UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to_________
Commission File No. 333-05017
UIH Australia/Pacific, Inc.
(Exact name of Registrant as specified in its charter)
State of Colorado 84-1341958
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4643 South Ulster Street, #1300
Denver, Colorado 80237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 770-4001
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
The Company has no publicly-traded shares of capital stock. As of May 7, 1999
the Company had 17,810,249 shares of common stock outstanding.
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UIH AUSTRALIA/PACIFIC, INC.
TABLE OF CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1 - Financial Statements
- ------
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998 (Unaudited)............. 2
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1999
and 1998 (Unaudited)................................................................................. 3
Condensed Consolidated Statement of Stockholder's Deficit for the Three Months Ended March 31, 1999
(Unaudited).......................................................................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and
1998 (Unaudited).................................................................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)........................................ 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............... 14
- ------
Item 3 - Quantitative and Qualitative Disclosures about Market Risk.......................................... 24
- ------
PART II - OTHER INFORMATION
---------------------------
Item 6 - Exhibits and Reports on Form 8-K.................................................................... 27
- ------
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UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
As of As of
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................................................................... $ 172 $ 181
Restricted cash.............................................................................. -- --
Short-term liquid investments................................................................ 769 763
Subscriber receivables, net.................................................................. 6,999 6,322
Related party receivables.................................................................... 1,400 746
Other receivables............................................................................ 934 736
Prepaids and other current assets............................................................ 3,671 4,615
-------- --------
Total current assets.................................................................. 13,945 13,363
Investments in and advances to affiliated companies, accounted for under
the equity method, net........................................................................ 27,328 24,597
Property, plant and equipment, net of accumulated depreciation of $175,052
and $147,511, respectively.................................................................... 125,933 122,968
Goodwill and other intangible assets, net of accumulated amortizaton of $19,520
and $17,512, respectively..................................................................... 42,618 42,559
Deferred financing costs, net of accumulated amortization of $3,867 and $3,237,
respectively.................................................................................. 11,208 11,675
Other non-current assets, net.................................................................. 814 870
-------- --------
Total assets.......................................................................... $221,846 $216,032
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable............................................................................. $ 12,187 $ 5,426
Accrued liabilities.......................................................................... 14,940 28,522
Construction payables........................................................................ 1,972 1,076
Current portion of due to parent............................................................. 4,712 3,665
Short-term debt.............................................................................. 57,088 36,738
Current portion of other long-term debt...................................................... 2,015 2,189
-------- --------
Total current liabilities.............................................................. 92,914 77,616
Due to parent.................................................................................. 8,233 6,578
Senior discount notes.......................................................................... 368,816 356,640
Other long-term debt........................................................................... 70,825 68,086
Other long-term liabilities.................................................................... 1,945 1,741
-------- --------
Total liabilities...................................................................... 542,733 510,661
-------- --------
Stockholder's deficit
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding... -- --
Common stock, $0.01 par value, 30,000,000 shares authorized, 17,810,249 shares
issued and outstanding...................................................................... 178 178
Additional paid-in capital................................................................... 235,643 215,624
Accumulated deficit.......................................................................... (528,775) (481,240)
Other cumulative comprehensive loss.......................................................... (27,933) (29,191)
-------- --------
Total stockholder's deficit............................................................ (320,887) (294,629)
-------- --------
Total liabilities and stockholder's deficit............................................ $221,846 $216,032
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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2
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UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)
(Unaudited)
For the Three Months Ended
March 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenue.......................................................................................... $ 30,432 $ 20,453
System operating expense, including related party expense of $1,393 and $973, respectively....... (23,233) (12,323)
System selling, general and administrative expense............................................... (10,653) (10,372)
Regional overhead expense........................................................................ (292) (1,289)
Corporate general and administrative expense, including management fee to related party
of $219 and $203, respectively.................................................................. (737) (792)
Depreciation and amortization.................................................................... (24,461) (27,409)
---------- ----------
Net operating loss....................................................................... (28,944) (31,732)
Interest income.................................................................................. 33 100
Interest expense, including related party expense of $0 and $317, respectively.................. (14,922) (13,116)
Other expense, net............................................................................... (330) (296)
---------- ----------
Net loss before other items.............................................................. (44,163) (45,044)
Share in results of affiliated companies, net.................................................... (3,372) (2,289)
---------- ----------
Net loss................................................................................. $ (47,535) $ (47,333)
========== ==========
Basic and diluted loss per common share.......................................................... $ (2.67) $ (3.41)
========== ==========
Weighted-average number of common shares outstanding............................................. 17,810,249 13,864,941
========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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3
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UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
(Stated in thousands, except share amounts)
(Unaudited)
Other
Common Stock Additional Cumulative
-------------------- Paid-In Accumulated Comprehensive
Shares Amount Capital Deficit Loss(1) Total
---------- -------- ---------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1999.............. 17,810,249 $178 $215,624 $(481,240) $(29,191) $(294,629)
Cash contributions from parent......... -- -- 19,230 -- -- 19,230
Non-cash contributions from parent..... -- -- 789 -- -- 789
Net loss............................... -- -- -- (47,535) -- (47,535)
Change in cumulative translation
adjustments........................... -- -- -- -- 1,258 1,258
---------
Total comprehensive loss............... 46,277
---------- ---- -------- --------- -------- ---------
Balances, March 31, 1999............... 17,810,249 $178 $235,643 $(528,775) $(27,933) $(320,887)
========== ==== ======== ========= ======== =========
(1) As of March 31, 1999, Other Cumulative Comprehensive Loss represents
foreign currency translation adjustments.
The accompanying notes are an integral part of this condensed consolidated financial statement.
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4
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UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Stated in thousands)
(Unaudited)
For the Three Months Ended
March 31,
-----------------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................. $(47,535) $(47,333)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization.......................................................... 24,461 27,409
Share in results of affiliated companies, net.......................................... 1,777 2,289
Allocation of expense accounted for as capital contributions by parent................. 789 1,774
Accretion of interest on senior notes and amortization of deferred financing costs..... 12,731 11,695
Increase in subscriber receivables..................................................... (447) (140)
(Increase) decrease in related party receivables....................................... (527) 118
Decrease (increase) in other assets.................................................... 2,135 (1,212)
Increase in technical assistance agreement payables.................................... 2,253 991
Decrease in accounts payable, accrued liabilities and other............................ (7,865) (86)
-------- --------
Net cash flows from operating activities................................................. (12,228) (4,495)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments................................................ (1,066) --
Sale of short-term liquid investments.................................................... 1,060 12,325
Investments in and advances to affiliated companies...................................... (5,177) (51)
Deconsolidation of New Zealand subsidiary................................................ -- (9,881)
Purchase of property, plant and equipment................................................ (22,064) (11,442)
Increase in construction payables........................................................ 852 349
-------- --------
Net cash flows from investing activities................................................. (26,395) (8,700)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributions from parent........................................................... 19,230 1,511
Borrowings of other debt................................................................. 18,941 --
Borrowings (payments) on capital leases and other debt................................... 37 (187)
-------- --------
Net cash flows from financing activities................................................. 38,208 1,324
-------- --------
EFFECT OF EXCHANGE RATES ON CASH......................................................... 406 448
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS.................................................... (9) (11,423)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................... 181 12,344
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................. $ 172 $ 921
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash received for interest............................................................... $ 8 $ 138
======== ========
Cash paid for interest................................................................... $ 2,311 $ 1,129
======== ========
DECONSOLIDATION OF NEW ZEALAND SUBSIDIARY:
Working capital.......................................................................... $ -- $ 4,159
Property, plant and equipment............................................................ -- (26,484)
Goodwill and other intangible assets..................................................... -- (2,805)
Notes payable and other debt............................................................. -- 3,833
Minority interest........................................................................ -- 11,416
-------- --------
Total cash relinquished.................................................................. $ -- $ (9,881)
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
5
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999
(Monetary amounts stated in thousands, except share and per share amounts)
(Unaudited)
1. ORGANIZATION AND NATURE OF OPERATIONS
UIH Australia/Pacific, Inc. (the "Company"), a wholly-owned subsidiary of UIH
Asia/Pacific Communications, Inc. ("UAP"), which is in turn an indirect
98.0%-owned subsidiary of United International Holdings, Inc. ("UIH"), was
formed on October 14, 1994, for the purpose of developing, acquiring and
managing foreign multi-channel television, programming and telephony operations.
