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EXHIBIT 20
OpTel, Inc
[OPTEL LOGO]
OPTEL, INC REPORTS RESULTS FOR THIRD QUARTER
AND FIRST NINE MONTHS OF FISCAL YEAR 1999
TELEPHONY: OPTEL ACHIEVES A 33%
PENETRATION OF HOMES PASSED
DALLAS, July 6, 1999 - OpTel, Inc ("OpTel") today announced its unaudited
financial results for the third quarter and the first nine months of the fiscal
year ending August 31, 1999 ("fiscal 1999"). Total revenues for the third
quarter climbed to a record $22.1 million, a 22% growth over third quarter of
fiscal 1998, and an 8% increase over the prior sequential quarter. Total
revenues for the nine months ended May 31, 1999 rose to $63 million; a 40%
growth over the comparable nine month period of fiscal 1998. Telephony revenues
increased by 108% over third quarter of fiscal 1998 as we achieved 33% lines
penetration over a substantially larger number of homes passed.
Operating and financial highlights (in thousands of dollars where appropriate)
are set out below.
OPERATING HIGHLIGHTS - COMPARED TO THIRD QUARTER OF FISCAL 1998
Three Months Ended
-----------------------------------------------------------------
May 31, Feb. 28, Percent May 31, Percent
1999 1999 change 1998 change
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FINANCIAL HIGHLIGHTS
TOTAL REVENUE $ 22,059 $ 20,425 8% $ 18,025 22%
Cable television 19,823 18,912 5% 16,948 17%
Telecommunications 2,236 1,513 48% 1,077 108%
EBITDA ($ 4,393) ($ 2,670) -- $ 1,085 --
In April 1998, OpTel closed an acquisition of certain properties of Interactive
Cable Systems, Inc. ("ICS"). The terms of the transaction required ICS to obtain
transfer consents for certain properties, the absence of which would permit the
return to ICS of these properties. During the third quarter of fiscal 1999,
OpTel returned a total of 7,287 units (the "Returned Units"), consisting of
6,511 cable and 776 telecommunications units. The prior period operating
statistics have been restated to reflect the Returned Units. The original and
restated statistics are provided at the end of this release for comparative
purposes.
UNITS UNDER CONTRACT (RESTATED TO EXCLUDE THE RETURNED UNITS)
o 587,219 units under contract, up 14% year-over-year
o 30% increase in units under contract for telecommunications from 88,955 to
115,460
o 2.7% increase in units under contract for cable television from 424,876 to
436,487
o 35,272 units under contract for high speed Internet launched in the fall of
1998
CUSTOMER NUMBERS (RESTATED TO EXCLUDE THE RETURNED UNITS)
o Telecommunications lines up 122% to 16,560 lines with a penetration of
33.4% of passings
o Cable television customers up 1.8% to 217,750 with a penetration of 54.8%
of passings
o 273 high speed internet customers
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OpTel, Inc
Commenting on the Company's results, Louis Brunel, President and Chief Executive
Officer, said:
"During the third quarter of fiscal 1999, we realized a sizeable increase in
revenues from both our cable and telephony operations. This increase is all the
more significant in that it represents mostly organic growth above and beyond
the ICS acquisition we completed and reflected in the results of third quarter
of 1998. While we continued to show strong progress on the deployment of our
telephony services, with our telecommunication lines more than doubling, I am
particularly pleased to report an improvement of our cable growth. A good
indication of this growth is the sequential quarter-over-quarter growth of 5% in
cable revenues and 1.4% in cable customers (on a restated basis) from the second
quarter of fiscal 1999.
We are augmenting our telephony strategy to expand our addressable market via
collocation of our central office switch termination equipment within the
end-offices of incumbent local exchange carriers (ILECs). Our intent is to
expand our telephony business through collocation improving our time to market,
deploying capital more efficiently, and promoting new Rights of Entry. We have
activated 3 collocation sites in Houston with an addressable MDU market of
29,000 units. We have filed with respective ILECs, and received confirmation, to
similarly collocate at 12 additional end offices in Houston and 8 in Dallas. We
intend to employ direct marketing efforts to secure customers at properties that
we can serve through collocation even without Rights of Entry contracts.
