TCI to cut 2,500 jobs, bosses' salaries Largest U.S. cable firm seeks to save $75 million

December 06, 1996|By BLOOMBERG BUSINESS NEWS

ENGLEWOOD, Colo. -- Tele-Communications Inc. said yesterday that it cut 2,500 jobs, or 6.5 percent of its work force, and froze or reduced salaries for up to 100 senior managers, including Chairman John Malone.

The nation's largest cable-television operator said that, in an effort to cut costs, it also is reviewing expenses in its 1997 budget that aren't directly related to serving its 14 million cable .. TV customers.

The company, which has the cable franchise in Baltimore City, said it is making the moves to stem losses, compete better and reduce its $14.5 billion debt. The company's cable shares have fallen about 26 percent this year.

"All this is indicative of serious problems at the company," said Hal Vogel, an analyst at Cowen & Co. in New York. "This is how they are going to get their cash flow growing."

Shares of Tele-Communications rose 37.5 cents to close at $13.50 yesterday in trading of 4.76 million, compared with its three-month daily average of 4.92 million.

The moves are expected to save about $75 million in annual overhead costs, said Christopher Dixon, an analyst at PaineWebber Inc. In the first nine months of 1996, the company had general and administrative expenses of $1.87 billion.

Tele-Communications had a 1995 loss of $120 million on revenue of $5.1 billion. In the first nine months of 1996, it had losses of about $260 million on revenue of $4.55 billion.

The company had told investors and analysts that it expected to make the moves, reducing a work force that swelled about 18 percent this year to 38,500 people.

Spokeswoman LaRae Marsik said TCI began notifying employees Wednesday that they will be fired and will receive severance packages. In Colorado, 103 jobs will be eliminated, she said.

The salary reductions and freezes will affect 50 to 100 executives, including Malone. Marsik said no officers have been fired.

"Salary reductions for [key executives] range from 5 percent to 20 percent," she said. "You may assume that the effect on John [Malone] will be among the biggest."

Malone, who also is the company's president and chief executive, was paid an $850,000 salary in 1995, according to the company's most recent proxy statement.

The job cuts and salary actions come as Tele-Communications seeks to boost its cash flow and assure investors that the company can retain its customers in the face of subscriber rate increases.

Analyst Dixon said he expects 1996 cash flow of $2.5 billion, up from $2.4 billion last year. Cash flow, a widely used measure of financial performance of indebted companies, is earnings before interest, taxes, depreciation and amortization.

In addition to the cuts, TCI is slowing spending to upgrade its systems with fiber-optic cable and distribute set-top boxes that will accept digital TV. And Malone is seeking to raise rates for the programmers who provide channels.

Pub Date: 12/06/96

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