CSG SYSTEMS INTERNATIONAL INC, 10-K, 2000-03-24

CSG SYSTEMS INTERNATIONAL INC
10-K, 2000-03-24
COMPUTER PROCESSING & DATA PREPARATION

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1999

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-27512

CSG SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

47-0783182
(I.R.S. Employer Identification No.)

7887 East Belleview, Suite 1000
Englewood, Colorado 80111
(Address of principal executive offices, including zip code)

(303) 796-2850
(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [_]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the last sales price of such stock, as of
the close of trading on January 31, 2000 was $1,747,664,105.

Shares of common stock outstanding at March 20, 2000: 52,077,921.

DOCUMENTS INCORPORATED BY REFERENCE

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Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be filed on or prior to April 29, 2000, are incorporated by
reference into Part III of the Form 10-K.

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CSG SYSTEMS INTERNATIONAL, INC.

1999 FORM 10-K

TABLE OF CONTENTS

<TABLE>
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Page
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PART I
Item 1. Business......................................................... 3
Item 2. Properties....................................................... 8
Item 3. Legal Proceedings................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders.............. 9

PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.......................................................... 10
Item 6. Selected Financial Data.......................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 13
Item 8. Financial Statements and Supplementary Data...................... 25
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................. 45

PART III
Item 10. Directors and Executive Officers of the Registrant.............. 45
Item 11. Executive Compensation.......................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 45
Item 13. Certain Relationships and Related Transactions.................. 45

PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 45
Signatures................................................................ 46
</TABLE>

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PART I

Item 1. Business

General

CSG Systems International, Inc. (the "Company" or "CSG") was formed in
October 1994 and acquired all of the outstanding stock of CSG Systems, Inc.
(formerly Cable Services Group, Inc.) from First Data Corporation ("FDC") in
November 1994 (the "CSG Acquisition"). CSG Systems, Inc. had been a subsidiary
or division of FDC from 1982 until the acquisition.

The Company's principal executive offices are located at 7887 East
Belleview, Suite 1000, Englewood, Colorado 80111, and the telephone number at
that address is (303) 796-2850. The Company's common stock is listed on the
Nasdaq National Market under the symbol "CSGS".

Company Overview

The Company provides customer care and billing solutions worldwide for the
converging communications markets, including cable television, direct
broadcast satellite ("DBS"), telephony, on-line services and others. The
Company's products and services enable its clients to focus on their core
businesses, improve customer service, and enter new markets and operate more
efficiently. The Company offers its clients a full suite of processing and
related services, and software and professional services which automate
customer care and billing functions. These functions include set-up and
activation of customer accounts, sales support, order processing, invoice
calculation, production and mailing, management reporting, and customer
analysis for target marketing. The Company's products and services combine the
reliability and high volume transaction processing capabilities of a mainframe
platform with the flexibility of client/server architecture. The Company
generated revenue of $322.2 million in 1999 compared to $236.6 million in
1998, an increase of 36%, and revenue grew at a compound annual growth rate of
35% over the five-year period ended December 31, 1999.

The Company has established a leading presence by developing strategic
relationships with major participants in the cable television and DBS
industries, and derived approximately 76% and 16% of its total revenues in
1999 from the U.S. cable television and U.S. and Canadian DBS industries,
respectively. The Company provides customer care and billing to one-third of
the households in the U.S. During 1999, the Company derived approximately 79%
of its total revenues from processing and related services. At December 31,
1999, the Company was servicing client sites having an aggregate of 33.8
million customers in the U.S., compared to 29.5 million customers serviced as
of December 31, 1998, an increase of 15%. During 1999, the Company converted
and processed approximately 4.5 million new customers on its systems. Total
domestic revenue per customer account for 1999 was $9.88, compared to $8.71
for 1998, an increase of 13%, and revenue per customer account grew at a
compound annual growth rate of 15% over the five-year period ended December
31, 1999.

The convergence of communications markets and growing competition are
increasing the complexity and cost of managing the interaction between
communications service providers and their customers. Customer care and
billing systems coordinate all aspects of the customer's interaction with a
service provider, from initial set-up and activation, to service activity
monitoring, through billing and accounts receivable management. The growing
complexity of communications services and the manner in which they are
packaged and priced has created increased demand for customer care and billing
systems which deliver enhanced flexibility and functionality. Because of the
significant level of technological expertise and capital resources required to
develop and implement such systems successfully, the majority of cable
television, DBS, and wireless service providers have elected to outsource
customer care and billing.

In 1998, the Company acquired substantially all of the assets of US Telecom
Advanced Technology Systems, Inc. ("USTATS") for approximately $6.0 million in
cash and assumption of certain liabilities of approximately $1.3 million.
USTATS, a South Carolina-based company, specializes in open systems,

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client/server customer care and billing systems serving the telecommunications
markets. The Company used the acquired technology and software primarily to
enhance its current service-bureau telephony customer care and billing system.

In September 1997, the Company entered into a 15-year processing agreement
with Tele-Communications, Inc. ("TCI") which expires in 2012. In March 1999,
AT&T completed its merger with TCI and consolidated the TCI operations into
AT&T Broadband ("AT&T"). The Company continues to service AT&T under the terms
of the 15-year processing contract (the "AT&T Contract"). The AT&T Contract
has minimum financial commitments over the 15-year life of the contract and
includes exclusive rights to provide customer care and billing products and
services for AT&T's offerings of wireline video, all Internet/high-speed data
services, residential wireline telephony services, and print and mail
services. As of December 31, 1999, the Company had successfully converted
approximately 11 million AT&T cable television customers onto its system,
bringing the total of AT&T customers on the Company's system to approximately
14 million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for additional discussion of the AT&T Contract and
the TCI and AT&T merger.

In addition, during 1997, the Company purchased certain SUMMITrak software
technology assets that were in development from TCI. The Company continued the
research and development ("R&D") of certain software technologies acquired
from TCI. Such efforts included the completion of the R&D projects and the
integration of the completed software technologies into certain of the
Company's current products. The related products from these development
efforts were available for general release in 1999. See Note 4 to the
Company's Consolidated Financial Statements for additional discussion of the
SUMMITrak asset acquisition.

Growth Strategy

The Company's growth strategy is designed to provide revenue and profit
growth. The key elements of the strategy include:

Expand Core Processing Business. The Company will continue to leverage its
investment and expertise in high-volume transaction processing to expand its
processing business. The processing business provides highly predictable
recurring revenues through multi-year contracts with a client base which
includes leading communications service providers in growing markets. The
Company increased the number of customers processed on its systems from 18.0
million as of December 31, 1995 to 33.8 million as of December 31, 1999. The
Company provides a full suite of customer care and billing products and
services which combine the reliability and high volume transaction processing
capabilities of a mainframe platform with the flexibility of client/server
architecture.

Introduce New Products and Services. The Company has a significant installed
client base to which it can sell additional value-added products and services.
The Company has increased its annual revenue per U.S. domestic customer from
$5.60 in 1995 to $9.88 in 1999, a compound annual growth rate of 15%, due
primarily to the introduction of new products and services. The Company will
continue to develop software applications, which will enhance and extend the
functionality of its customer care and billing solution and also provide
additional revenue opportunities.

Enter New Markets. As communications markets converge, the Company's
products and services can facilitate efficient entry into new markets by
existing or new clients. For example, as the cable television providers expand
into on-line services and telephony, the Company will continue to offer the
customer care and billing solutions necessary to meet their needs. The Company
plans to enter new markets, such as the HSD/ISP and IP markets, that with new
and/or acquired technology, or modifications to the Company's existing
technology, could be served by the Company's customer care and billing
solutions.

Enhance Growth Through Focused Acquisitions. The Company follows a
disciplined approach to acquire assets and businesses which provide the
technology and technical personnel to expedite the Company's product
development efforts, provide complementary products or services, or provide
access to new markets or clients.

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Continue Technology Leadership. The Company believes that its technology in
customer care and billing solutions gives communications service providers a
competitive advantage. The Company's continuing investment in R&D is designed
to position the Company to meet the growing and evolving needs of existing and
potential clients.

CSG Products and Services

CSG offers the most complete suite of flexible, scaleable products and
services in the communications market, serving voice, video and data
providers--handling all aspects of the customer lifecycle. CSG has invested an
average of 12% of revenues in R&D in the last five years. This has allowed the
Company to increase its offering from two products to more than 25. Listed
below are several of the products that make up the Company's Broadband
Express(TM) solution.

Customer Acquisition

Advanced Customer Service Representative(R) (ACSR(R)) is a Windows-based
software program that provides CSRs (customer service representatives) with
a complete view of a customer's account, easily showing all the customer's
services. Add-on modules include Customer Interaction Tracking(R)--which
tracks customers by type and subject, and features a planner for scheduling
follow-ups and reminders; Customer Based Training--a tutorial system; and
Application Object Interface--which develops customized applications and
requests special status updates from the ACSR system.

Credit Verification Service allows clients to determine whether an
individual qualifies for service based on their credit history and risk.

Risk Management System helps clients determine the credit-worthiness of
applicants and assists in collection efforts through online access to
credit histories and previous unpaid accounts.

Provisioning and Usage

Real-Time Usage Handling System provides real-time rating and aggregation
of convergence usage-based services such as Internet and telephony. The
robust and easy-to-use graphical user interface (GUI) enables clients to
set up and modify complex service plans in real-time.

Service Delivery System takes manual and automated tasks and configures
them into a logical workflow system, to perform certain functions such as
notifying external providers and activating telephony and high-speed
Internet services.

Product Pricing and Discounting

CSG Vantage(R) allows clients to collect and leverage marketing and
consumer behavior information to offer specific package pricing and
discounts to their customers.

CSG Convergent Express allows clients to seamlessly offer multiple lines
of business and cross product discount for these services. Using this
product, clients can create special package and pricing models based on
types of services to which their customers subscribe.

CCS Discount Module automates the process of establishing package pricing
and special discount programs within the customer care and billing system.
This module allows CSG clients to monitor their customer's buying patterns
as well as competitive trends, and to build and automatically apply
frequent buyer programs, loyalty discounts and other enhanced discounting
packages.

Customer Maintenance

Communications Control System (CCS(R)) lets CSRs enroll new customers,
modify services for current customers, schedule installation and repairs,
and process billing.

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Call Center ExpressSM is a suite of products that promotes customer self-
care and improves CSR efficiency. Over the phone, without the assistance of
a CSR, customers can check account balances and order a pay-per-view event.
In addition, when a call comes into the call center, a customer's account
information automatically appears on the CSR's computer screen.

CSG WorkForce ExpressSM is a suite of products that efficiently
dispatches field technicians, provides automatic and manual routing of work
orders, and workforce management functions. It connects each technician
with the customer care and billing system through a hand-held device (CSG
TechNet(R)), which presents information including the route to the next job
and background on the customer.

CSG Care Express(TM) is a web-based application providing end-user
customers with the ability to sign up for new services, add or modify
existing services, and manage their convergent account.

Billing and Invoicing

CSG Enhanced Statement Presentation(R) lets clients tailor logos,
graphics, and messages on customer invoices--turning a monthly bill into an
easy-to-read communications and marketing tool.

Internet Bill Presentment and Payment (IBPP) allows end-user customers to
view and pay bills via the Internet. This product maintains the previous
month's statements online and notifies customers of new statements via e-
mail. In addition, IBPP allows customers to view unbilled usage in real-
time.

CSG Statement Express(R) allows CSRs to use their computers to call up
the actual invoice a customer receives, so that it can be discussed with
the customer.

Collection and Delinquency

Paybill Advantage(R) lets customers have their bills automatically
debited from their checking accounts or placed on their credit cards.

Credit Card Processing Services uses a one-time credit card transaction
to automatically collect payments for monthly services and special
circumstances, such as a delinquent customer.

Electronic Lockbox Service(R) (ELS(R)) automates the process of posting
electronic payments, dramatically reducing the possibility of an error in
payment.

Collections Service automates the accounts receivable and collections
systems for clients, increasing recovery rates and reducing costs.

Year 2000

See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for discussion of the Company's efforts to address the year
2000 risks related to the Company's business.

Clients

The majority of the Company's largest clients (listed in alphabetic order)
are cable television and DBS providers located in the United States and
Canada, and are as follows:

AT&T Broadband (formerly TCI) Echostar Communications Corporation
Adelphia Communications Corp Media One Group, Inc.
Ameritech New Media Primestar by DIRECTV
Bell ExpressVu Prodigy Communications Corp
Charter Communications Time Warner

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During the years ended December 31, 1999, 1998, and 1997, revenues from AT&T
represented approximately 50.5%, 37.4%, and 32.9% of total revenues, and
revenues from Time Warner Cable and its affiliated companies ("Time Warner")
represented approximately 10.2%, 14.1%, and 20.1% of total revenues,
respectively. The increase in the AT&T percentage between 1999 and 1998
relates primarily to the additional AT&T customers converted to the Company's
systems as a result of the 15-year AT&T Contract executed in September 1997.
The Company has separate processing agreements with multiple affiliates of
Time Warner and provides products and services to them under separately
negotiated and executed contracts.

Client and Product Support

The Company's clients typically rely on CSG for ongoing support and training
needs relating to the Company's products. The Company has a multi-level
support environment for its clients. The Company's Product Support Center
operates 24 hours a day, seven days a week. Clients call an 800 number and
through an automated voice response unit, direct their calls to the specific
product support areas where the questions are answered. In addition, each
client has a dedicated account manager. This professional helps clients
resolve strategic and business issues. The Company has a full-time training
staff and conducts ongoing training sessions both in the field and at its
training facilities located in Denver, Colorado and Omaha, Nebraska.

Sales and Marketing

The Company has assembled a direct sales and sales support organization. The
Company has organized its sales efforts around senior level account managers
who are responsible for new revenues and renewal of existing contracts within
an account. Account managers are supported by direct sales and sales support
personnel who are experienced in the various products and services that the
Company provides.

FDC Data Processing Facility

The Company outsources to FDC data processing and related services required
for operation of the CCS system. The Company's proprietary software is run in
FDC's facility to obtain the necessary mainframe computer capacity and support
without making the substantial capital investment that would be necessary for
the Company to provide this service internally. The Company's clients are
connected to the FDC facility through a combination of private and
commercially provided networks. FDC provides the services to the Company
pursuant to a five-year agreement which is scheduled to expire December 31,
2001. The Company believes it could obtain data processing services from
alternative sources, if necessary.

Research and Development

The Company's product development efforts are focused on developing new
products and improving existing products. The Company believes that the timely
development of new applications and enhancements is essential to maintaining
its competitive position in the marketplace. The Company's development efforts
for 1999 were focused primarily on the development of products to (i) increase
the efficiencies and productivity of its clients' operations, (ii) address the
systems needed to support the convergence of the communications markets, (iii)
support a web-enabled, customer self-care and electronic bill
presentment/payment application, and (iv) allow clients to effectively rollout
new products and services to new and existing markets, such as residential
telephony, High-Speed Data/ISP and IP markets. The Company expects its
development efforts to focus on similar tasks in 2000 and expects to spend a
similar percentage of its total revenues on R&D in the future.

The Company's total R&D expense, excluding purchased R&D, was $34.4 million,
$27.5 million, and $22.6 million for the years ended December 31, 1999, 1998,
and 1997, or 10.7%, 11.6%, and 13.2% of total revenues, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Competition

The market for customer care and billing systems in the converging
communications industries is highly competitive. The Company competes with
both independent providers and in-house developers of customer

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management systems. The Company believes its most significant competitors are
DST Systems, Inc., Convergys Corporation, Portal Software, Inc., Kenan Systems
(a division of Lucent Technologies, Inc.), and in-house systems. As the
Company enters additional market segments, it expects to encounter additional
competitors. Some of the Company's actual and potential competitors have
substantially greater financial, marketing and technological resources than
the Company.

The Company believes that the principal competitive factors in its markets
include time to market, flexibility and architecture of the system, breadth of
product features, product quality, customer service and support, quality of
R&D effort, and price.

Proprietary Rights and Licenses

The Company relies on a combination of trade secrets and copyright laws,
patents, license agreements, non-disclosure and other contractual provisions,
and technical measures to protect its proprietary rights. The Company
distributes its products under service and software license agreements which
typically grant clients non-exclusive licenses to use the products. Use of the
software products is restricted and subject to terms and conditions
prohibiting unauthorized reproduction or transfer of the software products.
The Company also seeks to protect the source code of its software as a trade
secret and as a copyrighted work. Despite these precautions, there can be no
assurance that misappropriation of the Company's software products and
technology will not occur. The Company also incorporates via licenses or
reselling arrangements a variety of third party technology and software
products that provide specialized functionality within its own products and
services. Although the Company believes that its product and service offerings
conform with such arrangements and do not infringe upon the intellectual
property rights of the other parties to such arrangements or of other third
parties, there can be no assurance that any third parties will not assert
contractual or infringement claims against the Company.

Employees

As of December 31, 1999, the Company had a total of 1,522 employees, an
increase of 194 from December 31, 1998. The Company's success is dependent
upon its ability to attract and retain qualified employees. None of the
Company's employees are subject to a collective bargaining agreement. The
Company believes that its relations with its employees are good.

Item 2. Properties

The Company leases five facilities, totaling approximately 159,000 square
feet in Denver, Colorado and surrounding communities. The Company utilizes
these facilities primarily for (i) corporate headquarters, (ii) sales and
marketing activities, (iii) product and operations support, and (iv) certain
R&D activities. The leases for these facilities expire in the years 2000
through 2010.

The Company leases six facilities, totaling approximately 280,000 square
feet in Omaha, Nebraska. The Company utilizes these facilities primarily for
(i) client services, training and product support, (ii) systems and
programming activities, (iii) R&D activities, (iv) statement production and
mailing, and (v) general and administrative functions. The leases for these
facilities expire in the years 2000 through 2007.

The Company leases one facility, totaling 63,000 square feet in Wakulla
County, Florida. This facility is used for statement production and mailing
and the lease expires in 2008.

The Company leases office space totaling 13,000 square feet in Slough,
Berkshire, in the United Kingdom for its U. K. operations. The lease for this
facility expires in 2002.

The Company believes that its facilities are adequate for its current needs
and that additional suitable space will be available as required. The Company
also believes that it will be able to extend leases as they terminate. See
Note 9 to the Company's Consolidated Financial Statements for information
regarding the Company's obligations under its facilities leases.

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Item 3. Legal Proceedings

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. In the opinion
of the Company's management, after consultation with legal counsel, the
Company is not presently a party to any material pending or threatened legal
proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

None

***

Executive Officers of the Registrant

The present executive officers of the Company are Neal C. Hansen (Chairman
of the Board and Chief Executive Officer), John P. Pogge (President and Chief
Operating Officer), Greg A. Parker (Vice President and Chief Financial
Officer) and Edward C. Nafus (Executive Vice President). During 1998, the
Company executed employment agreements with each of the executive officers.
Information concerning such executive officers appears in the following
paragraphs:

Mr. Hansen, 59, is a co-founder of the Company and has been the Chairman of
the Board and Chief Executive Officer and a director of the Company since its
inception in 1994. From 1991 until founding the Company, Mr. Hansen served as
a consultant to several software companies, including FDC. From 1989 to 1991,
Mr. Hansen was a General Partner of Hansen, Haddix and Associates, a
partnership which provided advisory management services to suppliers of
software products and services. From 1983 to 1989, Mr. Hansen was Chairman and
Chief Executive Officer of US WEST Applied Communications, Inc., and President
of US WEST Data Systems Group.

Mr. Pogge, 46, joined the Company in 1995 and has served as President, Chief
Operating Officer and a director of the Company since September 1997. Prior to
that time, Mr. Pogge was an Executive Vice President of the Company and
General Manager, Business Units. From 1992 to 1995, Mr. Pogge was Vice
President, Corporate Development for US WEST, Inc. From 1987 to 1991, Mr.
Pogge served as Vice President and General Counsel of Applied Communications,
Inc. Mr. Pogge holds a J.D. degree from Creighton University School of Law and
a BBA in Finance from the University of Houston. Mr. Pogge and Mr. Parker are
brothers-in-law.

Mr. Parker, 41, joined the Company in July 1995 and has served as Vice
President and Chief Financial Officer since April 1997. Prior to that time,
Mr. Parker was Vice President, Finance. Previously, Mr. Parker was with Banc
One for thirteen years and was Chief Financial Officer for Banc One in Houston
and San Antonio. Mr. Parker received a BBA in Accounting and Economics from
the University of Iowa in 1980. Mr. Pogge and Mr. Parker are brothers-in-law.

Mr. Nafus, 59, joined the Company in August 1998 as Executive Vice
President. From 1992 to 1998, Mr. Nafus served as Executive Vice President of
First Data Corporation and President of First Data International. Mr. Nafus
was President of First Data Resources from 1989 to 1992, Executive Vice
President of First Data Resources from 1984 to 1989 and held various other
management positions with that company since 1984. Mr. Nafus holds a B.S.
degree in Mathematics from Jamestown College.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's Common Stock is listed on the Nasdaq National Market
("NASDAQ/NMS") under the symbol "CSGS". The following table sets forth, for
the fiscal quarters indicated, the high and low sale prices of the Company's
Common Stock as reported by NASDAQ/NMS since the Company's Initial Public
Offering on February 28, 1996. The per share amounts disclosed herein have
been adjusted to reflect the Company's two-for-one stock split which was
effective on March 5, 1999.

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High Low
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1999
First quarter.................................................. $41.63 $31.75
Second quarter................................................. 45.00 23.44
Third quarter.................................................. 29.94 20.31
Fourth quarter................................................. 44.75 23.94
<CAPTION>
High Low
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1998
First quarter.................................................. $22.63 $18.44
Second quarter................................................. 24.50 18.91
Third quarter.................................................. 24.63 18.38
Fourth quarter................................................. 39.50 19.13
</TABLE>

On March 20, 2000, the last sale price of the Company's Common Stock as
reported by NASDAQ/NMS was $65.88 per share. On January 31, 2000, the number
of holders of record of Common Stock was 273.

Dividends

The Company has not declared or paid cash dividends on its Common Stock
since its incorporation. The Company's debt agreement contains certain
restrictions on the payment of dividends. See Note 6 to the Company's
Consolidated Financial Statements.

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Item 6. Selected Financial Data

The following selected financial data have been derived from the audited
financial statements of the Company. The selected financial data presented
below should be read in conjunction with, and is qualified by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements. The
information below is not necessarily indicative of the results of future
operations.

<TABLE>
<CAPTION>
Company(1)(2)
-------------------------------------------------
Year ended December 31,
-------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- --------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenues:
Processing and related
services.................. $255,167 $191,802 $ 131,399 $113,422 $ 96,343
Software and professional
services.................. 66,995 44,838 40,405 18,875 61
-------- -------- --------- -------- --------
Total revenues............ 322,162 236,640 171,804 132,297 96,404
-------- -------- --------- -------- --------
Expenses:
Cost of processing and
related services:
Direct costs............... 88,475 77,155 58,259 52,027 46,670
Amortization of acquired
software(1)............... -- -- 10,596 11,003 11,000
Amortization of client
contracts and related
intangibles(1)............ 7,231 5,043 4,293 4,092 4,092
-------- -------- --------- -------- --------
Total cost of processing
and related services..... 95,706 82,198 73,148 67,122 61,762
Cost of software and
professional services..... 36,415 25,048 16,834 7,123 --
-------- -------- --------- -------- --------
Total cost of revenues.... 132,121 107,246 89,982 74,245 61,762
-------- -------- --------- -------- --------
Gross margin (exclusive of
depreciation).............. 190,041 129,394 81,822 58,052 34,642
-------- -------- --------- -------- --------
Operating expenses:
Research and development:
Research and development... 34,388 27,485 22,586 20,206 14,278
Charge for purchased
research and
development(5)............ -- -- 105,484 -- --
Impairment of capitalized
software development
costs(6).................. -- -- 11,737 -- --
Selling and marketing...... 14,361 11,810 10,198 8,213 3,770
General and administrative:
General and administrative. 25,781 22,959 19,385 13,702 11,406
Amortization of noncompete
agreements and
goodwill(1)............... 4,889 5,381 6,927 6,392 5,680
Impairment of intangible
assets(7)................. -- -- 4,707 -- --
Stock-based employee
compensation(1)........... 280 297 449 3,570 841
Depreciation............... 10,190 8,159 6,884 5,121 5,687
-------- -------- --------- -------- --------
Total operating expenses.. 89,889 76,091 188,357 57,204 41,662
-------- -------- --------- -------- --------
Operating income (loss)..... 100,152 53,303 (106,535) 848 (7,020)
-------- -------- --------- -------- --------
Other income (expense):
Interest expense........... (7,214) (9,771) (5,324) (4,168) (9,070)
Interest income............ 2,981 2,484 1,294 844 663
Other...................... 10 (21) 349 -- --
-------- -------- --------- -------- --------
Total other............... (4,223) (7,308) (3,681) (3,324) (8,407)
-------- -------- --------- -------- --------
Income (loss) before income
taxes, extraordinary item
and discontinued
operations................. 95,929 45,995 (110,216) (2,476) (15,427)
Income tax (provision)
benefit(8)................ (36,055) 39,643 -- -- --
-------- -------- --------- -------- --------
Income (loss) before
extraordinary item and
discontinued operations.... 59,874 85,638 (110,216) (2,476) (15,427)
Extraordinary loss from
early extinguishment of
debt(3)(5)................ -- -- (577) (1,260) --
-------- -------- --------- -------- --------
Income (loss) from
continuing operations...... 59,874 85,638 (110,793) (3,736) (15,427)
Discontinued operations(4):
Loss from operations....... -- -- -- -- (3,093)
Gain (loss) from
disposition............... -- -- 7,922 -- (660)
-------- -------- --------- -------- --------
Total gain (loss) from
discontinued operations.. -- -- 7,922 -- (3,753)
-------- -------- --------- -------- --------
Net income (loss)........... $ 59,874 $ 85,638 $(102,871) $ (3,736) $(19,180)
======== ======== ========= ======== ========
Diluted net income (loss)
per common share(9):
Income (loss) attributable
to common stockholders.... $ 1.10 $ 1.62 $ (2.16) $ (.07) $ (2.76)
Extraordinary loss from
early extinguishment of
debt...................... -- -- (.01) (.03) --
Gain (loss) from
discontinued operations... -- -- .15 -- (.54)
-------- -------- --------- -------- --------
Net income (loss)
attributable to common
stockholders.............. $ 1.10 $ 1.62 $ (2.02) $ (.10) $ (3.30)
======== ======== ========= ======== ========
Weighted average diluted
common shares............. 54,660 52,991 50,994 43,746 6,901
======== ======== ========= ======== ========
</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
Company(1)(2)
---------------------------------------------
Year ended December 31,
---------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Other Data (at Period End):
Number of clients' customers
processed...................... 33,753 29,461 21,146 19,212 17,975
Balance Sheet Data (at Period
End):
Cash and cash equivalents....... $ 48,676 $ 39,593 $ 20,417 $ 6,134 $ 3,603
Working capital................. 32,092 7,050 3,518 4,430 2,359
Total assets(5)................. 274,968 271,496 179,793 114,910 105,553
Total debt(3)(5)................ 81,000 128,250 135,000 32,500 85,068
Redeemable convertible preferred
stock(3)....................... -- -- -- -- 62,985
Stockholders' equity
(deficit)(1)(3)(5)(6).......... 116,862 60,998 (33,086) 41,964 (61,988)
</TABLE>
- --------
(1) The Company was formed in October 1994 and acquired all of the
outstanding shares of CSG Systems, Inc., formerly Cable Services Group,
Inc., from First Data Corporation ("FDC") on November 30, 1994 (the "CSG
Acquisition"). The Company did not have any substantive operations prior
to the CSG Acquisition. The CSG Acquisition was accounted for as a
purchase and the Company's Consolidated Financial Statements (the
"Consolidated Financial Statements") since the date of the acquisition
are presented on the new basis of accounting established for the
purchased assets and liabilities. The Company incurred certain
acquisition-related charges as a result of the CSG Acquisition. These
acquisition-related charges include periodic amortization of acquired
software, client contracts and related intangibles, noncompete agreement
and goodwill, and stock-based employee compensation.
(2) On June 28, 1996, the Company acquired all of the outstanding shares of
Bytel Limited. Bytel Limited changed its name to CSG International
Limited ("CSGI") in 1998. The acquisition was accounted for using the
purchase method of accounting.
(3) The Company completed an initial public offering ("IPO") of its Common
Stock in March 1996. The Company sold 6,670,000 shares of Common Stock
resulting in net proceeds to the Company of $44.8 million. Such proceeds
were used to repay long-term debt of $40.3 million and to pay accrued
dividends of $4.5 million on Redeemable Convertible Preferred Stock
("Preferred Stock"). As of the closing of the IPO, all of the Preferred
Stock was automatically converted into 35,999,996 shares of Common Stock.
The Company incurred an extraordinary loss of $1.3 million for the write-
off of deferred financing costs attributable to the portion of the long-
term debt repaid.
(4) Contemporaneously with the CSG Acquisition, the Company purchased from
FDC all of the outstanding capital stock of Anasazi Inc. ("Anasazi"). On
August 31, 1995, the Company completed a substantial divestiture of
Anasazi, resulting in the Company owning less than 20% of Anasazi. In
September 1997, the Company sold its remaining ownership interest in
Anasazi for $8.6 million in cash and recognized a gain of $7.9 million.
The Company accounted for its ownership in Anasazi as discontinued
operations after its acquisition in 1994.
(5) During 1997, the Company purchased certain SUMMITrak technology assets
from Tele-Communications, Inc. ("TCI") and entered into a 15-year
processing contract with TCI. In March 1999, AT&T completed its merger
with TCI and has consolidated the TCI operations into AT&T Broadband
("AT&T"). The Company continues to service AT&T under the terms of the
15-year processing contract (the "AT&T Contract"). The total purchase
price was approximately $159 million, with approximately $105 million
charged to purchased research and development and the remaining amount
allocated primarily to the AT&T Contract. The Company financed the asset
acquisition with a $150.0 million term credit facility (the "Term Credit
Facility"), of which $27.5 million was used to retire the Company's
previously outstanding debt, resulting in an extraordinary loss of $0.6
million for the write-off of deferred financing costs attributable to
such debt. See Note 4 to the Consolidated Financial Statements for
additional discussion.
(6) During 1997, the Company recorded a non-recurring charge of $11.7 million
to reduce certain CSG Phoenix assets to their net realizable value as of
December 31, 1997.
(7) During 1997, the Company recorded a non-recurring charge of $4.7 million
for the impairment of certain intangible assets related to software
systems which the Company decided to no longer market and support.
(8) During 1998, the Company recorded an income tax benefit of $39.6 million
related primarily to the elimination of its valuation allowance against
its deferred tax assets. See Note 7 to the Consolidated Financial
Statements for further discussion.
(9) On March 5, 1999, the Company completed a two-for-one stock split for
shareholders of record on February 8, 1999. In January 1996, the Company
also completed a two-for-one stock split. Both splits were effected as a
stock dividend. Share and per share data for all periods presented herein
have been adjusted to give effect to both splits. Diluted net income
(loss) per common share and the shares used in the per share computation
have been computed on the basis described in Note 2 to the Consolidated
Financial Statements.

