<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1998
REGISTRATION NO. 333-56489
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
_______________
UNITED INTERNATIONAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-1116217
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4643 SOUTH ULSTER STREET, SUITE 1300
DENVER, COLORADO 80237
(303) 770-4001
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
________________
J. TIMOTHY BRYAN
CHIEF FINANCIAL OFFICER
UNITED INTERNATIONAL HOLDINGS, INC.
4643 SOUTH ULSTER STREET, SUITE 1300
DENVER, COLORADO 80237
(303) 770-4001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
________________
COPIES TO:
GARTH B. JENSEN, ESQ. NICHOLAS P. SAGGESE, ESQ.
HOLME ROBERTS & OWEN LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1700 LINCOLN, SUITE 4100 300 SOUTH GRAND AVENUE, #3400
DENVER, COLORADO 80203 LOS ANGELES, CALIFORNIA 90071-3144
(303) 861-7000 (213) 687-5000
________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (1) OFFERING PRICE (1) FEE
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<S> <C> <C> <C> <C>
Class A Common Stock (par value 3,450,000 shares $14.15625 $48,839,063 $14,408/(2)/
$0.01 per share)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low price of
the Company's Class A Common Stock on June 22, 1998, as quoted on the
Nasdaq National Market(SM).
(2) Previously Paid
_______________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 24, 1998
, 1998
3,000,000 SHARES
[UNITED INTERNATIONAL HOLDINGS, INC. LOGO]
CLASS A COMMON STOCK
All of the 3,000,000 shares (the "Shares") of the Class A Common Stock, $0.01
par value per share (the "Class A Common Stock"), of United International
Holdings, Inc. ("UIH" or the "Company") offered hereby (the "Offering") are
being sold by the certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any proceeds from the sale of
shares by the Selling Stockholders. See "The Selling Stockholders" and
"Underwriting."
The Class A Common Stock is traded on the Nasdaq National Marketsm under the
symbol "UIHIA." On June 23, 1998, the closing sale price of the Class A Common
Stock, as reported on the Nasdaq National Marketsm, was $14.1875 per share.
Holders of Class A Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of the Company, and holders of
the Company's Class B Common Stock, $0.01 par value per share (the "Class B
Common Stock"), are entitled to ten votes per share. Both classes vote together
as a single class on all matters, except where class voting is required by the
Delaware General Corporation Law. Shares of Class B Common Stock are
convertible into shares of Class A Common Stock on a one-for-one basis at the
option of the holder. Upon consummation of the Offering, assuming no exercise
of the overallotment option granted to the Underwriters by the Company (as set
forth below), the holders of Class A Common Stock will have only approximately
23.0% of the combined voting power of the Company's outstanding common stock.
SEE "RISK FACTORS" STARTING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS PRIOR TO PURCHASING ANY
SHARES OF CLASS A COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND THE SELLING
THE PUBLIC COMMISSIONS(1) STOCKHOLDERS
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<S> <C> <C> <C>
Per Share............................. $ $ $
Total(2).............................. $ $ $
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</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against and to provide contribution with respect to certain
liabilities, including liabilities under the Securities Act. See
"Underwriting."
(2) The Company has agreed to pay certain expenses relating to the Offering,
estimated at $225,000. The Company has granted to the Underwriters a 30-day
option to purchase up to 450,000 additional shares of Class A Common Stock
at the Price to the Public, less Underwriting Discounts and Commissions,
solely to cover overallotments, if any. If this option is exercised in
full, the total Price to the Public, Underwriting Discounts and
Commissions, Proceeds to the Selling Stockholders and Proceeds to the
Company would be $ , $ , $ and $ ,
respectively. See "Underwriting."
The shares of Class A Common Stock are being offered by the Underwriters,
when, as and if delivered to and accepted by the Underwriters, subject to
various prior conditions, including their right to reject any order in whole or
in part. It is expected that delivery of the share certificates will be made in
New York, New York on or about , 1998, against payment therefor in
immediately available funds.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
JANCO PARTNERS, INC.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE CLASS A COMMON STOCK IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
ON NASDAQ IN ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE "UNDERWRITING."
