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 Quarterly Period Ended March 31, 2000
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 Number 1-8611
MediaOne Group, Inc.
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A Delaware Corporation IRS Employer No. 84-0926774
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188 Inverness Drive West, Englewood, Colorado 80112
Telephone Number 303-858-3000
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 __
The number of shares of MediaOne Group, Inc. common stock outstanding (net of
shares held in treasury), at April 28, 2000, was 639,062,407 shares.
===============================================================================
MediaOne Group, Inc.
Form 10-Q
TABLE OF CONTENTS
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Item Page
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PART I - FINANCIAL INFORMATION
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1. MediaOne Group, Inc. Financial Information
Consolidated Statements of Operations -
Three Months Ended March 31, 2000 and 1999 3
Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
2. MediaOne Group, Inc. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Consolidated Results of Operations 15
Liquidity and Capital Resources 23
Risk Management 25
3. MediaOne Group, Inc. Quantitative and Qualitative Disclosures About
Market Risk 27
PART II - OTHER INFORMATION
1. Legal Proceedings 28
6. Exhibits and Reports on Form 8-K 28
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2
Form 10-Q - Part I
MediaOne Group, Inc.
Consolidated Statements of Operations
(Unaudited)
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Three Months Ended
March 31,
--------------------------------
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Dollars in millions, except per share amounts 2000 1999
- - ---------------------------------------------------------------------------------------- ---------------- ---------------
Sales and other revenues:
Domestic cable and broadband $ 706 $ 654
Corporate and other - 11
---------------- ---------------
Total sales and other revenues 706 665
---------------- ---------------
Operating expenses:
Cost of sales and other revenues 296 269
Selling, general and administrative expenses 171 185
Depreciation and amortization 379 250
---------------- ---------------
Total operating expenses 846 704
---------------- ---------------
Operating loss (140) (39)
Interest expense (147) (96)
Equity losses in unconsolidated ventures (71) (115)
Gains (losses) on investments:
Sales and exchanges of domestic investments 191 70
Sales of international investments 1,993 124
PrimeStar investment - (65)
Minority interest expense in Centaur Funding (25) (25)
Guaranteed minority interest expense (24) (24)
Merger costs (19) (15)
Other income - net 155 37
---------------- ---------------
Income (loss) before income taxes 1,913 (148)
(Provision) benefit for income taxes (755) 37
---------------- ---------------
NET INCOME (LOSS) $ 1,158 $ (111)
================ ===============
Preferred stock dividends and accretion (1) (14)
---------------- ---------------
EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK $ 1,157 $ (125)
================ ===============
Basic earnings (loss) per common share $ 1.80 $ (0.21)
================ ===============
Diluted earnings (loss) per common share $ 1.78 $ (0.21)
================ ===============
AVERAGE COMMON SHARES OUTSTANDING (thousands):
Basic average common shares outstanding 642,947 603,813
================ ===============
Diluted average common shares outstanding 651,110 603,813
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See Notes to Consolidated Financial Statements.
3
Form 10-Q - Part I
MediaOne Group, Inc.
Consolidated Balance Sheets
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March 31, December 31,
Dollars in millions 2000 1999
- - -------------------------------------------------------------------------------- ------------------- ---------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 7,540 $ 7,471
Accounts and notes receivable - net 374 489
Current portion of deferred tax asset 68 69
Prepaid and other 26 29
Marketable securities 66 62
------------------- ---------------------
Total current assets 8,074 8,120
------------------- ---------------------
Property, plant and equipment - net 5,369 5,090
Investment in Vodafone Group 9,725 8,718
Investment in Time Warner Entertainment 2,609 2,597
Net investment in international ventures held for sale 820 938
Intangible assets - net 11,329 11,507
Other assets 3,152 2,816
------------------- ---------------------
Total assets $ 41,078 $ 39,786
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See Notes to Consolidated Financial Statements.
4
Form 10-Q - Part I
MediaOne Group, Inc.
Consolidated Balance Sheets
(Continued)
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March 31, December 31,
Dollars in millions 2000 1999
- - -------------------------------------------------------------------------------- ------------------- --------------------
(Unaudited)
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt $ 1,505 $ 1,506
Accounts payable 292 350
Employee compensation 75 92
Deferred revenue and customer deposits 186 174
Current income taxes payable 937 1,552
Other 483 571
------------------- --------------------
Total current liabilities 3,478 4,245
------------------- --------------------
Long-term debt 9,119 8,673
Deferred income taxes 7,998 7,711
Deferred credits and other 349 168
Commitments and contingencies
Minority interest in Centaur Funding 1,115 1,113
Company-obligated mandatorily redeemable preferred securities of subsidiary
trust holding solely Company-guaranteed subordinated debentures 1,060 1,060
Preferred stock subject to mandatory redemption 50 50
Shareowners' equity:
Common shares 10,943 11,448
Retained earnings 5,280 4,123
Accumulated other comprehensive income 1,686 1,195
------------------- --------------------
Total shareowners' equity 17,909 16,766
------------------- --------------------
Total liabilities and shareowners' equity $ 41,078 $ 39,786
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See Notes to Consolidated Financial Statements.
5
Form 10-Q - Part I
MediaOne Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
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Three Months Ended March 31, 2000 1999
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Dollars in millions
OPERATING ACTIVITIES
Net income (loss) $ 1,158 $ (111)
Adjustments to net income (loss):
Depreciation and amortization 379 250
Equity losses in unconsolidated ventures 71 115
(Gains) losses on investments:
Sales and exchanges of domestic investments (191) (70)
Sales of international investments (1,993) (124)
PrimeStar investment - 65
Deferred income taxes (23) (18)
Changes in operating assets and liabilities:
Accounts and notes receivable, and other current assets 120 (77)
Accounts payable and accrued liabilities (155) 37
Current income taxes payable (615) 346
Other - net 29 45
--------------- ---------------
Cash (used for) provided by operating activities (1,220) 458
--------------- ---------------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (462) (401)
Investment in international ventures (14) (55)
Proceeds from sales of investments 2,289 304
Other - net 3 11
--------------- ---------------
Cash provided by (used for) investing activities 1,816 (141)
--------------- ---------------
FINANCING ACTIVITIES
Net repayments of short-term debt - (160)
Repayments of long-term debt - (3)
Proceeds from issuance of common stock 57 23
Dividends paid on preferred stock (1) (13)
Purchases of treasury stock (583) (47)
--------------- ---------------
Cash used for financing activities (527) (200)
--------------- ---------------
CASH AND CASH EQUIVALENTS
Increase 69 117
Beginning balance 7,471 415
--------------- ---------------
Ending balance $ 7,540 $ 532
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See Notes to Consolidated Financial Statements.