12
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

General

The Company. The Company was formed in October 1994 and acquired all of the
outstanding stock of CSG Systems, Inc. from First Data Corporation ("FDC") in
November 1994 (the "CSG Acquisition"). CSG Systems, Inc. had been a subsidiary
or division of FDC from 1982 until the acquisition.

The Company provides customer care and billing solutions worldwide for the
converging communications markets, including cable television, direct
broadcast satellite, telephony, on-line services and others. The Company
offers its clients a full range of processing services, software and support
services that automate customer management functions, including billing, sales
support and order processing, invoice calculation and production, management
reporting and customer analysis for target marketing. The Company's products
and services combine the reliability and high volume transaction processing
capabilities of a mainframe platform with the flexibility of client/server
architecture. The Company provides its services to more than one-third of the
households in the United States.

Forward-Looking Statements. This report contains a number of forward-looking
statements relative to future plans of the Company and its expectations
concerning the customer care and billing industry, as well as the converging
telecommunications industry it serves, and similar matters. Such forward-
looking statements are based on assumptions about a number of important
factors, and involve risks and uncertainties that could cause actual results
to differ materially from estimates contained in the forward-looking
statements. Some of the risks that are foreseen by management are contained in
Exhibit 99.01 of this report. Exhibit 99.01 constitutes an integral part of
this report, and readers are strongly encouraged to read that section closely
in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations.

AT&T Contract and Merger. In September 1997, the Company entered into a 15-
year processing contract with Tele-Communications, Inc. ("TCI"). In March
1999, AT&T completed its merger with TCI and has consolidated the TCI
operations into AT&T Broadband ("AT&T"). The Company continues to service AT&T
under the terms of the 15-year processing contract (the "AT&T Contract").

Stock Split. On March 5, 1999, the Company completed a two-for-one stock
split, effected as a stock dividend, for shareholders of record on February 8,
1999. Share and per share data for all periods presented herein have been
adjusted to give effect to the split.

Stock Offering. In April 1998, the Company completed a secondary public
stock offering of approximately 7.0 million shares of Common Stock. The
primary shareholders in the offering included Morgan Stanley affiliated
entities and General Motors employee benefit plan trusts. The Company received
none of the proceeds from the offering, nor incurred any expense.

Acquisitions

USTATS Asset Acquisition. On July 30, 1998, the Company acquired
substantially all of the assets of US Telecom Advanced Technology Systems,
Inc. ("USTATS") for approximately $6.0 million in cash and assumption of
certain liabilities of approximately $1.3 million. USTATS, a South Carolina-
based company, specializes in open systems, client/server customer care and
billing systems serving the telecommunications markets. The Company used the
acquired technology and software primarily to enhance its current service-
bureau telephony customer care and billing system. The total purchase price of
$7.3 million has been allocated to the technology and software acquired and is
being amortized over its expected useful life of five years.

Acquisition of SUMMITrak Assets. In September 1997, the Company purchased
certain SUMMITrak software technology assets that were in development from
TCI. The Company continued the research and development ("R&D") of certain
software technologies that were acquired from TCI. Such efforts included the
completion of the R&D projects and the integration of the completed software
technologies into certain of its

13
<PAGE>

current products. The related products from these development efforts were
available for general release in 1999. See Note 4 to the Company's
Consolidated Financial Statements for additional discussion of the SUMMITrak
asset acquisition.

Acquisition-Related Charges

Acquisition Charges. The CSG Acquisition was accounted for using the
purchase method. As a result, the Company has recorded recurring, periodic
amortization of acquired software, client contracts and related intangibles,
noncompete agreement, goodwill and stock-based employee compensation
(collectively, the "Acquisition Charges"). The Acquisition Charges totaled
$7.5 million, $8.2 million, and $20.7 million for the years ended December 31,
1999, 1998 and 1997, respectively. Going forward, the Acquisition Charges will
be approximately $0.2 million per year until fully amortized in 2004.

Discontinued Operations. Contemporaneously with the CSG Acquisition, the
Company purchased from FDC all of the outstanding shares of Anasazi Inc.
("Anasazi") for $6.0 million cash. The Company accounted for its ownership in
Anasazi as discontinued operations after its acquisition in 1994. On August
31, 1995, the Company completed a substantial divestiture of Anasazi,
resulting in the Company owning less than 20% of Anasazi. As a result,
Anasazi's results of operations subsequent to August 31, 1995 are not included
in the Company's results of operations as the Company accounted for its
investment in Anasazi under the cost method subsequent to August 31, 1995. In
September 1997, the Company sold its remaining interest in Anasazi for $8.6
million in cash and recognized a gain of $7.9 million.

Non-Recurring Items

Charge for Purchased Research and Development. During 1997, the Company
recorded a charge of $105.5 million related primarily to the portion of the
SUMMITrak asset acquisition purchase price allocated to purchased research and
development related to software technologies which had not reached
technological feasibility and had no other alternative future use as of the
acquisition.

Impairment of Capitalized Software Development Costs. During 1997, the
Company recorded a charge of $11.7 million related to certain CSG Phoenix
assets. After the consideration of multiple factors and events, consisting
primarily of an increase in demand for the Company's outsourced processing
services and previously announced delays in the delivery of CSG Phoenix, such
assets were reduced to their estimated net realizable value as of December 31,
1997. The charge primarily included previously capitalized internal
development costs and purchased software incorporated into the product.

Impairment of Intangible Assets. During 1997, the Company recorded a charge
of $4.7 million for the impairment of certain intangible assets related to
software systems which the Company decided to no longer market and support.
This impairment charge related principally to the Company's CableMAX product.
CableMAX was a personal computer-based customer management system targeted at
smaller cable systems of 2,500 customers or less. During 1997, the Company
decided not to invest the resources necessary to make the software year 2000
compliant, resulting in the impairment of the CableMAX intangible assets.

Extraordinary Loss From Early Extinguishment Of Debt. In September 1997, the
Company retired its outstanding bank indebtedness of $27.5 million in
conjunction with obtaining financing for the SUMMITrak asset acquisition. Upon
repayment of the outstanding debt, the Company recorded an extraordinary loss
of $0.6 million for the write-off of deferred financing costs.

Income Tax Benefit. As of September 30, 1998, the Company had a valuation
allowance of $48.5 million against certain of its deferred tax assets due to
the uncertainty that it would realize the income tax benefit from these
assets. During the fourth quarter of 1998, the Company concluded that it was
more likely than not that it would realize the entire tax benefit from its
deferred tax assets. As a result, the Company eliminated the entire valuation
allowance of $48.5 million as of December 31, 1998, which resulted in the
Company recording a net

14
<PAGE>

income tax benefit of $39.6 million during the fourth quarter. This conclusion
was based primarily upon the Company's expected profitable operations in
future periods. See below for additional discussion.

Adjusted Results of Operations

Impact of Acquisition Charges and Non-recurring Charges on Earnings. As
discussed above, the Company has incurred Acquisition Charges and non-
recurring charges in each of the last three years. The total of these charges
was $7.5 million, $8.2 million, and $135.3 million for the years ended
December 31, 1999, 1998 and 1997, respectively. The Company's adjusted results
of operations excluding these items are shown in the following table. In
addition to the exclusion of these expenses from the calculation, the adjusted
results of operations were computed using an effective income tax rate of
38.0%, and outstanding shares on a diluted basis.

<TABLE>
<CAPTION>
For the year ended
December 31,
--------------------------
1999 1998 1997
-------- ------- -------
(in thousands, except
per share amounts)
<S> <C> <C> <C>
Adjusted Results of Operations:
Operating income............................... $107,613 $61,512 $36,131
Operating income margin........................ 33.4% 26.0% 21.0%
Income before income taxes..................... 103,390 54,204 32,450
Net income..................................... 64,102 33,606 20,119
Earnings per diluted common share.............. 1.17 .63 .39
Weighted average diluted common shares......... 54,660 52,991 52,138
</TABLE>

15
<PAGE>

Results of Operations

The following table sets forth certain financial data and the percentage of
total revenues of the Company for the periods indicated.

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1999 1998 1997
----------------- ----------------- ------------------
% of % of % of
Amount Revenue Amount Revenue Amount Revenue
-------- ------- -------- ------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Processing and related
services.............. $255,167 79.2% $191,802 81.1% $ 131,399 76.5%
Software and
professional services. 66,995 20.8 44,838 18.9 40,405 23.5
-------- ------ -------- ----- --------- -----
Total revenues........ 322,162 100.00 236,640 100.0 171,804 100.0
-------- ------ -------- ----- --------- -----
Expenses:
Cost of processing and
related services:
Direct costs........... 88,475 27.5 77,155 32.6 58,259 33.9
Amortization of
acquired software..... -- -- -- -- 10,596 6.2
Amortization of client
contracts and related
intangibles........... 7,231 2.2 5,043 2.1 4,293 2.5
-------- ------ -------- ----- --------- -----
Total cost of
processing and
related services..... 95,706 29.7 82,198 34.7 73,148 42.6
Cost of software and
professional services. 36,415 11.3 25,048 10.6 16,834 9.8
-------- ------ -------- ----- --------- -----
Total cost of
revenues............. 132,121 41.0 107,246 45.3 89,982 52.4
-------- ------ -------- ----- --------- -----
Gross margin (exclusive
of depreciation)....... 190,041 59.0 129,394 54.7 81,822 47.6
-------- ------ -------- ----- --------- -----
Operating expenses:
Research and
development:
Research and
development........... 34,388 10.7 27,485 11.6 22,586 13.2
Charge for purchased
research and
development........... -- -- -- -- 105,484 61.4
Impairment of
capitalized software
development costs..... -- -- -- -- 11,737 6.8
Selling and marketing.. 14,361 4.4 11,810 5.0 10,198 5.9
General and
administrative:
General and
administrative........ 25,781 8.0 22,959 9.7 19,385 11.3
Amortization of
noncompete agreements
and goodwill.......... 4,889 1.5 5,381 2.3 6,927 4.0
Impairment of
intangible assets..... -- -- -- -- 4,707 2.7
Stock-based employee
compensation.......... 280 .1 297 .1 449 .3
Depreciation........... 10,190 3.2 8,159 3.4 6,884 4.0
-------- ------ -------- ----- --------- -----
Total operating
expenses............. 89,889 27.9 76,091 32.1 188,357 109.6
-------- ------ -------- ----- --------- -----
Operating income (loss). 100,152 31.1 53,303 22.6 (106,535) (62.0)
-------- ------ -------- ----- --------- -----
Other income (expense):
Interest expense....... (7,214) (2.2) (9,771) (4.1) (5,324) (3.1)
Interest income........ 2,981 .9 2,484 1.0 1,294 .7
Other.................. 10 -- (21) -- 349 .2
-------- ------ -------- ----- --------- -----
Total other........... (4,223) (1.3) (7,308) (3.1) (3,681) (2.2)
-------- ------ -------- ----- --------- -----
Income (loss) before
income taxes,
extraordinary item and
discontinued
operations............. 95,929 29.8 45,995 19.5 (110,216) (64.2)
Income tax (provision)
benefit............... (36,055) (11.2) 39,643 16.7 -- --
-------- ------ -------- ----- --------- -----
Income (loss) before
extraordinary item and
discontinued
operations............. 59,874 18.6 85,638 36.2 (110,216) (64.2)
Extraordinary loss from
early extinguishment
of debt............... -- -- -- -- (577) (.3)
-------- ------ -------- ----- --------- -----
Income (loss) from
continuing operations.. 59,874 18.6 85,638 36.2 (110,793) (64.5)
Gain from disposition
of discontinued
operations............ -- -- -- -- 7,922 4.6
-------- ------ -------- ----- --------- -----
Net income (loss)....... $ 59,874 18.6% $ 85,638 36.2% $(102,871) (59.9)%
======== ====== ======== ===== ========= =====
</TABLE>

16
<PAGE>

Twelve Months Ended December 31, 1999 Compared to Twelve Months Ended December
31, 1998

Revenues. Total revenues increased $85.5 million, or 36.1%, to $322.2
million in 1999, from $236.6 million in 1998.

Revenues from processing and related services increased $63.4 million, or
33.0%, to $255.2 million in 1999, from $191.8 million in 1998. Of the total
increase in revenue, approximately 68% resulted from the Company serving a
higher number of customers for its clients and approximately 32% was due to
increased revenue per customer. Customers serviced as of December 31, 1999 and
1998 were 33.8 million and 29.5 million, respectively, an increase of 14.6%.
The increase in the number of customers serviced was due to the conversion of
additional customers by new and existing clients to the Company's systems, and
internal customer growth experienced by existing clients. During 1999, the
Company converted and processed approximately 4.5 million new customers on its
systems, with approximately 3.4 million of these new customers coming from
AT&T.

Revenues from software and professional services increased $22.1 million, or
49.4%, to $67.0 million in 1999, from $44.8 million in 1998. The Company sells
its software products principally to its existing client base to (i) enhance
the core functionality of its service bureau processing application, (ii)
increase the efficiency and productivity of its clients' operations, and (iii)
allow clients to effectively rollout new products and services to new and
existing markets. The increase in revenue between years relates to the
continued strong demand for the Company's existing software products,
principally ACSR, and the rollout of additional new products to meet the
changing needs of the Company's client base.

Total domestic revenue per customer account for 1999 was $9.88, compared to
$8.71 for 1998, an increase of 13.4%. Revenue per customer increased due
primarily to (i) a greater percentage of processing revenues in 1999 being
generated under the AT&T Contract, (ii) price increases included in client
contracts, and (iii) increased software sales to new and existing clients.

Cost of Processing and Related Services. Direct processing costs as a
percentage of related revenues were 34.7% for 1999, compared to 40.2% for
1998. The improvement between years relates primarily to better overall
leveraging of the direct processing costs as a result of the continued growth
of the customer base processed on the Company's system. Amortization of client
contracts and related intangibles increased $2.2 million, or 43.4%, to $7.2
million in 1999, from $5.0 million in 1998. The increase in expense is due
primarily to the amortization of the value assigned to the AT&T Contract. The
value assigned to the AT&T Contract is being amortized over the life of the
contract in proportion to the financial minimums included in the contract.
Amortization related to the AT&T Contract was $3.3 million in 1999, compared
to $1.9 million in 1998. For 2000, the scheduled amortization for the AT&T
Contract is $3.4 million.

Cost of Software and Professional Services. The cost of software and
professional services as a percentage of related revenues was 54.4% in 1999,
compared to 55.9% in 1998. The slight decrease in this percentage is due
primarily to the timing of the sales cycle for new products introduced both in
1999 and 1998.

Gross Margin. Gross margin increased $60.6 million, or 46.9%, to $190.0
million in 1999, from $129.4 million in 1998, due primarily to revenue growth.
The gross margin as a percentage of total revenues increased to 59.0% in 1999,
compared to 54.7% in 1998. The overall increase in the gross margin percentage
is due primarily to the improvement in the gross margin percentage for
processing and related services, due primarily to the increase in revenue per
customer while controlling the cost of delivering such services.

Research and Development Expense. R&D expense increased $6.9 million, or
25.1%, to $34.4 million in 1999, from $27.5 million in 1998. As a percentage
of total revenues, R&D expense decreased to 10.7% in 1999, from 11.6% in 1998.
The Company did not capitalize any software development costs during 1999. The
Company capitalized third party, contracted programming costs of approximately
$1.4 million during 1998, related primarily to enhancements to existing
products. As a result, total R&D development expenditures (i.e., the total R&D
costs expensed, plus the capitalized development costs) for 1999 and 1998,
were $34.4 million, or 10.7% of total revenues, and $28.9 million, or 12.2% of
total revenues, respectively.

17
<PAGE>

The overall increase in the R&D expenditures between periods is due
primarily to increased efforts on several products which are in development
and enhancements of the Company's existing products. The Company's development
efforts for 1999 were focused primarily on the development of products to (i)
increase the efficiencies and productivity of its clients' operations, (ii)
address the systems needed to support the convergence of the communications
markets, (iii) support a web-enabled, customer self-care and electronic bill
presentment/payment application, and (iv) allow clients to effectively rollout
new products and services to new and existing markets, such as residential
telephony, High-Speed Data/ISP and IP markets. The Company expects its
development efforts to focus on similar tasks in 2000 and expects to spend a
similar percentage of its total revenues on R&D in the future.

Selling and Marketing Expense. Selling and marketing ("S&M") expense
increased $2.6 million, or 21.6%, to $14.4 million in 1999, from $11.8 million
in 1998. As a percentage of total revenues, S&M expense decreased to 4.4% in
1999, from 5.0% in 1998. The decrease in S&M expenses as a percentage of total
revenues is due primarily to increased revenues, while controlling S&M costs.

General and Administrative Expense. General and administrative ("G&A")
expense increased $2.8 million, or 12.3%, to $25.8 million in 1999, from $23.0
million in 1998. As a percentage of total revenues, G&A expense decreased to
8.0% in 1999, from 9.7% in 1998. The increase in G&A expenses relates
primarily to the continued expansion of the Company's management and
administrative staff and other administrative costs to support the Company's
overall growth. The decrease in G&A expenses as a percentage of total revenues
is due primarily to increased revenue, while controlling G&A costs.

Amortization of Noncompete Agreements and Goodwill. Amortization of
noncompete agreements and goodwill decreased $0.5 million, or 9.1%, to $4.9
million in 1999, from $5.4 million in 1998. The decrease in amortization
expense is due primarily to the noncompete agreement from the CSG Acquisition
becoming fully amortized as of November 30, 1999.

Depreciation Expense. Depreciation expense increased $2.0 million, or 24.9%,
to $10.2 million in 1999, from $8.2 million in 1998. The increase in expense
relates to capital expenditures made throughout 1999 and 1998 in support of
the overall growth of the Company, consisting principally of computer hardware
and related equipment and statement processing equipment and related
facilities. Depreciation expense for all property and equipment is reflected
separately in the aggregate and is not included in the cost of revenues or the
other components of operating expenses.

Operating Income. Operating income was $100.2 million for 1999, compared to
$53.3 million in 1998, with the increase attributable to the factors discussed
above. The Company's operating income margin, excluding the Acquisition
Charges discussed above, was 33.4% for 1999, compared to 26.0% for 1998.

Interest Expense. Interest expense decreased $2.6 million, or 26.2%, to $7.2
million in 1999, from $9.8 million in 1998, with the decrease attributable
primarily to (i) scheduled principal payments on the Company's long-term debt,
(ii) optional prepayments on long-term debt made during 1999, and (iii) a
decrease in interest rates between periods. The balance of the Company's long-
term debt as of December 31, 1999, was $81.0 million, compared to $128.3
million as of December 31, 1998, a decrease of $47.3 million.

Interest Income. Interest income increased $0.5 million, or 20.0%, to $3.0
million in 1999, from $2.5 million in 1998, with the increase attributable
primarily to an increase in operating funds available for investment.

Income Tax (Provision) Benefit. As of September 30, 1998, the Company had
recorded a valuation allowance of $48.5 million against certain of its
deferred tax assets due to the uncertainty that it would realize the income
tax benefit from those assets. During the fourth quarter of 1998, the Company
concluded that it was more likely than not that it would realize the entire
tax benefit from its deferred tax assets. As a result, the Company eliminated
the entire valuation allowance of $48.5 million as of December 31, 1998, which
resulted in the Company reflecting a net income tax benefit of $39.6 million
for 1998.

18
<PAGE>

For the year ended December 31, 1999, the Company recorded an income tax
provision of $36.1 million, or an effective income tax rate of approximately
38%. As of December 31, 1999, management continues to believe that sufficient
taxable income will be generated to realize the entire benefit of its deferred
tax assets. The Company's assumptions of future profitable operations are
supported by its strong operating performances in 1999 and 1998, and the
conversion of a significant number of new customers onto its processing system
during these periods.

Twelve Months Ended December 31, 1998 Compared to Twelve Months Ended December
31, 1997

Revenues. Total revenues increased $64.8 million, or 37.7%, to $236.6
million in 1998, from $171.8 million in 1997.

Revenues from processing and related services increased $60.4 million, or
46.0%, to $191.8 million in 1998, from $131.4 million in 1997. Of the total
increase in revenue, approximately 61% resulted from the Company serving a
higher number of customers for its clients and approximately 39% was due to
increased revenue per customer. Customers serviced as of December 31, 1998 and
1997 were 29.5 million and 21.1 million, respectively, an increase of 39.3%.
The increase in the number of customers serviced was due to the conversion of
additional customers by new and existing clients to the Company's systems, and
internal customer growth experienced by existing clients. During 1998, the
Company converted and processed approximately 9.0 million new customers on its
systems, with approximately 7.7 million of these new customers coming from
AT&T.

Revenues from software and professional services increased $4.4 million, or
11.0%, to $44.8 million in 1998, from $40.4 million in 1997. This increase
relates to the continued strong demand of the Company's software products and
related professional services.

Total domestic revenue per customer account for 1998 was $8.71, compared to
$7.73 for 1997, an increase of 12.7%. Revenue per customer increased due
primarily to (i) the AT&T Contract, which was executed in September 1997, (ii)
increased usage of ancillary services by clients, and (iii) price increases
included in client contracts.

Cost of Processing and Related Services. Direct processing costs as a
percentage of related revenues were 40.2% for 1998, compared to 44.3% for
1997. The improvement between years relates primarily to better overall
leveraging of the direct processing costs as a result of the continued growth
of the customer base processed on the Company's system. Amortization of
acquired software decreased to zero in 1998, from $10.6 million in 1997, due
to acquired software from the CSG Acquisition becoming fully amortized as of
November 30, 1997. Amortization of client contracts and related intangibles
increased $0.7 million, or 17.5%, to $5.0 million in 1998, from $4.3 million
in 1997. The increase in expense is due to amortization of the value assigned
to the AT&T Contract, offset by a decrease in the amortization of certain
intangible assets from the CSG Acquisition becoming fully amortized as of
November 30, 1997. Amortization related to the AT&T Contract was $1.9 million
in 1998, compared to $0.3 million in 1997.

Cost of Software and Professional Services. The cost of software and
professional services as a percentage of related revenues was 55.9% in 1998,
compared to 41.7% in 1997. The increase in this percentage between years
relates primarily to the timing of the sales cycle for new products introduced
in 1998.

Gross Margin. Gross margin increased $47.6 million, or 58.1%, to $129.4
million in 1998, from $81.8 million in 1997, due primarily to revenue growth.
The gross margin as a percentage of total revenues increased to 54.7% in 1998,
compared to 47.6% in 1997. The overall increase in the gross margin percentage
is due primarily to the increase in revenues while the amount of amortization
of acquired software decreased, and to a lesser degree, the improvement in the
gross margin percentage for processing and related services, due primarily to
the increase in revenue per customer while controlling the cost of delivering
such services.

Research and Development Expense. R&D expense increased $4.9 million, or
21.7%, to $27.5 million in 1998, from $22.6 million in 1997. As a percentage
of total revenues, R&D expense decreased to 11.6% in 1998, from 13.2% in 1997.

19
<PAGE>

During 1997, the Company capitalized software development costs of
approximately $9.7 million, which consisted of $8.4 million of internal
development costs and $1.3 million of purchased software. The Company
capitalized third party, contracted programming costs of approximately $1.4
million during 1998, related primarily to enhancements to existing products.
As a result, total R&D development expenditures (i.e., the total R&D costs
expensed, plus the capitalized development costs) for 1998 and 1997, were
$28.9 million, or 12.2% of total revenues, and $31.0 million, or 18.0% of
total revenues, respectively. The overall decrease in the R&D expenditures
between periods is due primarily to effective control of development costs,
primarily the reduction of third party, contracted programming services.