Internet access service deployment continues to be another area of progress. To
date, we have launched our high speed Internet service at properties in Dallas,
Houston, Denver, and San Francisco. While in its infancy, our Internet offering
is so far exceeding our projections for early adoption.
I am pleased to welcome on board two senior managers to lead our sales and
marketing efforts consistent with our strategy to reorganize and energize this
effort. Dan Smith joins us as the Vice President of Sales from Intermedia
Communications Inc., where he engaged in selling telephony services in
competition with the ILECs. He will be responsible primarily for increasing
units under contract. Rosalind Bell joins us as Vice President of Marketing.
Prior to joining us, she held various key marketing management positions at Six
Flags Entertainment Corporation, The Pillsbury Company, and Gillette. Most
recently, she was the Vice President of Marketing at Avada Brands. She is
responsible for applying her consumer marketing experience towards increasing
our cable, telephony, and Internet customers.
In addition, David Curtin has joined us as Vice President of Engineering. David
has extensive experience at Southern New England Telephone, where he was
President of SNET Cellular, Inc. His goals are to advance our telephony
initiatives and ensure efficient engineering solutions that are consistent with
the quality of service reputation OpTel has nurtured to date.
As anticipated, we are reporting negative EBITDA for the third quarter of fiscal
1999. The accelerated roll-out of telephony central office switches, the
deployment of switch collocation access and Internet access services, direct
marketing efforts, and staff increases to further improve service quality will
continue to put pressure on EBITDA. Moreover, as announced earlier, we withdrew
our intended IPO during the last quarter. This resulted in a write-off of
approximately $1 million in IPO related costs that are reflected in the
earnings.
Having withdrawn its proposed IPO, OpTel is exploring financing alternatives to
fund its operations for the following twelve months. OpTel is in preliminary
negotiations with its principal shareholder, by Le Groupe Videotron Ltee, for a
portion of the required financing for this period. No assurance can be given
that any financing will be consummated. OpTel currently has cash on hand that it
expects will be sufficient to fund its operations for approximately 90 days.
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, owner of the second largest cable television operator in
Canada.
# # #
For further information, please contact:
Waqar Nasim
Treasurer
214-879-8257
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OpTel, Inc
FINANCIAL RESULTS FOR THE THIRD QUARTER OF FISCAL 1999
TOTAL REVENUES. Total revenues for the third quarter of fiscal 1999
increased by $4.0 million, or 22%, to $22.1 million compared to revenues of $18
million for the third quarter of fiscal 1998.
CABLE TELEVISION. Cable television revenues for the third quarter of fiscal
1999 increased by $2.9 million, or 17%, to $19.8 million from $16.9 million for
the comparable period in fiscal 1998. This reflected a 12% increase in the
average quarterly number of basic customers and an 8.5% increase in the average
monthly revenue per basic customer. The average monthly revenue per basic
customer increased from $27.74 for the third quarter of fiscal 1998 to $30.10
for the third quarter of fiscal 1999. The increase in average monthly revenue
per basic customers mainly resulted from annual rate increases and rate
increases following property upgrades. The Company increased basic penetration
from 54.7% to 54.8% year-over-year.
TELECOMMUNICATIONS. Telecommunications revenues for the third quarter of
fiscal 1999 increased by 108% to $2.2 million, up from $1.1 million for the
comparable period of the preceding year, reflecting a 122% increase in the
number of lines compared to the restated third quarter of fiscal 1998. 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 $7.8 million for the third quarter of fiscal 1998
to $10.5 million for the third quarter of fiscal 1999. The increased cost is
primarily attributed to the customer growth mentioned above and to increases in
rates charged by programming suppliers.
CUSTOMER SUPPORT, GENERAL AND ADMINISTRATIVE. Customer support, general and
administrative expenses were $15.9 million for the third quarter of fiscal 1999
compared to $9.1 million for the third quarter of fiscal 1998. The increase in
customer support, general and administrative expenses was largely due to the
accelerated roll-out of telephony central office switches, the deployment of
switch collocation access and Internet access services, direct marketing
efforts, and staff increases to further improve service quality. The third
quarter expenses also include approximately $1 million in costs associated with
the withdrawn initial public offering of the Company's common stock.