6
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 2000
(Dollars in millions)
(Unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The Consolidated Financial Statements have been prepared
by MediaOne Group, Inc. ("MediaOne Group" or the "Company") pursuant to the
interim reporting rules and regulations of the Securities and Exchange
Commission ("SEC") and include the accounts of MediaOne Group and its
consolidated subsidiaries. Certain information and footnote disclosures normally
accompanying financial statements prepared in accordance with generally accepted
accounting principles ("GAAP") have been condensed or omitted pursuant to such
SEC rules and regulations.
In the opinion of MediaOne Group's management, the Consolidated Financial
Statements include all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the financial information set forth therein. It is
suggested that these Consolidated Financial Statements be read in conjunction
with the Company's 1999 Consolidated Financial Statements and notes thereto
included in MediaOne Group's Form 10-K filed with the SEC on March 23, 2000.
Certain reclassifications within the Consolidated Financial Statements have been
made to conform to the current year presentation.
NOTE 2: AT&T MERGER
On May 6, 1999, MediaOne Group entered into an agreement with AT&T Corp.
("AT&T") to merge its operations with those of AT&T. The merger is expected to
close in mid-2000, subject to legal and regulatory approval.
NOTE 3: DOMESTIC ASSET DISPOSITIONS, EXCHANGES AND OTHER
On March 1, 2000, MediaOne Group sold its investment in shares of Motorola, Inc.
("Motorola") for gross proceeds of $41, resulting in a net pretax gain of $24.
The Motorola shares were received in January 2000 as a result of the exercise of
certain General Instrument Corporation ("GI") warrants held by the Company,
which were converted to Motorola shares as a result of the merger of GI into
Motorola.
7
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
(Dollars in millions)
(Unaudited)
On March 10, 2000, the Company's interest in the Trip.com, an online travel
services company, was merged into Galileo International, Inc. ("Galileo"). The
Company's interest was converted into stock of Galileo and approximately $30 in
cash, resulting in a net pretax gain of $85. Also during March 2000, the
Company's investments in Preview Travel and IPIX were merged and exchanged into
investments in Travelocity.com and Bamboo.com, respectively, resulting in total
net pretax gains of $82. The new investments will be accounted for under the
cost method of accounting, as available for sale securities, with changes in the
fair market value of the investment being recorded in equity as a component of
other comprehensive income.
NOTE 4: OPERATING SEGMENTS
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information," the
following table presents selected information for MediaOne Group's operating
segments for the three month periods ended March 31, 2000 and 1999. "Sales and
Other Revenues" and earnings before interest, taxes, depreciation, amortization
and other ("EBITDA") for the domestic segment are presented on a proportionate
basis. Proportionate results reflect the relative weight of MediaOne Group's
ownership in each of its respective domestic equity ventures together with the
consolidated results of its subsidiaries. The computation of EBITDA also
excludes gains on asset sales, equity losses, guaranteed minority interest
expense and minority interest expense in Centaur Funding. Adjustments made to
Sales and Other Revenues and EBITDA to arrive at proportionate results are
reversed in the column labeled "Eliminations and Adjustments," in conformity
with SFAS No. 131, so that in total, Sales and Other Revenues and EBITDA reflect
consolidated results.
Beginning in 2000, the Company no longer evaluates the proportionate results of
its international interests when assessing performance and allocating resources
due to the sale of a significant portion of these international investments.
Amounts previously disclosed for 1999 have been reclassified to conform with the
current year presentation.
8
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
(Dollars in millions)
(Unaudited)
Operating Results:
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Domestic Cable & Broadband
-------------------------- Eliminations
MediaOne of Multimedia &
Delaware (1) Ventures (2) Internat'l. Adjustments Other Consolidated
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Three months ended
March 31, 2000
Sales and other revenues $ 706 $ 841 $ - $ - $ (841) $ 706
EBITDA(3) 261 216 (1) (20) (217) 239
Equity gains (losses) in
unconsolidated ventures - - (85) - 14 (71)
Net income (loss) (4) (123) 6 1,219 56 - 1,158
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Three months ended
March 31, 1999
Sales and other revenues $ 654 $ 748 $ 10 $ 1 $ (748) $ 665
EBITDA(3) 241 243 (12) (16) (245) 211
Equity gains (losses) in
unconsolidated ventures - - (108) - (7) (115)
Net income (loss) (74) 4 (18) (23) - (111)
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(1) MediaOne of Delaware represents the operations of the Company's domestic
cable and broadband subsidiary.
(2) Multimedia Ventures includes MediaOne Group's 25.51 percent equity interest
in TWE, as well as related overheads. The reported TWE results are prepared
in accordance with GAAP and have not been adjusted to report TWE
investments accounted for under the equity method on a proportionate basis.
(3) The Company believes EBITDA is an important indicator of the operating
performance of its businesses and should not be considered an alternative
to operating or net income as an indicator of the performance of MediaOne
Group's businesses, or as an alternative to cash flows from operating
activities as a measure of liquidity, in each case determined in accordance
with GAAP.
(4) Consolidated net income for the three month period of 2000 includes one
time gains recognized on investment sales and exchanges of $1,344,
including $1,226 of one time gains on sales of international investments.