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or
an offer to sell or the solicitation of an offer to buy such securities by any
person in any circumstances or jurisdiction in which such offer or
solicitation is unlawful. The distribution of this Prospectus and the offering
and sale of the securities in certain jurisdictions may be restricted by law.
Persons into whose possession this Prospectus comes are required by the
Company, the Selling Stockholders and the Underwriters to inform themselves
about and to observe any such restrictions. For a further description of
certain restrictions on offering and sales of the securities, see
"Underwriting."
In particular, there are restrictions on the offer and sale of securities in
the United Kingdom. No action has been taken to permit the securities to be
offered to the public in the United Kingdom. This Prospectus may only be
issued or passed on in or into the United Kingdom to any person to whom this
Prospectus may lawfully be issued or passed on by reason of, or of any
regulation made under, section 58 Financial Services Act 1986. It is the
responsibility of all persons under whose control or into whose possession
this Prospectus comes to inform themselves about and to ensure observance of
all applicable provisions of the Public Offers of Securities Regulations 1995
and the Financial Services Act 1986 in respect of anything done in relation to
the securities in, from or otherwise involving, the United Kingdom.
2
<PAGE>
TOTAL COMPANY
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97
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<S> <C> <C> <C> <C>
TOTAL HOMES UNDER LICENSE 3,966,900 7,121,400 9,834,130 9,886,256
TOTAL HOMES PASSED 1,507,069 3,980,710 6,996,931 7,650,672
TOTAL BASIC SUBSCRIBERS (1) 819,175 2,115,762 2,745,099 3,137,019
EQUITY BASIC SUBSCRIBERS (1)(2) 158,973 634,733 1,023,431 1,955,091
</TABLE>
(1) Excludes programming subscribers.
(2) Equity data represents certain operating statistics multiplied by the
Company's ownership percentage.
UIH EUROPE INCLUDING UPC (3)
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97
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<S> <C> <C> <C> <C>
TOTAL HOMES UNDER LICENSE 1,656,900 3,565,800 4,092,760 4,219,656
TOTAL HOMES PASSED 1,246,527 2,780,669 3,130,949 3,698,327
TOTAL BASIC SUBSCRIBERS (1) 744,787 1,932,399 2,131,835 2,400,163
EQUITY BASIC SUBSCRIBERS (1)(2) 125,065 515,401 691,088 1,555,561
</TABLE>
(1) Excludes programming subscribers.
(2) Equity date represents certain operating statistics multiplied by the
Company's ownership percentage.
(3) UIH Europe including UPC figures take into account the acquisition of
Philips' interest in UPC on December 11, 1997, but do not take into account
the acquisition of the Combivisie systems.
UIH LATIN AMERICA
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<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97
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<S> <C> <C> <C> <C>
TOTAL HOMES UNDER LICENSE 590,000 1,444,000 3,372,600 3,259,600
TOTAL HOMES PASSED 257,206 875,654 2,189,716 2,144,285
TOTAL BASIC SUBSCRIBERS (1) 73,945 154,138 462,804 465,176
EQUITY BASIC SUBSCRIBERS (1)(2) 33,686 102,857 209,332 173,824
</TABLE>
(1) Excludes programming subscribers.
(2) Equity data represents certain operating statistics multiplied by the
Company's ownership percentage.
UIH ASIA/PACIFIC
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97
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<S> <C> <C> <C> <C>
TOTAL HOMES UNDER LICENSE 1,720,000 2,111,600 2,368,770 2,407,000
TOTAL HOMES PASSED 3,336 324,387 1,676,266 1,808,060
TOTAL BASIC SUBSCRIBERS (1) 443 29,285 150,460 271,680
EQUITY BASIC SUBSCRIBERS (1)(2) 222 16,475 123,011 225,706
</TABLE>
(1) Excludes programming subscribers.
(2) Equity data represents certain operating statistics multiplied by the
Company's ownership percentage.