Selling and Marketing Expense. S&M expense increased $1.6 million, or 15.8%,
to $11.8 million in 1998, from $10.2 million in 1997. As a percentage of total
revenues, S&M expense decreased to 5.0% in 1998, from 5.9% in 1997. The
overall decrease in S&M expenses as a percentage of total revenues is due
primarily to increased revenues, while controlling S&M costs.

General and Administrative Expense. G&A expense increased $3.6 million, or
18.4%, to $23.0 million in 1998, from $19.4 million in 1997. As a percentage
of total revenues, G&A expense decreased to 9.7% in 1998, from 11.3% in 1997.
The increase in G&A expenses relates primarily to the continued expansion of
the Company's administrative staff and other administrative costs to support
the Company's overall growth. The decrease in G&A expenses as a percentage of
total revenues is due primarily to increased revenue, while controlling G&A
costs.

Amortization of Noncompete Agreements and Goodwill. Amortization of
noncompete agreements and goodwill decreased $1.5 million, or 22.3%, to $5.4
million in 1998, from $6.9 million in 1997. The decrease in amortization
expense is due primarily to a write-down of certain intangible assets in 1997.
See Note 2 to the Consolidated Financial Statements for additional discussion.

Depreciation Expense. Depreciation expense increased $1.3 million, or 18.5%,
to $8.2 million in 1998, from $6.9 million in 1997. The increase in expense
relates to capital expenditures made throughout 1998 and 1997 in support of
the overall growth of the Company, consisting principally of computer hardware
and related equipment and statement processing equipment and related
facilities. Depreciation expense for all property and equipment is reflected
separately in the aggregate and is not included in the cost of revenues or the
other components of operating expenses.

Operating Income (Loss). Operating income was $53.3 million for 1998,
compared to an operating loss of $106.5 million in 1997. The change between
years relates primarily to the non-recurring charges recorded in 1997, as
discussed above. The Company's operating income margin, excluding the
Acquisition Charges and non-recurring charges discussed above, was 26.0% for
1998, compared to 21.0% for 1997.

Interest Expense. Interest expense increased $4.5 million, or 83.5%, to $9.8
million in 1998, from $5.3 million in 1997, with the increase attributable
primarily to the financing of the Company's acquisition of the SUMMITrak
assets in September 1997. The balance of the Company's long-term debt as of
December 31, 1998 was $128.3 million, compared to $135.0 million as of
December 31, 1997, a decrease of $6.7 million.

Interest Income. Interest income increased $1.2 million, or 92.0%, to $2.5
million in 1998, from $1.3 million in 1997, with the increase attributable
primarily to an increase in operating funds available for investment and an
increase in interest charges on aged client accounts.

20
<PAGE>

Financial Condition, Liquidity and Capital Resources

As of December 31, 1999, the Company's principal sources of liquidity
included cash and cash equivalents of $48.7 million and a revolving credit
facility with a bank in the amount of $40 million, of which there were no
borrowings outstanding as of December 31, 1999. The Company's ability to
borrow under the revolving credit facility is subject to maintenance of
certain levels of eligible receivables. At December 31, 1999, all of the $40.0
million revolving credit facility was available to the Company. The revolving
credit facility expires in September 2002. The Company's working capital as of
December 31, 1999 and 1998 was $32.1 million and $7.1 million, respectively.

As of December 31, 1999 and 1998, the Company had $67.5 million and $60.5
million, respectively, in net billed trade accounts receivable, an increase of
$7.0 million, with the increase primarily a result of the Company's revenue
growth. The Company's trade accounts receivable balance includes billings for
several non-revenue items, such as postage, communication lines, travel and
entertainment reimbursements, sales tax, and deferred items. As a result, the
Company evaluates its performance in collecting its accounts receivable
through its calculation of days billings outstanding (DBO) rather than a
typical days sales outstanding (DSO) calculation. DBO is calculated based on
the billing for the period (including non-revenue items) divided by the
average net trade accounts receivable balance for the period. The Company's
DBO calculations for the years ended December 31, 1999 and 1998 were 55 and 56
days, respectively.

The Company's net cash flows from operating activities for the years ended
December 31, 1999, 1998 and 1997 were $102.1 million, $47.3 million and $31.4
million, respectively. The increase of $54.7 million, or 115.7% in 1999 over
1998 relates to a $37.8 million increase in net cash flows from operations, in
addition to an increase in the net change in operating assets and liabilities
of $16.9 million. The increase of $15.9 million, or 50.6%, in 1998 over 1997
relates to an $18.0 million increase in net cash flows from operations, offset
by a decrease in the net change in operating assets and liabilities of $2.1
million.

The Company's net cash flows used in investing activities totaled $36.7
million in 1999, compared to $27.1 million in 1998, an increase of $9.6
million. The increase between years relates primarily to conversion incentive
payments of $24.7 million (principally to AT&T) in 1999, compared to $4.0
million in 1998. This increase is offset by (i) a cash payment of $6.0 million
for the acquisition of assets of USTATS in 1998, (ii) software additions of
$1.4 million in 1998, and (iii) a decrease in property and equipment purchases
of $3.7 million. The Company's net cash flows used in investing activities
totaled $117.4 million in 1997. The decrease of $90.3 million between 1998 and
1997 relates primarily to the cash payments of $106.5 million for the
SUMMITrak assets acquired in September 1997 and a decrease of $8.7 million in
capitalized software development costs between years, with these decreases
offset by (i) proceeds of $8.6 million from the final disposition of Anasazi
in 1997, (ii) a cash payment of $6.0 million for the acquisition of assets of
USTATS in 1998, (iii) conversion incentive payments of $4.0 million made in
1998, and (iv) an increase in purchases of net property and equipment of $6.3
million.

The Company's net cash flows used in financing activities was $56.1 million
in 1999, compared to $1.1 million in 1998, an increase of $55.0 million. The
significant increase between years relates to (i) an increase in scheduled
principal payments on long-term debt of $8.9 million, (ii) optional long-term
debt prepayments of $31.6 million made in 1999, and (iii) repurchase of
655,500 shares of common stock for $20.2 million in 1999, as discussed below.
This increase is offset by an increase in proceeds received from the issuance
of common stock of $5.4 million, related primarily to the exercise of stock
options by employees. The Company's net cash flows used in financing
activities was $100.7 million in 1997. The decrease of $101.8 million from
1997 to 1998 relates primarily to the net change in the Company's long-term
debt between years. In 1997, the Company generated $150.0 million from a new
debt agreement entered into primarily to fund the SUMMITrak asset acquisition,
and repaid long-term debt of $47.5 million, which included (i) $5.0 million of
scheduled payments on the previous debt agreement, (ii) $27.5 million of
existing debt which was refinanced as part of the new debt agreement, and
(iii) an optional prepayment of $15.0 million on the new debt. The scheduled
principal payments made in 1998 were $6.8 million.

21
<PAGE>

Earnings before interest, taxes, depreciation and amortization ("EBITDA")
for 1999 was $124.6 million or 38.7% of total revenues, compared to $73.5
million or 31.0% of total revenues for 1998. EBITDA is presented here as a
measure of the Company's debt service ability and is not intended to represent
cash flows for the periods.

Interest rates for the Term Credit Facility and revolving credit facility
are chosen at the option of the Company and are based on the LIBOR rate or the
prime rate, plus an additional percentage spread, with the spread dependent
upon the Company's leverage ratio. As of December 31, 1999, the spread on the
LIBOR rate and prime rate was 0.50% and 0%, respectively. See Note 6 to the
Consolidated Financial Statements for additional discussion of the Term Credit
Facility.

The Company was required to make certain monetary conversion payments under
the AT&T Contract. AT&T surpassed the milestone of 13 million customers
processed on the Company's systems during the third quarter of 1999. Upon
reaching this significant milestone, AT&T was paid its final monetary
conversion incentive by the Company. The total monetary conversion incentives
paid during 1999 to AT&T were $22.0 million.

Effective August 4, 1999, the Company's Board of Directors approved a stock
repurchase plan which authorized the Company at its discretion to purchase up
to a total of 5.0 million shares of its Common Stock from time to time as
market and business conditions warrant. As of December 31, 1999, the Company
had repurchased 655,500 shares of Common Stock for $20.2 million (a weighted
average price of $30.88 per share). The repurchased shares are held as
treasury shares.

For income tax purposes, the amortization of the intangible assets from
acquisitions (including the intangible assets related to the CSG Acquisition
and the charge for purchased R&D related to the SUMMITrak asset acquisition)
are principally deductible over 15 years on a straight-line basis. The Company
has paid U.S. income taxes since its inception in 1994. Based on its current
projections, the Company expects to pay U.S. income taxes for 2000, and its
effective book income tax rate for 2000 is expected to be approximately 38%.

The Company continues to make significant investments in capital equipment,
facilities, research and development, and at its discretion, may continue to
make stock repurchases. The Company had no significant capital commitments as
of December 31, 1999. The Company believes that cash generated from
operations, together with the current cash and cash equivalents and the amount
available under the revolving credit facility, will be sufficient to meet its
anticipated cash requirements for operations, income taxes, debt service,
capital expenditures, and stock repurchases for both its short- and long-term
purposes. The Company also believes it has significant unused borrowing
capacity and could obtain additional cash resources by amending its current
credit facility and/or establishing a new credit facility.

Market Risk

The Company is exposed to various market risks, including changes in
interest rates and foreign currency exchange rates. Market risk is the
potential loss arising from adverse changes in market rates and prices. The
Company has entered into an interest rate collar agreement to manage its
interest rate risk from the variable rate features of its long-term debt. The
Company does not utilize any derivative financial instruments for purposes of
managing its foreign currency exchange rate risk. The Company does not enter
into derivatives or other financial instruments for trading or speculative
purposes.

Interest Rate Risk. The Company had long-term debt (including current
maturities) of $81.0 million as of December 31, 1999. Interest rates for the
debt are chosen at the option of the Company and are based on the LIBOR rate
or the prime rate, plus an additional percentage spread, with the spread
dependent upon the Company's leverage ratio. As of December 31, 1999, the
spread on the LIBOR rate and prime rate was 0.50% and 0%, respectively. As of
December 31, 1999, the entire amount of the debt was under either a three- or
six-month LIBOR contract, with an overall weighted average interest rate of
6.55% (i.e., LIBOR at 6.05% plus spread of 0.50%). The carrying amount of the
Company's long-term debt approximates fair value due to its

22
<PAGE>

variable interest rate features. See Note 6 to the Consolidated Financial
Statements for additional description of the long-term debt and scheduled
principal payments.

As required by the debt agreement with its bank, the Company entered into a
three-year interest rate collar in December 1997 with a major bank to manage
its risk from its variable rate long-term debt. The underlying notional amount
covered by the collar agreement is $60.6 million as of December 31, 1999, and
decreases over the three-year term in relation to the scheduled principal
payments on the long-term debt. Any payment on the 4.9% (LIBOR) interest rate
floor, or receipt on the 7.5% (LIBOR) interest rate cap component of the
collar, would be recognized as an adjustment to interest expense in the period
incurred. There are no amounts due or receivable under this agreement as of
December 31, 1999, and the agreement had no effect on the Company's interest
expense for 1999, 1998 or 1997. The fair value of the collar agreement is not
recognized in the Company's financial statements. The fair value of the collar
agreement at December 31, 1999, based on a quoted market price, was not
significant.

Foreign Exchange Rate Risk. The Company's foreign currency transactions
relate almost entirely to the operations conducted through its United Kingdom
("UK") subsidiary, CSGI. CSGI's transactions are executed primarily within the
UK and generally are denominated in British pounds. The Company does not
utilize any derivative financial instruments for purposes of managing its
foreign currency exchange rate risk. Exposure to variability in currency
exchange rates is mitigated by the fact that purchases and sales are typically
in the same currency with similar maturity dates and amounts. A hypothetical
adverse change of 10% in year-end exchange rates would not have a material
effect upon the Company's financial condition or results of operations.

AT&T Contract and Merger

AT&T completed its merger with TCI in March 1999 and has consolidated the
TCI operations into AT&T Broadband. During the years ended December 31, 1999,
1998 and 1997, revenues from AT&T and affiliated companies generated under the
AT&T Contract represented approximately 50.5%, 37.4%, and 32.9% of total
revenues, respectively. The AT&T Contract has a 15-year term and expires in
2012. The AT&T Contract has minimum financial commitments over the term of the
contract and includes exclusive rights to provide customer care and billing
products and services for AT&T's offerings of wireline video, all
Internet/high-speed data services, residential wireline telephony services,
and print and mail services. The AT&T Contract provides certain performance
criteria and other obligations to be met by the Company. The Company is
required to perform certain remedial efforts and is subject to certain
penalties if it fails to meet the performance criteria or other obligations.
The Company is also subject to an annual technical audit to determine whether
the Company's products and services include innovations in features and
functions that have become standard in the wireline video industry. To date,
the Company believes it has complied with the terms of the contract. Since
execution of the AT&T Contract in September 1997 through December 31, 1999,
the Company has successfully converted approximately 11 million AT&T cable
television customers onto its system.

The Company expects to continue performing successfully under the AT&T
Contract, and is hopeful that it can continue to sell products and services to
the combined entity that are in excess of the minimum financial commitments
and exclusive rights included in the contract.

See Note 4 to the Consolidated Financial Statements for discussion regarding
the Company's Common Stock Warrants held by AT&T.

Year 2000

Results of Computer Systems Rollover Into Year 2000. The Company's year 2000
("Y2K") program was described in the Company's most recent Form 10-Q dated
November 15, 1999. This program was substantially

23
<PAGE>

completed prior to January 1, 2000, and included rigorous compliance criteria
and testing of the Company's various computer systems that could be affected
by Y2K. As of the date of this filing, the Company has not experienced any
significant disruptions in its operations as a result of its computer systems
rollover to, and processing of dates within, the year 2000. This included the
Company's information technology ("IT") systems (including products and
services), non-IT systems with embedded technology, and software and hardware
from significant vendors. Any Y2K-related disruptions within the Company's
systems occurred primarily during the first week of January 2000, and
consisted of minor items only (e.g., screen and/or report displays), all of
which were timely resolved without significant cost to or effort by the
Company, and had minimal impact to the Company's or its clients' operations.
Although the Company has not experienced any significant disruptions to date,
there is no assurance that the Company will not experience any future Y2K-
related disruptions.

Costs to Address the Company's Year 2000 Issues. Since inception of its
program in 1995 through December 31, 1999, the Company has incurred and
expensed costs of approximately $4.2 million related to its Y2K compliance
efforts, with approximately $1.4 million of this amount incurred in 1999. The
total estimated costs to be incurred in the future related to this matter are
not expected to be significant. However, there can be no assurance that these
estimates will be achieved and actual results could differ materially from
those anticipated.

Continuing Y2K Compliance Efforts and Remaining Risks. The Company believes
that the year 2000 dates with the most significant risk of disruptions
(January 1, 2000 and February 29, 2000) have passed without significant
disruptions to the Company and/or its clients. The Company believes if any Y2k
disruptions are experienced in the future, such disruptions would be of a
similar nature as those items already reported to the Company's Product
Support Center ("PSC"), and therefore, could be timely and adequately
identified and resolved using existing problem reporting, remediation and
recovery procedures. The Company continues to maintain its Y2K corporate
program as a means to monitor continued Y2K compliance and whether any
reported events to the PSC resulted from Y2K-related issues.

Although the Company believes the risk of any significant Y2K-related
disruptions in the future is low, there can be no assurances that (i) the
Company's systems and products (including software and hardware from
significant vendors) contain all the necessary date code changes to avoid any
significant disruptions related to processing of dates into and beyond the
Year 2000, or (ii) if such disruptions are experienced, that the Company can
timely identify and resolve any disruptions without significant impact to the
Company's and/or its clients' operations. Furthermore, it has been widely
reported that a significant amount of litigation surrounding business
interruptions may arise out of Y2K issues. Although the Company is currently
not aware of any such litigation that might affect the Company, the
unprecedented nature of potential litigation regarding Y2K compliance issues
makes it uncertain whether, or to what extent, the Company may be affected by
such litigation in the future.

Certain Factors That May Affect Future Results of Operations. Except for
statements of existing or historical facts, the foregoing discussion of Y2K
consists of forward-looking statements and assumptions relating to forward-
looking statements, including without limitation the statements relating to
future costs, the timetable for completion of Y2K compliance efforts,
potential problems relating to Y2K, the Company's state of readiness, third
party representations, and the Company's plans and objectives for addressing
Y2K problems. Certain factors could cause actual results to differ materially
from the Company's expectations, including without limitation (i) the failure
of vendors and service providers to timely achieve Y2K compliance, (ii) system
incompatibilities with third parties resulting from software conversions,
(iii) the Company's systems and products not containing all necessary date
code changes, (iv) the failure of existing or future clients to achieve Y2K
compliance, (v) potential litigation arising out of Y2K issues, the risk of
which may be greater for information technology based service providers such
as the Company, (vi) the failure of the Company's validation and testing phase
to detect operational problems internal to the Company, in the Company's
products or services or in the Company's interface with service providers,
vendors or clients, whether such failure results from the technical inadequacy
of the Company's validation and testing efforts, the technological
infeasibility of testing certain non-IT systems, the perceived cost-benefit
constraints against conducting all available testing, or the unavailability of
third parties to participate in testing, or (vii) the failure to timely
implement a contingency plan to the extent Y2K compliance is not achieved.

24
<PAGE>

Item 8. Financial Statements and Supplementary Data

CSG SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED FINANCIAL STATEMENTS

INDEX

<TABLE>
<S> <C>
Report of Independent Public Accountants................................... 26
Consolidated Balance Sheets as of December 31, 1999 and 1998............... 27
Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997....................................................... 28
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997.......................................... 29
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997....................................................... 30
Notes to Consolidated Financial Statements................................. 31
</TABLE>

25
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
CSG Systems International, Inc.:

We have audited the accompanying consolidated balance sheets of CSG Systems
International, Inc. (a Delaware corporation) and Subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CSG Systems International,
Inc. and Subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

Arthur Andersen llp

Omaha, Nebraska
January 17, 2000

26
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 48,676 $ 39,593
Accounts receivable--
Trade--
Billed, net of allowance of $2,975 and $2,051............ 67,477 60,529
Unbilled................................................. 8,311 2,828
Other..................................................... 909 1,179
Deferred income taxes..................................... 1,972 1,803
Other current assets...................................... 2,850 2,275
-------- --------
Total current assets...................................... 130,195 108,207
-------- --------
Property and equipment, net................................ 26,507 24,711
Software, net.............................................. 6,145 9,422
Noncompete agreements and goodwill, net.................... 2,652 7,596
Client contracts and related intangibles, net.............. 55,343 59,791
Deferred income taxes...................................... 52,845 59,389
Other assets............................................... 1,281 2,380
-------- --------
Total assets.............................................. $274,968 $271,496
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 21,711 $ 19,125
Customer deposits......................................... 10,549 10,018
Trade accounts payable.................................... 9,450 10,471
Accrued employee compensation............................. 16,386 12,276
Deferred revenue.......................................... 16,746 13,470
Conversion incentive payments............................. -- 22,032
Accrued income taxes...................................... 11,710 6,756
Other current liabilities................................. 11,551 7,009
-------- --------
Total current liabilities................................. 98,103 101,157
-------- --------
Non-current liabilities:
Long-term debt, net of current maturities................. 59,289 109,125
Deferred revenue.......................................... 714 216
-------- --------
Total non-current liabilities............................. 60,003 109,341
-------- --------
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, par value $.01 per share; 10,000,000
shares authorized; zero shares issued and outstanding.... -- --
Common stock, par value $.01 per share; 100,000,000 shares
authorized; 13,591,947 and 11,421,416 shares reserved for
common stock warrants, employee stock purchase plan and
stock incentive plans; 51,638,629 and 51,465,646 shares
outstanding.............................................. 523 515
Common stock warrants; 3,000,000 warrants issued and
outstanding.............................................. 26,145 26,145
Additional paid-in capital................................ 136,373 120,599
Deferred employee compensation............................ (48) (328)
Notes receivable from employee stockholders............... (115) (478)
Other comprehensive income-cumulative translation
adjustments.............................................. (120) 38
Treasury stock, at cost, 722,486 shares and 66,000 shares. (20,374) (97)
Accumulated deficit....................................... (25,522) (85,396)
-------- --------
Total stockholders' equity................................ 116,862 60,998
-------- --------
Total liabilities and stockholders' equity................ $274,968 $271,496
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

27
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1999 1998 1997
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Processing and related services............... $255,167 $191,802 $ 131,399
Software and professional services............ 66,995 44,838 40,405
-------- -------- ---------
Total revenues............................... 322,162 236,640 171,804
-------- -------- ---------
Expenses:
Cost of processing and related services:
Direct costs.................................. 88,475 77,155 58,259
Amortization of acquired software............. -- -- 10,596
Amortization of client contracts and related
intangibles.................................. 7,231 5,043 4,293
-------- -------- ---------
Total cost of processing and related
services.................................... 95,706 82,198 73,148
Cost of software and professional services.... 36,415 25,048 16,834
-------- -------- ---------
Total cost of revenues....................... 132,121 107,246 89,982
-------- -------- ---------
Gross margin (exclusive of depreciation)....... 190,041 129,394 81,822
-------- -------- ---------
Operating expenses:
Research and development:
Research and development...................... 34,388 27,485 22,586
Charge for purchased research and development. -- -- 105,484
Impairment of capitalized software development
costs........................................ -- -- 11,737
Selling and marketing......................... 14,361 11,810 10,198
General and administrative:
General and administrative.................... 25,781 22,959 19,385
Amortization of noncompete agreements and
goodwill..................................... 4,889 5,381 6,927
Impairment of intangible assets............... -- -- 4,707
Stock-based employee compensation............. 280 297 449
Depreciation.................................. 10,190 8,159 6,884
-------- -------- ---------
Total operating expenses..................... 89,889 76,091 188,357
-------- -------- ---------
Operating income (loss)........................ 100,152 53,303 (106,535)
-------- -------- ---------
Other income (expense):
Interest expense.............................. (7,214) (9,771) (5,324)
Interest income............................... 2,981 2,484 1,294
Other......................................... 10 (21) 349
-------- -------- ---------
Total other.................................. (4,223) (7,308) (3,681)
-------- -------- ---------
Income (loss) before income taxes,
extraordinary item and discontinued
operations.................................... 95,929 45,995 (110,216)
Income tax (provision) benefit................ (36,055) 39,643 --
-------- -------- ---------
Income (loss) before extraordinary item and
discontinued operations....................... 59,874 85,638 (110,216)
Extraordinary loss from early extinguishment
of debt...................................... -- -- (577)
-------- -------- ---------
Income (loss) from continuing operations....... 59,874 85,638 (110,793)
Gain from disposition of discontinued
operations................................... -- -- 7,922
-------- -------- ---------
Net income (loss).............................. $ 59,874 $ 85,638 $(102,871)
======== ======== =========
Basic net income (loss) per common share:
Income (loss) before extraordinary item and
discontinued operations...................... $ 1.16 $ 1.67 $ (2.16)
Extraordinary loss from early extinguishment
of debt...................................... -- -- (.01)
Gain from disposition of discontinued
operations................................... -- -- .15
-------- -------- ---------
Net income (loss) attributable to common
stockholders................................. $ 1.16 $ 1.67 $ (2.02)
======== ======== =========
Weighted average common shares................ 51,675 51,198 50,994
======== ======== =========
Diluted net income (loss) per common share:
Income (loss) before extraordinary item and
discontinued operations...................... $ 1.10 $ 1.62 $ (2.16)
Extraordinary loss from early extinguishment
of debt...................................... -- -- (.01)
Gain from disposition of discontinued
operations................................... -- -- .15
-------- -------- ---------
Net income (loss) attributable to common
stockholders................................. $ 1.10 $ 1.62 $ (2.02)
======== ======== =========
Weighted average diluted common shares........ 54,660 52,991 50,994
======== ======== =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

28
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
NOTES
RECEIVABLE TOTAL
COMMON COMMON ADDITIONAL DEFERRED FROM CUMULATIVE STOCKHOLDERS'
STOCK COMMON STOCK PAID-IN EMPLOYEE EMPLOYEE TRANSLATION TREASURY ACCUMULATED EQUITY
OUTSTANDING STOCK WARRANTS CAPITAL COMPENSATION STOCKHOLDERS ADJUSTMENTS STOCK DEFICIT (DEFICIT)
----------- ------ -------- ---------- ------------ ------------ ----------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31,
1996........... 50,978 $510 $ -- $111,112 $(1,207) $(861) $ 573 $ -- $(68,163) $ 41,964
Comprehensive
loss:
Net loss........ -- -- -- -- -- -- -- -- (102,871) --
Foreign currency
translation
adjustments.... -- -- -- -- -- -- (574) -- -- --
Comprehensive
loss........... -- -- -- -- -- -- -- -- -- (103,445)
Issuance of
common stock
for purchase of
assets......... 3 -- -- 75 -- -- -- -- -- 75
Issuance of
common stock
warrants,
granted as part
of the
SUMMITrak asset
acquisition.... -- -- 26,145 -- -- -- -- -- -- 26,145
Amortization of
deferred stock-
based employee
compensation
expense........ -- -- -- -- 449 -- -- -- -- 449
Repurchase of
common stock... (209) (2) -- (342) 122 176 -- -- -- (46)
Exercise of
stock options
for common
stock.......... 149 2 -- 1,016 -- -- -- -- -- 1,018
Purchase of
common stock
pursuant to
employee stock
purchase plan.. 39 -- -- 439 -- -- -- -- -- 439
Tax benefit of
stock options
exercised...... -- -- -- 315 -- -- -- -- -- 315
------ ---- ------- -------- ------- ----- ----- -------- -------- --------
BALANCE,
December 31,
1997........... 50,960 510 26,145 112,615 (636) (685) (1) -- (171,034) (33,086)
Comprehensive
income:
Net income...... -- -- -- -- -- -- -- -- 85,638 --
Foreign currency
translation
adjustments.... -- -- -- -- -- -- 39 -- -- --
Comprehensive
income......... -- -- -- -- -- -- -- -- -- 85,677
Amortization of
deferred stock-
based employee
compensation
expense........ -- -- -- -- 297 -- -- -- -- 297
Repurchase of
common stock... (66) -- -- (12) 11 146 -- (97) -- 48
Exercise of
stock options
for common
stock.......... 540 5 -- 4,957 -- -- -- -- -- 4,962
Payments on
notes
receivable from
stockholders... -- -- -- -- -- 61 -- -- -- 61
Purchase of
common stock
pursuant to
employee stock
purchase plan.. 32 -- -- 622 -- -- -- -- -- 622
Tax benefit of
stock options
exercised...... -- -- -- 2,417 -- -- -- -- -- 2,417
------ ---- ------- -------- ------- ----- ----- -------- -------- --------
BALANCE,
December 31,
1998........... 51,466 515 26,145 120,599 (328) (478) 38 (97) (85,396) 60,998
Comprehensive
income:
Net income...... -- -- -- -- -- -- -- -- 59,874 --
Foreign currency
translation
adjustments.... -- -- -- -- -- -- (158) -- -- --
Comprehensive
income......... -- -- -- -- -- -- -- -- -- 59,716
Amortization of
deferred stock-
based employee
compensation
expense........ -- -- -- -- 280 -- -- -- -- 280
Repurchase of
common stock... (656) -- -- -- -- -- -- (20,277) -- (20,277)
Common stock
swap for option
exercise....... -- -- -- 35 -- -- -- -- -- 35
Exercise of
stock options
for common
stock.......... 795 8 -- 10,000 -- -- -- -- -- 10,008
Payments on
notes
receivable from
stockholders... -- -- -- -- -- 363 -- -- -- 363
Purchase of
common stock
pursuant to
employee stock
purchase plan.. 34 -- -- 926 -- -- -- -- -- 926
Tax benefit of
stock options
exercised...... -- -- -- 4,813 -- -- -- -- -- 4,813
------ ---- ------- -------- ------- ----- ----- -------- -------- --------
BALANCE,
December 31,
1999........... 51,639 $523 $26,145 $136,373 $ (48) $(115) $(120) $(20,374) $(25,522) $116,862
====== ==== ======= ======== ======= ===== ===== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

29
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1999 1998 1997
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 59,874 $ 85,638 $(102,871)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities--
Depreciation................................... 10,190 8,159 6,884
Amortization................................... 15,026 12,684 23,035
Deferred income taxes.......................... 6,373 (52,880) (6,206)
Charge for purchased research and development.. -- -- 105,484
Impairment of capitalized software development
costs......................................... -- -- 11,737
Impairment of intangible assets................ -- -- 4,707
Stock-based employee compensation.............. 280 297 449
Extraordinary loss from early extinguishment
of debt....................................... -- -- 577
Gain from discontinued operations.............. -- -- (7,922)
Changes in operating assets and liabilities:
Trade accounts and other receivables, net..... (12,255) (16,320) (9,511)
Other current and noncurrent assets........... (633) (75) 11
Trade accounts payable and other liabilities.. 23,196 9,811 5,038
-------- -------- ---------
Net cash provided by operating activities.... 102,051 47,314 31,412
-------- -------- ---------
Cash flows from investing activities:
Purchases of property and equipment, net....... (12,003) (15,706) (9,389)
Acquisition of assets.......................... -- (5,974) (106,500)
Additions to software.......................... -- (1,410) (10,185)
Proceeds from disposition of discontinued
operations.................................... -- -- 8,654
Payments of conversion incentive payments...... (24,692) (3,968) --
-------- -------- ---------
Net cash used in investing activities........ (36,695) (27,058) (117,420)
-------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock......... 10,934 5,584 1,457
Payment of note receivable from employee
stockholders.................................. 454 64 --
Repurchase of common stock..................... (20,242) (2) (46)
Proceeds from long-term debt................... -- -- 150,000
Payments on long-term debt..................... (47,250) (6,750) (47,500)
Payment of deferred financing costs............ -- -- (3,181)
-------- -------- ---------
Net cash provided by (used in) financing
activities.................................. (56,104) (1,104) 100,730
-------- -------- ---------
Effect of exchange rate fluctuations on cash.... (169) 24 (439)
-------- -------- ---------
Net increase in cash and cash equivalents....... 9,083 19,176 14,283
Cash and cash equivalents, beginning of period.. 39,593 20,417 6,134
-------- -------- ---------
Cash and cash equivalents, end of period........ $ 48,676 $ 39,593 $ 20,417
======== ======== =========
Supplemental disclosures of cash flow
information:
Cash paid during the period for--
Interest....................................... $ 6,386 $ 8,151 $ 4,767
Income taxes................................... $ 19,905 $ 7,259 $ 3,357
</TABLE>

Supplemental disclosure of non-cash investing and financing activities:

During 1998, the Company assumed liabilities of $1.3 million as part of the
purchase price for the USTATS asset acquisition.

