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OpTel, Inc
EXHIBIT 99.A
[OPTEL LOGO]
OPTEL, INC REPORTS RESULTS FOR SECOND QUARTER FOR FISCAL YEAR 1999
NEW MILESTONES ACHIEVED IN
TELEPHONY DEPLOYMENT
DALLAS, March 24, 1999 - OpTel, Inc ("OpTel") today announced its unaudited
financial results for the second quarter and the first half of the fiscal year
ending August 31, 1999 ("fiscal 1999"). Operating and financial highlights (in
thousands of dollars where appropriate) are set out below.
OPERATING HIGHLIGHTS - COMPARED TO SECOND QUARTER OF FISCAL 1998
UNITS UNDER CONTRACT
o 543,000 units under contract, up 25%
o 75% increase in units under contract for telecommunications from 61,082 to
107,109
o 17% increase in units under contract for cable television from 372,138 to
435,738
CUSTOMER NUMBERS
o Telecommunications lines up 108% to 13,229 lines
o Cable television customers up 26% to 218,023
Three Months Ended
--------------------------------------------------------
Feb. 28, Nov. 30, Percent Feb.28, Percent
-------- -------- -------- -------- --------
1999 1998 change 1998 change
-------- -------- -------- -------- --------
FINANCIAL HIGHLIGHTS
TOTAL REVENUE $ 20,425 $ 20,540 (1%) $ 14,639 40%
Cable television 18,912 19,183 (1%) 13,774 37%
Telecommunications 1,513 1,357 11% 865 75%
EBITDA $ (2,670) $ (1,389) -- $ 107 --
Commenting on the Company's results, Louis Brunel, President and Chief Executive
Officer, said:
"In the second quarter of fiscal 1999, we continued to show strong progress on
the deployment of telephony services. Compared to the end of the second quarter
of 1998, our phone units under contract increased by 75% while our phone units
passed have increased by almost three fold. I am particularly pleased to report
that our first direct selling effort in the central office markets has exceeded
our expectations, generating in the second quarter alone an increase of 26% in
phone lines. We had to overcome local number portability (LNP) interface
problems with the local exchange carrier (LEC) before launching this direct
sales program. We did, and OpTel now is a large user of LNP and most likely the
largest user in Texas.
Last quarter we presented our new telephony access strategy to expand our
addressable market. In a short period of time we obtained confirmation for
collocation of our central office switch termination equipment in 11 end offices
in Houston and 5 more in final phase of approval, with the first activation
planned for May. We also filed similar
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OpTel, Inc
requests for 11 end offices in Dallas. Collocation is intended to improve our
time to market, leverage our telephony investment and promote new Rights of
Entry.
Internet access service deployment was another area of progress. During the
second quarter we launched our high speed service in Dallas, Houston, and San
Francisco. We plan to roll it out to our major markets within the next twelve
months.
However, while telephone passings, revenues and line growth were gaining
momentum in the second quarter, cable passings, revenues and customers remained
flat. To address the situation, we are reorganizing marketing and sales
management, we launched direct sales activities and will introduce in the third
quarter other direct marketing initiatives.
As anticipated, we are reporting negative EBITDA for the second quarter of
fiscal 1999 as the accelerated roll-out of telephony central office switches in
six additional markets and the deployment of switch collocation access and
Internet access services continued to put pressure on EBITDA in the short term."
OpTel is a leading network based provider of integrated communications services,
including local and long distance telephone, cable television and high speed
Internet access services, to residents of multiple dwelling units in the United
States. The Company currently provides cable television and telecommunications
services in a number of metropolitan areas including Los Angeles, San Diego, San
Francisco, Phoenix, Denver, Houston, Dallas-Fort Worth, Chicago, Indianapolis,
Atlanta, Miami-Ft. Lauderdale and Orlando-Tampa. OpTel is majority owned by Le
Groupe Videotron Ltee ("GVL"), owner of the second largest cable television
operator in Canada.
# # #
For further information, please contact:
Bertrand Blanchette
Chief Financial Officer
214-637-8716
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OpTel, Inc
FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 1999
TOTAL REVENUES. Total revenues for the second quarter of fiscal 1999
increased by $5.8 million, or 40%, to $20.4 million compared to revenues of
$14.6 million for the second quarter of fiscal 1998. The increase in total
revenue is principally the result of the acquisition of ICS in April 1998.