Total Assets:
Total assets are those assets and investments that are used in, or pertain to,
each segment's operations, as follows:
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Domestic Cable & Broadband
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MediaOne of Multimedia
Delaware (1) Ventures (2) International Other Consolidated
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Total assets as of:
March 31, 2000 $ 17,287 $ 2,639 $ 1,491 $ 19,661 $ 41,078
December 31, 1999 17,270 2,629 1,885 18,002 39,786
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(1) MediaOne of Delaware represents the operations of the Company's domestic
cable and broadband subsidiary.
(2) Multimedia Ventures includes MediaOne Group's 25.51 percent equity interest
in TWE.
9
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
(Dollars in millions)
(Unaudited)
The "Other" column includes primarily cash, debt and equity securities, domestic
Internet related investments, and other corporate assets. The increase in Other
total assets of $1,659, or 9.2 percent, during 2000 is due primarily to changes
in the fair market value of the Company's investments in marketable equity
securities, including Vodafone Group Public Limited Company ("Vodafone")
American Depository Receipts ("ADRs") and preferred stock.
Revenue and EBITDA amounts for the three month period of 2000 represent results
from the Company's domestic operations. For the same period in 1999, these
results represented primarily domestic operations.
NOTE 5: NET INVESTMENT IN INTERNATIONAL VENTURES
On February 15, 2000, MediaOne Group sold its 25 percent interest in Singapore
Cablevision ("Singapore") to Singapore Technologies for gross proceeds of $218,
resulting in a net pretax gain of $199.
On March 23, 2000, MediaOne Group sold its interests in certain of its Central
European wireless ventures for proceeds of $2 billion, resulting in a net pretax
gain of $1,794. The ventures sold included Polska Telefonia Cyfrowa, a wireless
operator located in Poland, and Westel 900 and Westel Radiotelefon, wireless
operators located in Hungary.
On March 21, 2000, the Company signed an agreement to sell its interest in the
Russian Telecommunications Development Corporation ("RTDC"), a Russian venture
which holds various wireless investments, to MCT Corporation.
In 1999, the Company incurred a $43 charge as a result of the decision to exit
its international businesses. The exit charge included employee severance and
foreign income tax settlement costs ("Severance Costs") of $33 for approximately
120 people, and lease termination, relocation and other costs ("Other Costs") of
$10. During first quarter 2000, the Company paid $2 of Severance Costs, $1 of
Other Costs, and 15 people left under the exit plan. Since the inception of the
charge, the Company has paid a total of $7 of Severance Costs, $2 of Other
Costs, and approximately 60 people have left under the exit plan.
10
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
(Dollars in millions)
(Unaudited)
NOTE 6: SHAREOWNERS'EQUITY
Following is a rollforward of shareowners' equity since the end of 1999:
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Accumulated Other
Comprehensive
Common Shares Retained Income
Earnings
- - -------------------------------------------------------------- ----------------- ---------------- -------------------
Balance at December 31, 1999 $ 11,448 $ 4,123 $ 1,195
Net income 1,158
Issuance of MediaOne Group Stock 30
Purchase of treasury stock (583)
Preferred stock dividends (1)
Market value adjustments for debt and equity securities, and
Exchangeable Notes,(1) net of reclassification
adjustments and income taxes 445
Foreign currency translation, net of income taxes 46
Other 48
----------------- ---------------- -------------------
Balance at March 31, 2000 $ 10,943 $ 5,280 $ 1,686
- - -------------------------------------------------------------- ================= ================ ===================
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(1) The "Exchangeable Notes" represent debt exchangeable into Vodafone ADRs,
and/or the cash value of Vodafone ADRs.
Common Stock. Other activity during 2000 represents a gain of $27 on the
exercise of a call option on MediaOne Group Stock and $21 of tax benefits on
employee stock option exercises.
Share Repurchase. During the three month period ended March 31, 2000, MediaOne
Group purchased and placed into treasury 9,448,900 shares of MediaOne Group
Stock, at an average purchase price of $61.69 per share and a total cost basis
of $583. The share repurchases were transacted under a 25 million share
repurchase plan authorized in 1998 by the Company's Board of Directors.
11
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
(Dollars in millions)
(Unaudited)
Comprehensive Income. Total comprehensive income and the components of
comprehensive income follow:
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Three Months Ended
March 31,
----------------------------------------
2000 1999
---------------------------------------------------------------------- -------------------- -------------------
Net income (loss) $ 1,158 $ (111)
Other comprehensive income, before tax:
Foreign currency translation adjustment (11) (65)
Unrealized gains on debt and equity securities, and
Exchangeable Notes 823 899
Reclassification for (gains) losses realized in net income
(loss) (10) (105)
Income tax provision related to items of other comprehensive
income (311) (281)
-------------------- -------------------
Total other comprehensive income, net of tax 491 448
-------------------- -------------------
Total comprehensive income $ 1,649 $ 337
---------------------------------------------------------------------- ==================== ===================
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The majority of the unrealized gains on debt and equity securities during the
three month period of 2000 relate to the Company's investment in Vodafone ADRs
and preferred stock, as well as its investment in shares of Time Warner Telecom,
Inc. ("TW Telecom"). Of the reclassifications for gains and losses realized in
2000, $97 pretax ($62 after tax) relate to gains realized upon the sale of
Motorola shares and upon the exchange of various Internet investments, and $87
pretax ($54 after tax) relate to foreign currency translation losses on the sale
of various international investments during the period. The majority of the
unrealized gains and losses on debt and equity securities during 1999 related to
the Company's investment in AirTouch Communications, Inc. common and preferred
stock. The reclassification in 1999 related to the sale of the Company's
investment in shares of Cable & Wireless Optus Limited ("Optus").
12
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
(Dollars in millions)
(Unaudited)
NOTE 7: EARNINGS PER SHARE
The following table reflects the computation of MediaOne Group's basic and
diluted earnings (loss) per share in accordance with SFAS No. 128, "Earnings Per
Share." The 1999 diluted loss per share and related share amounts do not include
potential share issuances associated with stock options and the Company's then
outstanding convertible Series D preferred shares since the effect would have
been antidilutive on the net loss for the period.