EBITDA. The Company's EBITDA (earnings before interest, income taxes, and
depreciation and amortization) for the third quarter of fiscal 1999 was negative
$4.4 million compared to positive $1.1 million for the third 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 $9.1
million for the third quarter of fiscal 1999 compared to $7.7 million for the
third 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 $11.7
million for the third quarter of fiscal 1999, a $4.1 million increase from
interest expense of $7.6 million for the third quarter of fiscal 1998. This
increase is attributable to higher debt levels and higher interest rates on the
11 1/2% Senior Notes than the bank facility they replaced.
INTEREST AND OTHER INCOME. For the third quarter of fiscal 1999, interest
and other income was $1.2 million, compared to $2.3 million for the third
quarter of fiscal 1998 reflecting a decrease of $1.1 million. This is primarily
the result of the Company having a smaller average balance of invested cash
during the third 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 third quarter of 1999 the Company incurred
$25.4 million in capital expenditures compared to $24.1 million for the
corresponding period in 1998 (including intangible assets but excluding
acquisition of businesses).
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OpTel, Inc
FINANCIAL & OPERATIONAL DATA
RESTATED DATA EXCLUDING RETURNED UNITS
May 31, August 31, November 30, FEBRUARY 28, MAY 31,
1998 1998 1998 1999 1999
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Cable Television
UNITS UNDER CONTRACT (NOTE 1) 424,876 426,444 429,625 429,227 436,487
AS A % OF MARKET (NOTE 2) 14.2% 14.2% 14.3% 14.3% 14.5%
UNITS PASSED (NOTE 1) 390,770 392,699 394,867 395,089 397,476
BASIC CUSTOMERS (NOTE 1) 213,903 213,046 214,390 214,820 217,750
PENETRATION 54.7% 54.3% 54.3% 54.4% 54.8%
PAY TO BASIC RATIO (NOTE 3) 86.7% 84.5% 83.6% 80.9% 83.7%
AVERAGE MONTHLY REVENUE PER CUSTOMER (NOTE 4) $ 27.74 $ 29.05 $ 29.42 $ 28.98 $ 30.10
Telecommunications
UNITS UNDER CONTRACT (NOTE 1) 88,955 93,562 106,087 106,333 115,460
AS A % OF MARKET (NOTE 2) 3.0% 3.1% 3.6% 3.6% 3.7%
UNITS PASSED (NOTE 1) 32,355 34,895 41,523 46,686 49,507
LINES (NOTE 1) 7,446 8,990 10,229 12,975 16,560
PENETRATION 23.0% 25.8% 24.6% 27.8% 33.4%
AVERAGE MONTHLY REVENUE PER LINE (NOTE 4) $ 50.63 $ 46.09 $ 46.30 $ 43.07 $ 51.40
COLLOCATION ADDRESSABLE MARKET (UNITS) -- -- -- -- 29,000
High Speed Internet
UNITS UNDER CONTRACT (NOTE 1) 1,225 17,879 35,272
AS A % OF MARKET (NOTE 2) -- 0.6% 1.2%
UNITS PASSED (NOTE 1) 126 6,600 13,016
BASIC CUSTOMERS (NOTE 1) 3 76 273
PENETRATION 2.4% 1.2% 2.1%
AVERAGE MONTHLY REVENUE PER CUSTOMER (NOTE 4) $ 42.81 $ 41.65 $ 42.26
1. Units under contract represents the number of units currently passed
and additional units 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. All figures have been restated to reflect the return of 7,287
units (6,511 cable and 776 telephone) of the Returned Units comprising
3,203 cable customers and 254 telephone lines.
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
customers/lines for the fiscal periods ended as of the date shown.