During 1997, the Company granted 3.0 million common stock warrants, valued
at $26.1 million, and recorded a liability for $26.0 million for conversion
incentive payments as part of the purchase price for the SUMMITrak asset
acquisition.

The accompanying notes are an integral part of these consolidated financial
statements.

30
<PAGE>

CSG SYSTEMS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. General

CSG Systems International, Inc. (the "Company" or "CSG"), a Delaware
corporation, was formed in October 1994 and acquired all of the outstanding
shares of CSG Systems, Inc. ("CSG Systems") from First Data Corporation
("FDC") in November 1994 (the "CSG Acquisition"). CSG Systems had been a
subsidiary or division of FDC from 1982 until the acquisition. The Company did
not have any substantive operations prior to the acquisition of CSG Systems.

Based in Denver, Colorado, the Company provides customer care and billing
solutions worldwide for the converging communications markets, including cable
television, direct broadcast satellite, telephony, on-line services and
others. The Company offers its clients a full range of processing services,
software and support services that automate customer management functions,
including billing, sales support and order processing, invoice calculation and
production, management reporting and customer analysis for target marketing.

On March 5, 1999, the Company completed a two-for-one stock split, effected
as a stock dividend, for shareholders of record on February 8, 1999. Share and
per share data for all periods presented herein have been adjusted to give
effect to the split.

In April 1998, the Company completed a secondary public stock offering of
approximately 7.0 million shares of Common Stock. The primary shareholders in
the offering included Morgan Stanley affiliated entities and General Motors
employee benefit plan trusts. The Company received none of the proceeds from
the offering, nor incurred any expense.

2. Summary of Significant Accounting Policies

Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries. All
material intercompany accounts and transactions have been eliminated.

Use of Estimates in Preparation of Consolidated Financial Statements. The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Revenue Recognition. The Company classifies its revenues into two main
categories: processing and related services, and software and professional
services. Processing and related services revenues consist primarily of
monthly processing fees generated from the Company's core service bureau
customer care and billing application called Communication Control System
("CCS"), and services ancillary to CCS. Software and professional services
revenues consist primarily of software license and maintenance fees, and
professional services related to the delivery of such products, such as
installation and training services.

Processing and related services are recognized as the services are
performed. Processing fees are typically billed monthly based on the number of
client's customers serviced, ancillary services are typically billed on a per
transaction basis, and certain customized print and mail services are billed
on a usage basis.

The Company follows the guidelines of Statement of Position ("SOP") 97-2,
"Software Revenue Recognition", as amended, in accounting for its software
transactions. For sales transactions which have multiple elements, such as
software and services, the Company allocates the contract value to the
respective elements based on their relative fair values. Arrangements for
software license fees consist of both one-time perpetual licenses and term
licenses. Perpetual license fees are typically recognized upon delivery,
depending upon the

31
<PAGE>

nature and extent of the installation and/or customization services, if any,
to be provided by the Company. Term license fees and maintenance fees are
recognized ratably over the contract term. Professional services are
recognized as the related services are performed.

Payments received for revenues not yet recognized are reflected as deferred
revenue in the accompanying consolidated balance sheets. Revenue recognized
prior to the scheduled billing date of an item is reflected as unbilled
accounts receivable.

Postage and Communications Lines. The Company passes through to its clients
the cost of postage and the cost of communication lines between client sites
and the mainframe data processing facility. Such reimbursements of costs are
netted against the expense and are not included in total revenues. The Company
requires postage and communications lines deposits from its clients based on
contractual arrangements. These amounts are reflected as current liabilities
regardless of the contract period.

Realizability of Long-Lived and Intangible Assets. The Company continually
evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life of long-lived and intangible assets may
warrant revision or that the remaining balance of these assets may not be
recoverable. The Company evaluates the recoverability of its long-lived and
intangible assets by measuring the carrying amount of the assets against the
estimated undiscounted future cash flows associated with them. At the time
such evaluations indicate that the future undiscounted cash flows of certain
long-lived and intangibles assets are not sufficient to recover the carrying
value of such assets, the assets are adjusted to their estimated fair values.

Cash and Cash Equivalents. The Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.

Property and Equipment. Property and equipment are recorded at cost and are
depreciated over their estimated useful lives ranging from two to ten years.
Depreciation is computed using the straight-line method for financial
reporting purposes. Depreciation expense for all property and equipment is
reflected separately in the aggregate and is not included in the cost of
revenues or the other components of operating expenses. Depreciation for
income tax purposes is computed using accelerated methods.

Property and equipment at December 31 consists of the following (in
thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Computer equipment....................................... $ 29,212 $ 24,515
Leasehold improvements................................... 3,515 3,676
Operating equipment...................................... 19,529 14,445
Furniture and equipment.................................. 5,162 4,639
Construction in process.................................. 931 1,179
Other.................................................... 22 22
-------- --------
58,371 48,476
Less--accumulated depreciation........................... (31,864) (23,765)
-------- --------
Property and equipment, net............................ $ 26,507 $ 24,711
======== ========
</TABLE>

Software. Software at December 31 consists of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Acquired software........................................ $ 40,849 $ 40,849
Internally developed software............................ 2,547 3,964
-------- --------
43,396 44,813
Less--accumulated amortization........................... (37,251) (35,391)
-------- --------
Software, net.......................................... $ 6,145 $ 9,422
======== ========
</TABLE>

32
<PAGE>

Acquired software resulted from acquisitions and is stated at cost.
Amortization expense related to acquired software for the years ended December
31, 1999, 1998, and 1997 was $1.5 million, $0.6 million, and $10.6 million,
respectively.

The Company's research and development ("R&D") efforts consist of
development of new products and services as well as enhancements to existing
products and services. The Company capitalizes certain software development
costs when the resulting products reach technological feasibility and begins
amortization of such costs upon the general availability of the products for
licensing. The Company did not capitalize any costs in 1999, and capitalized
costs of $1.4 million and $9.7 million for the years ended December 31, 1998,
and 1997, respectively.

Amortization of internally developed software and acquired software costs
begins when the products are available for general release to clients and is
computed separately for each product as the greater of (i) the ratio of
current gross revenue for a product to the total of current and anticipated
gross revenue for the product, or (ii) the straight-line method over the
remaining estimated economic life of the product. Estimated lives of two to
five years are used in the calculation of amortization. Amortization expense
related to capitalized software development costs for the years ended December
31, 1999, 1998, and 1997 was $0.4 million, $0.7 million, and $0.6 million,
respectively.

The Company continually evaluates the carrying value of its unamortized
capitalized software development costs. The amount by which the unamortized
capitalized costs exceed the net realizable value of the asset is expensed.
During 1997, the Company recorded a charge of $11.7 million related to certain
CSG Phoenix capitalized costs. After the consideration of multiple factors and
events, consisting primarily of an increase in demand for the Company's
outsourced processing services and previously announced delays on the delivery
of CSG Phoenix, such assets were reduced to their estimated net realizable
value as of December 31, 1997. The charge primarily included previously
capitalized internal development costs and purchased software incorporated
into the product.

Noncompete Agreements and Goodwill. Noncompete agreements and goodwill as of
December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Noncompete agreements.................................... $ 25,340 $ 25,340
Goodwill................................................. 7,039 7,134
-------- --------
32,379 32,474
Less--accumulated amortization........................... (29,727) (24,878)
-------- --------
Noncompete agreements and goodwill, net................ $ 2,652 $ 7,596
======== ========
</TABLE>

The noncompete agreements resulted from acquisitions and are being amortized
on a straight-line basis over the terms of the agreements, ranging from three
to five years. Goodwill resulted from acquisitions and is being amortized over
seven to ten years on a straight-line basis.

During 1997, the Company recorded a charge of $4.7 million for the
impairment of certain intangible assets related to software systems which the
Company decided to no longer market and support. This impairment charge
related principally to the Company's CableMAX product. CableMAX was a personal
computer based customer management system that was targeted at smaller cable
systems of 2,500 customers or less. During 1997, the Company decided not to
invest the resources necessary to make the software year 2000 compliant,
resulting in the impairment to the CableMAX intangible assets. The estimated
fair value of the CableMAX intangible assets was based upon an analysis of
expected future cash flows and a quoted purchase price from an independent
buyer.

Client Contracts and Related Intangibles. Client contracts and related
intangibles which resulted from the CSG Acquisition were amortized over their
estimated lives of five and three years, respectively. The value

33
<PAGE>

assigned to all other client contracts is being amortized over the lives of
the respective contracts. As of December 31, 1999 and 1998, accumulated
amortization for client contracts and related intangibles was $24.8 million
and $17.7 million, respectively.

Financial Instruments with Market Risk and Concentrations of Credit Risk. In
the normal course of business, the Company is exposed to credit risk resulting
from the possibility that a loss may occur from the failure of another party
to perform according to the terms of a contract. The Company regularly
monitors credit risk exposures and takes steps to mitigate the likelihood of
these exposures resulting in a loss. The primary counterparties to the
Company's accounts receivable and sources of the Company's revenues consist of
cable television providers throughout the United States. The Company generally
does not require collateral or other security to support accounts receivable.
The activity in the Company's allowance for uncollectible accounts receivable
for the years ended December 31 is as follows (in thousands);

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Balance, beginning of period....................... $ 2,051 $ 1,394 $ 819
Additions.......................................... 2,021 1,724 875
Reductions......................................... (1,097) (1,067) (300)
------- ------- ------
Balance, end of period............................. $ 2,975 $ 2,051 $1,394
======= ======= ======
</TABLE>

Financial Instruments. The Company's balance sheet financial instruments as
of December 31, 1999 and 1998 include cash and cash equivalents, accounts
receivable, accounts payable, conversion incentive payments, and long-term
debt. Because of their short maturities, the carrying amounts of cash
equivalents, accounts receivable, accounts payable, and conversion incentive
payments approximate their fair value. The carrying amount of the Company's
long-term debt (including current maturities) approximates fair value due to
its variable interest rates.

In December 1997, the Company entered into a three-year interest rate collar
with a major bank to manage its risk from its variable rate long-term debt.
The underlying notional amount covered by the collar agreement was $60.6
million as of December 31, 1999, and decreases over the three-year term in
relation to the scheduled principal payments on the long-term debt. Any
payment on the 4.9% (LIBOR) interest rate floor, or receipt on the 7.5%
(LIBOR) interest rate cap component of the collar, would be recognized as an
adjustment to interest expense in the period incurred. There are no amounts
due or receivable under this agreement as of December 31, 1999, and the
agreement had no effect on the Company's interest expense for 1999, 1998, or
1997. The fair value of the collar agreement is not recognized in the
Company's financial statements. The fair value of the collar agreement at
December 31, 1999, based on a quoted market price, was not significant.

Translation of Foreign Currency. The Company's foreign subsidiaries use as
their functional currency the local currency of the countries in which they
operate. Their assets and liabilities are translated into U.S. dollars at the
exchange rates in effect at the balance sheet date. Revenues and expenses are
translated at the average rates of exchange prevailing during the period.
Translation gains and losses are included in total comprehensive income in the
Company's Consolidated Statements of Stockholders' Equity. Transaction gains
and losses related to intercompany accounts are not material and are included
in the determination of net income or loss.

Earnings Per Common Share. The Company follows Statement of Financial
Accounting Standards ("SFAS") No. 128 in calculating earnings per share
("EPS"). Basic EPS is computed by dividing income attributable to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS is consistent with the calculation of basic EPS
while giving effect to any dilutive potential common shares outstanding during
the period. Basic and diluted EPS are presented on the face of the Company's
Consolidated Statements of Operations. No reconciliation of the EPS numerator
is necessary as the basic and diluted net income available to common
stockholders is the same for all periods presented. The reconciliation of the
EPS denominator is as follows (in thousands):

34
<PAGE>

<TABLE>
<CAPTION>
Year Ended December 31
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Basic weighted average common shares................. 51,675 51,198 50,994
Dilutive shares from common stock warrants........... 838 -- --
Dilutive shares from common stock options............ 2,147 1,793 --
------- ------- -------
Weighted average diluted common shares............... 54,660 52,991 50,994
======= ======= =======
</TABLE>

Common Stock options of 4.2 million shares were excluded from the
computation of diluted EPS for 1997 because their inclusion would have had an
antidilutive effect on EPS as a result of the Company's loss from continuing
operations for the year. Common Stock options of 0.6 million shares and 1.7
million shares for 1999 and 1998, respectively, were excluded from the
computation of diluted EPS because the exercise prices of these options were
greater than the average market price of the common shares for the respective
periods.

The diluted potential common shares related to the warrants were excluded
from the computation of diluted EPS for all quarters the warrants were not
considered exercisable. As of December 31, 1999, all of the 3.0 million
warrants were considered exercisable (Note 4).

Stock-Based Compensation. The Company accounts for its stock-based
compensation plans under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations, and
follows the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). See Note 12 for the required disclosures under
SFAS 123.

Comprehensive Income. During 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which establishes standards for
reporting and display of comprehensive income and its components in a
financial statement for the period in which they are recognized. The
components of comprehensive income are reflected in the Company's Consolidated
Statements of Stockholders' Equity.

Reclassification. Certain December 31, 1998 and 1997 amounts have been
reclassified to conform to the December 31, 1999 presentation.

3. Segment Reporting

During 1998, the Company adopted SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires
disclosures of selected information about operating segments and related
disclosures about products and services, geographic areas, and major
customers. SFAS 131 requires operating segments to be determined based on the
way management organizes a company for purposes of making operating decisions
and assessing performance. Based on the guidelines of SFAS 131, the Company
has determined it has only one reportable segment: customer care and billing
solutions for the worldwide converging communications markets.

Products and Services. The Company provides customer care and billing
solutions worldwide for the converging communications markets, including cable
television, direct broadcast satellite, telephony, on-line services and
others. The Company generates a significant portion of its revenues from its
core service bureau processing product, CCS. The Company sells its software
products and professional services principally to its existing client base of
processing customers to (i) enhance the core functionality of its service
bureau processing application, (ii) increase the efficiency and productivity
of the clients' operations, and (iii) allow clients to effectively rollout new
products and services to new and existing markets, such as residential
telephony, High-Speed Data/ISP and IP markets.

The Company derived approximately 78.3%, 78.0%, and 76.7% of its total
revenues in the years ended December 31, 1999, 1998 and 1997, respectively,
from CCS and related products and ancillary services. The Company generated
75.8%, 77.7%, and 73.1% of its total revenues from the U.S. cable television
industry, and

35
<PAGE>

15.5%, 13.0%, and 10.5% of its total revenues from the U.S. and Canadian
direct broadcast satellite ("DBS") industry during the years ended December
31, 1999, 1998 and 1997, respectively.

Geographic Regions. Revenues are generated from external customers only. The
Company uses the location of the customer as the basis of attributing revenues
to individual countries. Financial information relating to the Company's
operations by geographic areas is as follows (in thousands):

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Total Revenue:
United States................................... $308,266 $221,778 $155,243
United Kingdom.................................. 9,569 11,740 15,756
Other........................................... 4,327 3,122 805
-------- -------- --------
$322,162 $236,640 $171,804
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
As of December 31,
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Long-Lived Assets (excludes intangible assets):
United States.................................... $25,903 $23,398 $15,780
United Kingdom................................... 604 1,313 1,377
------- ------- -------
$26,507 $24,711 $17,157
======= ======= =======
</TABLE>

Significant Clients. During the years ended December 31, 1999, 1998, and
1997, revenues from AT&T represented approximately 50.5%, 37.4%, and 32.9% of
total revenues, and revenues from Time Warner Cable and its affiliated
companies ("Time Warner") represented approximately 10.2%, 14.1%, and 20.1% of
total revenues, respectively. See Note 4 for discussion of the Company's
contract with AT&T. The Company has separate processing agreements with
multiple affiliates of Time Warner and provides products and services to them
under separately negotiated and executed contracts.

4. Acquisitions

USTATS Asset Acquisition. On July 30, 1998, the Company acquired
substantially all of the assets of US Telecom Advanced Technology Systems,
Inc. ("USTATS") for approximately $6.0 million in cash and assumption of
certain liabilities of approximately $1.3 million. USTATS, a South Carolina-
based company, specializes in open systems, client/server customer care and
billing systems serving the telecommunications markets. The Company used the
acquired technology and software primarily to enhance its current service-
bureau telephony customer care and billing system. The cash portion of the
purchase price was paid out of corporate funds. The total purchase price of
$7.3 million has been allocated to the technology and software acquired and is
being amortized over its expected useful life of five years.

SUMMITrak Asset Acquisition. In September 1997, the Company purchased
certain SUMMITrak software technology assets (the "SUMMITrak Acquisition")
that were in development from Tele-Communications, Inc. ("TCI") and entered
into a 15-year exclusive contract with a TCI affiliate to consolidate 13.0
million TCI customers onto the Company's customer care and billing system. In
March 1999, AT&T completed its merger with TCI and has consolidated the TCI
operations into AT&T Broadband ("AT&T"). The Company continues to service AT&T
under the terms of the 15-year processing contract (the "AT&T Contract").

36
<PAGE>

The purchase price for the SUMMITrak Acquisition was determined as follows
(in thousands):

<TABLE>
<S> <C>
Cash paid at closing............................................... $106,000
Transaction-related costs.......................................... 500
Conversion incentive payments...................................... 26,000
Common Stock warrants granted...................................... 26,145
--------
Total purchase price............................................. $158,645
========
</TABLE>

The purchase price included certain conversion incentive payments, with the
amounts and the timing of the payments based principally upon the number of
AT&T customers converted to and processed on the Company's customer care and
billing system. AT&T surpassed the final milestone of 13 million customers
processed on the Company's systems during the third quarter of 1999. Upon
reaching this significant milestone, AT&T was paid its final monetary
conversion incentive by the Company. The total monetary conversion incentives
paid during 1999 and 1998 to AT&T were $22.0 million and $4.0 million,
respectively. The amounts paid were reflected in the Company's Consolidated
Balance Sheets as "conversion incentive payments".

The Company also granted 3.0 million Common Stock warrants to AT&T as part
of the overall purchase price. The warrants have a five-year life with a $12
per share exercise price. The fair value of the warrants included in the
purchase price was estimated as of the date of the grant using the Black-
Scholes pricing model.

The Company engaged an independent party to assist in the allocation of the
purchase price to the assets acquired. The Company allocated the purchase
price as follows (in thousands):

<TABLE>
<S> <C>
Purchased research and development................................. $105,000
AT&T Contract...................................................... 51,575
Other assets....................................................... 2,070
--------
Total allocated purchase price................................... $158,645
========
</TABLE>

Purchased research and development represents R&D of software technologies
which had not reached technological feasibility as of the acquisition date,
and had no other alternative future use. Purchased research and development
was charged to operations in 1997. The Company continued the R&D of certain
software technologies acquired from AT&T. Such efforts included the completion
of the R&D projects and the integration of the completed software technologies
into certain of its current products. The related products from these
development efforts were available for general release in 1999.

The value assigned to the AT&T Contract is being amortized over the life of
the contract in proportion to the financial minimums included in the contract.
The amortization expense for the AT&T Contract was $3.3 million, $1.9 million,
and $0.3 million for the years ended December 31, 1999, 1998 and 1997,
respectively. The other assets are being depreciated over their estimated
useful lives of three years.

5. Stock Repurchase Program

On August 4, 1999, the Company's Board of Directors approved a stock
repurchase plan which authorized the Company to purchase up to a total of 5.0
million shares of its Common Stock from time to time as market and business
conditions warrant. This program represents approximately 10% of the Company's
outstanding shares. During 1999, the Company repurchased a total of 655,500
shares for approximately $20.2 million (a weighted average price of $30.88 per
share). The repurchased shares are held as treasury shares.

6. Debt

In conjunction with the SUMMITrak Acquisition, the Company entered into a
$190.0 million debt agreement with a bank in September 1997 (the "1997 Debt"),
which consists of a $150.0 million term facility

37
<PAGE>

(the "Term Credit Facility") and a $40.0 million revolving credit facility.
The proceeds from the Term Credit Facility were used to pay the $106.0 million
cash purchase price for the SUMMITrak assets, retire the Company's previous
bank debt of $27.5 million, and pay transaction costs of $3.4 million. The
remaining proceeds were used for general corporate purposes. In conjunction
with this refinancing, the Company recorded an extraordinary loss of $0.6
million for the write-off of deferred financing costs. The Company did not
recognize any income tax benefit related to the extraordinary loss. In
addition to the scheduled quarterly principal payments, the Company also made
optional principal payments on the Term Credit Facility of $31.6 million and
$15.0 million in 1999 and 1997, respectively.

Interest rates for the 1997 Debt, including the term and revolving credit
facilities, are chosen at the option of the Company and are based on the LIBOR
rate or the prime rate, plus an additional percentage spread, with the spread
dependent upon the Company's leverage ratio. As of December 31, 1999, the
spread on the LIBOR rate and prime rate was 0.50% and 0%, respectively. The
Company entered into an interest rate collar agreement in December 1997 to
manage its risk from the variable rate features of the 1997 Debt agreement
(Note 2). The 1997 Debt agreement is collateralized by all of the Company's
assets and the stock of its subsidiaries.

The 1997 Debt agreement requires maintenance of certain financial ratios and
contains other restrictive covenants, including restrictions on payment of
dividends, a fixed charge coverage ratio, a leverage ratio, and restrictions
on capital expenditures. As of December 31, 1999, the Company was in
compliance with all covenants. The payment of cash dividends or other types of
distributions on any class of the Company's stock is restricted unless the
Company's leverage ratio, as defined in the 1997 Debt agreement, is under
1.50. As of December 31, 1999, the leverage ratio was 0.62.

Long-term debt as of December 31 consists of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Term Credit Facility, due September 2002, quarterly
payments beginning June 30, 1998, ranging from $2.3
million to $13.4 million, interest at adjusted LIBOR
plus 0.50% (weighted average rate of 6.55% at
December 31,1999).................................... $ 81,000 $128,250
Revolving credit facility, due September 2002,
interest at adjusted LIBOR plus 0.50%................ -- --
-------- --------
81,000 128,250
Less-current portion.................................. (21,711) (19,125)
-------- --------
Long-term debt, net of current maturities............. $ 59,289 $109,125
======== ========
</TABLE>

There were no borrowings made on the revolving credit facilities during the
years ended December 31, 1999, 1998, and 1997. Under the 1997 Debt agreement,
the Company pays an annual commitment fee on the unused portion of the
revolving credit facility, based upon the Company's leverage ratio. As of
December 31, 1999, the fee was 0.25%. The Company's ability to borrow under
the current revolving credit facility is subject to maintenance of certain
levels of eligible receivables. At December 31, 1999, all of the $40.0 million
revolving credit facility was available to the Company.

As of December 31, 1999 and 1998, unamortized deferred financing costs were
$1.1 million and $2.0 million, respectively. Deferred financing costs are
amortized to interest expense over the related term of the debt agreement
using a method which approximates the effective interest rate method. Interest
expense for the years ended December 31, 1999, 1998 and 1997 includes
amortization of deferred financing costs of approximately $0.9 million, $0.9
million, and $0.5 million, respectively.

As of December 31, 1999, scheduled maturities of the Company's long-term
debt for each of the years ending December 31 are: 2000--$21.7 million, 2001--
$25.9 million, and 2002--$33.4 million.

38
<PAGE>

7. Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 109 is an asset and liability
approach which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events which have been recognized
in the Company's Consolidated Financial Statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all expected
future events other than enactment of or changes in the tax law or rates.