CABLE TELEVISION. Cable television revenues for the second quarter of
fiscal 1999 increased by $5.1 million, or 37%, to $18.9 million from $13.8
million for the comparable period in fiscal 1998. This reflected a 26 % increase
in the number of basic subscribers and a 5 % increase in the average monthly
revenue per basic subscribers. The average monthly revenue per basic subscriber
increased from $27.57 for the second quarter of fiscal 1998 to $28.98 for the
second quarter of fiscal 1999. The increase in average monthly revenue per basic
subscribers mainly resulted from annual rate increases, rate increases following
property upgrades, and a shift in the mix of basic subscribers to favor cities
with higher revenues per basic subscribers. The Company maintained basic
penetration at 54 %.
TELECOMMUNICATIONS. Telecommunications revenues for the second quarter of
fiscal 1999 increased by 75% to $1.5 million, up from $0.9 million for the
comparable period of the preceding year, reflecting a 108 % increase in the
number of lines compared to the second quarter of fiscal 1998 offset by a slight
decline in the average monthly revenue per line which decreased from $43.64 to
$43.07. Since launching central office switches in Houston and Dallas during
fiscal 1998, the Company has increased its efforts to market its telephone
product in these markets.
PROGRAMMING, ACCESS FEES AND REVENUE SHARING. Programming, access fees and
revenue sharing increased from $6.7 million for the second quarter of fiscal
1998 to $9.3 million for the second quarter of fiscal 1999. The increased cost
is primarily attributed to the subscriber growth mentioned above and to
increases in rates charged by programming suppliers.
CUSTOMER SUPPORT, GENERAL AND ADMINISTRATIVE. Customer support, general and
administrative expenses were $13.8 million for the second quarter of fiscal 1999
compared to $7.9 million for the second quarter of fiscal 1998. The increase in
customer support, general and administrative expenses was largely due to an
increase in personnel associated with the expansion of the Company's operations
and the roll-out of telephone and Internet services. In connection with
reorganizing the management of certain departments, the Company has incurred
costs in excess of $0.6 million.
EBITDA. The Company's EBITDA (earnings before interest, income taxes, and
depreciation and amortization) for the second quarter of fiscal 1999 was
negative $2.7 million compared to $0.1 million for the second quarter of fiscal
1998. EBITDA is not intended to represent cash flow from operations or an
alternative to net loss, each as defined by generally accepted accounting
principles.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $9.3
million for the second quarter of fiscal 1999 compared to $5.8 million for the
second quarter of fiscal 1998. This increase is primarily attributable to an
increase in cable and telephone systems and intangible assets resulting from
continued purchases and construction of such systems and from acquisitions of
businesses.
INTEREST EXPENSE. Interest expense (net of amounts capitalized) was $12.9
million for the second quarter of fiscal 1999, a $1.4 million decrease from
interest expense of $14.3 million for the second quarter of fiscal 1998. This
decrease is attributable to the elimination of interest expense associated with
the convertible notes payable to stockholder which were converted to preferred
stock in march 1998.
INTEREST AND OTHER INCOME. For the second quarter of fiscal 1999, interest
and other income was $1.2 million, compared to $2.2 million for the second
quarter of fiscal 1998 reflecting a decrease of $0.9 million. This is primarily
the result of the Company having a smaller average balance of invested cash
during the second quarter of fiscal 1999 than fiscal 1998. The Company invests
its cash in money market funds and other short-term, high grade instruments
according to its investment policy and certain restrictions of its indebtedness.
CAPITAL EXPENDITURES. For the second quarter of 1999 the Company incurred
$31.5 million in capital expenditures compared to $20.2 million for the
corresponding period in 1998 (including acquisition of intangible assets).