The following chart presents a summary of the Company's significant investments
in multi-channel television, programming and telephony operations as of March
31, 1999.
***********************************************************
* *
* UIH *
* *
***********************************************************
*
100% *
***********************************************************
* *
* United International Properties, Inc. ("UIPI") *
* *
***********************************************************
*
98% *
***********************************************************
* *
* UAP *
* *
***********************************************************
*
100% *
***********************************************************
* *
* The Company *
* *
***********************************************************
*
*
***********************************************************
* *
*Australia: *
* CTV Pty Limited and STV Pty Limited *
* (collectively, "Austar") 100.0% *
* United Wireless Pty Limited ("United *
* Wireless") 100.0% *
* XYZ Entertainment Pty Limited ("XYZ *
* Entertainment") 25.0% *
*New Zealand: *
* Saturn Communications Limited ("Saturn") 65.0% *
*Tahiti: *
* Telefenua S.A. ("Telefenua") 90.0% *
* *
***********************************************************
LIQUIDITY AND CAPITAL RESOURCES
A substantial portion of the Company's investments to date relate to our
investment in Austar, which is comprised primarily of multi-channel multi-point
distribution systems ("MMDS") and direct-to-home ("DTH") satellite operations.
Austar has essentially completed the construction and deployment of its entire
MMDS network infrastructure and has incurred certain other significant
expenditures, such as Austar's National Customer Service Center, which
contemplates provision of MMDS and DTH services to a substantially larger
customer base than currently exists. In order to expand Austar's customer base
and build-out the Company's other projects, the Company will need a significant
amount of additional capital. As of March 31, 1999, the Company had a net
working capital deficit of $74,257, excluding related party payables of $4,712.
This working capital deficit includes $57,088 of bank debt for Austar which was
refinanced as of April 28, 1999 (see Note 8).
6
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying interim condensed consolidated financial statements are
unaudited and include the accounts of the Company and all subsidiaries where the
Company exercises a controlling financial interest through the ownership of a
majority voting interest. The Company previously consolidated the operations of
Saturn from July 1, 1996 through September 30, 1998. Prior to that time, the
Company accounted for its investment in Saturn under the equity method. During
the fourth quarter of 1998, the Company discontinued consolidating the results
of operations of Saturn effective as of January 1, 1998 and returned to the
equity method of accounting. The change was made to comply with the consensus
guidance of the Emerging Issues Task Force regarding Issues 96-16 ("EITF
96-16"), and related rules of the SEC, because the minority shareholders of
Saturn have participating approval or veto rights with respect to certain
significant decisions of Saturn in the ordinary course of business. Accordingly,
the condensed consolidated statement of operations and statement of cash flows
for the period ended March 31, 1998 have been adjusted to reflect the
deconsolidation of Saturn effective as of January 1, 1998. The Company is
currently pursuing alternatives which would allow for the future consolidation
of Saturn. Effective October 1, 1998, the Company discontinued consolidating the
results of operations of Telefenua due to an other-than-temporary loss of
control and began using the equity method of accounting. All significant
intercompany accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS
Cash and cash equivalents include cash and investments with original maturities
of less than three months. Short-term liquid investments include certificates of
deposit, commercial paper and government securities which have original
maturities greater than three months but less than twelve months. Short-term
liquid investments are classified as available-for-sale and are reported at fair
market value.
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
For those investments in unconsolidated subsidiaries and companies in which the
Company's voting interest is 20.0% to 50.0%, the Company's investments are held
through a combination of voting common stock, preferred stock, debentures or
convertible debt and/or the Company exerts significant influence through board
representation and management authority, the equity method of accounting is
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's proportionate share of net earnings or
losses of the affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, including any debt guarantees or other funding
commitments. The Company's proportionate share of net earnings or losses of
affiliates includes the amortization of the excess of its cost over its
proportionate interest in each affiliate's net tangible assets.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for normal
repair and maintenance of property, plant and equipment are charged to expense
as incurred. Upon disconnection of a MMDS or DTH subscriber, the remaining book
value of the subscriber equipment, excluding converters which are recovered upon
disconnection, and the unamortized portion of capitalized labor are written off
and accounted for as additional depreciation expense. Depreciation is calculated
using the straight-line method over the economic life of the asset.
The economic lives of property, plant and equipment at acquisition are as
follows:
Subscriber premises equipment and converters... 5-10 years
MMDS/DTH distribution facilities............... 5-10 years
Cable distribution networks.................... 5-10 years
Office equipment, furniture and fixtures....... 3-10 years
Buildings and leasehold improvements........... 3-10 years
Other.......................................... 3-10 years
7
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized using the straight-line method over 15
years. The acquisition of MMDS licenses has been recorded at fair market value,
and amortization expense is computed using the straight-line method over the
term of the license, up to a maximum of 15 years.
REVENUE RECOGNITION
Revenue is primarily derived from the sale of multi-channel cable television
services to subscribers and is recognized in the period the related services are
provided. Initial installation fees are recognized as revenue in the period in
which the installation occurs, to the extent installation fees are equal to or
less than direct selling costs, which are expensed. To the extent installation
fees exceed direct selling costs, the excess fees are deferred and amortized
over the average contract period. All installation fees and related costs with
respect to reconnections and disconnections are recognized in the period in
which the reconnection or disconnection occurs because reconnection fees are
charged at a level equal to or less than related reconnection costs.
BASIC AND DILUTED LOSS PER SHARE
"Basic loss per share" is determined by dividing net loss available to common
stockholders by the weighted-average number of common shares outstanding during
each period. "Diluted loss per share" includes the effects of potentially
issuable common stock, but only if dilutive. The Company's warrants are excluded
from the Company's diluted loss per share amounts for all years presented
because their effect would be anti-dilutive
FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK
The functional currency for the Company's foreign operations is the applicable
local currency for each affiliate company. Assets and liabilities of foreign
subsidiaries are translated at exchange rates in effect at period-end, and the
statements of operations are translated at the average exchange rates during the
period. Exchange rate fluctuations on translating foreign currency financial
statements into U.S. dollars that result in unrealized gains or losses are
referred to as translation adjustments. Cumulative translation adjustments are
recorded as a separate component of stockholder's deficit and are included in
Other Cumulative Comprehensive Loss.
Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in exchange rates result in transaction gains and losses which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.
Cash flows from the Company's operations in foreign countries are translated
based on their functional currencies. As a result, amounts related to assets and
liabilities reported in the consolidated statements of cash flows will not agree
to changes in the corresponding balances in the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line item below cash flows from financing activities.
Certain of the Company's foreign operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. In general, the Company and the operating companies do not
execute hedge transactions to reduce the Company's exposure to foreign currency
exchange rate risks. Accordingly, the Company may experience economic loss and a
negative impact on earnings and equity with respect to its holdings solely as a
result of foreign currency exchange rate fluctuations.
8
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NEW ACCOUNTING PRINCIPLES
The Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5") issued by the American Institute of Certified Public Accountants
which defines start-up and organization costs which must be expensed as incurred
has been adopted.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133, accounting for changes in fair market value of a derivative
depends on its intended use and designation. SFAS 133 is effective for fiscal
years beginning after June 15, 1999. The Company is currently assessing the
effect of this new standard.
3. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER
THE EQUITY METHOD
<TABLE>
<CAPTION>
As of March 31, 1999
-------------------------------------------------------------------------------------------
Investments in Cumulative Share Cumulative
and Advances to in Results of Translation Valuation
Affiliated Companies Affiliated Companies Adjustments Allowance Total
-------------------- -------------------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Saturn............... $55,990 $(26,113) $(3,550) $ -- $26,327
XYZ Entertainment.... 19,363 (18,473) 111 -- 1,001
Telefenua............ 18,599 (14,215) -- (4,384)(1) --
------- -------- ------- ------- -------
Total........... $93,952 $(58,801) $(3,439) $(4,384) $27,328
======= ======== ======= ======= =======
December 31, 1998
-------------------------------------------------------------------------------------------
Investments in Cumulative Share Cumulative
and Advances to in Results of Translation Valuation
Affiliated Companies Affiliated Companies Adjustments Allowance Total
-------------------- -------------------- ----------- --------- -------
Saturn............... $49,808 $(23,138) $(2,881) $ -- $23,789
XYZ Entertainment.... 19,363 (18,666) 111 -- 808
Telefenua............ 18,599 (14,215) -- (4,384)(1) --
------- -------- ------- ------- -------
Total.......... $87,770 $(56,019) $(2,770) $(4,384) $24,597
======= ======== ======= ======= =======
</TABLE>
(1) The Company has reserved the remaining balance of the Telefenua
investment of $4,384 due to the uncertainty of realization.
