429.78
Capital costs: HFC DC Internet POTS
Fixed per home passed 1998 250.00 20 11 35

Variable per new subscriber - 350 350 678
1.50% 1.30% 0.10%
Penetration 225,000.00 195,000.00 15,000.00
Variable costs 78,750,000.00 68,250,000.00 10,170,000.00
Fixed costs 3,092,803,722.50 7,422,728.93 3,538,167.46 865,985.04
Total costs 3,092,803,722.50 86,397,728.93 71,983,167.46 11,050,985.04
Revenue/per subscriber per month 16.89 35.69 44.52
Revenues estimated per month 3,800,250.00 5,219,662.50 667,800.00
Revenues estimated in 1998 45,603,000.00 62,635,950.00 8,013,600.00
EBITDA 42% 38% 0.34
EBITDA in vaue 19,153,260.00 23,801,661.00 2,724,624.00
Breakeven year 4.510862847 3.024291769 4.055967004
20 | P a g e
2003 Scenario
Capital costs: 27,500,000.00

0.41 0.24 0.11
Penetration 24,827,862.69 11,275,000.00 6,600,000.00 3,025,000.00
Variable costs 1,691,250,000.00 825,000,000.00 1,648,625,000.00
Fixed costs 4,791,777,498.77 225,500,000.00 72,600,000.00 96,800,000.00
Total costs 4,791,777,498.77 1,928,025,000.00 904,200,000.00 1,748,450,000.00
Revenues estimated per month 190,434,750.00 176,665,500.00 134,673,000.00

Revenues estimated in 1998 2,285,217,000.00 2,119,986,000.00 1,616,076,000.00
EBITDA 42% 38% 0.34
EBITDA in value 959,791,140.00 805,594,680.00 549,465,840.00
Breakeven year 2.008796414 1.122400659 3.182090446
21 | P a g e
Ubiquitous digital deployment
total homes passed (us) in 1996 94,000,000.00
Total Basic subscribers 63,732,000.00
TCI basic subscribers 14,000,000.00
TCI home passed 23,688,663.28
TCI subscribers (us) in 1998 16,000,000.00

75.00% 75.00% 75.00%
Penetration 12,000,000.00 12,000,000.00 12,000,000.00

Variable costs 4,200,000,000.00 4,200,000,000.00 8,136,000,000.00
Fixed costs 6,185,607,445.01 371,136,446.70 204,125,045.69 649,488,781.73

Total costs 6,185,607,445.01 4,583,136,446.70 4,416,125,045.69 8,797,488,781.73
Revenues estimated per month 202,680,000.00 321,210,000.00 534,240,000.00

Revenues estimated in 1998 2,432,160,000.00 3,854,520,000.00 6,410,880,000.00
EBITDA 42% 38% 0.34

EBITDA in value 1,021,507,200.00 1,464,717,600.00 2,179,699,200.00
Breakeven year 0.4 0.1 0.3
22 | P a g e
Organizational Structure and Design
n Case study
Comparative study of situations
1998 2003 Ubiquitous

Total Cost Required 3262235604 9372452499 23982357719
Total break even years 7 4.048835034 1.6
DC cost 86397728.93 1928025000 1021507200
DC breakeven 4.510862847 2.008796414 0.4
Internet cost 71983167.46 904200000 1464717600
Internet breakeven 3.024291769 1.122400659 0.1
POTS Cost 11050985.04 1748450000 2179699200
POTS breakeven 4.055967004 3.182090446 0.3
3E+10
2.5E+10
2E+10
1998
1.5E+10
2003
1E+10 Ubiquitous
5E+09
0
Total Cost Required DC cost Internet cost POTS Cost
4 1998
3 2003
Ubiquitous
2
0
Total break even DC breakeven Internet breakeven POTS breakeven
years
23 | P a g e
If Ubiquitous deployment is done:
Advantage:
• Will gain a percentage of transaction revenues from the usage of TCI’s digital services
• In late nineties, internet was booming, a number of start-ups and marketing companies raced
for their share on internet – an opportunity for first movers
• TCI can negotiate for equity stakes in these companies
• Ubiquitous deployment would pre-empt competition from traditional telephone companies
trying for a share in digital space
• Capital cost expected to reduce in near future owing to technological advancements in the
silicon valley
• 1 million households would generate $10 million by the end of 1998, also the 1st-generation
digital converter penetration was 5-13% within a few months
• By 2003, 2nd-generation digital converters were predicted to generate $17.44 in incremental
monthly revenue
• Video-on-demand(VoD) was a promising application, also the rapid reduction in headend
servers cost further improved its economic prospects
• HDTV has huge scope of revenue generation although the price of HDTV sets initially were high
and HDTV programming was in nascent stage
• Development of OpenCable standards helped reduce MSO’s capital expenditures
• In 1997, total cable modem subscribers - 111000
TCI’s share was < 4440
Penetration rate was high, TCI could leverage on this to provide High Speed Internet Access
Services
• Consumer market for online services was expected to grow from $6.9 to $9.7 billion in 3 years
from 1998
• Establishment of industry standards for cable modems reduced their life-cycle costs and thereby
capital item off MSO’s balance sheet
• Target market for cable telephony was huge, estimated to be in excess of $100 billion
• IP telephone services market was projected to grow from $49 million in 1998 t $1.9 billion in
2003
• Savings on international calls through IP over switched-circuit service averaged 30%-70%
24 | P a g e
Disadvantage:
• Free cash flow would suffer