Income tax provision (benefit) consists of the following (in thousands):

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Current:
Federal....................................... $25,442 $ 11,574 $ 4,466
State......................................... 3,029 1,594 615
Foreign....................................... 1,160 (36) 810
------- -------- --------
29,631 13,132 5,891
------- -------- --------
Deferred:
Federal....................................... 5,792 6,592 (38,298)
State......................................... 690 908 (5,276)
Foreign....................................... (58) 1,048 393
------- -------- --------
6,424 8,548 (43,181)
------- -------- --------
Change in valuation allowance................... -- (61,323) 37,290
------- -------- --------
Net income tax provision (benefit).............. $36,055 $(39,643) $ --
======= ======== ========
</TABLE>

The difference between the income tax provision (benefit) computed at the
statutory federal income tax rate and the financial statement provision
(benefit) for income taxes is summarized as follows (in thousands):

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Provision (benefit) at federal rate of 35%..... $33,575 $ 16,099 $(36,005)
Change in valuation allowance.................. -- (59,224) 37,290
Effective state income taxes................... 2,415 1,625 (3,030)
Amortization of nondeductible goodwill......... 235 781 1,582
Stock-based employee compensation.............. 42 362 157
Other.......................................... (212) 714 6
------- -------- --------
$36,055 $(39,643) $ --
======= ======== ========
</TABLE>

39
<PAGE>

The deferred tax assets and liabilities result from differences in the
timing of the recognition of certain income and expense items for tax and
financial reporting purposes. The sources of these differences at December 31
are as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Current deferred tax assets (liabilities):
Accrued expenses and reserves............................ $ 1,794 $ 1,598
Deferred revenue......................................... 129 205
Other.................................................... 49 --
------- -------
$ 1,972 $ 1,803
======= =======
Noncurrent deferred tax assets (liabilities):
Purchased research and development....................... $42,981 $47,086
Software................................................. 7,052 7,942
Client contracts and related intangibles................. (2,645) (370)
Noncompete agreements.................................... 6,034 5,104
Property and equipment................................... 125 705
Other.................................................... (702) (1,078)
------- -------
$52,845 $59,389
======= =======
</TABLE>

As part of an acquisition accounted for as a purchase in 1996, the Company
acquired certain net deferred tax assets (principally related to net operating
loss carryforwards) and established a valuation allowance of approximately
$1.0 million against those net deferred tax assets as of the acquisition date.
Upon the realization of these deferred tax assets, the Company eliminated the
valuation allowance and reduced goodwill by a corresponding amount of $0.9
million in 1998.

As of December 31, 1997, the Company had a valuation allowance of $61.3
million against certain of its deferred tax assets due to the uncertainty that
it would realize the income tax benefit from these assets. During 1998, the
Company concluded that it was more likely than not that it would realize the
entire tax benefit from its deferred tax assets based on its evaluation of the
Company's anticipated profitability over the period of years that the
temporary differences were expected to become deductions. As a result, the
Company eliminated the entire valuation allowance as of December 31, 1998,
which resulted in the Company reflecting a net income tax benefit of $39.6
million for 1998. As of December 31, 1999, management continues to believe
that sufficient taxable income will be generated to realize the entire benefit
of these deferred tax assets. The Company's assumptions of future profitable
operations are supported by its strong operating performances in 1999 and
1998, and the conversion of a significant number of new customers onto its
processing system during these periods.

8. Employee Retirement Benefit Plans

Incentive Savings Plan. The Company sponsors a defined contribution plan
covering substantially all employees of the Company. Participants may
contribute up to 15% of their annual wages, subject to certain limitations, as
pretax, salary deferral contributions. The Company makes certain matching and
service-related contributions to the plan. The Company's matching and service-
related contributions for the years ended December 31, 1999, 1998 and 1997,
were approximately $3.4 million, $2.9 million, and $2.0 million, respectively.

Deferred Compensation Plan. The Company maintains a non-qualified deferred
compensation plan for certain Company executives which allows the participants
to defer a portion of their annual compensation. The Company provides a 25%
matching contribution of the participant's deferral, up to a maximum of $6,250
per year. The Company also credits the participant's deferred account with a
specified rate of return on an annual basis. The Company records the
actuarially determined present value of the obligations expected to be paid
under the plan. As of December 31, 1999 and 1998, the Company has recorded a
liability for this obligation of $1.1

40
<PAGE>

million and $1.0 million, respectively. The Company's expense for this plan
for the years ended December 31, 1999, 1998 and 1997, which includes Company
contributions and interest expense, was $0.4 million, $0.4 million, and $0.5
million, respectively. The plan is unfunded.

9. Commitments and Contingencies

Operating Leases. The Company leases certain office and production
facilities under operating leases which run through 2010. Future aggregate
minimum lease payments under these agreements for the years ending December 31
are as follows: 2000--$6.1 million, 2001--$6.8 million, 2002--$6.3 million,
2003--$5.8 million, 2004--$4.5 million, thereafter--$16.9 million.

Total rent expense for the years ended December 31, 1999, 1998, and 1997,
was approximately $5.2 million, $3.9 million, and $3.4 million, respectively.

Service Agreements. The Company has service agreements with FDC and its
subsidiaries for data processing services, communication charges and other
related services. FDC provides data processing and related services required
for the operation of the Company's CCS system.

Effective January 1, 1997, the Company renegotiated its services agreement
with FDC and its subsidiaries. The new agreement expires December 31, 2001,
and is cancelable at the Company's option with (i) notice of six months any
time after January 1, 2000, and (ii) payment of a termination fee equal to 20%
of the fees paid in the twelve months preceding the notification of
termination. Under the agreement, the Company is charged based on usage and/or
actual costs, and is subject to certain limitations as to the amount of
increases or decreases in usage between years. The total amount paid under the
service agreements for the years ended December 31, 1999, 1998 and 1997, was
approximately $27.1 million, $22.1 million, and $19.2 million, respectively.
The Company believes it could obtain data processing services from alternative
sources, if necessary.

Legal Proceedings. From time to time, the Company is involved in litigation
relating to claims arising out of its operations in the normal course of
business. In the opinion of the Company's management, after consultation with
outside legal counsel, the ultimate dispositions of such matters will not have
a materially adverse effect on the Company's consolidated financial position
or results of operations.

10. Discontinued Operations

Contemporaneously with the CSG Acquisition, the Company purchased from FDC
all of the outstanding shares of Anasazi Inc. ("Anasazi") for $6.0 million
cash. The Company accounted for its ownership in Anasazi as discontinued
operations after its acquisition in 1994. On August 31, 1995, the Company
completed a substantial divestiture of Anasazi as part of a tax-free
reorganization, resulting in the Company owning less than 20% of Anasazi. As a
result, Anasazi's results of operations subsequent to August 31, 1995 are not
included in the Company's results of operations as the Company accounted for
its investment in Anasazi under the cost method subsequent to this date. In
September 1997, the Company sold its remaining interest in Anasazi for $8.6
million in cash and recognized a gain of $7.9 million.

11. Restricted Common Stock

During 1995 and 1994, the Company sold Common Stock to executive officers
and key employees pursuant to restricted stock agreements. Certain of these
shares vest over the individual's service period with the Company. The Company
has the option upon termination of employment to repurchase unvested shares of
restricted stock at either the original purchase price (ranging from $0.11 to
$2.13 per share) or the net book value per share, depending upon the specific
terms of the agreements. During the years ended December 31, 1998, and 1997,
the Company repurchased unvested shares of 66,000, and 209,100, respectively,
from terminated employees. The 66,000 shares repurchased in 1998 are held as
treasury shares. The shares repurchased in 1997 were cancelled. There were no
shares repurchased during 1999. As of December 31, 1999, 171,400 shares were
still subject to the repurchase option. In January 2000, the Company
repurchased 18,500 shares from a terminated

41
<PAGE>

employee. The remainder of the 152,900 shares are scheduled to vest in 2000.
Deferred compensation of $0.05 million and $0.3 million as of December 31,
1999 and 1998, respectively, relates to the unvested shares and is reflected
as a component of stockholders' equity. Stock-based compensation expense
related to these shares for 1999, 1998 and 1997 was $0.3 million, $0.3
million, and $0.4 million, respectively.

Certain employees financed a portion of their stock purchases with full
recourse promissory notes. The notes accrue interest at 7% annually and have
terms of approximately five years. As of December 31, 1999 and 1998, the
outstanding balance of the promissory notes was approximately $0.1 million and
$0.5 million, respectively, and is reflected as a component of stockholders'
equity.

12. Stock-Based Compensation Plans

Stock Incentive Plans. During 1995, the Company adopted the Incentive Stock
Plan (the "1995 Plan") whereby 514,000 shares of the Company's Common Stock
have been reserved for issuance to eligible employees of the Company in the
form of stock options. The 190,100 options outstanding under the 1995 Plan at
December 31, 1999, vest annually over five years.

During 1996, the Company adopted the 1996 Stock Incentive Plan (the "1996
Plan") whereby 4,800,000 shares of the Company's Common Stock have been
reserved for issuance to eligible employees of the Company in the form of
stock options, stock appreciation rights, performance unit awards, restricted
stock awards, or stock bonus awards. In December 1997, upon shareholder
approval, the number of shares authorized for issuance under the 1996 Plan was
increased to 8,000,000. In May 1999, upon shareholder approval, the number of
shares authorized for issuance under the 1996 Plan was increased to
11,000,000. The 5,278,722 options outstanding under the 1996 Plan as of
December 31, 1999, vest over four to five years. Certain options become fully
vested upon a change in control of the Company.

During 1997, the Company adopted the Stock Option Plan for Non-Employee
Directors (the "Director Plan") whereby 200,000 shares of the Company's Common
Stock have been reserved for issuance to non-employee Directors of the Company
in the form of stock options. The 136,000 options outstanding under the
Director Plan at December 31, 1999, vest annually over three years.

Stock options are granted with an exercise price equal to the fair market
value of the Company's Common Stock as of the date of the grant. All
outstanding options have a 10-year term. A summary of the stock options issued
under the 1996 Plan, the Director Plan, and 1995 Plan and changes during the
years ending December 31 are as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1999 1998 1997
------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of year................ 6,229,464 $17.23 4,152,220 $ 10.43 2,869,460 $ 9.31
Granted............... 731,050 33.85 3,276,000 23.86 2,223,400 11.61
Exercised............. (795,117) 12.63 (540,336) 9.20 (148,600) 6.80
Forfeited............. (560,575) 17.23 (658,420) 13.89 (792,040) 10.35
--------- ------ --------- ------- --------- ------
Outstanding, end of
year................... 5,604,822 $20.05 6,229,464 $ 17.23 4,152,220 $10.43
========= ====== ========= ======= ========= ======
Options exercisable at
year end............... 1,297,072 913,774 530,152
========= ========= =========
Weighted average fair
value of options
granted during the
year................... $13.04 $ 10.39 $ 4.60
====== ======= ======
Options available for
grant.................. 4,603,675 1,774,150 4,391,730
========= ========= =========
</TABLE>

42
<PAGE>

The following table summarizes information about the Company's stock options
as of December 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- --------------------------
Weighted
Average Weighted Weighted
Range Of Number Remaining Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.63 -
$ 1.88 190,100 5.6 $ 0.67 122,900 $ 0.68
$ 7.50 -
$11.06 1,269,066 6.9 9.13 547,716 9.09
$11.75 -
$14.88 581,210 6.9 14.53 309,010 14.54
$16.78 -
$23.44 1,362,521 8.3 20.87 291,196 20.76
$23.59 -
$27.97 1,623,875 8.9 26.48 25,000 24.05
$30.25 -
$39.50 578,050 8.9 35.98 1,250 32.71
-------- --------- --- ------ --------- ------
$ 0.63 -
$39.50 5,604,822 8.0 $20.05 1,297,072 $12.52
========= === ====== ========= ======
</TABLE>

In January 2000, the Company granted 919,800 options at prices that range
from $38.44 per share to $47.63 per share under the 1996 Plan, with such
options vesting over four years. These options are not reflected in the above
tables as they were granted subsequent to December 31, 1999.

1996 Employee Stock Purchase Plan. During 1996, the Company adopted the 1996
Employee Stock Purchase Plan whereby 500,000 shares of the Company's Common
Stock have been reserved for sale to employees of the Company and its
subsidiaries through payroll deductions. The price for shares purchased under
the plan is 85% of market value on the last day of the purchase period.
Purchases are made at the end of each month. During 1999, 1998, and 1997,
respectively, 34,352 shares, 31,374 shares, and 39,318 shares have been
purchased under the plan for $0.9 million ($18.91 to $37.08 per share) $0.6
million ($15.62 to $33.58 per share), and $0.4 million ($7.17 to $17.00 per
share).

Stock-Based Compensation Plans. At December 31, 1999, the Company had four
stock-based compensation plans, as described above. The Company accounts for
these plans under APB Opinion No. 25, under which no compensation expense has
been recognized in 1999, 1998 or 1997.

Had compensation expense for the Company's four stock-based compensation
plans been based on the fair value at the grant dates for awards under those
plans consistent with the methodology of SFAS 123, the Company's net income
(loss) and net income (loss) per share attributable to common stockholders for
1999, 1998 and 1997 would approximate the pro forma amounts as follows (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- ---------
<S> <C> <C> <C>
Net income (loss):
As reported.................................... $59,874 $85,638 $(102,871)
Pro forma...................................... 52,498 80,710 (104,776)
Diluted net income (loss) per common share:
As reported.................................... 1.10 1.62 (2.02)
Pro forma...................................... 0.96 1.52 (2.06)
</TABLE>

The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for options granted in 1999, 1998 and 1997, respectively: risk-
free interest rates of 5.0%, 4.9%, and 6.3%; dividend yield of zero percent
for all years; expected lives of 4.1 years, 4.4 years, and 3.9 years; and
volatility of 40.0% for all years. Consistent with SFAS 123, the Company
assumed zero volatility for all options granted prior to the date the Company
qualified as a public entity.

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 applies only to 1999, 1998 and 1997,
and additional awards in future years are anticipated.

43
<PAGE>

13. Unaudited Quarterly Financial Data

<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1999:
Total revenues.................... $71,087 $76,510 $84,034 $90,531
Gross margin (exclusive of
depreciation).................... 41,202 44,800 49,493 54,546
Operating income.................. 20,227 22,716 26,627 30,582
Income before income taxes........ 18,623 21,727 25,752 29,827
Income tax provision.............. (7,041) (8,234) (9,691) (11,089)
Net income attributable to common
stockholders..................... 11,582 13,493 16,061 18,738
Net income attributable to common
stockholders per share:
Basic........................... .22 .26 .31 .36
Diluted......................... .21 .25 .29 .34
1998:
Total revenues.................... $49,308 $54,244 $63,461 $69,627
Gross margin (exclusive of
depreciation).................... 26,158 29,152 34,757 39,327
Operating income.................. 8,377 10,707 15,456 18,763
Income before income taxes........ 6,484 8,651 13,576 17,284
Income tax benefit(1)............. -- -- -- 39,643
Net income attributable to common
stockholders..................... 6,484 8,651 13,576 56,927
Net income attributable to common
stockholders per share:
Basic........................... .13 .17 .26 1.11
Diluted......................... .12 .16 .26 1.06
</TABLE>
- --------
(1) The fourth quarter of 1998 included an income tax benefit of $39.6
million, or $0.74 per diluted share, related primarily to the elimination
of the Company's valuation allowance against its deferred tax assets
(Note 7).

44
<PAGE>

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None.

Item 10. Directors and Executive Officers of the Registrant

See the Proxy Statement for the Company's Annual Meeting of Stockholders,
which information regarding directors is incorporated herein by reference.
Information regarding the Company's executive officers will be omitted from
such proxy statement and is furnished in a separate item captioned "Executive
Officers of the Registrant" included in Part I of this Form 10-K.

Item 11. Executive Compensation

See the Proxy Statement for the Company's Annual Meeting of Stockholders,
which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

See the Proxy Statement for the Company's Annual Meeting of Stockholders,
which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

See the Proxy Statement for the Company's Annual Meeting of Stockholders,
which information is incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Financial Statements, Financial Statement Schedules, and Exhibits:

(1) Financial Statements

The financial statements filed as part of this report are listed on
the Index to Consolidated Financial Statements on page 25.

(2) Financial Statement Schedules:

None. Any information required in the financial statement schedules
is provided in sufficient detail in the Consolidated Financial
Statements and notes thereto.

(3) Exhibits

Exhibits are listed in the Exhibit Index on page 47.

The Exhibits include management contracts, compensatory plans and
arrangements required to be filed as exhibits to the Form 10-K by Item
601(10)(iii) of Regulation S-K.

(b) Reports on Form 8-K

None

45
<PAGE>

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

CSG Systems International, Inc.

/s/ Neal C. Hansen
By: _________________________________
Neal C. Hansen
Chief Executive Officer
(Principal Executive Officer)

Date: March 24, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Neal C. Hansen Chairman of the Board of March 24, 2000
______________________________________ Directors and Chief
Neal C. Hansen Executive Officer
(Principal Executive
Officer)

/s/ John P. Pogge President, Chief Operating March 24, 2000
______________________________________ Officer and Director
John P. Pogge

/s/ Greg A. Parker Vice President and Chief March 24, 2000
______________________________________ Financial Officer
Greg A. Parker (Principal Financial
Officer)

/s/ Randy R. Wiese Vice President and March 24, 2000
______________________________________ Controller (Principal
Randy R. Wiese Accounting Officer)

/s/ George F. Haddix Director March 24, 2000
______________________________________
George F. Haddix

/s/ Royce J. Holland Director March 24, 2000
______________________________________
Royce J. Holland

/s/ Janice Obuchowski Director March 24, 2000
______________________________________
Janice Obuchowski

/s/ Bernard W. Reznicek Director March 24, 2000
______________________________________
Bernard W. Reznicek

/s/ Rockwell A. Schnabel Director March 24, 2000
______________________________________
Rockwell A. Schnabel

/s/ Frank V. Sica Director March 24, 2000
______________________________________
Frank V. Sica
</TABLE>

46
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
--------- -----------
<C> <S>
2.01(1) Agreement of Merger among CSG Holdings, Inc., CSG Acquisition
Corporation, Cable Services Group, Inc. and First Data Resources
Inc., dated October 26, 1994

(2.02 intentionally omitted)

2.03(1) Amendment Agreement between First Data Corporation, First Data
Resources Inc., CSG Holdings, Inc., CSG Systems, Inc. and Anasazi
Inc., dated April 27, 1995

(2.04-2.06 intentionally omitted)

2.07(1) Founder Stock Purchase Agreement between CSG Holdings, Inc. and Neal
C. Hansen, dated November 30, 1994

2.08(1) Founder Stock Purchase Agreement between CSG Holdings, Inc. and
George Haddix, dated November 30, 1994

2.09(1) Founder Performance Stock Purchase Agreement between CSG Holdings,
Inc. and Neal C. Hansen, dated November 30, 1994, and first and
second amendments thereto

2.10(1) Founder Performance Stock Purchase Agreement between CSG Holdings,
Inc. and George Haddix, dated November 30, 1994, and first and
second amendments thereto

2.11(1) Series A Preferred Stock Purchase Agreement among CSG Holdings, Inc.
and the purchasers listed on the Schedule of Purchasers attached
thereto, dated November 30, 1994

2.12(1) Stockholders Agreement among CSG Holdings, Inc. and each of the
investors listed on the Schedule of Investors attached thereto,
dated November 30, 1994

(2.13-2.18 intentionally omitted)

2.19(4)* Restated and Amended CSG Master Subscriber Management System
Agreement between CSG Systems, Inc. and TCI Cable Management
Corporation dated August 10, 1997

2.19A(6)* Second Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation, dated January 9, 1998.

2.19B(7)* First Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation, dated June 29, 1998.

2.19C(8) Sixth Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation, dated July 22, 1998.

2.19D(8)* Seventh Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation, dated September 8, 1998.

2.19E(8) Eighth Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation, dated September 25, 1998.

2.19F(8)* Eleventh Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation, dated September 30, 1998.

2.19G(9)* Fifth, Ninth, Tenth, Thirteenth, Fourteenth, Seventeenth and
Nineteenth Amendments to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation.

</TABLE>

47
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
----------- -----------
<C> <S>
2.19H(10)* Fourth and Twenty-Second Amendments and Schedule L to Restated and
Amended CSG Master Subscriber Management System Agreement between
CSG Systems, Inc. and TCI Cable Management Corporation.

2.19I(11)* Twenty-Third, Twenty-Fourth, Twenty-Fifth, Twenty-Seventh, Twenty-
Eighth, Thirtieth, Thirty-Fourth Amendments and Schedule Q to
Restated and Amended CSG Master Subscriber Management System
Agreement between CSG Systems, Inc. and TCI Cable Management
Corporation.

2.19J(12)* Thirty-Sixth and Thirty-Eighth Amendments to Restated and Amended
CSG Master Subscriber Management System Agreement between CSG
Systems, Inc. and TCI Cable Management Corporation.

2.19K* Fifteenth, Twenty-Ninth, Forty-First and Forty-Third Amendments
and Schedules I and X to Restated and Amended CSG Master
Subscriber Management System Agreement between CSG Systems, Inc.
and TCI Cable Management Corporation.

2.20(4) Asset Purchase Agreement between CSG Systems International, Inc.
and TCI SUMMITrak of Texas, Inc., TCI SUMMITrak, L.L.C., and TCI
Technology Ventures, Inc., dated August 10, 1997

2.21(4) Contingent Warrant to Purchase Common Stock between CSG Systems
International, Inc. and TCI Technology Ventures, Inc., dated
September 19, 1997

2.22(4) Royalty Warrant to Purchase Common Stock between CSG Systems
International, Inc. and TCI Technology Ventures, Inc., dated
September 19, 1997

2.23(4) Registration Rights Agreement between CSG Systems International,
Inc. and TCI Technology Ventures, Inc., dated September 19, 1997

2.24(4) Loan Agreement among CSG Systems, Inc. and CSG Systems
International, Inc. as co-borrowers, and certain lenders and
Banque Paribas, as Agent, dated September 18, 1997

2.25(5) First Amendment to Loan Agreement among CSG Systems, Inc. and CSG
Systems International, Inc. as co-borrowers, and certain lenders
and Banque Paribas, as Agent, dated November 21, 1997

2.26(9) Second Amendment to Loan Agreement among CSG Systems, Inc. and CSG
Systems International, Inc. as co-borrowers, and certain lenders
and Banque Paribas, as Agent, dated November 16, 1998.

3.01(1) Restated Certificate of Incorporation of the Company

3.02(3) Restated Bylaws of CSG Systems International, Inc.

3.03(3) Certificate of Amendment of Restated Certificate of Incorporation
of CSG Systems International, Inc.

4.01(1) Form of Common Stock Certificate

10.01(1) CSG Systems International, Inc. 1995 Incentive Stock Plan

10.02(1) CSG Employee Stock Purchase Plan

10.03(11) CSG Systems International, Inc. 1996 Stock Incentive Plan

10.04(1) Employee Performance Stock Purchase Agreement between CSG Systems
International, Inc. and George Haddix, dated August 17, 1995, and
first amendment thereto

10.04A(6) Second Amendment of Employee Performance Stock Purchase Agreement
dated March 18, 1998.

10.05(1) Employee Restricted Stock Purchase Agreement between CSG Systems
International, Inc. and John P. Pogge, dated March 6, 1995

</TABLE>

48
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------------ -----------
<C> <S>
10.06(1) Employee Performance Stock Purchase Agreement between CSG Systems
International, Inc. and John P. Pogge, dated March 6, 1995, and
first and second amendments thereto

10.07(1) Employee Performance Stock Purchase Agreement between CSG Systems
International, Inc. and John P. Pogge, dated May 16, 1995, and
first and second amendments thereto

(10.08-10.10 intentionally omitted)

10.11(1) Registration Rights Agreement among CSG Systems International,
Inc. and the purchasers listed on the Schedule of Purchasers
attached thereto, dated November 30, 1994

(10.12-10.13 intentionally omitted)

10.14(9) Employment Agreement with Neal C. Hansen, dated November 17, 1998

10.15(5) Indemnification Agreements between CSG Systems International,
Inc. and certain directors

10.16(1) Indemnification Agreements between CSG Systems International,
Inc. and its directors and certain officers

(10.17-10.38 intentionally omitted)

10.39 CSG Systems, Inc. Wealth Accumulation Plan, as amended November
16, 1999

10.40(2)* Amended and Restated Services Agreement between First Data
Technologies, Inc. and CSG Systems, Inc., formerly known as Cable
Services Group, Inc., dated December 31, 1996

10.40A(2) Schedules 2.11, 2.14, 5.3 and 6.4 and Exhibit 9(a) to Schedule
5.6 to Amended and Restated Services Agreement between First Data
Technologies, Inc. and CSG Systems, Inc., formerly known as Cable
Services Group, Inc., dated December 31, 1996

10.40B(P)(2) Schedules 1.21 and 1.47 and Exhibit A to Schedule 5.6 to Amended
and Restated Services Agreement between First Data Technologies,
Inc. and CSG Systems, Inc., formerly known as Cable Services
Group, Inc., dated December 31, 1996

10.40C(8)* First Amendment to Amended and Restated Services Agreement
between CSG Systems, Inc. and First Data Technologies, Inc.,
dated July 8, 1998.

(10.41-10.43 intentionally omitted)

10.44(3) CSG Systems International, Inc. Stock Option Plan for Non-
Employee Directors

10.45(9) Employment Agreement with John P. Pogge, dated November 17, 1998.

10.46(9) Employment Agreement with Edward Nafus, dated November 17, 1998.

10.47(9) Employment Agreement with Greg Parker, dated November 17, 1998;

21.01 Subsidiaries of the Company

23.01 Consent of Arthur Andersen LLP

27.01 Financial Data Schedule (EDGAR Version Only)

99.01 Safe Harbor for Forward-Looking Statements Under the Private
Securities Litigation Reform Act of 1995--Certain Cautionary
Statements and Risk Factors
</TABLE>
- --------
(1) Incorporated by reference to the exhibit of the same number to the
Registration Statement No. 333-244 on Form S-1.
(2) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1996.
(3) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-Q for the period ended June 30,
1997.
(4) Incorporated by reference to the exhibit of the same number to the
Registrant's Current Report on Form 8-K dated October 6, 1997.

49
<PAGE>

(5) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-K, as amended for the year ended
December 31, 1997.
(6) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-Q for the period ended March
31, 1998.
(7) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-Q for the period ended June 30,
1998.
(8) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1998.
(9) Incorporated by reference to the exhibit of the same number to the
Registrant's Annual Report on Form 10-K, as amended for the year ended
December 31, 1998.
(10) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-Q for the period ended March
31, 1999.
(11) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-Q for the period ended June 30,
1999.
(12) Incorporated by reference to the exhibit of the same number to the
Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1999.
* Portions of the exhibit have been omitted pursuant to an application for
confidential treatment, and the omitted portions have been filed
separately with the Commission.

<PAGE>

EXHIBIT 2.19K

Pages where confidential treatment has
been requested are stamped "Confidential
Treatment Requested and the Redacted Material
has been separately filed with the Commission,"
and places where information has been redacted
have been marked with (***).

FIFTEENTH AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Fifteenth Amendment (the "Amendment") is executed this 19th day of
November, 1999, and is made by and between CSG Systems, Inc., a Delaware
corporation ("CSG") and TCI Cable Management Corporation ("Customer"). CSG and
Customer entered into a certain Restated and Amended CSG Master Subscriber
Management System Agreement dated August 10, 1997, which has subsequently been
amended pursuant to separately executed amendments (collectively, the
"Agreement"), and now desire to amend the Agreement in accordance with the terms
and conditions set forth in this Amendment. If the terms and conditions set
forth in this Amendment shall be in conflict with the Agreement, the terms and
conditions of this Amendment shall control. Any terms in initial capital letters
or all capital letters used as a defined term but not defined in this Amendment,
shall have the meaning set forth in the Agreement. Upon execution of this
Amendment by the parties, any subsequent reference to the Agreement between the
parties shall mean the Agreement as amended by this Amendment. Except as amended
by this Amendment, the terms and conditions set forth in the Agreement shall
continue in full force and effect according to their terms.