9
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. PROPERTY, PLANT AND EQUIPMENT
As of As of
March 31, December 31,
1999 1998
--------- ------------
Subscriber premises equipment and converters..... $213,211 $ 187,247
MMDS/DTH distribution facilities................. 58,782 54,725
Cable distribution networks...................... 2,084 2,009
Office equipment, furniture and fixtures......... 10,228 9,810
Buildings and leasehold improvements............. 2,989 2,841
Other............................................ 13,691 13,847
-------- --------
300,985 270,479
Accumulated depreciation.................... (175,052) (147,511)
-------- --------
Net property, plant and equipment............ $125,933 $122,968
======== ========
5. GOODWILL AND OTHER INTANGIBLE ASSETS
As of As of
March 31, December 31,
1999 1998
--------- ------------
Austar........................................... $57,718 $55,805
Other............................................ 4,420 4,266
------- -------
62,138 60,071
Accumulated amortization..................... (19,520) (17,512)
------- -------
Net goodwill and other intangible assets..... $42,618 $42,559
======= =======
6. SHORT-TERM DEBT
As of As of
March 31, December 31,
1999 1998
--------- ------------
Austar Bank Facility (see Note 8)................ $57,088 $36,738
------- -------
Total notes payable.......................... $57,088 $36,738
======= =======
7. SENIOR DISCOUNT NOTES
As of As of
March 31, December 31,
1999 1998
--------- ------------
May 1996 Notes (as defined below), net of
unamortized discount............................ $332,950 $321,687
September 1997 Notes (as defined below),
net of unamortized discount..................... 35,866 34,953
-------- --------
Total senior discount notes.................. $368,816 $356,640
======== ========
MAY 1996 NOTES
The 14.0% senior notes, which the Company issued in May 1996 at a discount from
their principal amount of $443,000 (the "May 1996 Notes"), had an accreted value
of $332,950 as of March 31, 1999. On and after May 15, 2001, cash interest will
accrue and will be payable semi-annually on each May 15 and November 15,
commencing November 15, 2001. The May 1996 Notes are due May 15, 2006. Effective
May 16, 1997, the interest rate on these notes increased by an additional 0.75%
per annum to 14.75%. On October 14, 1998, the Company consummated an equity sale
resulting in gross proceeds to the Company of $70,000 which reduced the interest
rate from 14.75% to 14.0% per annum. Due to the increase in the interest rate
effective May 16, 1997 until consummation of the equity sale, the May 1996 Notes
will accrete to a principal amount of $447,418 on May 15, 2001, the date cash
interest begins to accrue. The quoted fair market value of these notes was
approximately $279,600 and $223,700 as of March 31, 1999 and December 31, 1998,
respectively.
10
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 1997 NOTES
The 14.0% senior notes, which the Company issued in September 1997 at a discount
from their principal amount of $45,000 (the "September 1997 Notes"), had an
accreted value of $35,866 as of March 31, 1999. On and after May 15, 2001, cash
interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. The September 1997 Notes are due May
15, 2006. Effective September 23, 1997, the interest rate on these notes
increased by an additional 0.75% per annum to 14.75%. On October 14, 1998, the
Company consummated an equity sale, reducing the interest rate from 14.75% to
14.0% per annum. Due to the increase in the interest rate effective September
23, 1997 until consummation of the equity sale, the September 1997 Notes will
accrete to a principal amount of $45,448 on May 15, 2001, the date cash interest
begins to accrue. The quoted fair market value of these notes was approximately
$28,400 and $22,700 as of March 31, 1999 and December 31, 1998, respectively.
On November 17, 1997, pursuant to the terms of the indentures governing the May
1996 Notes and the September 1997 Notes (collectively, the "Notes"), the Company
issued warrants to purchase 488,000 shares of its common stock, which
represented 3.4% of the Company's common stock. The warrants are exercisable at
a price of $10.45 per share which would result in gross proceeds of
approximately $5,100 upon exercise. The warrants are exercisable through May 15,
2006. The warrants were valued at $3,678 and have been reflected as an
additional discount to the Notes on a pro-rata basis and as an increase in
additional paid-in capital.
8. OTHER LONG-TERM DEBT
As of As of
March 31, December 31,
1999 1998
--------- ------------
Austar Bank Facility............................. $69,775 $67,352
Capitalized leases and other..................... 3,065 2,923
------- -------
72,840 70,275
Less current portion.......................... (2,015) (2,189)
------- -------
Total other long-term debt.................... $70,825 $68,086
======= =======
AUSTAR BANK FACILITY
In July 1997, Austar secured a senior syndicated term debt facility (the "Austar
Bank Facility") in the amount of A$200,000 ($126,863 as of March 31, 1999) to
fund Austar's subscriber acquisition and working capital needs. The Austar Bank
Facility consisted of three sub-facilities: (i) A$50,000 revolving working
capital facility, (ii) A$60,000 cash advance facility and (iii) A$90,000 term
loan facility. All of Austar's assets were pledged as collateral for the Austar
Bank Facility. As of March 31, 1999, Austar had drawn the entire amount of the
working capital facility and the cash advance facility totaling A$110,000
($69,775 converted using the March 31, 1999 exchange rate). The working capital
facility was fully repayable on June 30, 2000. The cash advance facility was
fully repayable pursuant to an amortization schedule beginning December 31, 2000
and ending June 30, 2004.
In September, 1998, Austar received an amendment to the Austar Bank Facility
which allowed Austar to temporarily draw under the A$90,000 term loan facility
at an increased interest rate of 2.25% above the professional market rate in
Australia. As of March 31, 1999, Austar had drawn A$90,000 ($57,088) on the term
loan facility for a total outstanding balance of A$200,000. On April 23, 1999
(subsequently executed and funded A$222,000 on April 28, 1999), Austar secured a
new A$400,000 syndicated senior secured debt facility (the "New Austar Bank
Facility") to refinance the A$200,000 Austar Bank Facility and to fund Austar's
subscriber acquisition and working capital needs. The New Austar Bank Facility
consists of two sub-facilities: (i) A$200,000 amortizing term facility ("Tranche
1") and (ii) A$200,000 cash advance facility ("Tranche 2"). Tranche 1 was used
to refinance the Austar Bank Facility, and Tranche 2 is available upon the
contribution of additional equity on a 2:1 debt-to-equity basis. All of Austar's
assets are pledged as collateral for this facility. In addition, pursuant to
this facility, Austar cannot pay any dividends, interest or fees under its
technical assistance agreements without the consent of the majority banks. The
New Austar Bank Facility bears interest at the professional market rate in
Australia plus a margin ranging from 1.75% to 2.25% based upon certain debt to
cash flow ratios. The New Austar Bank Facility is fully repayable pursuant to an
amortization schedule beginning December 31, 2002 and ending March 31, 2006.
11
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. RELATED PARTY
Effective May 1, 1996, the Company and UIH Management, Inc. ("UIH Management"),
an indirect wholly-owned subsidiary of UIH, executed a 10-year management
services agreement (the "Management Agreement"), pursuant to which UIH
Management performs certain administrative, accounting, financial reporting and
other services for the Company, which has no separate employees of its own.
Pursuant to the Management Agreement, the management fee was $750 for the first
year of such agreement (beginning May 1, 1996), and it increases on each
anniversary date of the Management Agreement by 8.0% per year. Effective March
31, 1997, UIH Management assigned its rights and obligations under the
Management Agreement to UAP, the Company's immediate parent, and extended the
agreement for 20 years from that date (the "UAP Management Agreement"). For the
three months ended March 31, 1999 and 1998, the Company recorded $1,612 and
$1,176, respectively, in related party management fees. In addition, the Company
reimburses UAP or UIH for any out-of-pocket expenses including travel, lodging
and entertainment expenses, incurred by UAP or UIH on behalf of the Company. In
December 1997, UIH began allocating corporate and regional general and
administrative expense to the Company in the form of capital contributions,
based on increased activity at the operating system level. Management believes
that this method of allocating costs is reasonable. For the three months ended
March 31, 1999 and 1998, the Company recorded $789 and $1,774, respectively, in
corporate and regional general and administrative expense allocated from UIH.