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Three Months Ended March 31,
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2000 1999
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Net income (loss) $ 1,158 $ (111)
Preferred stock dividends and accretion (1) (14)
----------------- ----------------
Earnings (loss) available to common stock shareowners used for basic
and diluted earnings (loss) per share $ 1,157 $ (125)
================= ================
Weighted average number of shares used for basic earnings (loss) per share 642,947 603,813
Effect of dilutive securities - stock options 8,163 -
----------------- ----------------
Weighted average number of shares used for diluted earnings (loss) per share 651,110 603,813
- - ----------------------------------------------------------------------------- ================= ================
Basic earnings (loss) per common share $ 1.80 $ (0.21)
================= ================
Diluted earnings (loss) per common share $ 1.78 $ (0.21)
- - ----------------------------------------------------------------------------- ================= ================
</TABLE>
NOTE 8: SUBSEQUENT EVENTS
During April 2000, MediaOne Group sold its Japanese cable and telephony
investment for proceeds of $280, including the repayment of $71 in capital
contributions made to the Japanese venture after June 30, 1999, plus interest
earned on these contributions. In addition, MediaOne Group was released from
guarantees given to support debt at the Japanese venture, which, as of March 31,
2000, totaled approximately $150. MediaOne Group also agreed to sell an
investment in a Japanese cellular company, which is expected to close during the
second quarter of 2000.
13
Form 10-Q - Part I
MediaOne Group, Inc.
Notes to Consolidated Financial Statements
(Dollars in millions)
(Unaudited)
In April 2000, in accordance with the merger agreement between Telewest
Communications plc ("Telewest") and Flextech plc ("Flextech"), MediaOne Group
received approximately 39,762,000 shares of Telewest in exchange for its
investment in Flextech shares. The Company now owns an approximate 23 percent
interest in Telewest. In addition, an agreement entered into by the Company in
the fourth quarter of 1999 to sell its interest in Flextech shares has expired.
On April 28, 2000, MediaOne Group sold 9 million shares of its investment in TW
Telecom for gross proceeds of $450, thereby decreasing its investment in TW
Telecom to approximately 6.3 million shares. The Company also granted a
thirty-day option to the underwriters to purchase up to an additional 500,000
shares of TW Telecom, if needed, under the same terms and conditions.
14
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
Some of the information presented in or in connection with this report
constitutes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include: (i) greater than
anticipated competition from new entrants into the cable and wireless
communications markets, and from direct broadcast satellite systems,
(ii) changes in demand for the Company's products and services, (iii) regulatory
changes affecting the cable and telecommunications industries, (iv) changes in
economic conditions in the various markets served by MediaOne Group operations,
including international markets, that could adversely affect the level of demand
for cable, wireless, or other services offered by the Company, (v) greater than
anticipated competitive activity requiring new pricing for services, (vi) higher
than anticipated start-up costs associated with new business opportunities,
(vii) higher than anticipated employee levels, capital expenditures, and
operating expenses, (viii) consumer acceptance of broadband services, including
telephony and data services, and wireless services, (ix) increases in fraudulent
activity with respect to broadband and wireless services, or (x) delays in the
development of anticipated technologies, or the failure of such technologies to
perform according to expectations.
Results of Operations - First Quarter 2000 Compared with First Quarter 1999
Normalized Net Loss
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Three Months Ended
March 31, Change
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2000 1999 $ %
- - ------------------------------------------------------------- -------------- -------------- ------------ ------------
Net income (loss) $ 1,158 $ (111) $ 1,269 -
Adjustments to reported net income (loss)
(Gains) losses on investments:
Sales and exchanges of domestic investments (118) (43) (75) -
Sales of international investments (1,226) (76) (1,150) -
PrimeStar investment - 40 (40) -
Merger costs 12 15 (3) (20.0)
-------------- -------------- ------------ ------------
Normalized net loss $ (174) $ (175) $ 1 (0.6)
- - ------------------------------------------------------------- ============== ============== ============ ============
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15
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions, except per share amounts)
Normalized Basic Loss Per Share Available for Common Stock
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Three Months Ended
March 31, Change
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2000 1999 $ %
- - ------------------------------------------------------------- -------------- -------------- ------------ ------------
Earnings (loss) available for common stock $ 1.80 $ (0.21) $ 2.01 -
Adjustments to reported earnings (loss):
(Gains) losses on investments:
Sales and exchanges of domestic investments (0.18) (0.07) (0.11) -
Sales of international investments (1.91) (0.13) (1.78) -
PrimeStar investment - 0.07 (0.07) -
Merger costs 0.02 0.03 (0.01) (33.3)
-------------- -------------- ------------ ------------
Normalized loss available for common stock $ (0.27) $ (0.31) $ 0.04 (12.9)
- - ------------------------------------------------------------- ============== ============== ============ ============
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The decrease in normalized loss was primarily a result of increased interest and
dividend income, decreased equity losses in unconsolidated ventures, and
increased EBITDA. The decrease was partially offset by increased depreciation
and amortization expense, and increased interest expense during 2000. The table
above normalizes for significant one-time items and aids in the comparability of
the Company's performance period over period. Routine acquisitions and
dispositions are normalized within the discussion of revenues and operating loss
which follows.
Sales and Other Revenues
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Three Months Ended
March 31, Change
----------------------------- ------------------------
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2000 1999 $ %
- - --------------------------------------------------------------- ------------- --------------- ----------- ------------
Domestic cable and broadband $ 706 $ 654 $ 52 8.0
Corporate and other - 11 (11) -
------------- --------------- ----------- ------------
Total $ 706 $ 665 $ 41 6.2
- - --------------------------------------------------------------- ============= =============== =========== ============
</TABLE>
MediaOne Group sales and other revenues increased during the three month period
of 2000 due to growth in domestic cable and broadband operations, partially
offset by the sales of certain international cable and broadband and wireless
operations.