CSG and Customer agree as follows:

1. For the fees set forth in paragraph 2 below, Customer will receive the
@Home implementation services set forth below. Such services are the only
implementation services that Customer will receive in connection with house
loads for @Home. As a result, any implementation services set forth in Exhibit
A-2 as of the date of execution of this Amendment shall not apply with respect
to AT&T @Home house loads. For conversion of AT&T @Home subscribers to CCS, the
services outlined in Exhibit A-2 shall be provided. Accordingly, Exhibit A-2 of
the Agreement shall be amended to include the following:

Technical Services For House Loads
- -----------------------------------

. Analyze the house load specifications
. Copy mapping tables and enter site-specific from/to values.
. Upload test house data from PC to mainframe
. Run tests and verify output.
. Make changes received from test output as necessary and re-test.
. Upload live house data from PC to mainframe.
. Run live house conversion process.
. Verify live output.
. Make any changes requested and rerun, reverify
. Merge houses into production system
. Balance house load and produce balancing forms (sent only to site),
. Send house load sign-off to site for final verification.

Non-Technical Services For House Loads
- --------------------------------------

. System Set-Up - Includes the UDF/Service Codes, RMS, Sys/Prin/Agents, UDF
transfers and code table configuration
. Specification Definition - Receive from site. Review with CSG programming
. Review/Verify Output - Verify Address reports (also sent to site), field-to-
field review, verify Exception Reports (also sent to site)
<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."

. Environment set-up, LU pools, Sys/Prin access, destinations, push code table
to server, build passwords and profiles, establish ".ini" settings
. Test Connectivity (occurs only when @Home sites precedes video
implementation)
. Printers - build print queue on server(s), verify configuration, test
printers

On-Site Launch Services
- -----------------------

. Data Base verification
. Converter Data
. House Info
. Account accessing by all appropriate customer information
. Printer testing with RMS - Work Orders and Reports
. RMS training and review
. WPT setup and training
. Work Order Auto Tech Assignment setup and training
. UDF and CTD review and approval
. Password and profiles reviewed and setup for production
. Scheduling and Dispatch CTD review
. Exception & production reports reviewed and worked
. Review and verification of all tax code tables

2. Schedule D of the Agreement shall be amended to include the following fees
to be paid by Customer for the services set forth in Paragraph 1 above.

A. Fees for Full Initial Houseload:
1. On-site Services are provided*
a. CCS/ACSR in production at System Site $(***)
b. CCS/ACSR not in production at System Site $(***)

2. On-site Services are not provided*
a. CCS/ACSR in production at System Site $(***)
b. CCS/ACSR not in production at System Site $(***)

*Includes up to sixteen (16) hours of on-site support. Any additional hours
required by Customer shall be at CSG's then current rates. Excludes
Reimbursable Expenses which will be billed separately.

B. Other Ancillary Fees:
. Full Agent Addition $(***) per System Site
. Partial Agent Refresh $ (***) per System Site
. Data Clean-up $(***) per System Site
. Develop Houseload Time and Materials
specifications

THIS AMENDMENT is executed on the day and year first shown above.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT CORPORATION
("Customer")

By: /s/ Joseph T. Ruble By: /s/ Ann Montgomery
----------------------------- --------------------------------

Name: Joseph T. Ruble Name: Ann Montgomery
--------------------------- -----------------------------

Title: V.P. & General Counsel Title: EVP, Fulfillment Services
-------------------------- -----------------------------
& Operations
--------------

CONFIDENTIAL AND PROPRIETARY INFORMATION - FOR USE BY AUTHORIZED EMPLOYEES
OF THE PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR
OUTSIDE THEIR RESPECTIVE COMPANIES
<PAGE>

EXHIBIT 2.19K

TWENTY-NINTH AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Twenty-Ninth Amendment (the "Amendment") is executed this 19/th/ day of
November, 1999, and is made by and between CSG Systems, Inc., a Delaware
corporation ("CSG") and TCI Cable Management Corporation ("Customer"). CSG and
Customer entered into a certain Restated and Amended CSG Master Subscriber
Management System Agreement dated August 10, 1997, which has subsequently been
amended pursuant to separately executed amendments (collectively, the
"Agreement"), and now desire to amend the Agreement in accordance with the terms
and conditions set forth in this Amendment. If the terms and conditions set
forth in this Amendment shall be in conflict with the Agreement, the terms and
conditions of this Amendment shall control. Any terms in initial capital
letters or all capital letters used as a defined term but not defined in this
Amendment, shall have the meaning set forth in the Agreement. Upon execution of
this Amendment by the parties, any subsequent reference to the Agreement between
the parties shall mean the Agreement as amended by this Amendment. Except as
amended by this Amendment, the terms and conditions set forth in the Agreement
shall continue in full force and effect according to their terms.

CSG and Customer agree as follows:

1. As of the date of execution of this Amendment, Customer receives CSG's
Electronic Bill Payment Services pursuant to the Electronic Bill Payment
Services Agreement executed by CSG and TCI Communications Inc. ("TCIC") on
March 29, 1996 (the "Paybill Agreement"). Upon Customer's final conversion
from the services provided by CSG under the Paybill Agreement to the
services provided by CSG under the terms and conditions set forth in
Schedule I of the Agreement, the Paybill Agreement shall be terminated and
of no further force or effect.

2. Until such time that Customer fully converts from the services provided by
CSG under the Paybill Agreement to the services provided by CSG under the
terms and conditions set forth in Schedule I of the Agreement, Customer
shall continue to pay the fees set forth in the Paybill Agreement.

3. Customer agrees to purchase CSG's Electronic Bill Payment Services (Paybill
Advantage(R)) as set forth in Schedule I of the Agreement. The fees for
such services are set forth below and shall become effective when Customer
fully converts from the services provided by CSG under the Paybill
Agreement to the services provided by CSG under the terms and conditions
set forth in Schedule I of the Agreement. Accordingly, Schedule D shall be
amended to include the following fees:
<PAGE>

-Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ITEM/DESCRIPTION PRICE
- ----------------------------------------------------------------------------------------------------------------
Initial Fees:
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
1. One-time start-up fee (Note 1) $(***) per system principle
- ----------------------------------------------------------------------------------------------------------------
2. Communication interface installation $(***)
- ----------------------------------------------------------------------------------------------------------------
Monthly Fees:
- ----------------------------------------------------------------------------------------------------------------
1. Monthly fee per ACH debit and prenote transaction:
- ----------------------------------------------------------------------------------------------------------------
Monthly Volume per system principle (Note 2) Amount per ACH debit and prenote transaction
- ----------------------------------------------------------------------------------------------------------------
1 to 1,000 transactions $(***)
- ----------------------------------------------------------------------------------------------------------------
1,001 to 2,000 transactions $(***)
- ----------------------------------------------------------------------------------------------------------------
2,001 to 3,000 transactions $(***)
- ----------------------------------------------------------------------------------------------------------------
3,001 to 4,000 transactions $(***)
- ----------------------------------------------------------------------------------------------------------------
4,001 to 5,000 transactions $(***)
- ----------------------------------------------------------------------------------------------------------------
5,001 and above transactions
- ----------------------------------------------------------------------------------------------------------------
2. Monthly fee for insufficient funds returns $(***) per item
- ----------------------------------------------------------------------------------------------------------------
3. Monthly fee for notification of change $(***) per item
- ----------------------------------------------------------------------------------------------------------------
4. Monthly fee for redeposit $(***) per item
- ----------------------------------------------------------------------------------------------------------------
5. Monthly maintenance fee $(***) per system principle
- ----------------------------------------------------------------------------------------------------------------
6. Monthly communication interface fees Responsibility of Customer or their ACH bank
- ----------------------------------------------------------------------------------------------------------------
Other Fees:
- ----------------------------------------------------------------------------------------------------------------
1. ACH bank set-up and testing (Note 3) $(***) per hour
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

Note 1: The one-time start-up fee does not apply to the system principles
converting from the services provided by CSG under the Paybill Agreement.

Note 2: For clarification purposes, the volume discounts are cumulative and not
incremental (e.g., if a system principle has 2,000 transactions during the
month, all 2,000 transactions would be charged at $(***) per transaction.)

Note 3: Customer's ACH bank must be able to process CSG's format which is the
NACHA standard file format. CSG requires ninety (90) days for set-up of new ACH
bank.

THIS AMENDMENT is executed on the day and year first shown above.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT CORPORATION
("Customer")

By:/s/ Joseph T. Ruble By:/s/ Ann Montgomery
---------------------------- ------------------------------------------

Name: Joseph T. Ruble Name: Ann Montgomery
-------------------------- ----------------------------------------

Title: V.P. & General Counsel Title: EVP Fulfillment Services & Operations
------------------------- --------------------------------------

CONFIDENTIAL AND PROPRIETARY INFORMATION-FOR USE BY AUTHORIZED EMPLOYEES OF THE
PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE THEIR
RESPECTIVE COMPANIES

2
<PAGE>

EXHIBIT 2.19K

FORTY-FIRST AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Forty-First Amendment (the "Amendment") is executed this 23/rd/ day of
December, 1999, and is made by and between CSG Systems, Inc., a Delaware
corporation ("CSG") and TCI Cable Management Corporation ("Customer"). CSG and
Customer entered into a certain Restated and Amended CSG Master Subscriber
Management System Agreement dated August 10, 1997, which has subsequently been
amended pursuant to separately executed amendments (collectively, the
"Agreement"), and now desire to amend the Agreement in accordance with the terms
and conditions set forth in this Amendment. If the terms and conditions set
forth in this Amendment shall be in conflict with the Agreement, the terms and
conditions of this Amendment shall control. Any terms in initial capital
letters or all capital letters used as a defined term but not defined in this
Amendment, shall have the meaning set forth in the Agreement. Upon execution of
this Amendment by the parties, any subsequent reference to the Agreement between
the parties shall mean the Agreement as amended by this Amendment. Except as
amended by this Amendment, the terms and conditions set forth in the Agreement
shall continue in full force and effect according to their terms.

CSG and Customer agree as follows:

1. For the fees set forth in paragraph 3 below and in accordance with the
terms and conditions of the Agreement, CSG hereby grants to Customer a
site license pursuant to which Customer may use ACSR on an additional
************************* ((***)) workstations.

2. CSG shall provide Customer one (1) master copy of ACSR for the purpose of
installing ACSR on the ************************* ((***)) workstations
referenced above.

3. The fees to be paid by Customer for the additional site license of
************************* ((***)) workstations of ACSR are as follows:

ACSR Perpetual License Fees
---------------------------
(***) workstations $(***)
($(***) per workstation)

ACSR Annual Maintenance Fees
----------------------------
(***) percent (***%) of License Fees

Note: The ACSR Annual Maintenance period on the
************************* ((***)) workstations licensed under this
Amendment shall begin on January 1, 2000 and shall continue on each
January 1 thereafter throughout the term of the Agreement.

THIS AMENDMENT is executed on the day and year first shown above.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT CORPORATION
("Customer")

By: /s/ Joseph T. Ruble By: /s/ Ann Montgomery
-------------------------------- -----------------------------------

Name: Joseph T. Ruble Name: Ann Montgomery
------------------------------ ----------------------------------

Title: V.P. & General Counsel Title: EVP, Fulfillment Services and
----------------------------- ------------------------------
Operations
----------
<PAGE>

EXHIBIT 2.19K

FORTY-THIRD AMENDMENT
TO
RESTATED AND AMENDED CSG MASTER
SUBSCRIBER MANAGEMENT SYSTEM AGREEMENT
BETWEEN
CSG SYSTEMS, INC.
AND
TCI CABLE MANAGEMENT CORPORATION

This Forty-Third Amendment (the "Amendment") is executed this 29th day of
December, 1999, and is made by and between CSG Systems, Inc., a Delaware
corporation ("CSG") and TCI Cable Management Corporation ("Customer"). CSG and
Customer entered into a certain Restated and Amended CSG Master Subscriber
Management System Agreement dated August 10, 1997, which has subsequently been
amended pursuant to separately executed amendments (collectively, the
"Agreement"), and now desire to amend the Agreement in accordance with the terms
and conditions set forth in this Amendment. If the terms and conditions set
forth in this Amendment shall be in conflict with the Agreement, the terms and
conditions of this Amendment shall control. Any terms in initial capital
letters or all capital letters used as a defined term but not defined in this
Amendment, shall have the meaning set forth in the Agreement. Upon execution of
this Amendment by the parties, any subsequent reference to the Agreement between
the parties shall mean the Agreement as amended by this Amendment. Except as
amended by this Amendment, the terms and conditions set forth in the Agreement
shall continue in full force and effect according to their terms.

CSG and Customer agree as follows:

1. Schedule D is amended to include the following fees for CSG Aggregator
Express(TM):

A. Installation Services:
- -------------------------

Initial Installation Services Fee $(***)
(Includes the installation services set forth
in Exhibit X-1, for the System Sites set
forth in Exhibit X-1 as of the date of execution
of this Amendment)

B. Aggregation Account Fee:
- ----------------------------

Monthly Aggregation Account Fee (per aggregated
account on CCS) $(***)

Note: The definition of an Aggregation
Account shall be any account set up on CCS
for the sole purpose of storing summary
information from non-CCS billing sources
resident on CSG Aggregator Express.
<PAGE>

"Confidential Treatment Requested
and the Redacted Material has been
separately filed with the Commission."
C. Aggregation Processing Fee:
- -------------------------------

Monthly Transaction Fee (per account, per LOB on CSG Aggregator
Express) $(***)

THIS AMENDMENT is executed on the day and year first shown above.

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT CORPORATION ("Customer")

By: /s/ Joseph T. Ruble By: /s/ Ann Montgomery
---------------------------- --------------------------------------------

Name: Joseph T. Ruble Name: Ann Montgomery
-------------------------- ------------------------------------------

Title: V.P. & General Counsel Title: EVP, Fulfillment Services & Operations
------------------------- -----------------------------------------

CONFIDENTIAL AND PROPRIETARY INFORMATION - FOR USE BY AUTHORIZED EMPLOYEES OF
THE PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE
THEIR RESPECTIVE COMPANIES
<PAGE>

EXHIBIT 2.19K

SCHEDULE I
----------

Electronic Payment Services (Paybill Advantage(R))
---------------------------

This Schedule I is made as of this 19/th/ day of November, 1999, between CSG
----------
Systems, Inc. ("CSG"), and TCI Cable Management Corporation ("Customer"),
pursuant to the CSG Systems Master Subscriber Management Agreement executed as
of August 10, 1997 (the "Master Agreement"), and of which this Schedule I forms
----------
an integral part.

1. Electronic Payment Services. Subject to the terms and conditions of the
Master Agreement, for the term set forth in Section 11 below and for the fees
set forth in Schedule D, CSG will provide to Customer, and Customer
will purchase from CSG all of Customer's requirements for the data processing
services, including reasonable backup security for Customer's data, to support
electronic bill paying services as set forth in Section 2 below (the "Basic
Services") for all of Customer's subscriber accounts that elect to utilize
Customer's electronic bill payment services (the "Subscribers").

2. Basic Services

(a) Consumer Debits. Each Subscriber will have the option to preauthorize a
debit to either their checking account or savings account each month for a
predetermined date of Customer's choosing. Customer's third party ACH
Originator will be responsible for the disbursement, remittance and settlement
of all funds. CSG will create and submit a preauthorized payment disbursement
file according to bank industry standards (National Automated Clearing House
Association, "NACHA", or Electronic Data Interface, "EDI") containing a debit
record for Subscribers who have preauthorized monthly debits to be made from
checking or savings accounts on a day designated by Customer each month. The ACH
Originator will submit to an automated clearing house data in the required form
for the collection of the monthly payments from Subscribers bank accounts, which
will be effected on the collection date, or if that date is not a banking day,
the first banking day after such date. Each Debit will be submitted so as to
effect the payment on the designated date.

(b) Credit of Remittances. CSG will post to Subscriber's CCS account a payment
transaction for each processing Subscriber on the Subscriber's collection day.

(c) Enrollment Process. Customer is responsible for obtaining Subscriber
enrollment information that authorizes his respective bank to post debit
transactions to his respective bank checking account or savings account as
required by NACHA. Customer will input Subscriber type of account, bank account
number, payment method, and bank routing information into the CCS system. CSG
will initiate an ACH prenote the day the form is processed or the day after the
form is processed if the form is entered after the daily cutoff time. A daily
report will be generated for the Customer each business day for which input is
processed showing that a prenote has been initiated. If the prenote process
produces an error, the CCS system will automatically update the Subscribers'
payment status to reflect an error and add the error to a daily report. If the
error was correctable by the receiving depository financial institution, the CCS
system will automatically update the information on the CCS system. The first
debit will be initiated on the appropriate date to effect the debit on the
Customer's predetermined date.

(d) Automatic Preauthorized Payments. Customer's ACH Originator shall provide
automatic payment deduction which will occur monthly on a date predetermined by
Customer. CSG will submit a file to Customer's the ACH Originator two days prior
to the date the deduction is scheduled to take place. The Subscriber payment
amount submitted to the ACH Originator will be the statement balance if the
statement balance is less than the current balance or if the statement balance
is greater than the current balance, then the current balance will be used. If
the designated date for deduction falls on a weekend and/or holiday, the
deduction will not occur until the next scheduled banking day.

CONFIDENTIAL AND PROPRIETARY INFORMATION - FOR USE BY AUTHORIZED EMPLOYEES OF
THE PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE
THEIR RESPECTIVE COMPANIES

1
<PAGE>

(e) Settlement. Customer's The ACH Originator will be responsible for
crediting Customer's bank account for the gross ACH collection. on the same day
as the Debit to Subscriber's checking or savings account.

(f) Settlement of Returns. Customer's The ACH Originator will be responsible
for settling daily returns against Customer's bank account. Settlement with
Customer will be done daily. Each day for which there are returns, the ACH
Originator will initiate a Debit to the Customer's specified account for the
total amount of Debits received by ACH Originator that day. First time NSF
returns that will be re-deposited by ACH Originator will not be debited to the
Customer's specified account.

(g) Record Keeping. Customer is responsible for maintaining Subscriber
authorization forms for a period of at least seven (7) years in accordance with
the CSG Systems Master Master Subscriber Management Agreement dated August 10,
1997.Agreement

3. Additional Services. If Customer desires CSG to provide other services in
addition to the Basic Services, the parties agree to negotiate in good faith
with respect to the terms and conditions (including without limitation, pricing)
on which such services shall be provided. Such services include, but are not
limited to (i) special computer runs or reports, special accounting and
information applications; and (ii) data processing and related forms and
supplies and equipment other than those provided as standard pursuant to this
Agreement (the "Additional Services"). The description of any such additional
services, and any other terms and conditions related thereto, shall be set forth
in an amendment to this Agreement signed and dated by both parties. Unless
otherwise agreed in writing by the parties in such amendment any such additional
services shall be subject to the terms of this Schedule I.

4. Subscriber Authorization. Customer shall obtain from each Subscriber the
proper documents authorizing automatic transfers to and from such Subscriber's
savings account or checking account. Customer will enter only valid
authorizations for processing.

5. Collection Data. Customer shall update Subscriber account balance
information to provide necessary data for the Basic Services and Additional
Services and shall ensure through periodic checks and updates that the data is
current and accurate at all times.

6. Settlement of Returns. Customer is ultimately responsible to cover on a
daily basis all return debits incurred by ACH originator and in the event
collections have ceased.

7. Reserved.

8. Subscriber Reports. If Customer requests that CSG provide Customer with a
tape containing information regarding Customer's Subscribers and related banking
information and payment data, then Customer shall pay CSG's then current rates
for such tape.

9. Compliance with Laws. Customer will comply in all material respects
with all federal, state or local laws and regulations pertaining to electronic
payment processing. In the event of clear evidence of significant fraudulent
activity by Customer, the Basic Services and any Additional Services will be
discontinued immediately and any funds on the way to Customer will be impounded
immediately.

10. Reliance on Information. CSG shall be entitled to rely upon and act in
accordance with any instructions, guidelines or information provided to CSG by
Customer, which are given by such persons as have actual or apparent authority
to provide such instructions, guidelines or information and shall incur no
liability in doing so.

CONFIDENTIAL AND PROPRIETARY INFORMATION - FOR USE BY AUTHORIZED EMPLOYEES OF
THE PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE
THEIR RESPECTIVE COMPANIES

2
<PAGE>

11. Term. The term of this Schedule shall be coterminous with the term set
forth in Section 15 of the Master Agreement.

Agreed and accepted this 19th day of November, 1999, by:

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT CORPORATION
("Customer")

By: /s/ Joseph T. Ruble By: /s/ Ann Montgomery
------------------------ ------------------------------

CONFIDENTIAL AND PROPRIETARY INFORMATION - FOR USE BY AUTHORIZED EMPLOYEES OF
THE PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE
THEIR RESPECTIVE COMPANIES

3
<PAGE>

EXHIBIT 2.19K

SCHEDULE X

CSG Aggregator Express(TM)

This Schedule X is made as of this 29/th/ day of December, 1999, between CSG
----------
Systems, Inc. ("CSG"), and TCI Cable Management Corporation ("Customer"),
pursuant and in accordance with the Restated and Amended CSG Master Subscriber
Management System Agreement, executed as of August 10, 1997 (the "Agreement").

1. License. CSG hereby grants Customer, and Customer hereby accepts from CSG,
a non-exclusive and non-transferable perpetual right to use the software
products known as CSG Aggregator Express (the "Aggregator Express Product"),
which, when used in the designated environment described in Section 3, accepts
data from external customer care and billing systems and enables Customer to
create consolidated billing statements. Customer will be licensed to use the
Aggregator Express Product at the System Sites set forth in Exhibit X-1, for the
fees set forth in Schedule D and subject to the terms and conditions of the
Master Agreement, including, but not limited to, those specified below.

2. Required Products and Services. Customer acknowledges that CCS, Statement
Express and ESP (the "Required Products and Services") are required in order for
Customer to use the Aggregator Express Product, and Customer shall comply with
all of the terms set forth in the Master Agreement for each of those Products
and Services in accordance with the terms thereof.

3. Designated Environment. In addition to the Designated Environment for each
of the Required Products as set forth in the respective Schedules, Customer is
required to use the hardware and software set forth in Exhibit X-2 (the
"Aggregator Designated Environment"). Customer may use the Aggregator Express
Product only in the Aggregator Designated Environment and will be solely
responsible for upgrading the Aggregator Designated Environment to the
specifications that CSG may provide from time to time. In the event that the
Aggregator Designated Environment is inadequate to permit the required products
to operate in accordance with their express performance warranties on the date
of delivery hereunder, CSG agrees that it shall be responsible for the hardware
costs associated with upgrading the Aggregator Designated Environment such that
it complies with this representation .

4. Installation Services. Customer will receive the installation services set
forth in Exhibit X-1 in connection with its license to use the Aggregator
Express Product.

5. Term. This Schedule X shall be effective upon the date set forth above
----------
and shall continue in effect until June 30, June 30, 2000 unless terminated
earlier in accordance with the terms and conditions of the Agreement. Any
extension of this Schedule X shall be pursuant to the parties' mutual written
consent.

Agreed and accepted this 29th day of December, 1999, by:

CSG SYSTEMS, INC. ("CSG") TCI CABLE MANAGEMENT CORPORATION ("Customer")

By: /s/ Joseph T. Ruble By: /s/ Ann Montgomery
------------------------------ --------------------------------------

Name: Joseph T. Ruble Name: Ann Montgomery
---------------------------- ------------------------------------

Title: V.P. & General Counsel Title: EVP Fulfillment Svcs & Operations
--------------------------- -----------------------------------

Exhibit X-1.........Installation Services and System Sites
Exhibit X-2.........Designated Environment

CONFIDENTIAL AND PROPRIETARY INFORMATION-FOR USE BY AUTHORIZED EMPLOYEES OF THE
PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE THEIR
RESPECTIVE COMPANIES

1
<PAGE>

EXHIBIT X-1
-----------

INSTALLATION SERVICES AND SYSTEM SITES
--------------------------------------

1. For the fees set forth in Schedule D, CSG will provide the following
Installation Services in connection with Aggregator Express, for the System
Sites set forth below as of the date of execution of this Amendment:

. on-site product integration review
. documentation
. statement translator development
. ESP statement format development for Iowa and California and Texas
projects
. circuit sizing recommendations (via phone) for non-CSG rendered services
. UNIX/mainframe parameter setup
. pre-implementation support of operational concerns
. on-site ESP requirements gathering and training (at CSG facility)
. guide interface development
. CCS account creation
. development of auto registration
. up to fifty (50) hours of process consulting

2. System Sites:

Select System Sites in Iowa, Texas and California:*

Iowa
----
. Cedar Rapids
. Waterloo

Texas and California
--------------------
. Subscribers enrolled in the AT&T BIS
Bottom of the Bill Promotion

* Other mutually agreed upon System Sites.

CONFIDENTIAL AND PROPRIETARY INFORMATION-FOR USE BY AUTHORIZED EMPLOYEES OF THE
PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE THEIR
RESPECTIVE COMPANIES

2
<PAGE>

EXHIBIT X-2
-----------

================================================================================
CSG Aggregator Express (TM) Designated Environment
================================================================================
Effective 11/99 Page 1 of 1
================================================================================

CSG Aggregator Express - ACSR Integrated Environment /(1)/

- --------------------------------------------------------------------------------
Platform
- --------------------------------------------------------------------------------
See current Designated Environment hardware and software requirements for ACSR
for Windows NT, Windows 95 workstation, and Statement Express
- --------------------------------------------------------------------------------

(1) Requires CSG:
. CCS or ACSR;
. ESP; and
. Statement Express products

CSG Aggregator Express - Stand Alone Environment

- --------------------------------------------------------------------------------
Client Hardware
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Processors
- --------------------------------------------------------------------------------
Compaq, IBM and Dell Business Class computers with Intel Pentium, Pentium II and
Celeron processors designated as Microsoft Windows NT certified and Year 2000
compliant.
- --------------------------------------------------------------------------------
Random Access Memory (RAM)
- --------------------------------------------------------------------------------
64 MB
- --------------------------------------------------------------------------------
Minimum Hard Drive Space
- --------------------------------------------------------------------------------
1.2 GB
- --------------------------------------------------------------------------------
Minimum Video Requirements
- --------------------------------------------------------------------------------
1024 x 768 x 256 colors, small font
- --------------------------------------------------------------------------------
SVGA 15" Monitor
- --------------------------------------------------------------------------------
Printer
- --------------------------------------------------------------------------------
Any printer compatible with the client workstation/network environment
- --------------------------------------------------------------------------------
CD-ROM
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Client Software
- --------------------------------------------------------------------------------
Operating System
- --------------------------------------------------------------------------------
Microsoft Windows NT v4.0 w/ Service Pack 3 and Year 2000 fixes; or w/ Service
Pack 4 and Year 2000 fixes.
- --------------------------------------------------------------------------------
Microsoft Windows 95 with OSR 2.5, 4.00.1111 with Y2K fixes, and
WIN95Y2K.EXE applied
- --------------------------------------------------------------------------------
Communications
- --------------------------------------------------------------------------------
Internet Explorer 4.x minimum or greater, or Netscape Navigator 4.x minimum or
greater
- --------------------------------------------------------------------------------
Other
- --------------------------------------------------------------------------------
Open Windows
- --------------------------------------------------------------------------------

CONFIDENTIAL AND PROPRIETARY INFORMATION-FOR USE BY AUTHORIZED EMPLOYEES OF THE
PARTIES HERETO ONLY AND IS NOT FOR GENERAL DISTRIBUTION WITHIN OR OUTSIDE THEIR
RESPECTIVE COMPANIES

<PAGE>

EXHIBIT 10.39

[As Amended on
November 16, 1999]

CSG SYSTEMS, INC.