Austar, Saturn, Telefenua and United Wireless are also parties to technical
assistance agreements with UAP whereby such operating companies pay to UAP fees
based on their respective gross revenues. In addition, UIH has appointed certain
of its employees to serve in senior management positions at the operating
systems. The operating systems reimburse UIH for certain direct costs incurred
by UIH, including salaries and benefits relating to these senior management
positions, pursuant to the terms of the technical assistance agreements.
Included in the amount due to parent is the following:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Austar technical assistance agreement obligations, including deferred.........
management fees of $7,575 and $5,973, respectively (1)....................... $10,361 $ 8,347
United Wireless technical assistance agreement obligations.................... 658 605
Payable to parent for management fees......................................... 1,274 1,056
Other......................................................................... 652 235
------- -------
12,945 10,243
Less current portion.................................................. (4,712) (3,665)
------- -------
Total due to parent................................................... $ 8,233 $ 6,578
======= =======
</TABLE>
(1) UAP has the option of converting these management fees into equity.
10. SEGMENT INFORMATION
The Company's business has historically been derived from its video
entertainment segment. This service has been provided in various countries where
the Company owns and operates it systems. Accordingly, the Company's current
reportable segments are the various countries in which it operates multi-channel
television, programming and/or telephony operations. These reportable segments
are evaluated separately because each country presents different marketing
strategies and technology issues as well as distinct economic climates and
regulatory constraints. The key operating performance criteria used in this
evaluation include revenue growth, operating income before depreciation,
amortization and stock-based compensation expense ("Adjusted EBITDA"), and
capital expenditures. Senior management of the Company does not view segment
results below Adjusted EBITDA, therefore, interest income, interest expense,
provision for losses on investment related costs, gain on sale of investments,
share in results of affiliated companies, minority interests in subsidiaries and
other expenses are not broken out by segment below.
12
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended As of As of
March 31, 1999 March 31, 1998 March 31, December 31,
-------------------------- -------------------------- 1999 1998
Adjusted Adjusted --------------------------
Revenue EBITDA (1) Revenue EBITDA (1) Total Assets
------- ---------- ------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Australia..... $30,432 $(2,061) $19,316 $(1,385) $185,410 $181,169
New Zealand... -- -- -- -- 26,327 23,789
Tahiti........ -- -- 1,137 116 -- --
Corporate..... -- (810) -- (1,878) 10,109 11,074
------- ------- ------- ------- -------- --------
Total...... $30,432 $(2,871) $20,453 $(3,147) $221,846 $216,032
======= ======= ======= ======= ======== ========
</TABLE>
(1) "Adjusted EBITDA" represents earnings before net interest expense, income
tax expense, depreciation and amortization, stock-based compensation
charges, minority interest, share in results of affiliated companies (net),
currency exchange gains (losses) and other non-operating income (expense)
items. Industry analysts generally consider Adjusted EBITDA to be a helpful
way to measure the performance of cable television operations and
communications companies. Management believes Adjusted EBITDA helps
investors to assess the cash flow from operations from period to period and
thus to value the Company's business. Adjusted EBITDA should not, however,
be considered a replacement for net income, cash flows or for any other
measure of performance or liquidity under GAAP, or as an indicator of a
company's operating performance. The Company is not entirely free to use
the cash represented by Adjusted EBITDA. Several of the Company's
consolidated operating companies are restricted by the terms of their debt
arrangements. Each company has its own operating expenses and capital
expenditure requirements, which can limit the Company's use of cash. The
Company's presentation of Adjusted EBITDA may not be comparable to
statistics with a similar name reported by other companies. Not all
companies and analysts calculate EBITDA in the same manner.
Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:
For the Three Months
Ended March 31,
-------------------------------
1999 1998
--------- ---------
Net operating loss.................. $(28,944) $(31,732)
Depreciation and amortization....... 24,461 27,409
Management fees..................... 1,612 1,176
-------- --------
Consolidated Adjusted EBITDA...... $ (2,871) $ (3,147)
======== ========
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes thereto included elsewhere herein. Such
condensed consolidated financial statements provide additional information
regarding our financial activities and condition.
We have no employees of our own. UAP, our parent, provides various management,
financial reporting, accounting and other services for us pursuant to the terms
of the UAP Management Agreement. Austar, Saturn, Telefenua and United Wireless
are also parties to technical service agreements with UAP for which such
operating companies pay to UAP fees based on their respective gross revenues.
Certain statements in this report may constitute "forward-looking statements"
within the meaning of the federal securities laws. These forward-looking
statements may include, among other things, statements concerning our plans,
objectives and future economic prospects, expectations, beliefs, future plans
and strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. These forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements or industry results, to be
materially different from what we say or imply with such forward-looking
statements. These factors include, among other things, changes in television
viewing preferences and habits by subscribers and potential subscribers, their
acceptance of new technology, programming alternatives and new services we may
offer, our ability to secure adequate capital to fund other system growth and
development, risks inherent in investment and operations in foreign countries,
changes in government regulation, changes in the nature of key strategic
relationships with partners and joint ventures, and other factors referenced in
this report. These forward-looking statements apply only as of the date of this
report, and we have no obligation or plans to provide updates or revisions to
these forward-looking statements, or any other changes in events, conditions or
circumstances on which these statements are based. Our statements contained in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in this report related to Year 2000 issues are hereby denominated as
"Year 2000 Statements" within the meaning of the Year 2000 Information and
Readiness Disclosure Act.
INTRODUCTION
We currently hold (i) an effective 100% economic interest in Austar, (ii) a
65.0% interest in Saturn, (iii) a 25.0% interest in XYZ Entertainment, (iv) an
up to 90.0% economic interest in Telefenua and (v) a 100% interest in United
Wireless. We previously consolidated the operations of Saturn from July 1, 1996
through September 30, 1998. Prior to that time, we accounted for our investment
in Saturn under the equity method. During the fourth quarter of 1998, we
discontinued consolidating the results of operations of Saturn effective as of
January 1, 1998 and returned to the equity method of accounting. The change was
made to comply with the consensus guidance of the Emerging Issues Task Force
regarding Issues 96-16 ("EITF 96-16"), and related rules of the SEC, because the
minority shareholders of Saturn have participating approval or veto rights with
respect to certain significant decisions of Saturn in the ordinary course of
business. Accordingly, the condensed consolidated statement of operations and
statement of cash flow for the period ended March 31, 1998 have been adjusted to
reflect the deconsolidation of Saturn effective as of January 1, 1998. We are
currently pursuing alternatives which would allow for the future consolidation
of Saturn. Effective October 1, 1998, we discontinued consolidating the results
of operations of Telefenua due to an other-than-temporary loss of control and
began using the equity method of accounting.
14
<PAGE>
SUMMARY OPERATING DATA
The following tables set forth certain unaudited operating data:
<TABLE>
<CAPTION>
As of March 31, 1999
------------------------------------------------------------------------------------
Television Basic Economic
Homes in Homes Subscribers/ Basic Ownership
Service Area Passed Lines Penetration Interest
------------ ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Multi-channel television:
Austar......................... 2,085,000 2,083,108 311,119 14.9% 100.0%
Saturn......................... 141,000 56,249 7,590 13.5% 65.0%
Telefenua...................... 31,000 20,128 6,125 30.4% 90.0%
--------- --------- -------
Total.................... 2,257,000 2,159,485 324,834
========= ========= =======
Telephony:
Saturn (1)..................... 141,000 53,257 10,675 20.0% 65.0%
========= ========= =======
Programming:
XYZ Entertainment.............. N/A(2) N/A 750,439(3) N/A 25.0%
========= ========= =======
Data:
Saturn......................... 141,000 53,257 900(4) 1.7% 65.0%
========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1998
------------------------------------------------------------------------------------
Television Basic Economic
Homes in Homes Subscribers/ Basic Ownership
Service Area Passed Lines Penetration Interest
------------ ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Multi-channel television:
Austar......................... 1,635,000 1,589,000 199,955 12.6% 100.0%
Saturn......................... 141,000 23,780 3,245 13.6% 65.0%
Telefenua...................... 31,000 20,128 6,104 30.3% 90.0%
--------- --------- -------
Total.................... 1,807,000 1,632,908 209,304
========= ========= =======
Programming:
XYZ Entertainment.............. N/A(2) N/A 577,476(3) N/A 25.0%
========= ========= =======
</TABLE>
(1) In April 1998, Saturn launched business and residential telephony services
in the Wellington, New Zealand area.