16
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
Domestic Cable and Broadband
<TABLE>
<CAPTION>
<S> <C> <C>
- - --------------------------------------------------------------- ----------------------------- ------------------------
Three Months Ended
March 31, Change
----------------------------- ------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
REVENUES 2000 1999 $ %
- - --------------------------------------------------------------- --------------- ------------- ----------- ------------
Basic Cable $ 459 $ 439 $ 20 4.6
Premium 83 82 1 1.2
Pay-per-view 14 22 (8) (36.4)
Advertising 54 42 12 28.6
Equipment & Installation 49 46 3 6.5
Other (2) 1 (3) -
--------------- ------------- ----------- ------------
Video 657 632 25 4.0
New Products 49 22 27 -
--------------- ------------- ----------- ------------
Total revenues $ 706 $ 654 $ 52 8.0
- - --------------------------------------------------------------- =============== ============= =========== ============
</TABLE>
Domestic cable and broadband revenues increased during the three month period of
2000 due primarily to greater basic, advertising and new products revenues.
Normalized for the one-time effects of cable system acquisitions and
dispositions, total domestic cable and broadband revenues increased 9.1 percent
during 2000.
Basic Cable. Basic cable services revenues increased during 2000 due primarily
to an approximate 4.1 percent increase in revenue per average cable subscriber.
The increase in revenue per average cable subscriber is primarily the result of
increased rates. At March 31, 2000, basic cable subscribers were 4,984,000, an
increase of 1.2 percent compared with the same period in 1999, normalized for
the effects of cable system acquisitions and dispositions. MediaOne Group is
experiencing increased competition from direct broadcast satellite systems and
from new entrants into the cable industry. The Company anticipates countering
competition with the roll-out of digital video services and by bundling its
three product lines of video, high speed Internet access and telephone services.
Premium. Premium service revenues increased during 2000 due to improved premium
service customer growth, offset by discounting of premium service packages. At
March 31, 2000, premium units were 4,398,000, an increase of 7.2 percent
compared with the same period in 1999, normalized for the effects of cable
system acquisitions and dispositions.
At March 31, 2000, digital subscribers totaled 108,000 and digital market-ready
homes were 2,063,000.
17
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
Pay-per-view. Pay-per-view revenues decreased during the three month period of
2000 due to a lack of major sporting event presentations during the period,
compared with the offering of three such events in 1999. This decrease in
pay-per-view revenues was partially offset by greater movie and other product
purchases during 2000 as a result of growth in advanced analog and digital
subscribers, as well as higher impulse pay-per-view capabilities.
Advertising. Advertising revenues increased during 2000 primarily as a result of
growth in local and national advertising sales as compared with the same period
in 1999.
Equipment and Installation. Equipment and installation revenues increased in
2000 due primarily to subscribers upgrading converter boxes.
Other. Other revenues include franchise fee payments, revenues received for
guides and miscellaneous revenues. Video. Video revenue per average cable
subscriber was $43.97 per month for the three month period of 2000, an increase
of 3.6 percent compared with $42.45 per month for the same period in 1999.
Adjusted for the one-time effects of cable system acquisitions and dispositions,
video revenue per average cable subscriber increased 3.3 percent during 2000.
Video revenue per average cable subscriber has increased as a result of
increased rates and growth in advertising.
Normalized for the one-time effects of cable system acquisitions and
dispositions, video revenues increased 4.5 percent during 2000.
New Products. New products revenues increased during 2000 due primarily to
customer growth in both high speed Internet access services and residential
telephone services. Normalizing for dispositions, new products revenues
increased $31, or 172.2 percent, during 2000 compared with new products revenues
of $18 in 1999.
At March 31, 2000, MediaOne Group had approximately 278,000 high speed Internet
access customers compared with 114,000 customers for the same period in 1999.
High speed Internet access services were available to 5,754,000 market-ready
homes at March 31, 2000, compared with 3,754,000 market-ready homes for the same
period in 1999. High speed Internet access penetration at March 31, 2000 for
two-way market-ready homes was 5.5 percent.
At March 31, 2000, MediaOne Group had approximately 94,000 residential telephone
customers with 126,000 telephone lines, compared with 17,000 residential
telephone customers and 22,000 telephone lines for the same period in 1999.
Residential telephone services were available to 2,008,000 market-ready homes as
of March 31, 2000, compared with 713,000 market-ready homes for the same period
in 1999. As of March 31, 2000, telephone penetration of market-ready homes was
4.7 percent.
18
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
Corporate and Other. During 1999, corporate and other primarily included the
international cable and broadband operations of Cable Plus a.s. ("Cable Plus"),
a cable operator in the Czech Republic. Cable Plus was sold in October 1999.
Operating Loss
<TABLE>
<CAPTION>
<S> <C> <C>
----------------------------------------------- --------------------------------- --------------------------------
Three Months Ended
March 31, Change
--------------------------------- --------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2000 1999 $ %
----------------------------------------------- --------------- ----------------- --------------- ----------------
Domestic cable and broadband $ (114) $ (3) $ (111) -
Corporate and other (26) (36) 10 (27.8)
--------------- ----------------- --------------- ----------------
Total $ (140) $ (39) $ (101) -
----------------------------------------------- =============== ================= =============== ================
</TABLE>
During the three month period of 2000, MediaOne Group's operating loss increased
due primarily to greater depreciation and amortization expense related to the
Company's domestic cable networks. This increase was slightly offset by the lack
of results for Cable Plus and RTDC since, effective April 1, 1999, these
investments were no longer consolidated but rather accounted for under the
equity method of accounting.
MediaOne Group's EBITDA for the three month period of 2000 was $239, an increase
of $28, or 13.3 percent, compared with EBITDA of $211 during the same period in
1999. Normalizing for acquisitions and dispositions, EBITDA increased $32, or
15.5 percent, compared with EBITDA of $207 in 1999. MediaOne Group considers
EBITDA an important indicator of the operational strength and performance of its
businesses. EBITDA, however, should not be considered an alternative to
operating or net income as an indicator of the performance of MediaOne Group's
businesses, or as an alternative to cash flows from operating activities as a
measure of liquidity, in each case determined in accordance with GAAP.
