Tele-Communications Inc.

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Tele-Communications Inc
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Tele-Communications, Inc.
IndustryCable television
Founded1968; 56 years ago (1968)
Defunct1999; 25 years ago (1999)
FatePurchased by AT&T Corporation for broadband Internet services
Cable television systems sold to Cablevision, Comcast, Charter Communications, and Cox Communications
SuccessorAT&T Broadband
HeadquartersDenver, Colorado, U.S.
Key people
John Malone

Tele-Communications, Inc. (TCI) was a cable television provider in the United States, and for most of its history was controlled by Bob Magness and John Malone.

The company was started in 1958 in Bozeman, Montana as Western Microwave, Inc. and Community Television, Inc., two firms with common ownership.[1] The companies merged in 1968 and operations moved to Denver, taking the name Tele-Communications Inc. It was the largest cable operator in the United States at one time.

After going public in 1970, the company grew rapidly, and became the top cable provider in the United States. After a failed merger attempt with

Bell Atlantic in 1994,[2] it was purchased in 1999 by AT&T, whose cable television assets in select markets were later acquired by Charter Communications, Cox Communications, and then Cablevision and Comcast Corporation
.

History

After graduating from

mortgage
on his home and borrowed $2,500 from his father. His wife did the office work while Bob put up the wires himself.

Two years later Magness sold the system and was looking for a way to invest the sales proceeds. Another cable pioneer, Bill Daniels, told him about a community antenna system in Bozeman, Montana.[3] The Kearns-Tribune Corp., publisher of The Salt Lake Tribune, which owned a cable system in Reno, Nevada, began relaying signals by common carrier microwave from Salt Lake City in 1956.[4] In 1958 it became a partner with Magness in establishing a partnership for cable TV in Montana. George C. Hatch and Brian Glasmann were also partners in the companies known as Community Television Inc. and Western Microwave Inc. The Magness family moved to Bozeman.[1] Six systems were built, serving a total of 12,000 homes.[3]

In 1962, Magness purchased Collier Electric Company, which had subscribers in Wyoming, Colorado, and Nebraska, bringing the total number of subscribers to 18,000. Magness later moved to Scottsbluff, Nebraska.[5]

Over time, Magness acquired more systems but remained in Bozeman. By 1965, Daniels told him the companies needed to be located in a larger city.[3] Salt Lake City and Denver, Colorado, were both considered.[5] In 1968, the companies moved to Denver and became Tele-Communications Inc.

Tele-Communications Inc. went public in 1970.[3] At the time, it was the 10th largest cable company in the United States. By 1972, with 100,000 subscribers, Magness needed someone with more business knowledge to run the operation. He decided on John Malone, president of Jerrold Electronics, a division of General Instrument. Malone took on the bankers who wanted to call in their loans, and effectively saved the company from bankruptcy. Magness made Malone CEO but remained as chairman. By 1981, Malone had made TCI the largest cable company in the United States.[3][6][7]

In 1982, Malone hired Peter Barton, who called himself the company's "

Cable Value Network (later QVC) in 1986, and in 1991, president of TCI spinoff Liberty Media. Barton had a playful side and even kept toys in his Liberty Media office, and a gorilla costume to represent his status as "second banana" to Malone. Yet he had a reputation as "a shrewd and sometimes vicious negotiator".[8][9]

In 1995, TCI acquired the cable television assets of

Viacom
.

First Merger

In May 1991 United Artists announced a merger deal with their largest shareholder TCI (now[update] Liberty Media) to form the largest cable operator in the US, a deal valued at $142.5m for the 50% not already owned by TCI.[10] TCI and US West announced a joint venture, and in 1992 the joint venture company became Telewest Communications. By June, the deal was approved.[11] A week later on June 8 the deal was finalized with TCI acquiring the remaining 46% of United Artists, to allow full control.[12]

Flextech

During the autumn of 1993 talks were also held with

UK Gold, and 31% of UK Living
and 25% of the Children's Channel which increased its share in that channel.