(2) The Company expects that XYZ Entertainment's programming package will be
marketed to virtually all of Australia's 6.5 million television households
by Australian multi-channel television providers.
(3) This figure represents the total estimated subscribers to the five-channel
XYZ Entertainment package.
(4) Saturn launched data services in late 1998.
15
<PAGE>
SELECTED SYSTEM OPERATING DATA. The following table displays selected system
operating data in Austar's local currency:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Austar (A$):
Revenue................................................ 47,754 28,791
System operating expense (1)........................... (36,033) (17,112)
System selling, general and administrative expense..... (16,340) (14,340)
Adjusted EBITDA (2).................................... (2,433) (1,297)
Capital expenditures................................... 34,899 12,771
</TABLE>
(1) Includes management fees of A$2,186 and A$1,364 million, respectively.
(2) "Adjusted EBITDA" represents earnings before net interest expense,
income tax expense, depreciation and amortization, stock-based
compensation charges, minority interest, share in results of
affiliated companies (net), currency exchange gains (losses) and other
non-operating income (expense) items. Industry analysts generally
consider Adjusted EBITDA to be a helpful way to measure the
performance of cable television operations and communications
companies. We believe Adjusted EBITDA helps investors to assess the
cash flow from operations from period to period and thus to value our
business. Adjusted EBITDA should not, however, be considered a
replacement for net income, cash flows or for any other measure of
performance or liquidity under GAAP, or as an indicator of a company's
operating performance. We are not entirely free to use the cash
represented by Adjusted EBITDA. Several of our consolidated operating
companies are restricted by the terms of their debt arrangements. Each
company has its own operating expenses and capital expenditure
requirements, which can limit our use of cash. Our presentation of
Adjusted EBITDA may not be comparable to statistics with a similar
name reported by other companies. Not all companies and analysts
calculate EBITDA in the same manner.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, we had invested approximately $436.4 million in our
projects. These fundings do not include amounts contributed by shareholders
other than the Company or amounts contributed in either cash or stock to acquire
additional economic interests.
As of
March 31,
SOURCES OF FUNDINGS: 1999
--------------
(In thousands)
Senior discount notes proceeds, net of offering costs..... $244,652
Cash contributions and other equity from parent (1)....... 187,264
Cash received for interest................................ 4,526
--------
$436,442
========
As of
March 31,
USES OF FUNDINGS: 1999
(In thousands)
--------------
Austar (1)................................................ $339,929
Saturn.................................................... 44,612
Telefenua................................................. 16,738
XYZ Entertainment......................................... 16,481
United Wireless........................................... 10,764
Other..................................................... 7,918
--------
Total.................................................. $436,442
========
(1) Includes issuance/use of $29.8 million and $6.2 million in UIH
convertible preferred stock in 1995 and 1998, respectively, to acquire
additional economic interests in Australia.
16
<PAGE>
We are responsible for our proportionate share of the capital requirements of
the operating companies. We have funded our proportionate share to date with
capital contributed by UIH and UAP and proceeds from private debt offerings and
have reduced our proportionate share to date with subsidiary bank debt and
strategic partner contributions. Through the private placement of the May 1996
Notes, we raised total gross proceeds of approximately $225.1 million. These
notes will accrete to an aggregate principal amount of $447.4 million at
maturity. Through the private placement of the September 1997 Notes, we raised
total gross proceeds of approximately $29.9 million. These notes will accrete to
an aggregate principal amount of $45.4 million at maturity. Effective May 16,
1997, the interest rate on these notes increased by an additional 0.75% per
annum to 14.75%. On October 14, 1998, we consummated an equity sale, reducing
the interest rate from 14.75% to 14.0% per annum.
AUSTAR
In July 1997, Austar secured the Austar Bank Facility in the amount of A$200.0
million ($126.9 million as of March 31, 1999) to fund Austar's subscriber
acquisition and working capital needs. The Austar Bank Facility consists of
three sub-facilities: (i) A$50.0 million revolving working capital facility,
(ii) A$60.0 million cash advance facility and (iii) A$90.0 million term loan
facility. All of Austar's assets were pledged as collateral for the Austar Bank
Facility. As of March 31, 1999, Austar had drawn the entire amount of the
working capital facility and the cash advance facility totaling A$110.0 million
($69.8 million converted using the March 31, 1999 exchange rate). The working
capital facility was fully repayable on June 30, 2000. The cash advance facility
was fully repayable pursuant to an amortization schedule beginning December 31,
2000 and ending June 30, 2004.
In September, 1998, Austar received an amendment to the Austar Bank Facility
which allowed Austar to temporarily draw under the A$90.0 million term loan
facility at an increased interest rate of 2.25% above the professional market
rate in Australia. As of March 31, 1999, Austar had drawn A$90.0 million ($57.1
million) on the term loan facility for a total outstanding balance of A$200.0
million. On April 23, 1999 (subsequently executed and funded A$222.0 million on
April 28, 1999), Austar secured a new A$400.0 million syndicated senior secured
debt facility (the "New Austar Bank Facility") to refinance the A$200.0 million
Austar Bank Facility and to fund Austar's subscriber acquisition and working
capital needs. The New Austar Bank Facility consists of two sub-facilities: (i)
A$200.0 million amortizing term facility ("Tranche 1") and (ii) A$200.0 million
cash advance facility ("Tranche 2"). Tranche 1 was used to refinance the Austar
Bank Facility, and Tranche 2 is available upon the contribution of additional
equity on a 2:1 debt-to-equity basis. All of Austar's assets are pledged as
collateral for this facility. In addition, pursuant to this facility, Austar
cannot pay any dividends, interest or fees under its technical assistance
agreements without the consent of the majority banks. The New Austar Bank
Facility bears interest at the professional market rate in Australia plus a
margin ranging from 1.75% to 2.25% based upon certain debt to cash flow ratios.
The New Austar Bank Facility is fully repayable pursuant to an amortization
schedule beginning December 31, 2002 and ending March 31, 2006.
We expect the need for additional funding for Austar in the future. The amount
of capital needed is dependent primarily upon three factors: (i) the number of
new subscribers added; (ii) the level of churn, that is, the level of existing
subscribers who disconnect from Austar's service; and (iii) the mix of DTH
satellite compared to MMDS installations. Substantially all fixed costs required
to operate Austar's service have already been incurred. The average cost to
install a subscriber includes variables such as equipment, marketing and sales
costs, and installation fees. The average cost of a subscriber who disconnects
is reduced by the recovery of certain equipment (principally converters), and is
further reduced if a new subscriber is installed in a previously disconnected
home. Austar plans to continue to expand and add subscribers; however, the
timing of such expansion and the funds required for such expansion are largely
variable. Based upon current plans and budgeted churn, Austar will require
approximately $112.4 million to continue on its current expansion path from
January 1, 1999 through December 31, 1999. The required capital for 1999 will be
funded substantially by the New Austar Bank Facility and UIH. The remaining
sources of funds for such expansion may include the raising of private or public
equity by the Company or its subsidiaries. We currently plan that any proceeds
from an equity offering will be used to fund operations or for the payment of
bank debt and not to redeem the May 1996 Notes or the September 1997 Notes.
SATURN
In July 1997, Sasktel Holdings, Inc. ("SaskTel") purchased a 35.0% equity
interest in Saturn by investing NZ$29.9 million (approximately $19.6 million)
directly into Saturn for its newly-issued shares. In November 1998, Saturn
secured a syndicated senior debt facility in the amount of NZ$125.0 million
($70.0 million as of March 31, 1999) (the "Saturn Bank Facility") to fund the
completion of Saturn's network. Of this amount, NZ$83.3 million has been
subscribed for by financial institutions. Until Saturn obtains irrevocable
commitments in the form of equity funding or additional underwriting commitments
for the balance of NZ$41.7 million, the maximum that may be drawn down is
17
<PAGE>
NZ$73.0 million ($39.1 million as of March 31, 1999). If Saturn is successful in
obtaining the necessary commitments from other financing sources which is
expected to occur by the end of May 1999, Saturn may borrow an additional
NZ$10.3 million from the initial syndicate of banks. If Saturn is not successful
in obtaining the necessary commitments, the outstanding balance will be due May
31, 1999. As of March 31, 1999, Saturn had drawn NZ$50.0 million ($26.8 million
as of March 31, 1999) on the loan facility at a rate of approximately 8.12% per
annum. The eight-year debt facility has an interest rate of 3.0% over the
current base rate upon drawdown.
