A change in business strategy for Tele-Communications Inc. isn’t expected to shake up the basket of eggs for the wireless venture between Sprint Corp. and three cable companies.
“We have all the funding we need at this time, and no other commitments are necessary,” said Ed Mattix, spokesman for Sprint Spectrum L.P., noting the venture has already paid for operating licenses and secured money for network buildout.
TCI owns 30 percent of Sprint Spectrum L.P. and has paid nearly $1 billion into the partnership. TCI said it remains committed to the wireless venture, despite some changes it is making as the nation’s largest cable TV provider.
TCI has a direct line into 14 million American homes, a coveted ability in these days of local telephone competition. However, TCI has been losing customers to digital broadcast satellite systems and is struggling with a large debt load.
The company announced last week it intends to improve cash flow margins and reduce expenses by retreating from an ambitious plan to do a ubiquitous upgrade to fiber optic cable. Instead, TCI wants to convert to fiber in some areas and launch digital converters in other areas as a way to offer expanded channel capacity.
“There’s a heightened sensitivity about TCI’s activities, so some things are taken out of context,” said LaRae Marsik, TCI spokeswoman. “We’ve been talking for over a year now about the evolution of this company … from being a single product provider to a multiple product provider. Some changes are just now being realized.
“We’re not blindly upgrading across the board until we see what that change gives us. We’re not risking capital without a certainty of return,” Marsik said.
TCI’s investment into Sprint has been gradual, $40 million in 1994, $650 million in 1995 and $225 million in 1996. There is no relationship between TCI’s investment in Sprint Spectrum and TCI’s public battle against high operating margins, the company said.
Sprint Corp. owns 40 percent of Sprint Spectrum L.P., Cox Communications Inc. and Comcast Corp. each hold 15 percent.
The partners initially came together in 1994 with a plan that included:
plans to offer local telephony through cable,
a commitment to contribute money into an equity pool
and a pledge to market the Sprint PCS wireless service.
In February, the cable telephony portion of the plan was pulled out of the Sprint Spectrum partnership. Cable operators now will negotiate separately, with Sprint Corp., the long-distance provider, about plans to upgrade their cable systems to offer telephone service. Those contracts are no longer part of the Sprint Spectrum limited partnership.
And the equity pool has been filled. The partners have contributed to a $4.2 billion equity pool according to their ownership level.
From the $4.2 billion, Sprint Spectrum paid $2.1 billion for its 29 personal communications services licenses. The remaining $2 billion is being used to build out the nationwide wireless network. Sprint Spectrum also has acquired bank credit, vendor financing and raised money in a public offering this summer.
So with cable upgrades for telephony a problem shoved over to the long-distance carrier and the equity already contributed, TCI is left holding only the obligation to market the Sprint PCS wireless phone service.
“The partners are committed for the long run, because the scope and reach of the business provides so much,” Mattix said.