<PAGE>
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in, or incorporated by
reference into, this Prospectus. All foreign currency amounts translated to U.S.
dollars have been converted using a convenience translation unless otherwise
stated. Unless the context otherwise requires, all references to "$" or
"dollars" are to U.S. dollars. Unless specifically stated otherwise, information
presented herein assumes the Underwriters' overallotment option will not be
exercised.
THE COMPANY
The Company, through its subsidiaries and affiliates, is a leading provider
of multi-channel television services outside the United States, owning and
operating systems in over 20 countries around the world. UIH operates systems in
three geographic regions: (i) Europe, primarily through its subsidiary United
Pan-Europe Communications, N.V. ("UPC"), which is one of Europe's largest
privately owned multiple system operators; (ii) Asia/Pacific, including through
its indirect 98%-owned subsidiary, Austar, which is the largest provider of
multi-channel television services in regional Australia; and (iii) Latin
America, including through its 34% interest in VTR Hipercable S.A. ("VTRH"),
which is the largest multi-channel television provider in Chile. These operating
systems served an aggregate of approximately 3.1 million subscribers (excluding
approximately 3.0 million programming subscribers) and passed approximately 7.7
million of the approximately 9.9 million homes in their respective service areas
at December 31, 1997. UIH's equity interest in subscribers, homes passed and
homes in the Company's service areas has grown quickly from approximately 0.7
million, 1.6 million and 3.7 million, respectively, as of December 31, 1995, to
approximately 2.0 million, 4.9 million and 6.1 million, respectively, as of
December 31, 1997.
UIH was founded in 1989 by a management team that had substantial
experience in the cable television industry in the United States. Seeking to
take advantage of the opportunities it believes exist to bring multi-channel
television services to countries that have little or no such services, UIH has,
since its formation, focused on and invested in multi-channel television systems
outside the United States. UIH originally focused its efforts in Europe and
Israel, whose economies were sufficiently developed to support its operations
and where demand for service was significant. A number of UIH's original
development projects in Europe and Israel have established large subscriber
bases, realized high penetration rates and, as a result, are generating
substantial operating cash flow. To capitalize on the opportunities to apply its
expertise in building and operating multi-channel television systems in
developing markets with attractive economic, regulatory and demographic
profiles, UIH has significantly expanded the scope of its operations over time
to include portions of Latin America and the Asia/Pacific region. Many of UIH's
operating companies in these regions have attained leading positions in their
respective markets and have built significant subscriber bases.
In its early years, UIH acquired primarily minority ownership interests in
systems, which it, nonetheless, actively managed. Having successfully
established and developed many multi-channel television systems around the
world, UIH began rationalizing its operations in 1996 to focus on large,
majority owned systems, with the goal of significantly expanding the scale of
its operations and increasing the Company's financial flexibility. As a result,
the Company's total equity subscribers increased from approximately 659,000 at
December 31, 1995, to approximately 2.0 million at December 31, 1997, and the
Company realized gains on sales of assets of approximately $155.3 million during
the two years ended February 28, 1998. The primary elements of UIH's
rationalization plan are: (i) acquiring significant and/or controlling ownership
interests in significant operating companies; (ii) selling selected assets for
cash, generally at significant gains on its invested capital; (iii) obtaining
equity partners for certain other companies; and (iv) merging or swapping
selected assets in order to obtain larger or controlling ownership interests in
other companies or interests in larger, combined companies. Through a series of
such transactions, UIH has acquired controlling interests in the majority of its
large, primary systems. As a result, management believes the Company is well-
positioned to capitalize on the growth opportunities of its operating companies.
See "--UIH Asset Rationalization." In addition, UIH has substantially increased
its financial flexibility and reduced the cost of its debt capital.