WEALTH ACCUMULATION PLAN
------------------------

ARTICLE I
---------

PURPOSE
-------

The purpose of the CSG Systems, Inc. Wealth Accumulation Plan (the "Plan")
is to enable CSG Systems, Inc. to attract and retain a select group of executive
employees with exceptional ability by offering such executive employees a means
of enhancing their compensation, building their net worth, and supplementing
their retirement funds through the deferral of a portion of their compensation.

ARTICLE II
----------

DEFINITIONS
-----------

For purposes of the Plan, the following words and phrases shall have the
meanings indicated, unless the context clearly indicates otherwise:

2.1 Base Salary. "Base Salary" means all regular cash compensation for
-----------
services, other than Incentive Compensation, payable by Systems to a Participant
during a Plan Year (before taking into account any deferral pursuant to the Plan
and without taking into account any other compensation or benefit program of
Systems).

2.2 Beneficiary. "Beneficiary" or "Beneficiaries" means the person,
-----------
persons, entity, or entities designated by a Participant pursuant to Article
VIII, or otherwise provided in Article VIII, to receive any benefits payable
under the Plan in the event of such Participant's death.

2.3 Board. "Board" means the Board of Directors of Systems.
-----

2.4 Change of Control of Systems. "Change of Control of Systems" means
----------------------------
the occurrence of any of the following events:

(a) International is merged or consolidated into another corporation, and
immediately after such merger or consolidation becomes effective the
holders of a majority of the outstanding shares of voting capital
stock of
<PAGE>

International immediately prior to the effectiveness of such merger or
consolidation do not own (directly or indirectly) a majority of the
outstanding shares of voting capital stock of the surviving or
resulting corporation in such merger or consolidation,

(b) International ceases to own (directly or indirectly) a majority of the
outstanding shares of voting capital stock of Systems (unless such
event results from the merger of Systems into International, with no
change in the ownership of the voting capital stock of International,
or from the dissolution of Systems and the continuation of its
business by International),

(c) Systems is merged or consolidated into a corporation other than
International, and at any time after such merger or consolidation
becomes effective International does not own (directly or indirectly)
a majority of the outstanding shares of voting capital stock of the
surviving or resulting corporation in such merger or consolidation,

(d) Systems dissolves (unless the business of Systems will be continued by
International) or sells or otherwise disposes of all or substantially
all of its property and assets (other than to an entity or group of
entities which is then under common ownership (directly or indirectly)
with Systems),

(e) any person, entity, or group of persons within the meaning of Sections
13(d) or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")
and the rules promulgated thereunder becomes the beneficial owner
(within the meaning of Rule 13d-3 under the 1934 Act) of thirty
percent (30%) or more of the outstanding voting capital stock of
International,

(f) International dissolves or sells or otherwise disposes of all or
substantially all of its property and assets (other than to an entity
or group of entities which is then under common ownership (directly or
indirectly) with International), or

(g) during any period of two consecutive years or less, individuals who at
the beginning of such period constituted the Board of Directors of
International cease, for any reason, to constitute at least a majority
of the Board of Directors of International, unless the election or
nomination for election of each new director of International who took
office during such period was approved by a vote of at least seventy-
five percent (75%) of the directors of International still in office
at the time of such election or nomination for election who were
directors of International at the beginning of such period.

2.5 Committee. "Committee" means the Wealth Accumulation Plan Committee
---------
appointed by or at the direction of the Board to perform the duties set forth in
Article III.

2
<PAGE>

2.6 Deemed Investment. "Deemed Investment" means a bookkeeping device
-----------------
which (a) corresponds to a Fund that is a permitted investment under the CSG
Incentive Savings Plan (a 401(k) plan of Systems) and (b) is used by Systems to
determine the balance in a Participant's Deferral Account.

2.7 Deferral Account. "Deferral Account" means an account established and
----------------
maintained for a Participant on the books of Systems pursuant to Section 5.1.
Whenever the context requires, "Deferral Account" shall mean and separately
refer to the Deferral Credits Sub-Account and the Employer Credits Sub-Account
of a Deferral Account.

2.8 Deferral Agreement. "Deferral Agreement" means an agreement signed
------------------
and filed with the Committee by a Participant pursuant to Article IV.

2.9 Deferral Benefit. "Deferral Benefit" means the benefit payable under
----------------
the Plan to a Participant or a Participant's Beneficiary, as provided in Article
VII.

2.10 Deferral Credits. "Deferral Credits" means the credits to a
----------------
Participant's Deferral Account made pursuant to Section 5.2.

2.11 Deferral Credits Sub-Account. "Deferral Credits Sub-Account" means a
----------------------------
sub-account of a Participant's Deferral Account to which such Participant's
Deferral Credits are credited.

2.12 Disability. "Disability" means a physical or mental illness or
----------
incapacity of a Participant which has resulted in a determination that such
Participant is entitled to receive benefits (i) under a long-term disability
insurance policy maintained by Systems for such Participant or (ii) if no such
insurance policy is then in existence, under the federal social security
disability insurance program.

2.13 Eligible Executive. "Eligible Executive" means an executive employee
------------------
of Systems who is a Vice President, Senior Vice President, or more senior
executive employee of Systems or who is a National Sales Director of Systems.

2.14 Employer Credits. "Employer Credits" means the credits to a
----------------
Participant's Deferral Account made pursuant to Section 5.3.

2.15 Employer Credits Sub-Account. "Employer Credits Sub-Account" means a
----------------------------
sub-account of a Participant's Deferral Account to which such Participant's
Employer Credits are credited.

2.16 Fund. "Fund" means an open-end management investment company or an
----
individual series thereof (a mutual fund) whose shares or units are available
for purchase by the public.

3
<PAGE>

2.17 Incentive Compensation. "Incentive Compensation" means any cash bonus
----------------------
or commission payable by Systems to a Participant for a Plan Year in addition to
such Participant's Base Salary payable during such Plan Year (before taking into
account any deferral pursuant to the Plan and without taking into account any
other compensation or benefit program of Systems).

2.18 International. "International" means CSG Systems International, Inc.,
-------------
a Delaware corporation.

2.19 Normal Retirement Age. "Normal Retirement Age" means age 65.
---------------------

2.20 Participant. "Participant" means an Eligible Executive who has
------------
elected to participate in the Plan by entering into a Deferral Agreement for any
Plan Year or portion thereof.

2.21 Plan Year. "Plan Year" means the calendar year, except that the first
---------
Plan Year began on September 1, 1996, and ended on December 31, 1996.

2.22 Systems. "Systems" means CSG Systems, Inc., a Delaware corporation.
-------

ARTICLE III
-----------

ADMINISTRATION OF PLAN
----------------------

3.1 Administration. The Plan shall be administered by the Committee or
--------------
its delegate. The Committee or its delegate shall have the authority to
interpret the Plan, to make, amend, interpret, apply, and enforce all
appropriate rules and regulations for the administration and operation of the
Plan, to prescribe forms for use in connection with the Plan, and to decide any
and all questions which may arise in connection with the Plan. Any delegate of
the Committee for purposes of administration of the Plan shall not make any
discretionary decision on behalf of the Committee which pertains directly to
such delegate as a Participant.

3.2 Binding Effect of Decisions. The decision or action of the Committee
---------------------------
or its delegate with respect to any question arising out of or in connection
with the administration, operation, or interpretation of the Plan and the rules
and regulations promulgated under the Plan shall be final, conclusive, and
binding upon all persons having any interest in the Plan, unless a written
appeal from the affected Participant or Beneficiary is received by the Committee
or its delegate within thirty (30) days after the disputed decision or action of
the Committee or its delegate has been made or taken. Upon timely receipt of
such appeal, the Committee shall reconsider the disputed decision or action; and
the decision of the Committee with respect to such appeal shall be final,
conclusive, and binding on the person lodging such appeal and all persons
claiming by, through, or under such person.

3.3 Expenses of Administration. Systems shall pay all expenses of
--------------------------
administering the Plan, and the Participants shall not bear any of such
expenses.

4
<PAGE>

ARTICLE IV
----------

ELECTIVE DEFERRALS
------------------

4.1 Election to Participate in Plan. Except as otherwise provided in
-------------------------------
Section 4.2, an Eligible Executive may elect to participate in the Plan by
signing and filing with the Committee or its delegate a Deferral Agreement in
the form prescribed by the Committee or its delegate. To be effective, a
Deferral Agreement must be filed with the Committee or its delegate not later
than December 15 of the calendar year immediately preceding the Plan Year in
which the Eligible Executive will commence participation in the Plan; and, if
timely filed, such Deferral Agreement will become effective as of the first day
of such Plan Year and remain in effect in accordance with Section 4.4. An
Eligible Executive may enter into a new Deferral Agreement covering a period
subsequent to the period covered by a Deferral Agreement which will expire or
terminate pursuant to Section 4.4.

4.2 Initial Deferral Agreement. An employee who becomes an Eligible
--------------------------
Executive during a Plan Year may sign a Deferral Agreement and file it with the
Committee or its delegate not later than 30 days after such employee becomes an
Eligible Executive for the purpose of deferring a portion of the Eligible
Executive's Base Salary earned during such Plan Year after the filing of such
Deferral Agreement and for the purpose of deferring a portion of the Eligible
Executive's Incentive Compensation for such Plan Year which either is payable at
the discretion of Systems or is earned by the Eligible Executive after the
filing of such Deferral Agreement.

4.3 Compensation Which May Be Deferred. A Deferral Agreement signed and
----------------------------------
filed with the Committee by an Eligible Executive may provide for the deferral
of not less than five percent (5%) and not more than twenty-five percent (25%)
of the Eligible Executive's Base Salary payable during the Plan Years to which
such Deferral Agreement pertains and not less than five percent (5%) and not
more than one hundred percent (100%) of the Eligible Executive's Incentive
Compensation for the Plan Years to which such Deferral Agreement pertains.
Notwithstanding the provisions of the first sentence of this Section 4.3, in the
case of Eligible Executives other than the Chairman of the Board, the Chief
Executive Officer, the President, an Executive Vice President, and the Chief
Financial Officer of Systems, the maximum aggregate amount of Base Salary and
Incentive Compensation which an Eligible Executive may defer for any Plan Year
is $50,000; and if any Deferral Agreement would result in the deferral of an
aggregate amount greater than $50,000 for any Plan Year, then the actual
deferral for such Plan Year shall be limited to $50,000. Notwithstanding the
provisions of the first sentence of this Section 4.3, in the case of an Eligible
Executive who is the Chairman of the Board, the Chief Executive Officer, the
President, an Executive Vice President, or the Chief Financial Officer of
Systems, the maximum aggregate amount of Base Salary and Incentive Compensation
which such Eligible Executive may defer for any Plan Year is $700,000; and if
any Deferral Agreement would result in the deferral of an aggregate amount
greater than $700,000 for any Plan Year, then the actual deferral for such Plan
Year shall be limited to $700,000. Subject to the provisions of Sections 4.1
and 4.2, the Compensation Committee of the Board of Directors of International,
in its absolute discretion, may increase the maximum permitted deferral amount
for any Plan Year for any one or more Eligible Executives. A deferral
percentage provided for in a Participant's

5
<PAGE>

Deferral Agreement pursuant to this Section 4.3 may be expressed either as a
percentage (in which case the deferred amount will change as the Participant's
Base Salary or Incentive Compensation, as the case may be, changes) or as a
fixed amount falling within the permitted percentage range (in which case the
deferred amount will not change as the Participant's Base Salary or Incentive
Compensation, as the case may be, changes). Except as otherwise provided in the
Plan, a signed Deferral Agreement shall become irrevocable upon its timely
filing with the Committee or its delegate.

4.4 Period Covered by Deferral Agreement. Except as otherwise provided in
------------------------------------
the Plan and except to the extent that a Deferral Agreement is amended pursuant
to Section 4.5, a Deferral Agreement shall remain in effect for the first Plan
Year (or portion thereof) to which it applies and to the following six Plan
Years. However, a Deferral Agreement automatically shall terminate
prospectively if a Participant ceases to be an Eligible Executive or upon the
termination of a Participant's employment by Systems for any reason, including
but not limited to death, Disability, or retirement. If, pursuant to Section
7.3, a Participant makes an election to receive his or her Deferral Benefit
prior to the last day of the period to which a Deferral Agreement pertains, then
such Deferral Agreement shall remain in effect only for the Plan Years ending on
or prior to the date so elected; however, such Participant may enter into a new
Deferral Agreement covering later Plan Years pursuant to Section 4.1.

4.5 Amendment of Deferral Agreement. Except as otherwise provided in
-------------------------------
Section 10.15, a Participant may amend a Deferral Agreement previously filed by
such Participant with the Committee or its delegate solely for the purpose of
changing the amounts or percentages of Base Salary or Incentive Compensation (or
both) to be deferred by such Participant for the remaining Plan Years covered by
the Deferral Agreement being amended. Any amended Deferral Agreement must be
signed and delivered to the Committee or its delegate at least 15 days prior to
the commencement of the first Plan Year to which such amended Deferral Agreement
applies. The most recently dated Deferral Agreement signed and delivered to the
Committee or its delegate by a Participant on a timely basis shall govern as to
that Participant, but an amended Deferral Agreement shall have no effect on such
Participant's deferral amounts or percentages for Plan Years prior to the first
Plan Year to which such amended Deferral Agreement applies.

4.6 Effect on Other Plans. Systems shall not make a supplemental payment
---------------------
to any Participant to offset any reduction in benefits under any other employee
benefit plan of Systems which results from the deferral of Base Salary or
Incentive Compensation pursuant to the Plan. However, Systems shall compute life
insurance and disability benefits for any Participant payable under any employee
benefit plan of Systems which is based on compensation without reduction for the
amount of any Base Salary or Incentive Compensation deferred pursuant to the
Plan.

4.7 Suspension of Elective Deferral. The Committee or its delegate, in
-------------------------------
its sole and absolute discretion, may prospectively suspend the effectiveness of
a Participant's Deferral Agreement upon the written request of such Participant
based upon the occurrence of an unforeseeable emergency. For purposes of this
Section 4.7, "unforeseeable emergency" means an unanticipated emergency that is
caused by an event beyond the control of the Participant and

6
<PAGE>

that would result in severe financial hardship to the Participant if suspension
of the effectiveness of such Participant's Deferral Agreement were not
permitted.

ARTICLE V
---------

DEFERRAL ACCOUNT AND CREDITS
----------------------------

5.1 Establishment of Deferral Account. Systems shall establish and
---------------------------------
maintain on its books a separate Deferral Account for each Participant, and each
Deferral Account shall have a Deferral Credits Sub-Account and an Employer
Credits Sub-Account. A Participant who has entered into more than one Deferral
Agreement shall have a separate Deferral Account for each Deferral Agreement. A
Participant's Deferral Account and its Sub-Accounts shall be used solely as a
bookkeeping device for purposes of the Plan and shall not constitute or be
treated as a trust fund or reserve of any kind or require the segregation or
investment of any assets of Systems. Each Deferral Account established for a
Participant shall be administered separately in accordance with the provisions
of this agreement.

5.2 Deferral Credits. At the end of each payroll period, Systems shall
----------------
credit to the Deferral Credits Sub-Account of each Participant who has entered
into a Deferral Agreement applicable to Base Salary or Incentive Compensation
payable during such payroll period an amount equal to the Base Salary and
Incentive Compensation of such Participant deferred for such payroll period
pursuant to the Plan and such Deferral Agreement. To the extent that Systems is
required pursuant to any state, federal, or local law to withhold any taxes or
other amounts in respect of such deferred Base Salary or Incentive Compensation,
such taxes or other amounts shall be withheld from the Participant's other
compensation which is not deferred under the Plan or shall be paid to Systems in
cash by the Participant.

5.3 Employer Credits. Concurrently with the crediting of deferred Base
----------------
Salary or Incentive Compensation amounts pursuant to Section 5.2, Systems also
shall credit to the Employer Credits Sub-Account of each Participant an amount
equal to twenty-five percent (25%) of the deferred Base Salary or Incentive
Compensation of such Participant then being credited to such Participant's
Deferral Credits Sub-Account; provided, that the aggregate amount credited to
any Participant's Employer Credits Sub-Account pursuant to this Section 5.3
shall not exceed $6,250 for any one Plan Year. In its absolute discretion,
Systems may make a supplemental credit to the Employer Credits Sub-Accounts of
Participants for any Plan Year in addition to the credit required by the first
sentence of this Section 5.3; but the making of any such supplemental credit for
any Plan Year shall not entitle any Participant to a supplemental credit for any
other Plan Year. Any supplemental credit made by Systems pursuant to the
preceding sentence of this Section 5.3 may be made on a uniform or non-uniform
basis among all Participants or among only some Participants and may be made to
the Employer Credits Sub-Accounts of any one or more Participants to the
exclusion of the Employer Credits Sub-Accounts of any one or more other
Participants. To the extent that Systems is required pursuant to any state,
federal, or local law to withhold any taxes or other amounts in respect of the
amounts credited pursuant to this Section 5.3, such taxes or other amounts shall
be withheld from that portion of the Participant's

7
<PAGE>

compensation which is not deferred under the Plan or shall be paid to Systems in
cash by the Participant.

5.4 Deemed Investments. As a bookkeeping device and solely for the
------------------
purpose of determining the balance in a Participant's Deferral Account at any
particular time, the amounts credited to a Participant's Deferral Account from
time to time pursuant to Sections 5.2 and 5.3 shall be allocated on the books of
Systems to the Deemed Investments selected from time to time by the Participant
from among the then permitted Deemed Investments. A Participant shall make and
may change such selections in accordance with such procedures as the Committee
or its delegate may establish from time to time. If a Participant fails to
select a Deemed Investment for all or any portion of such Participant's Deferral
Account, then the Committee or its delegate shall make such selection on behalf
of the Participant. The allocation to the Deemed Investments selected by a
Participant shall be made on the books of Systems by crediting the Deferral
Account of such Participant with that number of units of each such Deemed
Investment which results from dividing (a) the dollar amount of (i) that portion
of the Participant's Deferral Account or (ii) that portion of the amount
currently being credited which has been allotted by the Participant to such
Deemed Investment by (b) the net asset value of the Fund corresponding to such
Deemed Investment as of the close of business on the date of such crediting (or,
if such date is not a business day, on the most recently preceding business
day). The number of units of each Deemed Investment of a Participant shall be
increased or decreased as appropriate from time to time to reflect (a) dividends
or distributions paid by the Fund which corresponds to the particular Deemed
Investment, (b) distributions pursuant to Article VII, (c) changes in the Deemed
Investments selected by such Participant, and (d) forfeitures pursuant to
Section 6.3. A Participant's selection of a Deemed Investment shall not
obligate Systems to acquire shares or units of the Fund corresponding to such
Deemed Investment; and no Participant shall have any rights with respect to or
any interest in the shares or units of any Fund which Systems, in its absolute
discretion, may elect to acquire.

5.5 Participant's Account Balance. The balance in a Participant's
-----------------------------
Deferral Account as of any date shall be determined by (a) multiplying (i) the
number of units of each Deemed Investment then credited to such Deferral Account
by (ii) the net asset value of the Fund corresponding to such Deemed Investment
as of the close of business on such date (or, if such date is not a business
day, on the most recently preceding business day) and (b) adding the products of
such multiplications. A Participant's Deferral Account balance shall be
determined, whenever necessary, after the making of all credits to and
deductions from such Deferral Account which are to be made pursuant to the Plan
prior to or as of the date as of which such Deferral Account balance is being
determined, including but not limited to the forfeiture provided for in Section
6.3 if applicable.

5.6 Statement of Account. Systems shall provide to each Participant,
--------------------
within 60 days after the end of each calendar quarter, a statement in such form
as Systems deems appropriate setting forth the balance in such Participant's
Deferral Account (by Deemed Investment and in total) as of the last day of such
calendar quarter.

5.7 Proportionate Decreases in Deemed Investments. Unless otherwise
---------------------------------------------
provided by the Committee or its delegate, distributions pursuant to Article VII
and deductions pursuant to

8
<PAGE>

Section 6.3 shall proportionately decrease all of the Deemed Investments then
credited to a Participant's Deferral Account.

ARTICLE VI
----------

VESTING
-------

6.1 Vesting of Deferral Credits Sub-Account Balance. At all times a
-----------------------------------------------
Participant shall be fully vested in his or her Deferral Credits Sub-Account
balance, and no portion of such Deferral Credits Sub-Account balance shall be
subject to forfeiture by such Participant.

6.2 Vesting of Employer Credits Sub-Account Balance. A Participant's
-----------------------------------------------
Employer Credits Sub-Account balance shall fully vest in such Participant and
become entirely nonforfeitable by such Participant on the first to occur of (i)
three years after the effective date of such Participant's initial participation
in the Plan, (ii) the death of such Participant, (iii) the termination of such
Participant's employment with Systems after such Participant has reached Normal
Retirement Age, (iv) the termination of such Participant's employment with
Systems solely by reason of such Participant's Disability, (v) the completion by
such Participant of five years of continuous employment with Systems, (vi) the
acceleration of such vesting by action of the Board pursuant to Section 6.4, or
(vii) a Change of Control of Systems.

6.3 Forfeiture of Non-Vested Employer Credits Sub-Account Balance. If the
-------------------------------------------------------------
Employer Credits Sub-Account balance of a Participant has not become fully
vested and entirely nonforfeitable pursuant to Section 6.2 at the time or as a
result of the termination of such Participant's employment with Systems, then
upon the termination of such Participant's employment with Systems the entire
balance in such Employer Credits Sub-Account automatically shall be forfeited;
and neither such Participant nor his or her Beneficiary shall have any further
rights with respect to such Employer Credits Sub-Account balance or any amount
that previously had been credited to such Employer Credits Sub-Account.

6.4 Accelerated Vesting. The Board reserves the right in its sole and
-------------------
absolute discretion at any time to accelerate the time of vesting of all or any
portion of a Participant's Employer Credits Sub-Account balance that has not yet
vested.

ARTICLE VII
-----------

PAY-OUT OF DEFERRAL BENEFITS
----------------------------

7.1 Termination of Employment Other Than by Death. Upon the termination
---------------------------------------------
of a Participant's employment with Systems for any reason other than such
Participant's death, such Participant shall be entitled to receive a Deferral
Benefit equal to 100% of the balance in such Participant's Deferral Account
(determined in accordance with Section 5.5) as of the last day of the calendar
month during which such termination of employment occurs. A Deferral Benefit
under this Section 7.1 shall be payable to such Participant in accordance with
Section 7.5.

9
<PAGE>

7.2 Death. Upon the death of a Participant while he or she is employed by
-----
Systems, such Participant's Beneficiary or Beneficiaries shall be entitled to
receive a Deferral Benefit equal to 100% of the balance in such Participant's
Deferral Account (determined in accordance with Section 5.5) as of the last day
of the calendar month during which such death occurs. A Deferral Benefit under
this Section 7.2 shall be payable to such Beneficiary or Beneficiaries in
accordance with Section 7.5. The Deferral Benefit provided for in this Section
7.2 shall be in lieu of all other benefits under the Plan in the event of a
Participant's death. Any Deferral Benefit which becomes payable under this
Section 7.2 to a person who is a minor for purposes of the Nebraska Uniform
Transfers to Minors Act may instead be paid by Systems to a custodian for such
person under such Act.

7.3 Pre-Termination Distribution. At the time that he or she signs a
----------------------------
Deferral Agreement pursuant to Section 4.1 or 4.2, a Participant may elect to
receive his or her Deferral Benefit at the end of the second, third, fourth,
fifth, sixth, or seventh Plan Year to which such Deferral Agreement pertains
rather than upon the termination of his or her employment with Systems;
provided, however, that if the employment of such Participant with Systems
terminates prior to the pre-termination distribution date elected by such
Participant pursuant to this Section 7.3, then the provisions of Section 7.1 or
7.2, as the case may be, shall supersede such election and shall govern the
distribution of such Participant's Deferral Benefit. If a Participant makes an
election pursuant to this Section 7.3, then such Participant shall be entitled
to receive a Deferral Benefit equal to 100% of the vested balance in such
Participant's Deferral Account (determined in accordance with Section 5.5) as of
the last day of the Plan Year elected by such Participant pursuant to this
Section 7.3. If a Participant makes an election pursuant to this Section 7.3,
then, not later than one year prior to the last day of the Plan Year originally
elected by such Participant, he or she may make one further election to defer
the payment of his or her Deferral Benefit either for an additional number of
Plan Years from one to seven or until the termination of his or her employment
with Systems. A Deferral Benefit under this Section 7.3 shall be payable to the
Participant in accordance with Section 7.5. Any portion of a Participant's
Deferral Account which is not paid pursuant to an election made under this
Section 7.3 because it is not fully vested as of the elected payment date shall
remain as a credit to such Deferral Account and shall be paid to such
Participant at the time it becomes fully vested (either as a lump-sum or as part
of the monthly payments, depending upon the method of Deferral Benefit payment
elected by such Participant).

7.4 Accelerated Distributions. The Committee or its delegate, in its sole
-------------------------
and absolute discretion, may accelerate the time of payment to a Participant of
all or a portion of the then vested balance of such Participant's Deferral
Account upon the written request of a Participant based upon the occurrence of
an unforeseeable emergency; however, the amount of such accelerated payment
shall not exceed the amount necessary to meet the particular emergency. For
purposes of this Section 7.4, "unforeseeable emergency" shall mean an
unanticipated emergency that is caused by an event beyond the control of the
Participant and that would result in severe financial hardship to the
Participant if such accelerated payment were not permitted.

7.5 Method of Benefit Payment. At such time as a Deferral Benefit becomes
-------------------------
payable pursuant to Section 7.1, 7.2, or 7.3, Systems shall pay the Deferral
Benefit to the Participant

10
<PAGE>

involved (or to such Participant's Beneficiary in the case of such Participant's
death) in whichever of the following methods was selected by such Participant in
the applicable Deferral Agreement:

(a) A lump-sum payment; or

(b) Monthly payments over a period of from 2 to 180 months, as specified
by such Participant in the applicable Deferral Agreement.

If a Participant did not select a method of payment in the applicable Deferral
Agreement, then the method of payment of such Participant's applicable Deferral
Benefit shall be determined by the Committee or its delegate from the
alternative methods set forth above in this Section 7.5. Payments pursuant to
this Article VII shall begin as soon as practicable after the amount thereof has
been determined. The Committee or its delegate shall determine the methodology
to be used to compute the amounts of monthly payments under this Section 7.5.

ARTICLE VIII
------------

BENEFICIARY DESIGNATION
-----------------------

8.1 Beneficiary Designation. Each Participant shall have the right at any
-----------------------
time during his or her lifetime to designate in writing on a form prescribed by
the Committee or its delegate any person, persons, entity, or entities as the
Beneficiary or Beneficiaries (primary or contingent) to whom benefits under the
Plan shall be paid in the event of the Participant's death prior to full payment
of the benefits due the Participant under the Plan. Such form shall be filed
with the Committee or its delegate during the Participant's lifetime and shall
become effective when so filed.