Mile High Cablevision

In Spring of 1995 TCI purchased Mile-Hi Cablevision, the CATV provider for the city of

Denver, Colorado and the city of Glendale, Colorado
. Mile-Hi Cablevision had been in business since 1983. And prior to the merger, TCI served only the suburbs around the city & county of Denver.

Merger with Liberty Media

In Spring 1993,

long distance service or transmit satellite television services such as Discovery Channel. TCI would also have to sell operations in Bell Atlantic territory. As for antitrust concerns, Bell Atlantic argued that competing telephone services could be offered where TCI had cable systems, and video services could compete with TCI. Vice President Al Gore supported the idea of improving the nation's infrastructure, and the business community took his statement to mean administration approval of the merger.[15]

The $33 billion deal, based on a $54 per share price for Bell Atlantic stock, would have been the largest in American telecommunications history, the resulting company serving one in four cable TV customers. But it fell apart for many reasons, including declining stock prices for both companies. Malone, who would have made over $1 billion, wanted more shares of Bell Atlantic when its price dropped below $54, which Ray Smith refused to do because it would lessen the value of existing shares. The two companies also had different cultures. Bell Atlantic paid dividends and was used to being regulated, while TCI tended to invest in the business rather than pay dividends. And thus ended a $20 billion project to expand the information superhighway, though other mergers promised to put the project back on track, with a more local emphasis rather than attempting a nationwide system upgrade.[16]

The Bell Atlantic deal also fell victim to new federal regulations that reduced cable bills up to 16 percent, costing TCI $300 million over two years. Higher spending coupled with lower cash receipts made TCI less attractive to investors, and the stock price dropped to $17 a share, half what experts believed the company was worth.

Primestar, and predicted a 28 percent share of the satellite market by the end of 1995.[17]

In Fall 1995,

Gerald Levin represent TCI.[18] This did not satisfy federal regulators. Malone ended the 15 percent discount on Turner programming that would have lasted 20 years, and Time Warner had to pay $67 million to cover TCI's taxes due.[19]

Magness died in November 1996, with a 26 percent share of the company. No one believed this meant the end of Malone's tenure as head of TCI, even though Malone called Magness his "mentor" and "father figure". Still, TCI had $15 billion in debt and negative cash flow of $400 million for 1996. Malone believed he could turn the company around. This meant higher rates for customers as well as programmers. Malone even succeeded in getting

Fox News Channel to pay $200 million for his companies to add the network. At the same time, cost cutting had to take place, and many of the cable customers were in rural areas with old equipment and limited offerings. Upgrading to fiber optic service, which could be used for Internet
and telephone service, would be cost-effective only in urban areas. Satellite TV, while not a major threat yet, represented a possible problem in the future. The good news: satellite companies could not offer local channels or phone service, and individual dishes served only one TV.

The new technologies had two benefits for TCI. First, customers would need set-top boxes, which TCI already had ordered from General Instrument. Another advantage was technology developed by a new company called Imedia which would allow four times as many channels to be delivered using existing technology, even in areas not getting fiber-optic service.

On the other hand, digital service had its disadvantages. Customers who did not even want a box would still lose channels so that digital channels could be added. And General Instrument only reluctantly agreed to allow multiple suppliers to bring TCI's costs down.[20]

In 1997 TCI sold ten of its cable systems in NJ and NY to Cablevision.[21]

TCI improved its fortunes, hiring Leo Hindery as president and making Malone chairman and CEO. Still, it was regarded as a company likely to be taken over. TCI was acquired by AT&T in 1999 and in 2002, Comcast acquired the rest of TCI's cable television systems.

Merger

In 1997 TCI merged with the Kearns-Tribune Corp., publisher of The Salt Lake Tribune, Utah's largest newspaper. Kearns-Tribune Corp. was a large holder of TCI stock.