Domestic Cable and Broadband. Domestic cable and broadband operating losses
increased during 2000 due primarily to increased depreciation and amortization
expense of $131 during the period. The increase in depreciation and amortization
expense was due primarily to the continuing upgrade of the Company's cable
networks, as well as the suspension of $30 of depreciation and amortization
expense in 1999 on cable systems held for sale during that time period which
were subsequently retained, and a net increase of $27 for depreciation and
amortization expense on cable system swaps.
19
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
During 2000, EBITDA for domestic cable and broadband operations was $261, an 8.3
percent increase compared with EBITDA of $241 in 1999. Revenue increases of $52,
or 8.0 percent, were partially offset by increased programming costs, and
increased operating, general and administrative costs. Normalized for the
one-time effects of cable system acquisitions and dispositions, domestic cable
and broadband EBITDA increased 10.1 percent.
Video EBITDA was $265 for the three month period of 2000, an increase of $5, or
1.9 percent, compared with $260 for the same period in 1999. Normalizing for
acquisitions and dispositions, video EBITDA increased $7, or 2.7 percent,
compared with video EBITDA of $258 for the same period in 1999.
New products EBITDA was a loss of $4 for the three month period of 2000, a
decrease in losses of $15, or 78.9 percent, compared with EBITDA losses of $19
in the same period of 1999. New products revenue increases of $27 were partially
offset by cost increases of $12 during the period for the offering of high speed
Internet access and residential telephone services. Normalizing for
dispositions, new products EBITDA loss decreased $17, or 81.0 percent during
2000, compared with an EBITDA loss of $21 for the same period in 1999.
Programming costs were $181 for the three month period of 2000, an increase of
$22, or 13.8 percent, over the same period in 1999. This increase was primarily
a result of greater programming costs per subscriber as a result of programmer
rate increases, expanded channel offerings and growth in subscribers, partially
offset by a $4 decrease in pay-per-view programming costs for sporting events
presented in 1999.
Operating, general and administrative costs were $264 during the three month
period of 2000, an increase of $10, or 3.9 percent, over the same period in
1999. Increases in operating, general and administrative costs were primarily a
function of adding customer service employees, and costs incurred in the
operation of the Company's customer service call centers.
Corporate and Other. Corporate and other includes corporate and international
overhead costs. These costs have decreased primarily as a result of the
wind-down of the Company's international operations.
20
Form 10-Q - Part I
Item 2. Managemen's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
Interest Expense and Other
<TABLE>
<CAPTION>
<S> <C> <C>
---------------------------------------------------------- ----------------------------- ----------------------------
Three Months Ended
March 31, Change
----------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2000 1999 $ %
---------------------------------------------------------- -------------- -------------- -------------- -------------
Interest expense $ (147) $ (96) $ (51) 53.1
Equity losses in unconsolidated ventures (71) (115) 44 (38.3)
Gains (losses) on investments:
Sales and exchanges of domestic investments 191 70 121 -
Sales of international investments 1,993 124 1,869 -
PrimeStar investment - (65) 65 -
Minority interest expense in Centaur Funding (25) (25) - -
Guaranteed minority interest expense (24) (24) - -
Merger costs (19) (15) (4) 26.7
Other income - net 155 37 118 -
---------------------------------------------------------- -------------- -------------- -------------- -------------
</TABLE>
Interest Expense. Interest expense during the three month period of 2000
increased due primarily to the issuance in 1999 of $1.7 billion of private
placement debt, a $1.5 billion note payable to AT&T related to the AT&T merger,
and $1.1 billion of Exchangeable Notes, partially offset by approximately $600
of debt redemptions and maturities during 1999.
Equity Losses in Unconsolidated Ventures. Equity losses during the three month
period of 2000 decreased compared with the same period of 1999 due predominantly
to the sale of various international investments and the suspension in 1999 of
the recognition of equity losses from the Company's investment in the RoadRunner
joint venture.
Gains (Losses) on Investments
Sales and Exchanges of Domestic Investments. During the three month period of
2000, MediaOne Group exchanged its investment in the Trip.com for shares of
Galileo plus cash resulting in a pretax gain of $85 ($52 after tax), and
recognized a pretax gain of $82 ($51 after tax) upon the merger and exchange of
certain of the Company's Internet related investments into other similar
investments. The Company also sold its investment in shares of Motorola for a
pretax gain of $24 ($15 after tax).
21
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
During the three month period of 1999, MediaOne Group sold its investments in
two providers of business telephony services resulting in a pretax gain of $44
($27 after tax), various cable systems resulting in a pretax gain of $14 ($9
after tax), and miscellaneous assets from its capital assets group resulting in
a pretax gain of $12 ($7 after tax).
Sales of International Investments. During the three month period of 2000,
MediaOne Group sold its interests in Polska Telefonia Cyfrowa, Westel 900 and
Westel Radiotelefon resulting in a total pretax gain of $1,794 ($1,108 after
tax). The Company also sold its interest in Singapore for a pretax gain of $199
($118 after tax).
During the three month period of 1999, MediaOne Group sold its investment in
shares of Optus resulting in a pretax gain of $124 ($76 after tax).
PrimeStar Investment. During the three month period of 1999, MediaOne Group
recorded a pretax loss of $65 ($40 after tax) for probable obligations to its
investment in PrimeStar, Inc.
Minority Interest Expense in Centaur Funding. Minority interest expense in
Centaur Funding represents dividends and accretion on the preferred shares
issued by Centaur Funding Corporation.
Guaranteed Minority Interest Expense. Guaranteed minority interest represents
interest on the Company-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Company-guaranteed subordinated debentures.