• Aggressive investments
• Sceptical of TCI’s moves as they had failed to deliver on past promises
• Uncertainties about the deployment could not be resolved as they had to be developed from
scratch
• Fear of a lack of critical mass
• High capital costs and regulatory uncertainty in case of POTS market
25 | P a g e
What are the strengths and limitations of Malone’s management style?
Strengths
Top-down management style
This style helped Malone to establish and revise strategic priorities on critical issues. Malone had an
exceptionally strong and flexible intellect. His ability to process information was highly talked about. In
meetings, Malone verbalized his thought process and not his conclusions. He described a problem from
different perspectives and traced multiple, complex, cause-and-effect sequences to better understand
TCI’s options. Through this approach, Malone constantly subjected his ideas to challenges from other
members of TCI’s management team. He sometimes deliberately kept his strategies fluid as they were
being formulated, because he was concerned that managers might fixate on one opinion, then find it
difficult to adapt if circumstances changed. He believed that “if you give people too much, too early,
they find it hard to move to the next strategy”.
Willingness to Act Decisively:
TCI’s managers confronted inevitable tradeoffs between investing in new opportunities early to capture
first-mover advantages and delaying commitment in order to gather more data and thereby reduce the
risk of pursuing a flawed strategy. Compared with many CEOs, Malone was more secure in his position
and therefore more willing to act decisively in the face of uncertainty. He controlled 40% of
shareholders votes in late 1997 by virtue of owning a large number of TCI Class B stock.
Less number of employees:
Malone believed in keeping TCI a lean company. Only a dozen senior executives ran the whole show.
The heads of engineering, operations, and accounting were mere steps from one another, and they
were all close to Malone’s office. Malone did not believe in memos. No paper passed from his desk to
underlings. No executive sought to curry favor or engage in the sort of Kremlinesque politics that causes
ulcers in so many midlevel executives. Communication was direct, effective, and efficient. The
executives shared secretaries, and an automated service answered the phone.
“We don’t believe in staff. Staff are people who second-guess people,”
----Malone to an interviewer.
Malone brought only a lawyer or two when he showed up at negotiations. Malone refused the
conventional thinking that TCI needed to have a brand name or a Madison Avenue image. The company
had no human resources department, and it wouldn’t hire its first public relations person until the end
of the 1980s.
26 | P a g e
Effective Reward Policy:
Malone saw to it that his executives were richly rewarded, sometimes through a nifty little bit of self-
dealing that gave them sweetheart terms on cable systems they bought from TCI and sold back to the
company in a series of complex transactions. Sometimes this approach helped the company sidestep
rules restricting how many systems it could own in a particular market. When TCI was ready to re-buy
the properties, it paid the executives in company stock, at a very nice premium.
This didn’t bother Malone nearly as much, as he saw nothing wrong with such deals and defended them
as perfectly legal. He explained later that he along with Bob Magness had cut several deals that allowed
executives to own cable systems privately, then eventually turn them over to TCI.
For Malone, it was a way not only to compensate his top employees as the values grew but, more
important, teach them.
“Guys will understand a cable system a hell of a lot better if they have skin in the game,” he said often.
If TCI, either for regulatory or for financial reasons, couldn’t own the systems, Malone didn’t want to
lose them to someone else. In one deal, Magness, Malone, and other TCI executives bought 21 percent
of a cable company called Liberty Cable, in exchange for cable TV properties valued at about $4 million.
Two years later, TCI bought their stock for nearly $15 million worth of TCI shares; by 1987, the shares
were worth $40 million—a 900 percent profit on the original investment.
Critics may have judged the deal as enriching insiders, but Malone paid little attention. Malone’s
attitude was: “You don’t like the way we reward management? Don’t buy the stock”.
Malone made no effort to conceal his compensation schemes: Every deal involving TCI executives was
displayed prominently in SEC filings.
TCI also instituted an employee stock purchase plan, and it made even the secretarial staff rich. For
employees and shareholders alike, 1,000 TCI shares bought for just $875 in 1976 were worth $450,000
by the end of the 1980s, thanks to two spin-offs, 12 stock splits, and an ever-rising stock price. TCI made
millionaires of many middle managers, and even a few secretaries, and the payoff built loyalty among
employees.
Decentralization Policy:
Malone wanted TCI to run as a highly decentralized organization. He had cut the company into six
separate operating divisions, each nearly autonomous, each with its own marketing, accounting, and
engineering departments. Ten senior executives ran the day-to-day business, sharing the responsibility
of supervising a total of only 250 corporate employees.
“When you’ve got it running right, when you’ve got it decentralized, when you’ve got it structured
properly, it’s like flying the most powerful fighter jet in the world,” he liked to say.
TCI wasn’t as pure a cable company as Cox in Atlanta, Cablevision in New York, or Comcast in
Philadelphia. Malone had dozens of different partnerships with other cable operators to own and
operate systems, and TCI doubled as an investment vehicle, investing in an ever-expanding portfolio of
cable channels. Malone viewed himself as an investor and shareholder in each of these enterprises. It
was not unusual for TCI to make straight financial investments in operators he deemed shrewd.
27 | P a g e
Limitations
Certain aspects of Malone’s management style slowed down the decision making process. The managers
had difficulty decoding the action implications of his rapidly evolving situational assessments. Rarely did
he give direct orders. He had a tendency to think out loud, which was a problem for young managers.
Also he made dynamic decisions. He chalked out better plans while talking. He could hold two seemingly
disparate ideas in his minds, which sometimes was not easy to decipher.
28 | P a g e