On June 24, 1998, AT&T, the nation's largest provider of telephone service, announced a plan to buy TCI, second to Time Warner among cable operators with 13 million customers, for $32 billion in stock and $16 billion in assumed debt. This marked the first major merger between phone and cable since deregulation. The new company, to be called AT&T Consumer Services, planned to "significantly accelerate" efforts to offer

SBC Communications (which purchased AT&T in 2005 and took the AT&T name), but this would have meant regulatory problems. Liberty Media stockholders would receive separate tracking stock.[22]

Federal regulators and the two companies' shareholders approved the merger February 17, 1999. By that time, the value of the stock portion of the deal had increased to $43.5 billion. The Federal Communications Commission did not require TCI to give other companies access to its cable lines, despite requests by America Online and others. TCI had made its cable lines capable of providing Internet access, and AT&T wanted those same lines to provide local phone service, which it was already doing in another agreement with Time Warner.[23]

AT&T completed its acquisition March 9, 1999, and TCI became AT&T Broadband and Internet Services, the company's largest unit, with Hindery its chief executive. Malone moved over to Liberty Media, which remained a separate stock and included newer TCI businesses under the heading of TCI Ventures.[24]

See also

References

  1. ^ a b "1958". Chronomedia. Archived from the original on December 13, 2004. Retrieved August 5, 2018.
  2. ^ Ramirez, Anthony (24 February 1994). "Partners in a Failed Merger, 2 Very Different Companies". The New York Times. Retrieved 2009-02-24.
  3. ^ a b c d e "Wayback Machine has not archived that URL". www.cablecenter.org. Archived from the original on 2012-02-13. Retrieved 2023-04-22.
  4. ^ O. N. Malmquist, The First 100 Years: A History of the Salt Lake Tribune, Utah State Historical Society, 1971 pp391
  5. ^ a b "Wayback Machine has not archived that URL". www.cablecenter.org. Archived from the original on 2012-02-13. Retrieved 2023-04-22.
  6. ^ Retrieved on 2009-03-12.
  7. ^ Retrieved on 2009-04-02.[permanent dead link]
  8. ^ "Peter Barton, the Cable Pioneer at John Malone's Side, Passes Away". Cable World. 2002-09-16. Retrieved 24 February 2009.
  9. ^ Retrieved on 2009-04-02.
  10. ^ "United Artists Entertainment Agrees to Merger : Media: It will become a subsidiary of Tele-Communications Inc., the nation's largest cable-TV firm". Los Angeles Times. 1991-06-08. Retrieved 2013-07-13.
  11. ^ Storch, Charles (1991-06-08). "TCI Cools Opposition With Sweetened United Artists Bid". Chicago Tribune. Retrieved 2013-07-13.
  12. ^ "COMPANY NEWS; Tele-Communications In United Artists Deal". The New York Times. 1991-06-08. Retrieved 2013-07-13.
  13. ^ "Flextech stock flies after TCI buy". HighBeam Research. 1993-11-01. Archived from the original on 2015-09-24. Retrieved 2013-07-13.
  14. ^ "Merger Plans For Flextech". The New York Times. 1994-01-03. Retrieved 2013-07-13.
  15. ^ "Plugging in for Profit". U.S. News & World Report. 1993-10-17. Archived from the original on 2012-10-13. Retrieved 2013-07-13.
  16. ^ Retrieved on 2009-04-02.
  17. ^ Retrieved on 2009-04-02.
  18. ^ Johnnie L. Roberts, "The Friendly Giant: Is Time Warner Favoring Its Merger Partners?" Newsweek, Feb 19, 1996.
  19. ^ Retrieved on 2009-04-02.
  20. ^ Retrieved on 2009-04-02.
  21. ^ "Cablevision to Buy 10 New York Systems". Los Angeles Times. 1997-06-10. Retrieved 2013-07-13.
  22. ^ Retrieved on 2009-04-02.
  23. ^ Aversa, Jeannine (1999-02-17). "FCC Approves AT&T-TCI Deal". Associated Press. Retrieved 2 April 2009.
  24. ^ "AT&T Calls TCI Deal Finished". The Hollywood Reporter. 1999-03-10. Retrieved 2 April 2009.
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