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OpTel, Inc
DATA INCLUSIVE OF ALL ICS PROPERTIES
May 31, August 31, November 30, FEBRUARY 28, MAY 31,
1998 1998 1998 1999 1999
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Cable Television
UNITS UNDER CONTRACT (NOTE 1) 431,387 432,955 436,136 435,738 436,487
AS A % OF MARKET (NOTE 2) 14.4% 14.4% 14.5% 14.5% 14.5%
UNITS PASSED (NOTE 1) 397,281 399,210 401,378 401,600 397,476
BASIC CUSTOMERS (NOTE 1) 217,106 216,249 217,593 218,023 217,750
PENETRATION 54.6% 54.2% 54.2% 54.3% 54.8%
PAY TO BASIC RATIO (NOTE 3) 86.7% 84.5% 83.6% 80.9% 83.7%
AVERAGE MONTHLY REVENUE PER CUSTOMER (NOTE 4) $ 27.74 $ 29.05 $ 29.42 $ 28.98 $ 30.10
Telecommunications
UNITS UNDER CONTRACT (NOTE 1) 89,731 94,338 106,863 107,109 115,460
AS A % OF MARKET (NOTE 2) 3.0% 3.1% 3.6% 3.6% 3.8%
UNITS PASSED (NOTE 1) 33,131 35,671 42,299 47,462 49,507
LINES (NOTE 1) 7,700 9,244 10,483 13,229 16,560
PENETRATION 23.2% 25.9% 24.8% 27.9% 33.4%
AVERAGE MONTHLY REVENUE PER LINE (NOTE 4) $ 50.63 $ 46.09 $ 46.30 $ 43.07 $ 51.40
COLLOCATION ADDRESSABLE MARKET (UNITS) -- -- -- -- 29,000
High Speed Internet
UNITS UNDER CONTRACT (NOTE 1) 1,225 17,879 35,272
AS A % OF MARKET (NOTE 2) -- 0.6% 1.2%
UNITS PASSED (NOTE 1) 126 6,600 13,016
BASIC CUSTOMERS (NOTE 1) 3 76 273
PENETRATION 2.4% 1.2% 2.1%
AVERAGE MONTHLY REVENUE PER CUSTOMER (NOTE 4) $ 42.81 $ 41.65 $ 42.26
1. Units under contract represents the number of units currently passed and
additional units 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 for all
periods, excluding May 31, 1999, include all units acquired from ICS as of
April 1998. The May 31, 1999 figures reflect the return of 7,287 units
(6,511 cable and 776 telephone) of the Returned Units comprising 3,203
cable customers and 254 telephone lines. Excluding the Returned Units,
units under contract were up 14% year-over-year (2.7% cable and 30%
telecommunications) with customers growing by 6% year-over-year (1.8% cable
and 122% telecommunications).
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
customers/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
May 31,
1999 1998
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REVENUES
Cable television 19,823 16,949
Telecommunications 2,236 1,077
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Total revenues 22,059 18,026
OPERATING EXPENSES:
Programming, access fees and revenue sharing (10,498) (7,795)
Customer support, general and administrative (15,954) (9,146)
Depreciation and amortization (9,136) (7,673)
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Total operating expenses (35,588) (24,614)
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LOSS FROM OPERATIONS (13,529) (6,588)
OTHER
Interest expense, net (11,652) (7,574)
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NET LOSS $ (25,181) $ (14,162)
========= =========
NET LOSS ATTRIBUTABLE TO COMMON EQUITY $ (28,518) $ (17,758)
========= =========
CONDENSED CONSOLIDATED BALANCE SHEETS
($'S IN THOUSANDS)
(UNAUDITED)
May 31,
1999 1998
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ASSETS
Cash and short term investments 35,507 99,704
Restricted investments 39,235 55,294
Property, plant & equipment 326,045 251,324
Intangibles &
Other assets 173,947 169,776
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Total 574,734 576,098
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LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable & other liabilities 54,724 35,730
Drawn portion of long term bank debt -- 125,000
Dividends payable -- 4,068
Notes payable & deferred acquisition liabilities 428,631 228,786
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Total liabilities 483,355 393,224
Stockholders' equity 91,379 182,874
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Total 574,374 576,098
========= =========
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.