Group 5 - Tele Communications Inc - Final Report Section C

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Organizational Structure and Design

Tele Communications Inc:

Tele communications Inc: A Brief Background

Tele Communications Inc: A Chronology

1957 Expands system to Plainview, Texas

1957 AT&T sells Canadian Northern Electric (later Nortel)

1958 Magness sells Texas holdings

1962 Magness buys Collier Electric cable group

1968 FCC allows non-Bell equipment to be conected to AT&T network

1973 TCI buys Foote Cone & Belding cable operations

1974 WTCI becomes second-largest US microwave common carrier

1975 CTCI becomes second-largest US cable operator, with 149 systems

1982 TCI becomes largest US cable operator with 2 million subscribers

1982 AT&T has one million employees

1983 Bell Canada becomes Bell Canada Enterprises (BCE)

1983 AT&T buys 25% of Olivetti for US$260m

1985 Forms Rogers Cantel with Rogers

1987 TCI takes major stake in Turner Broadcasting System

1987 Buys much of Westinghouse's Group W cable operations

1988 Buys part of Storer cable group from KKR

1990 McCaw Cellular Communications acquires 52% interest in LIN Broadcasting

1990 Liberty Media formed as TCI's programming arm

1991 TCI buys Cooke Cablevision

1991 AT&T buys NCR for US$7.4bn

1991 Liberty becomes partner in SportsChannel Chicago and SportsChannel Pacific

1992 Malone forecasts 500 channel universe in speech as Anaheim

1993 TCI US$35 billion merger with Bell Atlantic abandoned

1994 McCaw acquired by AT&T for US$11.5bn

1994 LIN broadcasting stations spun off as LIN TV

1995 TCI swaps stake in Turner for 7.5% of Time Warner

1996 Death of Magness, succeeded by John Malone

1996 Liberty Satellite established to sell satellite dishes

1996 AT&T spins off Bell Laboratories as basis of Lucent Technologies

1996 Sells NCR

1996 Sells AT&T Capital Corporation (leasing unit) for US$1.8bn

1997 AT&T sells Submarine Systems unit to Tyco for US$850m

1999 Liberty Media takes stake in News Corporation

2000 Liberty takes stake in Cendant

2000 Liberty sells stake in BET to Viacom for US2 billion

2000 Liberty buys Video Services Corporation for US$125m

2000 Buys 9% stake in IDT

2000 Pays US$200m for 5% of Primedia

2000 Buys Ascent Entertainment Group

2000 Liberty buys film processor Todd-AO, renamed Liberty Livewire

2001 Liberty Media spun off by AT&T

2001 Liberty takes US$1.4bn stake in UnitedGlobalCom/United Pan-Europe Communications cable

2001 AT&T spins off AT&T Wireless

2002 Sells stake in Telemundo to NBC

2003 Sells Corus Entertainment shares for US$100m

2003 Buys outstanding shares of Ascent Media Group

2003 Buys remaining 57% of QVC from Comcast for US$7.9bn

2004 Liberty completes acquisition of controlling interest in UnitedGlobalCom

2004 AT&T announces that it is no longer seeking residential customers

2004 Liberty sells stake in UK cable network TeleWest for £119m

2004 Increases voting stake in News to 17%

2005 AT&T agrees to US$16bn takeover by SBC Communications

2005 agrees to acquisition of SBS by KKR and Permira

John Malone: An overview

Table 1: TCI Communications Financial Performance 1994 – 1996

% change from % change from

Property & Equipment (Net of

Table 2: US Cable Industry Financial Performance 1994 - 1996