Tele-Communications Inc. said the tracking stock it is creating for its holding in Sprint Spectrum L.P. is designed to raise cash, and shouldn’t be seen as a sign that TCI has altered its vision of being an integral part of the partnership.
“From the wireless side of things, we continue to be excited about the opportunities for PCS,” said TCI spokeswoman LaRae Marsik.
Sprint Spectrum L.P. owns personal communications service licenses in major cities throughout the country, covering more than 150 million people. TCI owns 30 percent of that partnership.
Denver-based TCI filed preliminary materials with the Securities and Exchange Commission to create two new series of target common stock to be designated as the Series A Telephony Group Common Stock and the Series B Telephony Group Common Stock.
The TCI Telephony Group is comprised of only two holdings: TCI’s 30 percent interest in Sprint Spectrum and TCI’s 49.4 million shares of Teleport Communications Group, a competitive access provider.
TCI advisers Bear, Stearns & Co. Inc. said the company wants to receive money for its economic interest in the Sprint partnership without giving up its legal interest. Bear Stearns estimates the Telephony Group’s assets have a public market value of $2.5 billion to $3 billion.
But unlike the pre-launch days of 1994, when Sprint Spectrum formed, it’s not clear what TCI’s 30 percent of Sprint Spectrum is worth in today’s market, said Michael Elling, senior telecom analyst for Prudential Securities.
“PCS has come to market with a terrible whimper and cellular has responded aggressively. There wasn’t a bang or the creation of a value proposition that was difficult for the competition to maintain. So investors are indifferent, and don’t know what to make of it,” Elling said.
The four owners of Sprint Spectrum L.P. are TCI, Sprint Corp., with 40 percent, and Cox Communications Inc. and Comcast Corp., each with 15 percent.
TCI has invested just under $1 billion in Sprint Spectrum in the last two years. It is scheduled to contribute $200 million this year and $120 million in 1998.
“The primary purpose of a stock offering would be to raise money to continue to develop TCI’s wireless and alternative access opportunities,” said John Malone, TCI president and chief executive officer. Proceeds may be earmarked for debt reduction and reinforcement of the investment grade rating.
Selling its 30 percent isn’t out of the question, but TCI said that isn’t a goal. TCI may be precluded from reducing its equity position in Sprint Spectrum without giving Sprint Corp. the right of first refusal, Bear Stearns said. But why would Sprint Corp. be interested in buying? Elling said.
“There’s no need to buy it back, unless TCI would do something damaging. TCI is along for the ride and should benefit from the value,” he said.
Another goal of TCI is to pull two developing assets away from its core cable operations stock. TCI has struggled for the last year with a heavy debt load and intense competition from satellite TV providers. Last spring, Moody’s Investors Services Inc. lowered the ratings on TCI’s long-term senior unsecured debt, stating it was concerned about TCI’s financial flexibility due to the company’s heavy investment and acquisition spending. Moody’s said that while TCI’s investments may have long-term asset value appreciation potential, the investments negatively affect bondholder risk.