Merger Costs. Merger costs represent employee costs, and miscellaneous legal and
advisory fees incurred as a result of the anticipated merger with AT&T.
Other Income - Net. During the three month period of 2000, other income
increased primarily due to interest income earned on cash balances from asset
sales and dividends received from the Company's investment in Vodafone ADRs.
Also contributing to the increase were decreased foreign exchange transaction
losses associated with loans to international ventures. The increase was
slightly offset by the recognition in 1999 of a $15 fee paid by Optus to the
Company as a result of having met certain performance measures.
22
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
(Provision) Benefit for Income Taxes
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,
Change
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2000 1999 $ %
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(Provision) benefit for income taxes $ (755) $ 37 $ (792) -
Effective tax rate 39.5% 25.0%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------------------------------------------------------------------------
</TABLE>
The increase in the 2000 effective tax rate is primarily a result of merger
costs, and gains on sales and exchanges of investments. Excluding gains on sales
and exchanges of investments, the effective tax rate would have been 31.7
percent for the 2000 period. The effective tax rate for 1999 would have been
32.5 percent excluding gains and losses on investments, and merger costs.
Liquidity and Capital Resources
Operating Activities
Cash provided by operating activities during the three month period ended March
31, 2000 decreased $1,678, to a use of cash of $1,220, as compared with the same
period in 1999, primarily as a result of an income tax payment of $1,348 made in
2000 for the 1999 consolidated tax return. Also contributing to the decrease was
the receipt in 1999 of $394 of income tax benefits related to the carryback of
the 1998 taxable loss to the 1996 consolidated tax return.
MediaOne Group expects that cash from operations will not be adequate to fund
future expected cash requirements. Additional funding will come from cash on
hand and asset sales.
Investing Activities
Capital expenditures at MediaOne Group, on a cash basis, were $462 and $401
during the three month periods ended March 31, 2000 and 1999, respectively,
related to the continuing upgrade of the domestic cable network and the
provisioning of new and enhanced services.
For the three month period of 2000, MediaOne Group invested $32 in international
ventures, primarily capital contributions to a cable and telephony investment in
Japan, and received $18 as a loan repayment from a wireless investment in
Poland. For the three month period of 1999, MediaOne Group invested $55 in
international ventures, primarily capital contributions to cable investments in
Belgium, the Netherlands, Japan and Singapore, as well as a wireless venture in
India.
23
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
During April 2000, the Company sold its investment in a cable and telephony
venture in Japan. Proceeds from the sale included the reimbursement of
approximately $71 of capital contributions made to this venture between July
1999 and the date of sale.
For the three month period of 2000, MediaOne Group sold various investments
resulting in net proceeds of $2,289, comprised of the following: (a) investments
in various Central European wireless ventures for net cash proceeds of $2
billion, (b) the investment in Singapore for net cash proceeds of $218,
(c) shares of Motorola for net cash proceeds of $41, and (d) cash proceeds of
$30 from the exchange of the investment in Trip.com for an investment in
Galileo. Cash proceeds from investments sales in 1999 totaled $304, comprised of
the following: (a) shares of Optus for net cash proceeds of $126, (b) two
investments in providers of business telephony services for net proceeds of $82,
(c) miscellaneous assets from the capital assets group for net proceeds of $64,
and (d) various cable television systems for net proceeds of $32.
In March 2000, MediaOne Group announced that it would offer for sale its
investment in shares of TW Telecom as part of a stock offering by TW Telecom. On
April 28, 2000, the Company sold nine million shares of TW Telecom for net
proceeds of approximately $434. See Note 9 - Subsequent Events - to the
Consolidated Financial Statements.
Financing Activities
Debt Activity. Total debt at March 31, 2000 was $10,624, an increase of $445
compared with December 31, 1999. The increase in debt outstanding was due
primarily to a $451 non-cash increase in the value of the Exchangeable Notes as
the value of these notes reflects the corresponding changes in the fair value of
Vodafone ADRs.
Share Repurchase. During the three month period of 2000 and 1999, MediaOne Group
purchased and placed into treasury 9,448,900 and 830,000 shares of MediaOne
Group common stock for a total cost basis of $583 and $47, respectively.
Proceeds received in 2000 from the issuance of common stock include $27 from the
settlement of an option on shares of the Company's stock.
Other Financing Activities
Commitments and Debt Guarantees. As of March 31, 2000, MediaOne Group's
international commitments and debt guarantees totaled approximately $250. Taking
into account the sale of a Japanese cable and telephony investment in April
2000, the Company's international commitments and debt guarantees would have
totaled approximately $100.
24
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
Risk Management
MediaOne Group is exposed to market risks arising from changes in interest
rates, foreign exchange rates and equity prices. Derivative financial
instruments are used to selectively manage these risks. MediaOne Group does not
use derivative financial instruments for trading purposes.
Foreign Exchange Risk Management. MediaOne Group is exposed to foreign exchange
risk associated with its cash deposits and its investment in Flextech, a cost
method investment denominated in British Pounds. A hypothetical 10 percent
adverse change in the British Pound exchange rate as compared with the U. S.
dollar would reduce the market value of the cash deposits and investment by
approximately $30 as of March 31, 2000.
The $10 increase in the Company's exposure to foreign currency risk in 2000
compared with December 31, 1999 is primarily due to an increase in the value of
the Company's investment in Flextech. In April 2000, the Company's investment in
Flextech shares was converted into Telewest shares as a result of the merger of
Flextech and Telewest. See Note 8 - Subsequent Events - to the Consolidated
Financial Statements.
Equity-Price Risk Management. MediaOne Group is exposed to market risks
associated with equity security prices related to its investments in marketable
equity securities. On a selective basis, MediaOne Group enters into option
contracts and exchangeable debt instruments to manage risks associated with
fluctuations in equity security prices.