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OpTel, Inc
FINANCIAL & OPERATIONAL DATA
====================================================================================================================
February May 31, August 31, November February
28, 1998 1998 1998 30, 1998 28, 1999
CABLE TELEVISION
------------ ------------ ------------ ------------ ------------
UNITS UNDER CONTRACT (NOTE 1) 372,138 431,387 432,955 436,136 435,738
AS A % OF MARKET (NOTE 2) 12.5% 14.4% 14.4% 14.5% 14.5%
UNITS PASSED 320,288 397,281 399,210 401,378 401,600
BASIC SUBSCRIBERS (NOTE 1) 172,643 217,106 216,249 217,593 218,023
PENETRATION 53.9% 54.6% 54.2% 54.2% 54.3%
PAY TO BASIC RATIO (NOTE 3) 83.9% 86.7% 84.5% 83.6% 80.9%
AVERAGE MONTHLY REVENUE PER SUBSCRIBER (NOTE 4) $ 27.57 $ 27.74 $ 29.05 $ 29.42 $ 28.98
TELECOMMUNICATIONS
------------ ------------ ------------ ------------ ------------
UNITS UNDER CONTRACT (NOTE 1)
AS A % OF MARKET (NOTE 2) 61,082 89,731 94,338 106,863 107,109
UNITS PASSED 2.0% 3.0% 3.1% 3.6% 3.6%
LINES (NOTE 1) 17,551 33,131 35,671 42,299 47,462
PENETRATION (LINES) 6,375 7,700 9,244 10,483 13,229
AVERAGE MONTHLY REVENUE PER LINE (NOTE 4) 36.3% 23.2% 25.9% 24.8% 27.9%
$ 43.64 $ 50.63 $ $46.09 $ 46.30 $ 43.07
------------ ------------ ------------ ------------ ------------
====================================================================================================================
1. Units under contract represents the number of units currently passed and
additional units for with respect to which the Company has entered into
Rights of Entry for the provision of cable television and telecommunication
services, respectively, but which the Company has not yet passed and which
the Company expects to pass within the next five years. Amounts include all
units acquired from ICS as of April 1998. As of February 28, 1999, there
were 9,628 units under contract (8,852 cable and 776 telephone) for which
owner consents have to be delivered by ICS. These figures include 4,338
cable television subscribers and 216 telecommunication lines for which
owner consents have to be delivered by ICS. Although consents for these
properties have not been received, the Company services these units and
receives the revenue for these customers.
2. Based on an estimated 3.0 million units (as of March 25, 1998) in MDU's
with greater than 150 units located in the Company's markets as estimated
by industry sources and updated using Company estimates as necessary.
3. 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.
4. Represents average monthly revenue per the average number of basic
subscribers/lines for the fiscal periods ended as of the date shown.
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OpTel, Inc
CONDENSED STATEMENTS OF OPERATIONS
($'S IN THOUSANDS)
(UNAUDITED)
Quarter Ended
February 28,
1999 1998
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REVENUES
Cable television $ 18,912 $ 13,774
Telecommunications 1,513 865
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Total revenues 20,425 14,639
OPERATING EXPENSES:
Programming, access fees and revenue sharing (9,301) (6,654)
Customer support, general and administrative (13,794) (7,878)
Depreciation and amortization (9,288) (5,753)
---------- ----------
Total operating expenses (32,383) (20,285)
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LOSS FROM OPERATIONS (11,958) (5,646)
OTHER
Interest expense, net (11,637) (12,112)
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NET LOSS (23,595) $ (17,758)
========== ==========
EARNINGS ATTRIBUTABLE TO PREFERRED STOCK (4,923) --
----------
NET LOSS ATTRIBUTABLE TO COMMON EQUITY $ (28,518) $ (17,758)
========== ==========
CONDENSED CONSOLIDATED BALANCE SHEETS
($'S IN THOUSANDS)
(UNAUDITED)
February 28,
1999 1998
---------- ----------
ASSETS
Cash and short term investments $ 60,032 129,542
Restricted investments 38,645 54,509
Property, plant & equipment 308,289 203,778
Intangibles 159,055 110,050
Other assets 15,438 7,292
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Total $ 581,459 $ 505,171
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable & other liabilities $ 36,444 $ 26,166
Drawn portion of long term bank debt -- 125,000
Convertible notes payable to stockholder -- 139,244
Notes payable & deferred acquisition liabilities 428,853 228,423
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Total liabilities 465,297 518,833
Stockholders' equity 116,162 (13,662)
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Total $ 581,459 $ 505,171
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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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