We expect the need for additional funding for Saturn in the future. Saturn's
capital needs include approximately $37.2 million for the completion of the
network required by Saturn to offer cable television and telephony services and
approximately $4.8 million until Saturn has sufficient cash flows to cover its
operations and the capital required to install customers, although there can be
no assurance that further additional capital will not be required. The sources
of funds for such expansion may include the Saturn Bank Facility, the raising of
private or public equity by the Company or its subsidiaries and/or continued
investment by UIH and SaskTel. Even though we believe that this financing will
be successful, we believe that committed financial support from UIH combined
with, if necessary, reductions in planned capital expenditures, are sufficient
to sustain its operations through at least mid-2000.
OTHER
The Company expects that the aggregate future funding requirements for XYZ
Entertainment and United Wireless are less than $2.0 million for 1999.
The indentures governing UIH's senior secured discount notes due February 2008
and the Company's Notes (collectively, the "Indentures") place restrictions on
the Company and its restricted subsidiaries with respect to incurring additional
debt. The Company and all of the operating companies are currently restricted
under the UIH Indentures. The Company, Austar and Telefenua are restricted under
the Company's Indentures. The restrictions imposed by the UIH Indentures will be
eliminated upon the retirement of UIH's notes at their maturity in February
2008, and the restrictions imposed by the Company's Indentures will be
eliminated upon the retirement of the Company's Notes at their maturity in May
2006. In addition, pursuant to the New Austar Bank Facility, Austar cannot pay
any dividends, interest on debentures and subordinated debt, or fees under its
technical assistance agreements without the consent of the majority banks.
On November 17, 1997, pursuant to the terms of the indentures governing the
Notes, we issued warrants to purchase a total of 488,000 shares of our common
stock, which represented 3.4% of the Company's common stock. The warrants are
exercisable at a price of $10.45 per share which would result in gross proceeds
of approximately $5.1 million, if exercised. The warrants are exercisable
through May 15, 2006.
18
<PAGE>
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
We incurred a net loss during the three months ended March 31, 1999 of $47.5
million, which included non-cash items such as depreciation and amortization
expense totaling $24.5 million and accretion of interest on the Notes totaling
$12.7 million.
Cash and cash equivalents remained the same at $0.2 million as of March 31, 1999
and December 31, 1998. Principal sources of cash during the three months ended
March 31, 1999 included cash contributions from parent of $19.2 million,
borrowings on other debt of $18.9 million and other sources totaling $1.3
million.
During the three months ended March 31, 1999, cash was used principally for
purchases of property, plant and equipment totaling $22.0 million to continue
new subscriber connections at Austar and the build-out of existing projects, the
funding of operating activities of $12.2 million and investments in and advances
to affiliated companies of $5.2 million.
FOR THE THREE MONTHS ENDED MARCH 31, 1998
We incurred a net loss during the three months ended March 31, 1998 of $47.3
million, which included non-cash items such as depreciation and amortization
expense totaling $27.4 million and accretion of interest on the Notes totaling
$11.7 million.
Cash and cash equivalents decreased $11.4 million from $12.3 million as of
December 31, 1997 to $0.9 million as of March 31, 1998. Principal sources of
cash during the three months ended March 31, 1998 included net proceeds from the
sale of short-term investments of $12.3 million, cash contributions from parent
of $1.5 million, and other investing and financing sources of $0.8 million.
During the three months ended March 31, 1998, cash was used principally for the
purchase of property, plant and equipment of $11.4 million to construct Austar's
and Telefenua's systems, the funding of operating activities of $4.5 million,
the deconsolidation of Saturn of $9.9 million and other investing and financing
uses totaling $0.2 million.
RESULTS OF OPERATIONS
Effective as of January 1, 1998, we discontinued consolidating the results of
operations of Saturn and returned to the equity method of accounting (see Note
2). Accordingly, the results of operations for the three months ended March 31,
1998 have been restated to reflect the effect of this change.
EXCHANGE RATES. We translate revenue and expense from our foreign subsidiaries
using the weighted-average exchange rates during the period. However, for ease
of presentation, the spot rates for the countries in the Australia/Pacific
region are shown below for the Australian dollar and the New Zealand dollar,
respectively, per one U.S. dollar.
Australian New Zealand
Dollars Dollars
---------- -----------
March 31, 1999............. 1.5765 1.8667
December 31, 1998.......... 1.6332 1.8939
March 31, 1998............. 1.5108 1.8103
December 31, 1997.......... 1.5378 1.7161
REVENUE. Our revenue increased $9.9 million for the three months ended March 31,
1999 compared to the amounts for the corresponding period in the prior year as
follows:
For the Three Months Ended
March 31,
------------------------------
1999 1998
-------- --------
(In thousands)
Austar.................................. $30,348 $19,199
United Wireless......................... 84 117
Other................................... -- 1,137
------- -------
Total revenue........................ $30,432 $20,453
======= =======
19
<PAGE>
AUSTAR
Revenue for Austar increased $11.0 million, or 57.8%, from $19.2 million
for the three months ended March 31, 1998 to $30.3 million for the three
months ended March 31, 1999. On a functional currency basis, Austar's
revenue increased A$19.0 million, from A$28.8 million for the three months
ended March 31, 1998 to A$47.8 million for the three months ended March 31,
1999, a 66.0% increase. These increases were primarily due to subscriber
growth (311,119 at March 31, 1999 compared to 199,955 at March 31, 1998) as
Austar continues to roll-out its services. The U.S. dollar increase
occurred despite the negative impact of $1.5 million due to fluctuation in
exchange rates between the three months ended March 31, 1999 and 1998.
SYSTEM OPERATING EXPENSE. System operating expense increased $10.9 million for
the three months ended March 31, 1999 compared to the amounts for the
corresponding period in the prior year as follows:
For the Three Months Ended
March 31,
------------------------------
1999 1998
-------- --------
(In thousands)
Austar.................................. $22,906 $11,399
United Wireless......................... 327 362
Other................................... -- 562
------- -------
Total system operating expense....... $23,233 $12,323
======= =======
AUSTAR
Operating expense for Austar increased $11.5 million, or 100.9%, from $11.4
million for the three months ended March 31, 1998 to $22.9 million for the
three months ended March 31, 1999. On a functional currency basis, Austar's
operating expense increased A$18.9 million, from A$17.1 million for the
three months ended March 31, 1998 to A$36.0 million for the three months
ended March 31, 1999, a 110.5% increase. These increases were primarily due
to an increase in satellite programming costs resulting from the May 1998
agreements with Foxtel and Optus to obtain additional programming rights in
connection with the receivership of Australis Media Limited ("Australis")
as well as additional satellite platform costs associated with the May 1998
joint venture with Optus. We expect that the restructuring of programming
costs for certain channels will result in somewhat higher costs for these
channels which will be offset by lower costs in the long-term when compared
to Austar's previous agreements with Australis. The remainder of the
increase between periods was due to an increase in salaries and benefits
related to the additional personnel necessary to support Austar's
establishment of local and state offices in its markets and an increase in
customer subscriber management expense related to volume increases in
telephone, billing and collection costs. The U.S. dollar increase was
positively impacted by $1.1 million due to fluctuation in exchange rates
between the three months ended March 31, 1999 and 1998.
Austar expects operating expense as a percentage of service revenue to
decline in future periods because a significant portion of Austar's
distribution facilities and network costs, such as local and state office
staffing levels, operating costs and wireless license costs, have already
been incurred and are fixed in relation to changes in subscriber volumes.
Other system operating expense, such as certain costs related to
programming and subscriber management expense, will vary in direct
proportion to the number of subscribers.
SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and
administrative expense increased $0.3 million for the three months ended March
31, 1999 compared to the amounts for the corresponding period in the prior year
as follows:
20
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Austar......................................................... $10,384 $ 9,573
United Wireless................................................ 269 282
Other.......................................................... -- 517
------- -------
Total system selling, general and administrative expense.... $10,653 $10,372
======= =======
</TABLE>
AUSTAR
System selling, general and administrative expense increased $0.8 million,
or 8.3%, from $9.6 million for the three months ended March 31, 1998 to
$10.4 million for the three months ended March 31, 1999. On a functional
currency basis, Austar's selling, general and administrative expense
increased A$2.0 million, from A$14.3 million for the three months ended
March 31, 1998 to A$16.3 million for the three months ended March 31, 1999,
a 13.9% increase. The U.S dollar increase was positively impacted by $0.5
million due to fluctuation in exchange rates between the three months ended
March 31, 1999 and 1998.
Depreciation and Amortization Expense. Depreciation and amortization expense
decreased $2.9 million for the three months ended March 31, 1999 compared to the
amounts for the corresponding period in the prior year as follow:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Austar......................................................... $24,296 $26,881
United Wireless................................................ 165 159
Other.......................................................... -- 369
------- -------
Total depreciation and amortization expense................. $24,461 $27,409
======= =======
</TABLE>
AUSTAR
Depreciation and amortization expense for Austar decreased $2.6 million, or
9.7%, from $26.9 million for the three months ended March 31, 1998 to $24.3
million for the three months ended March 31, 1999. On a functional currency
basis, Austar's depreciation and amortization expense decreased A$2.1
million, from A$38.9 million for the three months ended March 31, 1998 to
A$36.8 million for the three months ended March 31, 1999, a 5.4% decrease.
The U.S. dollar increase was positively impacted by $0.3 million due to
fluctuation in exchange rates between the three months ended March 31, 1999
and 1998.
INTEREST EXPENSE. Interest expense increased $1.8 million for the three months
ended March 31, 1999 compared to the amounts for the corresponding period in the
prior year. This increase was primarily due to interest expense related to the
Austar Bank Facility which was $2.6 million and $1.5 million for the three
months ended March 31, 1999 and 1998, respectively.
21
<PAGE>
YEAR 2000 READINESS DISCLOSURE
Our multi-channel television, programming and telephony operations are heavily
dependent upon computer systems and other technological devices with embedded
chips. Such computer systems and other technological devices may not be capable
of accurately recognizing dates beginning on January 1, 2000. This problem could
cause miscalculations, resulting in our multi-channel television and telephony
systems or programming services malfunctioning or failing to operate.
YEAR 2000 PROGRAM. In response to possible Year 2000 problems, the Board of
Directors of UIH established a Task Force to assess the impact that potential
Year 2000 problems may have on company-wide operations, including the Company
and its operating companies, and to implement necessary changes to address such
problems. The Task Force reports directly to the UIH Board. In creating a
program to minimize Year 2000 problems, the Task Force identified certain
critical operations of our business. These critical operations are service
delivery systems, field and headend devices, customer service and billing
systems and corporate management and administrative operations (e.g., cash flow,
accounts payable and accounts receivable, payroll and building operations).
The Task Force has established a three-phase program to address potential Year
2000 problems:
(a) Identification Phase: identify and evaluate computer systems and other
devices (e.g., headend devices, switches and set top boxes) on a system
by system basis for Year 2000 compliance.
(b) Implementation Phase: establish a database and evaluate the information
obtained in the Identification Phase, determine priorities, implement
corrective procedures, define costs and ensure adequate funding.
(c) Testing Phase: test the corrective procedures to verify that all
material compliance problems will operate on and after January 1, 2000,
and develop, as necessary, contingency plans for material operations.
As of March 31, 1999, 90.0% of our operating systems had completed the
Identification Phase and the Task Force is working on the Implementation Phase
for these systems. The Task Force has researched almost 86.0% of the items
identified during the Identification Phase as to Year 2000 compliance. Of the
items researched, 77.0% are either compliant or can be easily remediated without
significant cost to us. Currently, the Task Force expects to complete its
research on substantially all of the items identified by mid-1999. Based on
current data to date, the computer systems for all corporate operations are
expected to be in compliance with Year 2000 by mid-1999 and should not require
material remediation or replacement.
The Task Force commenced the Testing Phase in first quarter 1999. The Task Force
is supervising the Testing Phase of the computer systems for our headend
controllers and our customer service billing systems and routers. Based on
current data to date, we expect to complete this testing by mid-1999. At this
time, we anticipate that all material aspects of the program will be completed
before January 1, 2000. Certain of our operating systems have not completed the
Identification Phase, including Tahiti and certain Australian programming
interests. Despite the Task Force's attempts to include these systems in the
Year 2000 Programs, these systems have not responded. Therefore, we have no
information on which to determine if these systems will be Year 2000 compliant
by December 31, 1999. If none of these systems are compliant, we do not believe
that their operation failure will have a material adverse effect on our business
as a whole. The basis for determining the above percentage includes these
systems. In general, UIH is managing the program with its internal Task Force.
In addition, we have retained independent consultants to assist with our
operations in New Zealand. The Task Force will continue to evaluate the need for
external resources to complete the Implementation Phase and implement the
Testing Phase. In the event the Task Force elects to use external resources,
such resources may not, however, be available.
In addition to its program, UIH is a member of a Year 2000 working group, which
has 12 cable television companies and meets under the auspices of Cable Labs.
The dialogue with the other cable operators has assisted UIH in developing its
Year 2000 program. Part of the agenda of the working group is to develop test
procedures and contingency plans for critical components of operating systems
for the benefit of all of its members. The test procedures are expected to be
available to members, including UIH and the Company, during second quarter 1999.
THIRD PARTY DEPENDENCIES. We believe our largest Year 2000 risk is our
dependency upon third-party products. Two significant areas on which our systems
depend upon third-party products are programming and telephony interconnects. We
do not have the ability to control such parties in their assessment and
remediation procedures for potential Year 2000 problems. Should these parties
not be prepared for Year 2000, their systems may fail and we would not be able
22
<PAGE>
to provide service to our customers. Notwithstanding these limitations, the Task
Force monitors the websites for all vendors used by us, to the extent available,
for information on such vendors' Year 2000 programs. To the extent applicable,
the Task Force uses such information to verify Year 2000 compliance and to
implement remediation procedures. We also have requested information from
various third parties on the status of their Year 2000 compliance programs in an
effort to prevent any possible interruptions or failures. To date, responses to
such communications have been limited and the responses received state only that
the party is working on Year 2000 issues and does not have a definitive position
at this time. As a result, we are unable to assess the risk posed by our
dependence upon such third parties' systems. Vendors for critical equipment
components, such as the headend controllers mentioned below, have been more
responsive and we believe substantially all of our equipment will be Year 2000
compliant. We cannot, however, give any assurance concerning compliance of
equipment because such belief is based on information provided by vendors, which
cannot be independently verified, and because of the uncertainties inherent in
Year 2000 remediation.
The Task Force is considering certain limited contingency plans, including
preparing back-up programming and stand-by power generators. Such contingency
plans may not, however, resolve the problem in a satisfactory manner. With
respect to other third-party systems, each operating system is responsible for
inquiring of their vendors and other entities with which they do business (e.g.,
utility companies, financial institutions and facility owners) as to such
entities' Year 2000 compliance programs. In addition, the Task Force has
distributed a contingency plan to all of our operating systems. Such plan sets
forth preparation procedures and recovery solutions.
The Task Force is working closely with the manufacturers of our headend devices
to remedy any Year 2000 problems assessed in the headend equipment. Recent
information from the two primary manufacturers of such equipment indicate that
most of the equipment used in our operating systems are not date sensitive.
Where such equipment needs to be upgraded for Year 2000 issues, such vendors are
upgrading without charge. These upgrades are expected to be completed before
year-end 1999, but such a process is not wholly within our control or our
systems' control. Approximately 92.0% of the headend controllers, which are the
most critical component of the headend devices have been upgraded. With respect
to billing and customer care systems, we use standard billing and customer care
programs from several vendors. The Task Force is working with such vendors to
achieve Year 2000 compliance for all systems.
