The involvement of Tele-Communications Inc. in Sprint Spectrum L.P. is in a holding pattern, possibly awaiting stronger financial times for TCI.
TCI shareholders voted overwhelmingly last month to create two new series of Telephony Group tracking stocks. Series A Telephony Group Common Stock contains TCI’s 30 percent interest in Sprint Spectrum L.P.; Series B holds TCI’s 49 million shares of Teleport Communications Group, a New York-based competitive access provider. No date has been set for an offering.
The Sprint Spectrum partnership holds licenses across the nation to provide personal communications services using Code Division Multiple Access technology. Using the Sprint PCS brand name, the group began launching markets last fall, and now offers service in 20 cities.
While TCI has contributed money, it isn’t playing the role first envisioned when the partnership formed in the fall of 1994.
Denver-based TCI has 14 million cable TV subscribers, which means 14 million direct lines to American homes and businesses. Sprint may be one of the nation’s largest long-distance providers, but it doesn’t have direct access to customers-it must go through a local phone company to get to its customer.
The 1994 dream was that TCI would upgrade its coaxial lines to fiber and launch local telephone service that would rival the regional phone companies. And the wireless service of Sprint PCS would be bundled into that offering.
But during 1995 and 1996, that plan began to unravel.
TCI began to struggle under its debt load. Antagonized by intense competition from satellite TV providers, TCI had to refocus on its core business.
Although TCI has continued to make its investment payments into the partnership, it renegotiated the contracts outlining its move to telephony service. The company said it was re-thinking plans to do a ubiquitous upgrade to fiber.
Sprint quickly shifted gears and said it would buy local phone time and resell it, in order to preserve its plan for a package deal.
TCI has invested slightly less than $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 other owners of Sprint Spectrum L.P. are Sprint Corp. with 40 percent, Comcast Corp. and Cox Communications Inc., each with 15 percent.
Comcast attributed part of its net loss during the fourth quarter, ended Dec. 31, to its share of start-up losses for Sprint PCS. Comcast said it expected its share of these losses to be significant in future periods as well, which is included in equity in net losses of affiliates.
Cox is building a novel network in California using cable plants. Commercial service was launched Dec. 27 in San Diego, will be activated in Orange County by mid-year and turned on in Los Angeles by year’s end.
The service is branded Sprint PCS.