The table below presents the approximate impact of hypothetical movements in the
equity security prices related to MediaOne Group's combined position in
marketable equity securities and derivative contracts. The hypothetical change
in stock price movements are based upon the historical trading volatility of the
stocks.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ---------------------------------------------------- ----------------------- -------------------- --------------------
Hypothetical Change
in 3/31/2000
Stock Price Increase in Decrease in
-----------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Investment Increase Decrease Fair Market Value Fair Market Value
- - ---------------------------------------------------- ---------- ------------ -------------------- --------------------
Vodafone common stock including Exchangeable Notes,
and purchased and written options 30% 30% $ 360 $ 570
TW Telecom 50% 50% 610 610
Internet related investments 50% 50% 190 190
All other investments 30% 30% 130 130
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------- -------------------- --------------------
Total $1,290 $1,500
- - ---------------------------------------------------- ---------- ------------ ==================== ====================
</TABLE>
25
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Dollars in millions)
The increase in the Company's exposure to equity price risk in 2000 compared
with December 31, 1999, is primarily due to stock price movements of the
Company's investments, primarily the investment in TW Telecom shares. In April
2000, the Company sold more than half of its TW Telecom shares. See Note 8 -
Subsequent Events - to the Consolidated Financial Statements.
The changes in foreign exchange rates and equity security prices are based on
hypothetical movements in future market rates and are not necessarily indicative
of actual results that may occur. Future gains and losses will be affected by
actual changes in interest rates, foreign exchange rates, equity security
prices, and changes in derivative financial instruments employed during the
year.
* * * * * * * * *
MediaOne Group from time to time engages in preliminary discussions regarding
restructurings, dispositions and other similar transactions. Any such
transaction may include, among other things, the transfer of certain assets,
businesses or interests, or the incurrence or assumption of indebtedness, and
could be material to the financial condition and results of operations of the
Company. There is no assurance that any such discussions will result in the
consummation of any such transaction.
26
Form 10-Q - Part I
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Reference is made to the information set forth on page 25.
27
Form 10-Q - Part II
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
MediaOne Group, Inc. and its subsidiaries are subject to claims and proceedings
arising in the ordinary course of business. While complete assurance cannot be
given as to the outcome of any contingent liabilities, in the opinion of
MediaOne Group, any financial impact to which MediaOne Group and its
subsidiaries are subject is not expected to be material in amount to MediaOne
Group's operating results or its financial position.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibits identified in parentheses below are on file with the
Securities and Exchange Commission and are incorporated herein by
reference. All other exhibits are provided as part of this electronic
submission.
Exhibit
Number
12 Statement regarding computation of earnings to fixed charges ratio of
MediaOne Group, Inc.
(b) Reports on Form 8-K filed during the First Quarter of 2000:
(1) Form 8-K Current Report dated February 29, 2000, concerning a Press Release
by the Company announcing its year-end 1999 earnings results.
SIGNATURES
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.
/s/ Richard A. Post
-----------------------------------------------
May 12, 2000 MediaOne Group, Inc.
Richard A. Post
Executive Vice President and
Chief Financial Officer
MediaOne Group, Inc.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(Dollars in Millions)
<TABLE>
<CAPTION>
<S> <C>
Quarter Ended
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
3/31/00 3/31/99
------------- -------------
Income (loss) before income taxes $ 1,913 $ (148)
Interest expense (net of amounts
capitalized) 147 96
Interest factor on rentals (1/3) 1 1
Equity losses in unconsolidated
ventures (less than 50% owned) 52 102
Minority interest expense 49 49
------------- -------------
Earnings $ 2,162 $ 100
============= =============
Interest expense $ 150 $ 99
Interest factor on rentals (1/3) 1 1
Minority interest expense 49 49
Preferred stock dividends (pre-tax
equivalent) 1 23
------------- -------------
Fixed charges $ 201 $ 172
============= =============
Ratio of earnings to combined fixed
charges and preferred stock dividends 10.76 A - B
- - ----------------------------------------------------------- ------------- -------------
</TABLE>
A) Earnings for the quarter ended March 31, 2000 include
gains on sales of international investments of $1,993, and
domestic investments of $191. Without these gains totaling $2,184,
earnings would be insufficient to cover fixed charges by $223.
B) Earnings for the quarter ended March 31, 1999 were
insufficient to cover fixed charges by $72.
MediaOne Group, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
<S> <C>
Quarter Ended
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
3/31/00 3/31/99
------------- -------------
Income (loss) before income taxes $ 1,913 $ (148)
Interest expense (net of amounts
capitalized) 147 96
Interest factor on rentals (1/3) 1 1
Equity losses in unconsolidated
ventures (less than 50% owned) 52 102
Minority interest expense 49 49
Earnings $ 2,162 $ 100
------------- --------------
Interest expense $ 150 $ 99
Interest factor on rentals (1/3) 1 1
Minority interest expense 49 49
------------- --------------
Fixed charges $ 200 $ 149
============= ==============
Ratio of earnings to fixed charges 10.81 A - B
- - ----------------------------------------------------------- ------------- -------------
</TABLE>
A) Earnings for the quarter ended March 31, 2000 include
gains on sales of international investments of $1,993, and
domestic investments of $191. Without these gains totaling $2,184,
earnings would be insufficient to cover fixed charges by $222.
B) Earnings for the quarter ended March 31, 1999 were
insufficient to cover fixed charges by $ 49.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
</LEGEND>
<CIK> 0000732718
<NAME> MediaOne Group, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,540
<SECURITIES> 66
<RECEIVABLES> 374
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,074
<PP&E> 7,217
<DEPRECIATION> 1,849
<TOTAL-ASSETS> 41,078
<CURRENT-LIABILITIES> 3,478
<BONDS> 9,119
1,110
0
<COMMON> 10,943
<OTHER-SE> 6,966
<TOTAL-LIABILITY-AND-EQUITY> 41,078
<SALES> 706
<TOTAL-REVENUES> 706
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 846
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147
<INCOME-PRETAX> 1,913
<INCOME-TAX> 755
<INCOME-CONTINUING> 1,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,158
<EPS-BASIC> 1.80
<EPS-DILUTED> 1.78
</TABLE>
