EXHIBIT 20
[LOGO OF OPTEL, INC. APPEARS HERE]
OPTEL, INC REPORTS RESULTS FOR FIRST QUARTER OF FISCAL 1998
MAJOR PROMISES DELIVERED:
TELEPHONE SWITCH LAUNCHED; MAJOR CREDIT FACILITY IN PLACE; PHONOSCOPE
ACQUISITION CONSUMATED; PROFITABILITY INCREASES IN LINE WITH PLAN
DALLAS, January 14, 1998 - OpTel, Inc ("OpTel") today announced its unaudited
financial results for the first quarter of the fiscal year ending August 31,
1998 ("fiscal 1998"). Operating and financial highlights (in thousands of
dollars where appropriate) include the effect of the acquisition of Phonoscope
which was completed on October 27, 1997.
OPERATING HIGHLIGHTS - COMPARED TO FIRST QUARTER OF FISCAL 1997
UNITS UNDER CONTRACT
. 43% increase in units under contract for cable television from 252,473 to
361,873
. 108% increase in units under contract for telecommunications from 23,970 to
49,938
CUSTOMER NUMBERS
. Cable television customers up 41% to 170,646
. Telecommunications customers up 55% to 6,922
PENETRATION
. Cable television penetration up 2.3 percentage points from 51.9% to 54.2%
. Telecommunications penetration up 6.1 percentage points from 34.3% to 40.4%
Three Months Ended
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November 30, August 31, Percent November 30, Percent
1997 1997 increase 1996 increase
------------- -------------- --------------- -------------- ---------------
Financial highlights
TOTAL REVENUE 12,252 10,720 14.3% 9,076 35.0%
Cable television 11,473 10,000 14.7% 8,374 37.0%
Telecommunications 779 720 8.2% 702 11.0%
EBITDA (1,485) (3,550) 41.8% (857) (173.0%)
Commenting on the Company's results, Louis Brunel, President and Chief Executive
Officer, said:
"I am pleased to be able to report further solid operational and financial
growth in the quarter. Operationally we continued to grow units under contract
and customer numbers in line with our forecasts. In Houston we successfully
launched residential CLEC services using our first class 5 telephone switch and
consummated the acquisition of Phonoscope. Our next telephone switch will be
deployed in Dallas early in calendar year 1998 and we are currently reviewing a
series of alternatives for further switch deployment in our other markets
shortly thereafter."
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Mr Brunel continued "Financially we have been able to grow our revenues whilst
maintain our operating costs. As a result our EBITDA loss reduced sharply from
the previous quarter and we are still forecasting to achieve break even EBITDA
in December 1997. Additionally, shortly after the end of the quarter we
successfully completed syndication of our $150 million senior secured credit
facility and I am pleased to report that this will provide us with sufficient
capital to fund our planned expansion for around the next two years."
OpTel is the largest provider of private cable television services to residents
of MDU developments in the United States and is expanding the telecommunications
services it offers to MDU residents. The Company provides cable television
services and (in certain markets) telecommunications services, to MDU residents
principally under long term contracts with owners of MDUs in eleven major cities
(Houston, Dallas - Fort Worth, San Diego, Phoenix, Chicago, Denver, San
Francisco, Los Angeles, Miami - Ft. Lauderdale, Tampa and Austin). OpTel is
majority owned by Le Groupe Videotron Ltee ("GVL"), owners of the second largest
cable television operator in Canada.
# # #
For further information, please contact:
Richard Alden
Treasurer
214-879-8257
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OpTel, Inc
FINANCIAL RESULTS FOR THE FIRST QUARTER OF FISCAL 1998
TOTAL REVENUES. Total revenues for the first quarter of fiscal 1998 increased
by $3.2 million or 35% to $12.3 million compared to revenues of $9.1 million for
the first quarter of fiscal 1997. Compared to the preceding quarter total
revenues increased by 14% from $10.7 million. Of this latter increase
approximately $0.8 million is attributable to the acquisition of Phonoscope.
