One man’s vision turned TCI into a global network with assets of around
There aren’t many companies that reward their managers for making a
loss, but the Denver-based TCI is one of them.
In the 25 years the company has taken to grow from a local antenna
business into a global telecommunications and media company, it has
seldom posted a profit - and yet its interests add up to assets of
dollars 25 billion, making it bigger than Walt Disney, and even dwarfing
Rupert Murdoch’s massive News Corporation.
There’s a simple explanation for this. The TCI president and chief
executive, Dr John Malone, is said to have told his senior staff that if
their divisions ever showed a profit, he would find the person
responsible and fire them. As profit inhibitors go, that’s not a bad
There is method in this apparent madness. Malone may have gained his
doctorate in electronics but its his financial engineering that has
impressed observers most. In particular, his policy of using any cash
generated to buy businesses rather than pay out dividends - thus
avoiding paying millions of dollars in corporate tax. Investors haven’t
complained because their stock has been one of the fastest-growing in
Wall Street’s history.
When Malone, now aged 56, joined TCI in 1973, he had cut his teeth in
tele-communications at the management consultancy, McKinsey. TCI was
actually founded by its chairman, Bob Magness, who now shares voting
control with Malone. But although Magness spotted the potential of local
cable in the 50s and sold his ranch to finance the company, it was
Malone who took TCI from its local roots on to the international stage.
The Denver-based giant now owns the largest cable operation in the US
and UK, and directly operates businesses in 20 countries worldwide. It
also has interests in more than 100 cable and satellite TV channels - a
figure that can be expected to grow exponentially as digital capability
becomes a reality. Finally, when the current Time Warner/Turner
Broadcasting merger clears all the regulatory hurdles, TCI will be the
largest single shareholder in that media megalith. But despite all this,
and a global alliance with Rupert Murdoch’s News Corporation which was
formed this summer to run Fox Sport TV sports channels around the globe,
the company has a low profile outside its North American heartland.
In part its invisibility is to do with TCI’s complex ownership
structure, which helps disguise just how far the corporation’s tentacles
reach. Keeping pace with the complex web of joint ventures,
partnerships, minority stakes and cross holdings that make up the
company is an achievement in itself.
In the UK alone, TCI has a majority shareholding in a publicly traded
company called Tele-Communications International or Tinta. Tinta has a
controlling interest in the UK’s largest cable operator, Telewest. It
also has a 49 per cent stake in the European music programmer, DMX
Europe, and a 48.8 per cent stake in the publicly quoted company,
Flextech - although in this company it has 50.9 per cent of the voting
shares, giving it full effective control. Flextech has stakes ranging
from 15 per cent to 100 per cent in a further 12 cable and satellite
channels, and a fifth share in the quoted terrestrial TV service,
Scottish TV, which in turn has interests in a raft of Scottish
newspapers, and a programme sales company. Complicated? The UK
arrangement is transparent compared with TCI’s multifarious interests in
TCI claims there are two main reasons for its complexity. The first,
inevitably, is regulation. TCI can’t legally own broadcast licences in
markets where it has cable interests, which is pretty much all of them:
there are restrictions on the number of channels it can own and in each
territory there is a different regulatory authority defining ownership
in a different way. So a little complexity is perhaps to be expected.
‘We contort ourselves to fit the rules,’ was how Malone described the
The second reason is that the company, by keeping its fingers in many
pies, can benefit from economies of scale.
‘We regard all the disparate parts of our business as a whole,’ Adam
Singer, the International president and chief operating officer of Tele-
Communications, says. ‘We see no point in being in distribution of
programmes, for example, and not in their production. And if you take
our cable and telephony services and broadcast TV interests and
satellite channels and programme-makers together you can see how we
start to get economies of scale.
‘Take Europe, for example, where the level of subscribers to cable and
satellite is still small. It would be very difficult because of that to
make a standalone channel work. You have to be able to share the costs.
What we try to do is to maximise the economies of scale which is the
whole trick to making a successful business.’
And TCI is a hugely successful business, emerging as a favourite to
complete a deal with the BBC to help it into the international world of
cable, satellite and digital broadcasting. Although this move came as a
surprise to those who had not kept pace with TCI’s growth in power, it
seems a logical step for one who is already in bed with many of the
world’s big guys. Indeed, those in the know have already realised that
TCI represents one of the biggest big guys there is.
TCI at a glance
TCI has 13.5 million analogue cable subscribers, with a digital service
rolling out later this year in three US markets. This will bring up to
80 more channels, including pay-per-view. Total cable revenues were
dollars 5.1 billion last year.
Primestar is a digital satellite service with more than half-a-million
TCI Internet Services offers high-speed Internet access, principally
through a company called @Home. This is being tested in three US markets
before a national and international rollout. TCI also has stakes in the
entertainment software publisher, Acclaim, and the Internet software
TCI Telephony Services offers telephone services to cable subscribers.
Liberty Media is the largest provider of cable programming in the US,
and runs several worldwide sports cable and satellite channels in
conjunction with News Corporation, including the Premier Sports Network,
Fox Sports and Prime International.
Liberty also owns 23 per cent of Turner Broadcasting Systems, which
operates channels ranging from CNN and the Discovery Channel through to
Court TV, the Cartoon Network and E! Entertainment. It also owns the
pay-per-view movie network, the Encore Media Corporation.
Silver King Communications, a venture with Murdoch’s former lieutenant,
Barry Diller, is the sixth-largest network terrestrial TV broadcaster in
the US, and owns the world’s largest home-shopping channel, QVC.
Tele-Communications International operates in nine European countries,
and eight South American and Asian markets.
Its prime programming arm in Europe is the UK-based Flextech company,
which operates Bravo, the Children’s Channel, UK Gold and UK Living, the
Family Channel, EBN, the Playboy Channel, Discovery, TLC, Sell-A-Vision,
Kindernet, VTV and the Parliamentary Channel.
In France a venture with Canal Plus and Compagnie Generale d’Images led
to five cable and satellite channels.