8.2 Change of Beneficiary. Any Beneficiary designation made by a
---------------------
Participant may be changed by such Participant at any time during such
Participant's lifetime by the filing of such change in writing on a form
prescribed by the Committee or its delegate. Effective upon its filing with the
Committee or its delegate prior to a Participant's death, the most recently
filed Beneficiary designation will cancel all Beneficiary designations
previously filed by such Participant.

8.3 No Beneficiary Designation. If a Participant fails to designate a
--------------------------
Beneficiary pursuant to this Article VIII, or if all designated Beneficiaries
predecease the Participant, then the Participant's designated Beneficiary shall
be deemed to be the person or persons surviving the Participant in the first of
the following classes in which there is a survivor, in equal shares by
representation:

(a) The Participant's surviving spouse;

(b) The Participant's descendants; or

11
<PAGE>

ARTICLE IX
----------

AMENDMENT AND TERMINATION OF PLAN
---------------------------------

9.1 Amendment. The Board may amend the Plan at any time in whole or in
---------
part without terminating the Plan; however, no amendment of the Plan shall
decrease any amount already credited to a Deferral Account then in existence
without the written consent of the affected Participant.

9.2 Termination. The Board may terminate the Plan at any time. Upon such
-----------
termination, Systems shall make the Deferral Account credits required under
Article V as of the effective date of the Plan termination, and all Participants
thereupon shall be fully vested in their respective Deferral Accounts and
promptly shall be paid the then balance in their respective Deferral Accounts in
a lump sum.

ARTICLE X
---------

MISCELLANEOUS
-------------

10.1 Creditor Status. Participants and their Beneficiaries shall have no
---------------
legal or equitable rights, interests, or claims in or to any particular property
or assets of Systems, nor shall they be beneficiaries of, or have any rights,
claims, or interests in or to, any life insurance policies or annuity contracts
(or the proceeds therefrom) now owned or which hereafter may be acquired by
Systems ("Policies"). The assets of Systems and such Policies (if any) shall
be, and remain, the general and unrestricted assets of Systems. Participants
and their Beneficiaries are and have the status of general unsecured creditors
of Systems, and the Plan constitutes a mere unfunded and unsecured promise of
Systems to make benefit payments in the future. Any trust created by Systems
and any assets held in such trust to assist Systems in meeting its obligations
under the Plan shall conform to the terms of the model trust described in
Revenue Procedure 92-64 of the Internal Revenue Service.

10.2 Nonassignability. Neither a Participant nor a Beneficiary nor any
----------------
other person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage, or otherwise encumber, alienate, hypothecate, or convey in
advance of actual receipt any amounts payable under the Plan, or any part
thereof, all of which are, and all rights to which are, nonassignable and
nontransferable. No part of any amounts payable under the Plan shall, prior to
actual payment, be subject to attachment, garnishment, or seizure for the
payment of any debts, judgments, alimony, child support, or separate maintenance
owed by a Participant or any other person nor be transferable by operation of
law in the event of a Participant's or any other person's bankruptcy or
insolvency.

12
<PAGE>

10.3 Not a Contract of Employment. The terms and conditions of the Plan
----------------------------
and of any Deferral Agreement entered into pursuant to the Plan shall not be
deemed to constitute a contract of employment between Systems and a Participant,
and a Participant (or a Participant's Beneficiary) shall have no rights against
Systems under the Plan except as may be specifically provided in the Plan.
Moreover, nothing in the Plan shall be deemed to give a Participant any right
(i) to be retained in the employ or other service of Systems for any specific
length of time, (ii) to interfere with the right of Systems to discipline or
discharge the Participant at any time, (iii) to hold any particular position or
responsibility with Systems, or (iv) to receive any particular compensation from
Systems.

10.4 Withholding; Payroll Taxes. To the extent required by applicable laws
--------------------------
in effect at the time payments are made under the Plan, Systems shall withhold
from such payments any taxes or other obligations required to be withheld from
such payments by federal, state, or local laws.

10.5 Participant Cooperation. Each Participant shall cooperate with
-----------------------
Systems by furnishing any and all information requested by Systems to facilitate
the payment of benefits under the Plan, by taking such physical examinations as
Systems may deem necessary for insurance or other purposes, and by taking such
other actions as reasonably may be requested by Systems.

10.6 Incompetency. If the Committee or its delegate reasonably determines
------------
that any Participant or Beneficiary to whom a benefit is payable under the Plan
is unable to manage his or her own affairs because of illness or accident, then
any payment due such Participant or Beneficiary (unless prior claim therefor
shall have been made by a duly authorized guardian or other legal
representative) may be paid, upon appropriate indemnification of Systems, to the
person deemed by the Committee or its delegate to have current responsibility
for the handling of the affairs of such Participant or Beneficiary. Any such
payment shall be a payment for the account of the Participant or Beneficiary and
shall be a complete discharge of any liability of Systems therefor.

10.7 Governing Law. The provisions of the Plan shall be governed by and
-------------
construed according to the laws of the State of Nebraska.

10.8 Number and Gender. Unless the context otherwise requires, for all
-----------------
purposes of the Plan, words in the singular number include their plural, words
in the plural include their singular, and words of one gender include the other
genders.

10.9 Section Titles. The titles of the various sections of the Plan are
--------------
for convenient reference only and shall not be considered in the interpretation
of the Plan.

10.10 Severability. If any provision of the Plan is determined by any
------------
court to be invalid, then such invalidity shall not affect any other provision
of the Plan to which effect reasonably can be given without such invalid
provision; and for such purpose the provisions of the Plan shall be severable
from one another.

13
<PAGE>

10.11 Successors. The provisions of the Plan shall be binding upon and
----------
inure to the benefit of Systems, each Participant, and each Beneficiary and
their respective heirs, personal representatives, successors, and permitted
assigns (if any).

10.12 Unfunded Plan. The Plan is and shall be unfunded within the meaning
-------------
of the Employee Retirement Income Security Act of 1974 ("ERISA") for purposes of
Title I of ERISA and for income tax purposes.

10.13 Credit for Prior Service. In the sole discretion of the Committee,
------------------------
a Participant may receive credit for purposes of Section 6.2 for his or her
prior employment with an employer whose business is acquired by Systems.

10.14 Effective Date. The Plan became effective on July 17, 1996, upon
--------------
its approval by the Board.

10.15 Transition Provisions. The amendments of the Plan approved by the
---------------------
Board on November 16, 1999, will apply to Plan Years beginning after December
31, 1999, and to Deferral Agreements entered into after November 16, 1999.
Except as otherwise provided in this Section 10.15, Deferral Agreements in
effect on November 16, 1999, will remain in effect in accordance with their
terms; however, no deferrals of Base Salary or Incentive Compensation shall be
made under such Deferral Agreements for Plan Years after 1999, and as of the
first business day of 2000, the balance in a Participant's Deferral Account as
of the close of business on December 31, 1999, shall be transferred to the
Deemed Investments selected by such Participant on or before December 31, 1999.
The Committee or its delegate shall provide to each Participant who is expected
to have a Deferral Account balance on December 31, 1999, a form for making such
Deemed Investment selection; if a Participant fails to make such selection by
December 31, 1999, then, as of the first business day of 2000, such
Participant's Deferral Account balance shall be transferred to a Deemed
Investment selected by the Committee, subject to such Participant's right to
subsequently select other Deemed Investments in accordance with the Plan. For
purposes of making the transfer referred to in this Section 10.15, the balance
in a Participant's Deferral Account shall mean the balance in such Participant's
Termination Event Sub-Account (as defined in the Plan prior to the amendment of
the Plan on November 16, 1999). Prior to December 31, 1999, each Participant who
has entered into a Deferral Agreement in effect for Plan Years prior to 2000 may
elect, pursuant to Section 7.3 and on a form provided by the Committee or its
delegate, to receive his or her Deferral Benefit under such Deferral Agreement
at the end of any Plan Year after 1999 to which such Deferral Agreement
originally pertained. A Participant who has entered into a Deferral Agreement
which is in effect on November 16, 1999, may enter into a new Deferral Agreement
for Plan Years after 1999.

<PAGE>

Exhibit 21.01

CSG SYSTEMS INTERNATIONAL, INC.
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1999

STATE OR COUNTRY
SUBSIDIARY OF INCORPORATION
---------- ----------------

CSG Systems, Inc. Delaware
CSG International Limited United Kingdom

<PAGE>

EXHIBIT 23.01

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
reports included in this Annual Report on Form 10-K, into the Company's
previously filed Registration Statement File No.'s 333-10315, 333-48451 and 333-
83715.

Omaha, Nebraska,
March 24, 2000

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL
REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000 <F1>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 48,676
<SECURITIES> 0
<RECEIVABLES> 79,672
<ALLOWANCES> 2,975
<INVENTORY> 0
<CURRENT-ASSETS> 130,195
<PP&E> 58,371
<DEPRECIATION> 31,864
<TOTAL-ASSETS> 274,968
<CURRENT-LIABILITIES> 98,103
<BONDS> 59,289
0
0
<COMMON> 523
<OTHER-SE> 116,339
<TOTAL-LIABILITY-AND-EQUITY> 274,968
<SALES> 322,162
<TOTAL-REVENUES> 322,162
<CGS> 132,121
<TOTAL-COSTS> 132,121
<OTHER-EXPENSES> 34,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,214
<INCOME-PRETAX> 95,929
<INCOME-TAX> 36,055
<INCOME-CONTINUING> 59,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,874
<EPS-BASIC> 1.16
<EPS-DILUTED> 1.10
<FN>
<F1>In thousands except per share amounts
</FN>

</TABLE>

<PAGE>

Exhibit 99.01

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

CERTAIN CAUTIONARY STATEMENTS AND
RISK FACTORS

CSG Systems International, Inc. and its subsidiaries (collectively, the
Company) or their representatives from time to time may make or may have made
certain forward-looking statements, whether orally or in writing, including
without limitation, any such statements made or to be made in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in its various SEC filings or orally in conferences or
teleconferences. The Company wishes to ensure that such statements are
accompanied by meaningful cautionary statements, so as to ensure to the fullest
extent possible the protections of the safe harbor established in the Private
Securities Litigation Reform Act of 1995.

ACCORDINGLY, THE FORWARD-LOOKING STATEMENTS ARE QUALIFIED IN THEIR ENTIRETY
BY REFERENCE TO AND ARE ACCOMPANIED BY THE FOLLOWING MEANINGFUL CAUTIONARY
STATEMENTS IDENTIFYING CERTAIN IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENTS.

This list of factors is likely not exhaustive. The Company operates in a
rapidly changing and evolving business involving the converging communications
markets, and new risk factors will likely emerge. Management cannot predict all
of the important risk factors, nor can it assess the impact, if any, of such
risk factors on the Company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
in any forward-looking statements.

ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT FORWARD-LOOKING STATEMENTS WILL
BE ACCURATE INDICATORS OF FUTURE ACTUAL RESULTS, AND IT IS LIKELY THAT ACTUAL
RESULTS WILL DIFFER FROM RESULTS PROJECTED IN FORWARD-LOOKING STATEMENTS AND
THAT SUCH DIFFERENCES MAY BE MATERIAL.

RELIANCE ON CCS

The Company derived approximately 78.3% and 78.0% of its total revenues
from its primary product, Communications Control System, and related products
and services (collectively, "CCS") in the years ended December 31, 1999 and
1998, respectively. CCS is expected to provide the substantial majority of the
Company's total revenues in the foreseeable future.

The Company continues to develop new products and services to address the
evolving needs of its new and existing clients as they roll out new product
offerings and enter new markets. A substantial portion of the Company's new
products and services require enhancements to the core functionality of CCS.
There is an inherent risk of technical problems in maintaining and operating CCS
as its complexity is increased. The Company's results will depend upon continued
market acceptance of CCS, as well as the Company's ability to continue to adapt,
modify, maintain, and operate CCS to meet the changing needs of its clients
without sacrificing the reliability or quality of service. Any reduction in
demand for CCS would have a material adverse effect on the financial condition
and results of operations of the Company.

AT&T RELATIONSHIP

Contract Rights and Obligations
- -------------------------------

The AT&T Contract includes minimum financial commitments by AT&T over the
15-year life of the contract, and includes exclusive rights for the Company to
provide customer care and billing products and services for
<PAGE>

AT&T's offerings of wireline video, all Internet/high speed data services,
residential wireline telephony services, and print and mail services. Since
execution of the AT&T Contract in September 1997 through December 31, 1999, the
Company has successfully converted approximately 11 million AT&T cable
television customers onto its system, bringing the total of AT&T customers on
the Company's system to approximately 14 million.

The AT&T Contract provides certain performance criteria and other
obligations to be met by the Company. The Company is subject to various remedies
and penalties if it fails to meet the performance criteria or other obligations.
The Company is also subject to an annual technical audit to determine whether
the Company's products and services include innovations in features and
functions that have become standard in the wireline video industry. If an audit
determines the Company is not providing such an innovation and it fails to do so
in the manner and time period dictated by the contract, then AT&T would be
released from its exclusivity obligation to the extent necessary to obtain the
innovation from a third party.

To fulfill the AT&T Contract and to remain competitive, the Company
believes it will be required to develop new and advanced features to existing
products and services, as well as new products and services, all of which will
require substantial research and development and implementation and operational
aptitude. AT&T has the right to terminate the AT&T Contract in the event of
certain defaults by the Company. To date, the Company believes it has complied
with the terms of the contract. The termination of the AT&T Contract or of any
of AT&T's commitments under the contract would have a material adverse effect on
the financial condition and results of operations of the Company.

Business Activities and Dependence On AT&T
- ------------------------------------------

AT&T completed its merger with TCI in March 1999 and has consolidated the
TCI operations into AT&T Broadband. During the year ended December 31, 1999 and
1998, revenues from AT&T and affiliated companies represented approximately
50.5% and 37.4% of total revenues, respectively. The Company expects a similar
percentage of its total revenues to be generated from AT&T in 2000.

AT&T began its efforts to provide convergent communications services in
several United States cities during 1999 and expects to continue these efforts
in 2000. The Company is working closely with AT&T to provide customer care and
billing services to customers in those cities. The convergence of video,
telephony and Internet services in the residential market is still in its
infancy. As a result, the degree to which converged, broadband services meet
with consumer acceptance and capture significant market share is speculative.
Further, there may be customer care and billing needs of the broadband consumer
that are not foreseen by the Company, or the Company's technological solutions
may prove unable to meet the new and unique needs of the converging
communications markets. The Company expects to continue performing successfully
under the AT&T Contract, but its failure to do so would have a material adverse
effect on the financial condition and results of operations of the Company.

Historically, a substantial portion of the Company's revenue growth
resulted from the sale of software and professional services to AT&T, both of
which are in excess of the minimum financial commitments included in the
contract. There can be no assurance that the Company will continue to sell
products and services to AT&T in excess of the minimum financial commitments
included in the contract.

AT&T's Planned Merger with MediaOne
- -----------------------------------

AT&T and MediaOne have agreed to merge, with AT&T being the surviving
entity. MediaOne has approximately 5.2 million cable television customers, and
approximately 1.0 million of these customers are currently being processed on
the Company's system. The Company is hopeful that it will have the opportunity
to convert the remaining MediaOne customers onto its system soon after the
acquisition is complete. There are a number of uncertainties concerning the
transaction, however, including its timing and any structure, operational or
other limitations that may be imposed by governmental authorities. Should the
transaction not be consummated, should it be significantly delayed or its
structure or operational authority be altered materially, it may have a material
adverse impact upon the company's ability to sustain its growth in the wireline
video customer care and billing market.

RENEWAL OF TIME WARNER CONTRACTS
<PAGE>

During the years ended December 31, 1999 and 1998, revenues from Time
Warner represented approximately 10.2% and 14.1% of total revenues,
respectively. The Company provides services to Time Warner under multiple,
separate contracts with various Time Warner affiliates. These contracts are
scheduled to expire on various dates. The failure of Time Warner to renew
contracts representing a significant part of its business with the Company would
have a material adverse effect on the financial condition and results of
operations of the Company. America Online, Inc. ("AOL") and Time Warner have
announced their intention to merge their companies. It would be premature to
predict the impact, if any, the successful consummation of this transaction
would have on the financial condition or results of operations of the Company.

CONVERSION TO THE COMPANY'S SYSTEMS

The Company's ability to convert new client sites to its customer care and
billing systems on a timely and accurate basis is necessary to meet the
Company's contractual commitments and to achieve its business objectives.
Converting multiple sites under the schedules required by contracts or business
requirements is a difficult and complex process. One of the difficulties in the
conversion process is that competition for the necessary qualified personnel is
intense and the Company may not be successful in attracting and retaining the
personnel necessary to complete conversions on a timely and accurate basis. The
inability of the Company to perform the conversion process timely and accurately
would have a material adverse effect on the results of operations of the
Company.

INDUSTRY CONSOLIDATION AND DEPENDENCE ON CABLE TELEVISION AND DBS INDUSTRIES

The Company's business is concentrated in the cable television and Direct
Broadcast Satellite ("DBS") industries, making the Company susceptible to a
downturn in those industries. During the years ended December 31, 1999 and 1998,
the Company derived 75.8% and 77.7%, and 15.5% and 13.0% of its total revenues
from companies in the U.S. cable television and U.S. and Canadian DBS
industries, respectively. A decrease in the number of customers served by the
Company's clients, loss of business due to non-renewal of client contracts,
industry consolidation, and/or changing consumer demand for services would
adversely effect the results of operations of the Company.

There can be no assurance that new entrants into the cable television
market will become clients of the Company. Also, there can be no assurance that
cable television providers will be successful in expanding into other segments
of the converging communications markets. Even if major forays into new markets
are successful, the Company may be unable to meet the special billing and
customer care needs of that market. The cable television industry is undergoing
significant ownership changes at an accelerated pace. One facet of these changes
is that cable television providers are consolidating, decreasing the potential
number of buyers for the Company's products and services. Currently, seven
providers account for 85% of the U.S. cable television market and two providers
account for almost the entire U.S. DBS market. The Company processes at least a
portion of the customers for five of the seven cable television providers, and
for both of the DBS providers. For the year ended December 31, 1999,
approximately 83% of the Company's total revenues were generated from companies
either under the control of, or expected to come under the control of, these
seven providers. Consolidation in the industry may put at risk the Company's
ability to leverage its existing relationships. Should this consolidation result
in a concentration of cable television customer accounts being owned by
companies with whom the Company does not have a relationship, or with whom
competitors are entrenched, it could negatively effect the Company's ability to
maintain or expand its market share, thereby adversely effecting the results of
operations.

NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE

The market for customer care and billing systems is characterized by rapid
changes in technology and is highly competitive with respect to the need for
timely product innovations and new product introductions. The Company believes
that its future success in sustaining and growing the annual revenue per
customer account depends upon continued market acceptance of its current
products, including CCS, and its ability to enhance its current products and
develop new products that address the increasingly complex and evolving needs of
its clients. Substantial research and development will be required to maintain
the competitiveness of the Company's products and services
<PAGE>

in the market. Development projects can be lengthy and costly, and are subject
to changing requirements, programming difficulties, a shortage of qualified
personnel, and unforeseen factors which can result in delays. In addition, the
Company is typically responsible for the implementation of new products, and
depending upon the specific product, may also be responsible for operations of
the product. There is an inherent risk in the successful implementation and
operations of these products as the technological complexity increases. There
can be no assurance (i) of continued market acceptance of the Company's current
products, (ii) that the Company will be successful in the timely development of
product enhancements or new products that respond to technological advances or
changing client needs, or (iii) that the Company will be successful in
supporting the implementation and/or operations of product enhancements or new
products.

CONVERGING COMMUNICATIONS MARKETS

The Company's growth strategy is based in large part on the continuing
convergence and growth of the cable television, DBS, telecommunications, and on-
line services markets. If these markets fail to converge, grow more slowly than
anticipated, or if providers in the converging markets do not accept the
Company's solution for combining multiple communications services for a
customer, there could be a material adverse effect on the Company's growth.

COMPETITION

The market for the Company's products and services is highly competitive.
The Company directly competes with both independent providers of products and
services and in-house systems developed by existing and potential clients. In
addition, some independent providers are entering into strategic alliances with
other independent providers, resulting in either a new competitor, or a
competitor(s) with greater resources. Many of the Company's current and
potential competitors have significantly greater financial, marketing,
technical, and other competitive resources than the Company, and many already
have significant international operations. There can be no assurance that the
Company will be able to compete successfully with its existing competitors or
with new competitors.

ATTRACTION AND RETENTION OF PERSONNEL

The Company's future success depends in large part on the continued service
of its key management, sales, product development, and operational personnel.
The Company is particularly dependent on its executive officers. The Company
believes that its future success also depends on its ability to attract and
retain highly skilled technical, managerial, operational, and marketing
personnel, including, in particular, additional personnel in the areas of
research and development and technical support. Competition for qualified
personnel is intense, particularly in the areas of research and development and
technical support. The Company may not be successful in attracting and retaining
the personnel it requires, which would adversely effect the Company's ability to
meet its commitments and new product delivery objectives.

VARIABILITY OF QUARTERLY RESULTS

The Company's quarterly revenues and results, particularly relating to
software and professional services, may fluctuate depending on various factors,
including the timing of executed contracts and the delivery of contracted
services or products, the cancellation of the Company's services and products by
existing or new clients, the hiring of additional staff, new product development
and other expenses, and changes in sales commission policies. No assurance can
be given that results will not vary due to these factors. As the Company's
overall revenue grows, so too does the risk associated with meeting financial
expectations for revenue derived from its software and services offerings. As a
result, there is a proportionately increased likelihood that the Company may
fail to meet revenue and earnings expectations of the analyst community. With
the current volatility of the stock market, should the Company fail to meet
analyst expectations by even a relatively small amount it would most likely have
a disproportionately negative impact upon the market price for the Company's
common stock.
<PAGE>

DEPENDENCE ON PROPRIETARY TECHNOLOGY

The Company relies on a combination of trade secret and copyright laws,
nondisclosure agreements, and other contractual and technical measures to
protect its proprietary rights in its products. The Company also holds a limited
number of patents on some of its newer products, and does not rely upon patents
as a primary means of protecting its rights in its intellectual property. There
can be no assurance that these provisions will be adequate to protect its
proprietary rights. Although the Company believes that its intellectual property
rights do not infringe upon the proprietary rights of third parties, there can
be no assurance that third parties will not assert infringement claims against
the Company or the Company's clients.

INTERNATIONAL OPERATIONS

The Company's business strategy includes a commitment to the marketing of
its products and services internationally, and the Company has acquired and
established operations outside of the U.S. The Company is subject to certain
inherent risks associated with operating internationally. Risks include product
development to meet local requirements such as the conversion to EURO currency,
difficulties in staffing and management, reliance on independent distributors or
strategic alliance partners, fluctuations in foreign currency exchange rates,
compliance with foreign regulatory requirements, variability of foreign economic
conditions, changing restrictions imposed by U.S. export laws, and competition
from U.S.-based companies which have firmly established significant
international operations. There can be no assurance that the Company will be
able to manage successfully the risks related to selling its products and
services in international markets.

INTEGRATION OF ACQUISITIONS

As part of its growth strategy, the Company seeks to acquire assets,
technology, and businesses which would provide the technology and technical
personnel to expedite the Company's product development efforts, provide
complementary products or services or provide access to new markets and clients.
Acquisitions involve a number of risks and difficulties, including expansion
into new geographic markets and business areas, the requirement to understand
local business practices, the diversion of management's attention to the
assimilation of acquired operations and personnel, potential adverse short-term
effects on the Company's operating results, and the amortization of acquired
intangible assets.

SYSTEM SECURITY

The end users of the Company systems are continuously connected to the
Company's products through a variety of public and private telecommunications
networks. The Company has plans to integrate the Internet more closely into its
product offerings thereby permitting, for example, a customer to use the
Internet to review account balances, order a pay per view event or execute
similar account management functions. The Company also operates an extensive
internal network of computers and systems used to manage internal
communications, financial information, development data and the like. The
Company's product and internal communications networks and systems carry an
inherent risk of failure as a result of human error, acts of nature and
intentional, unauthorized attacks from computer "hackers." Opening up these
networks and systems to permit access via the Internet increases their
vulnerability to unauthorized access and corruption, as well as increasing the
dependency of the systems' reliability on the availability and performance of
the Internet's infrastructure. Certain system security and other controls for
CCS are reviewed annually by an independent party. The Company has recently
undergone a security review of its internal systems by an independent party, and
is currently implementing a plan intended to minimize the risk of an
unauthorized access to the networks and systems.

The method, manner, cause and timing of an extended interruption or outage
in the Company's networks or systems is impossible to predict. As a result,
there can be no assurances that the networks and systems will not fail, nor that
the Company's business recovery plans will adequately mitigate any damages
incurred as a consequence. In addition, should the Company's networks or systems
be significantly compromised, it would most likely have a
<PAGE>

material adverse effect on the operations of the Company, including its ability
to meet product delivery obligations or client expectations. Likewise, should
the Company's networks or systems experience an extended interruption or outage,
have their security compromised or data lost or corrupted, it would most likely
result in an immediate loss of revenue, as well as damaging the reputation of
the Company. Any of these events could have both an immediate, negative impact
upon the Company's short term revenue and profit expectations, as well as its
long term ability to attract and retain new clients.

PRODUCT OPERATIONS AND SYSTEM AVAILABILITY

The Company's product operations are run in both mainframe and distributed
system computing environments, as follows:

Mainframe Environment
---------------------

CCS operates in a mainframe data processing center managed by FDC (the "FDC
Data Center"), with end users dispersed throughout the United States and
Canada. These services are provided under an agreement with FDC that is
scheduled to expire in December 2001. The Company believes it could obtain
mainframe data processing services from alternative sources, if necessary.
The Company has a business recovery plan as part of its agreement with FDC
should the FDC Data Center suffer an extended business interruption or
outage. This plan is tested on an annual basis.

Distributed Systems Environment
-------------------------------

The Company also operates certain of its new product applications in its
own distributed systems data processing center (the "CSG Data Center") for
the benefit of certain clients. Typically, these distributed product
applications interface to and operate in conjunction with CCS via
telecommunication networks. The Company is currently implementing its
business recovery plan for the CSG Data Center. The Company has extensive
experience in running applications within the mainframe computing platform,
and only within the last few years, began running applications within the
CSG Data Center. In addition, the mainframe computing environment and
related technology is mature and has proven to be a highly reliable and
scaleable computing platform. The distributed systems computing platform is
not at the same level of maturity as the mainframe computing platform.

The end users of the Company systems are continuously connected to the
Company's products through a variety of public and private telecommunications
networks, and are highly dependent upon the continued availability of the
Company's systems to conduct their business operations. Should the FDC Data
Center or CSG Data Center, or any particular product application or internal
system which is operated within the data centers, as well as the connecting
telecommunications networks, experience an extended business interruption or
outage, it could have an immediate impact to the business operations of the
Company's clients, which could have a material adverse effect on the financial
condition and results of operations of the Company.

YEAR 2000

The Company's business is dependent upon various computer software programs
and operating systems that utilize dates and process data beyond the year 2000.
If the actions taken by the Company to mitigate its risks associated with the
year 2000 are inadequate, there could be a material adverse effect on the
financial condition and results of operations of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
additional discussion of the Company's efforts to address the year 2000 risks.