UIH's operating companies are currently a combination of (i) highly
penetrated, mature systems that generate stable cash flow and, which management
believes, have the opportunity to increase revenues and cash flows through the
introduction of new services such as cable telephony, tiered programming, pay-
per-view and Internet/data services and (ii) earlier stage businesses that
typically have established leading market positions and whose
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4
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number of subscribers management believes will continue to increase primarily
through aggressive marketing within their respective service areas. UIH's
principal strategies are to: (i) increase the revenues and cash flows of its
existing systems; (ii) continue to capitalize on opportunities to rationalize
its operations; (iii) pursue selected new acquisition and development
opportunities; and (iv) finance its operating companies primarily through
internally generated cash flow and borrowings by its regional holding and
operating companies under existing facilities.
As a result of telecommunications deregulation in their respective markets,
various operating entities within UIH are either now offering or will be
offering local and long distance telephone service. In areas in which the
Company already operates a cable television system, such telephony service can
be offered over existing fiber optic and coaxial cable in a technology known as
"cablephone." In other areas, such as the Company's operations in Monor,
Hungary, and Wellington, New Zealand, the Company's operating units are using a
dual coaxial and copper twisted pair system to provide telephone service. The
Company in all cases chooses technology that is both the most cost efficient and
reliable for the particular telephone project.
The ability to offer telephone service is influenced to a large degree by
local regulation. In Europe, UPC has full telephony licenses in Norway, The
Netherlands, Belgium and Austria and has a license to offer telephony in the
Monor region of Hungary. In The Netherlands, the Company's 50%-owned subsidiary
A2000 Holding N.V. ("A2000") has launched a telephone service, and the Company
anticipates the launch of telephone service in several other of its operating
units in Europe. In Chile, the Company's 34%-owned subsidiary VTRH initiated
telephone service in the fall of 1997, with continuing plans to roll out the
service to a larger portion of its subscriber base in 1998. In New Zealand, the
Company's 65%-owned subsidiary Saturn Communications Limited commenced a
telephone service offering in April 1998.
With the increasing use of electronic means to communicate (i.e., the
Internet, electronic commerce), the Company has begun to market a data
transmission service to its customers. In many cases the Company's existing
cable television infrastructure is capable of handling such services, and in
every case the provision of data service is taken into account when rebuilding
or upgrading existing plant. In Europe, the Company has been offering "high
speed" data services in several of its operating areas, with transmission rates
considerably in excess of those obtained over a normal twisted pair phone line.
EUROPEAN OPERATIONS
Through UPC, UIH is one of the largest private sector multi-channel cable
television operators in Europe, with interests in well-established systems, as
well as in systems under construction, in 11 countries in Europe and in Israel.
In addition, UPC has been rebuilding its networks to state-of-the-art, using
two-way fiber optics, and is currently offering traditional cable, enhanced
video, telephone and Internet access service in several of its major European
markets. UIH holds effectively all of the voting control of UPC and owns all of
its issued and outstanding shares, other than approximately 8.4% of such shares,
which have been registered in the name of a foundation to support UPC's employee
equity incentive plan. UPC's operations consist primarily of large, developed
systems, including systems in Austria, Belgium, The Netherlands and Norway (the
"UPC Established Systems"). UPC's operations include two of the world's larger
clusters of systems: the Vienna and surrounding areas systems, in which UPC has
a 95% interest, which had approximately 435,900 subscribers as of December 31,
1997, and the Amsterdam and surrounding areas system in which UPC has a 50%
interest, which had approximately 518,200 subscribers as of December 31, 1997.
As of December 31, 1997, UPC's operating systems passed a total of approximately
3.6 million homes and had an aggregate of approximately 2.3 million subscribers
and, on an equity basis, passed approximately 2.4 million homes and had
approximately 1.5 million subscribers. For the year ended December 31, 1997, the
consolidated revenues and Adjusted EBITDA (as defined herein) of the UPC
Established Systems were approximately $169.5 million and $81.3 million,
respectively. See "Business--Summary Operating Data for the Company's Operating
Systems."
The UPC Established Systems are characterized generally by the following:
. High Penetration. Prior to the deregulation of cable television in
Europe, cable television was perceived as a utility by customers and
had penetration rates similar to those enjoyed by utilities. UPC has
maintained these penetration levels in less regulated environments and
the penetration of homes passed, which ranged from 49.0% to 95.9% in
1997, is very high in comparison to the other markets in which UIH
operates.