CABLE TELEVISION. Cable television revenues in the first quarter of fiscal 1998
increased by $3.1 million, or 37%, to $11.5 million from $8.4 million in the
comparable period in fiscal 1997, reflecting both a 41% increase in the number
of customers and a 16% increase in the average monthly revenue per customer
which rose from $22.7 in the first quarter of fiscal 1997 to $26.3 in the first
quarter of fiscal 1998. The increase in revenue per customer resulted from a
combination of rate increases following property upgrades, a change in mix of
customers to favor the cities with higher revenues per customer and increased
premium revenues as the Company's pay to basic ratio improved substantially from
64.7% to 85.2%. The Company also continued to grow basic penetration which
increased by 2.3 percentage points compared to the first quarter of fiscal 1997
and by almost 2 percentage points over the preceding quarter.
TELECOMMUNICATIONS. Telecommunications revenues in the first quarter of fiscal
1998 increased by 11% to $0.8 million, from $0.7 million in the comparable
period in the preceding year and increased by 8% on the preceding quarter. The
Company has chosen not to promote its telecommunications services in advance of
the planned roll out of its own switching capacity, except in Houston where the
company recently installed and launched its own central office telephone switch.
In Houston the Company is currently in the process of linking properties
previously served by PBXs to the central office switch. Whilst this conversion
process is taking longer than originally expected due to the cumbersome
administrative processes of the local RBOC substantially all of the Houston PBX
properties are expected to be converted to the central office switch by the end
of March 1998. In those properties where conversion has taken place initial
penetration has proved encouraging but management currently consider the volume
of data insufficient to prudently draw conclusions and will release this once
the available universe is increased.
The reduction in average monthly telephone revenue to $37.8 in the first quarter
of fiscal 1998 from $54.8 in the first quarter of the preceding year is largely
due to an increase in the proportion of total telephone lines supplied to
student accommodation (from 25% of total lines to 35%) where usage is
substantially lower than average and has been decreasing. As the number of
telephone lines is increased management expect the influence of the lower usage
contract to be substantially reduced. After adjusting for this lower usage
contract the average monthly revenue per customer increased over the period to
$55.8, despite having made substantial rate reductions in fiscal 1997 in line
with general market trends. The Company is currently in the process of
installing a central office telephone switch in Dallas and is reviewing a series
of alternatives for rapid switch deployment in other markets.
COST OF SERVICES. Gross margins remained flat over the period at around 53%,
disguising an increase in basic cable margins and an increase in the penetration
of lower margin premium services. In future management consider that gross
margins will increase as telephone services are expanded and as properties are
converted from PBXs to the central office switches. Compared to the preceding
quarter, gross margins improved from 51.6%.
EXPENSES. Expenses (customer support, general and administrative expenses) were
$8.0 million for the first quarter of fiscal 1998 compared to $5.7 million in
the first quarter of fiscal 1997. The increase in customer support, general and
administrative expenses was in line with the Company's budget and was largely
due to an increase in personnel associated with the expansion of the Company's
operations and recruitment for the roll out of the Company's telecommunications
services. Despite the considerable increase in the scale of the business,
management were able to maintain the level of expenses compared to the preceding
quarter at approximately $8 million.
EBITDA. As a result of maintaining tight control on expenses whilst sharply
increasing revenues the Company's negative EBITDA reduced from $2.4 million
(before one-time charges) in the preceding quarter to $1.5 million. This
improvement in profitability was achieved despite having included only one month
of results for Phonoscope and management are confident that the Company will
post break even EBITDA by the end of calendar year 1997 as previously
anticipated. Compared to the comparable period of the preceding year EBITDA
losses increased from $(0.9) million to $(1.5) million, largely due to the
expansion of the Company's operations in anticipation of the roll out of
telecommunications services.
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FINANCING. Interest expense (net of interest income and amounts capitalized)
was $9.8 million for the first quarter of fiscal 1998, an increase of $6.5
million over net interest expense of $3.3 million for the first quarter of
fiscal 1997, reflecting the increase in the Company's net debt incurred
principally to fund the build out of its network. Debt, net of cash and amounts
held in escrow under the terms of the Company's Senior Notes due 2005, amounted
to $265.5 million at November 30, 1998. This amount includes $134.4 million of
convertible debt payable to the parent company.