COSTS OF COMPLIANCE. The Task Force is not able to determine the full cost of
its Year 2000 program and its related impact on our financial condition. In the
course of our business, we have made substantial capital adjustments over the
past few years in improving our systems, primarily for reasons other than Year
2000. Because these upgrades also resulted in Year 2000 compliance, replacement
and remediation costs have been low. The Task Force has, however, revised its
estimates of the cost for the Year 2000 program to $1.0 million. The cost
includes certain identified replacement and remediation procedures and external
consultants, and has been increased because of system acquisitions and
additional date sensitive items that require research as to Year 2000
compliance. Such estimate does not, however, include internal costs because we
do not separately track the internal costs incurred for the Year 2000 program.
Although no assurance can be made, we believe that the known Year 2000
compliance issues can be remedied without a material financial impact. No
assurance can be made, however, as to the total cost for the Year 2000 program
until all of the data has been gathered. In addition, we can not predict the
financial impact we will incur if Year 2000 problems are caused by third parties
upon which our systems are dependent or experienced by entities in which we hold
investments. The failure of any one of these parties to implement Year 2000
procedures could have a material adverse impact on our operations and financial
condition.
23
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- ------------------------------------------------------------------
INVESTMENT PORTFOLIO
We do not use derivative financial instruments in our non-trading investment
portfolio. We place our cash and cash equivalent investments in highly liquid
instruments that meet high credit quality standards with original maturities at
the date of purchase of less than three months. We also place our short-term
investments in liquid instruments that meet high credit quality standards with
original maturities at the date of purchase of between three and twelve months.
We also limit the amount of credit exposure to any one issue, issuer or type of
instrument. These investments are subject to interest rate risk and will fall in
value if market interest rates increase, however, we do not expect any material
loss with respect to our investment portfolio.
IMPACT OF FOREIGN CURRENCY RATE CHANGES
We are exposed to foreign exchange rate fluctuations related to the operating
subsidiaries' monetary assets and liabilities and the financial results of
foreign subsidiaries when their respective financial statements are translated
into U.S. dollars during consolidation. Our exposure to foreign exchange rate
fluctuations also arises from intercompany charges such as the cost of
equipment, management fees and certain other charges. These intercompany
accounts are predominantly denominated in the functional currency of the foreign
subsidiary.
The operating companies' monetary assets and liabilities are subject to foreign
currency exchange risk as certain equipment purchases and payments for certain
operating expenses, such as programming expenses, are denominated in currencies
other than their own functional currency. In addition, certain of the operating
companies have notes payable and notes receivable which are denominated in a
currency other than their own functional currency. Foreign currency rate changes
also affect our share in results of our unconsolidated affiliates such as XYZ
Entertainment and Saturn.
The spot rates for the countries in the Australia/Pacific region are shown below
for the Australian and New Zealand dollars per one U.S. dollar.
Australian New Zealand
Dollars Dollars
---------- -----------
March 31, 1999................. 1.5765 1.8667
December 31, 1998.............. 1.6332 1.8939
March 31, 1998................. 1.5108 1.8103
December 31, 1997.............. 1.5378 1.7161
In general, the Company and the operating companies do not execute hedge
transactions to reduce our exposure to foreign currency exchange rate risk.
Accordingly, we may experience economic loss and a negative impact on earnings
and equity with respect to our holdings solely as a result of foreign currency
exchange rate fluctuations.
The countries in which the operating companies now conduct business generally do
not restrict the removal or conversion of local or foreign currency, however,
there is no assurance this situation will continue. We may also acquire
interests in companies that operate in countries where the removal or conversion
of currency is restricted.
24
<PAGE>
INTEREST RATE SENSITIVITY
The table below provides information about our primary debt obligations. The
information is presented in U.S. dollar equivalents, which is our reporting
currency. The instrument's actual cash flows are denominated in both U.S.
dollars (May 1996 and September 1997 Notes) and Australian dollars (Austar Bank
Facility).
<TABLE>
<CAPTION>
As of March 31, 1999
------------------------------------------
Book Value Fair Value
---------- ----------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C>
Long-term and short-term debt:
Fixed rate USD Denominated........... $368,816 $308,041
Average interest rate............... 14.00% 17.41%
Variable rate A$ Denominated......... $126,863 $126,863
Average interest rate............... 6.75% 6.75%
</TABLE>
The table below presents principal cash flows and related weighted-average
interest rates by expected maturity dates for our debt obligations. The
information is presented in U.S. dollar equivalents, which is our reporting
currency. The instrument's actual cash flows are denominated in both U.S.
dollars (May 1996 and September 1997 Notes) and Australian dollars (Austar Bank
Facility).
<TABLE>
<CAPTION>
As of March 31, 1999
------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
-------- -------- -------- -------- -------- ---------- ---------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term and short-term debt:
Fixed rate USD Denominated........ -- -- -- -- -- $368,816 $368,816
Average interest rate............ -- -- -- -- -- 14.00% 14.00%
Variable rate A$ Denominated...... $57,088 -- -- -- -- $ 69,775 $126,863
Average interest rate............ 6.75% -- -- -- -- 6.75% 6.75%
</TABLE>
Interest rate swap agreements are used by the Company from time to time, to
manage interest rate risk on its floating rate debt facilities. Interest rate
swaps are entered into depending on our assessment of the market, and generally
are used to convert the floating rate debt to fixed rate debt. Interest
differentials paid or received under these swap agreements are recognized over
the life of the contracts as adjustments to the effective yield of the
underlying debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated balance sheet. Currently, we
have two interest rate swaps to manage interest rate exposure on the Austar Bank
Facility. These swap agreements expire in 2002 and effectively convert an
aggregate principal amount of A$50.0 million ($31.7 million as of March 31,
1999) of variable rate, long-term debt into fixed rate borrowings. As of March
31, 1999, the weighted-average fixed rate under these agreements was 7.94%
compared to a weighted-average variable rate on the Austar Bank Facility of
6.75%. As a result of these swap agreements, interest expense was increased by
approximately A$0.2 million ($0.1 million) during first quarter 1999.
Fair values of the interest rate swap agreements are based on the estimated
amounts that we would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. As of March 31, 1999, we estimate that
we would have paid approximately A$1.3 million ($0.8 million) to terminate the
agreements.
The table below provides information about our interest rate swaps. The table
presents notional amounts and weighted-average interest rates by expected
(contractual) maturity dates. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract. The information is
presented in U.S. dollar equivalents (in thousands), which is our reporting
currency. The instrument's actual cash flows are denominated in Australian
dollars.
25
<PAGE>
<TABLE>
<CAPTION>
As of March 31, 1999
------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
-------- -------- -------- -------- -------- ---------- ---------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps:
Variable to fixed................. -- -- -- $31,716 -- -- $31,716
Average pay rate %................ 8.00% 8.00% 8.00% 8.00% -- -- 8.00%
Average receive rate %............ 6.75% 6.75% 6.75% 6.75% -- -- 6.75%
</TABLE>
26
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
10.1 A$400,000 Syndicated Senior Secured Debt Facility Agreement dated
April 23, 1999, among Austar Entertainment Pty Limited, Chase
Securities Australia Limited, the Guarantors named therein and
the financial institutions named therein. (1)
27.1 Financial Data Schedule
(1) Incorporated by reference from the Annual Report on Form
10-K of United International Holdings, Inc. for the period
ended December 31, 1998 (File No 0-21974).
(b) Reports on Form 8-K filed during the quarter.
None.
27
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
UIH AUSTRALIA/PACIFIC, INC.
Date: May 14, 1999
---------------------------------------------
By: /S/ Valerie L. Cover
---------------------------------------------
Valerie L. Cover
Controller
(A Duly Authorized Officer and Principal Financial Officer)
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UIH
AUSTRALIA/PACIFIC, INC.'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 172
<SECURITIES> 0
<RECEIVABLES> 6,999
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,945
<PP&E> 300,985
<DEPRECIATION> 175,052
<TOTAL-ASSETS> 221,846
<CURRENT-LIABILITIES> 92,914
<BONDS> 368,816
0
0
<COMMON> 178
<OTHER-SE> (293,132)
<TOTAL-LIABILITY-AND-EQUITY> 221,846
<SALES> 0
<TOTAL-REVENUES> 30,432
<CGS> 0
<TOTAL-COSTS> 23,233
<OTHER-EXPENSES> 24,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,922)
<INCOME-PRETAX> (47,535)
<INCOME-TAX> 0
<INCOME-CONTINUING> (47,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47,535)
<EPS-PRIMARY> (2.67)
<EPS-DILUTED> 0
</TABLE>