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November 30, February 28, May 28, August 31, November 30,
1996 1997 1997 1997 1997
CABLE TELEVISION
- ---------------------------------------------- --------------- ---------------- ------------ ------------- ---------------
Units under contract 252,473 265,518 280,683 295,149 361,873
As a % of market (Note 1) 10.1% 10.6% 11.2% 11.8% 14.5%
Units passed 233,265 239,801 252,481 254,032 314,744
Basic subscribers 121,099 125,090 134,147 132,556 170,646
Penetration 51.9% 52.2% 53.1% 52.2% 54.2%
Pay to basic ratio (Note 2) 64.7% 68.5% 69.9% 72.7% 85.2%
Average monthly revenue per subscriber (Note 3) $ 22.7 $ 23.9 $ 25.0 $ 25.0 $ 26.3
TELECOMMUNICATIONS
- ---------------------------------------------- ----------- ------------- ------------ ----------- ----------
Units under contract 23,970 27,373 29,934 39,831 49,938
As a % of market (Note 1) 1.0% 1.1% 1.2% 1.6% 2.0%
Units passed 12,987 14,416 15,248 16,572 17,120
Subscribers 4,456 4,791 5,080 6,825 6,922
Lines 5,668 6,039 6,403 8,190 8,306
Penetration 34.3% 33.3% 33.3% 41.2% 40.4%
Average monthly revenue per subscriber (Note 3) $ 54.8 $ 51.3 $ 53.2 $ 40.3 $ 37.8
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Notes:
1. Based on an estimated 2.5 million units in MDUs with greater than 150 units
located in the company's markets as estimated by REIS Reports Inc and
updated using Company estimates as necessary
2. In common with most other cable television providers the Company has
revised the method of reporting premium penetration to include all premium
units in the calculation. Historically the calculation excluded premium
channels that were provided to customers as part of an expanded basic line
up or other special arrangements.
3. Calculated quarter by quarter
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OpTel, Inc
UNAUDITED STATEMENT OF OPERATIONS
(US$ in thousands - under US GAAP)
QUARTER ENDED
November 30,
1997 1996
REVENUES
Cable Television $ 11,473 $ 8,374
Telecommunications 779 702
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12,252 9,076
Cost of services 5,765 4,265
Gross profit 6,487 4,811
General operating expenses (7,972) (5,668)
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EBITDA (1,485) (857)
Depreciation and amortization (5,006) (2,760)
Net interest expense (9,773) (3,277)
-------- --------
NET LOSS $(16,264) $ (6,894)
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UNAUDITED CONSOLIDATED BALANCE SHEETS
(US$ IN THOUSANDS - UNDER US GAAP) November 30,
1997 1996
ASSETS
Cash and cash equivalents $ 30,231 $ 3,383
Restricted investments 68,186 -
Property, Plant & Equipment 172,898 110,449
Other assets 127,603 74,271
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Total $398,918 $188,103
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LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable & other liabilities $ 39,138 $ 17,507
Notes payable & deferred acquisition liabilities 229,424 9,116
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Total liabilities 268,562 26,623
Convertible Notes payable to stockholder 134,451 109,096
Stockholders' Equity (4,095) 52,386
-------- --------
Stockholders' Equity and other capital contributions 130,356 161,482
-------- --------
Total $398,918 $188,105
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THE FOREGOING INCLUDES CERTAIN FORWARD LOOKING STATEMENTS THAT ARE IDENTIFIED BY
WORDS SUCH AS "EXPECT" AND SIMILAR EXPRESSIONS. ACHIEVEMENT OF SUCH
EXPECTATIONS IS SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING, AMONG
OTHERS, THE AVAILABILITY OF ADDITIONAL FINANCING ON A TIMELY BASIS AND ON
REASONABLE TERMS, OBTAINING VARIOUS REGULATORY APPROVALS AND SUCCESSFUL
MANAGEMENT OF THE COMPANY'S EXPANSION PLANS.
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