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5
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. Consistent Cash Flow. The UPC Established Systems, which are fully
built out, have been characterized by relatively high penetration
rates and stable cash flow derived from their core cable businesses.
Historically, UPC's revenues have consisted primarily of basic
subscription revenues, which, in general, are regulated.
. Revenue and Cash Flow Growth Opportunities. UPC is aggressively
pursuing a strategy of expanding the service offerings of the UPC
Established Systems to include tiered services, impulse pay-per-view
services, Internet/data services and cable telephony. UPC believes the
introduction of these services will increase its revenue and cash flow
per subscriber, which is currently substantially below the levels
experienced in the United States and in many countries in which UIH
operates.
. Modern Networks with Adequate Funding for Upgrade to Full Two-Way
Capability. The UPC Established Systems generally have modern, robust
system architecture that allows UPC to offer its customers multiple,
high quality telecommunications services. Since January 1, 1996, UPC
has invested approximately $182.2 million in capital expenditures in
the UPC Established Systems. In addition, UPC believes that it will
have, through cash on hand, borrowing capacity and cash flow generated
from future operations, the funding necessary to upgrade the UPC
Established Systems to full two-way capability, which will allow the
continued introduction of enhanced telecommunications services such as
cable telephony services and Internet/data services.
. Low Churn. The UPC Established Systems experience a very low churn
rate in comparison to systems in other parts of the world. The average
monthly churn rate of the UPC Established Systems was 0.6% for the
year ended December 31, 1997. By comparison, the Company estimates
that the average monthly churn rate of urban U.S. cable television
systems was between 1.7% and 2.5% in 1996.
. High Density Clusters. UPC has systems that cover large areas of dense
population, which, UPC believes, allows them to pass a high number of
customers quickly and on a cost-effective basis.
. Economies of Scale. UPC, as one of the largest private multi-channel
television operators in Europe with two of the larger systems in the
world (Amsterdam and Vienna and their surrounding areas systems), has
a scale that generally gives it negotiating leverage with suppliers of
both hardware and software (programming), as well as allowing it to
spread central administrative and maintenance costs over a large
subscriber base.
To date, UPC has successfully launched, or has plans to launch, the following
communications services in the UPC Established Systems, which are in addition to
its existing basic cable television service.
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6
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<TABLE>
<CAPTION>
LAUNCH DATE/
SERVICE EXPECTED LAUNCH DATE
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<S> <C> <C>
Austria.................... Expanded Basic Tier (7 channels) May 1997
Impulse Pay-Per-View (10 channels) May 1997
Internet/Data Services September 1997
Cable Telephony 1998-1999
Belgium ................... Expanded Basic Tier (12 channels) October 1996
Internet/Data Services September 1997
Impulse Pay-Per-View(1) January 1999
Netherlands/A2000.......... Expanded Basic Tier (11 channels) October 1996
Impulse Pay-Per-View (5 channels) April 1997
Cable Telephony July 1997
Internet/Data Services October 1997
Netherlands/KTE............ Expanded Basic Tier (8 channels) October 1996
Impulse Pay-Per-View(1) May 1998
Internet/Data Services 1998-1999
Cable Telephony 1999
Norway..................... Expanded Basic Tier (14 channels) 1989
Premium Services (3 channels) 1990
Internet/Data Services 1998
Impulse Pay-Per-View (1) 1998-1999
Cable Telephony 1999
</TABLE>
__________________
(1) Number of channels to be determined.
UPC also has majority interests in systems in the Czech Republic, France,
Romania and the Slovak Republic, which are at various stages of construction and
development (the "UPC Development Projects"), and non-consolidated equity
interests in systems in Hungary, Israel, Ireland and Malta (the "UPC Equity
Investments"). The Company believes these interests have significant value and
UPC is evaluating the potential sale of a portion of, or potentially acquiring a
majority interest in, these and selected other systems in order to do one or
more of the following: (i) rationalize its operations; (ii) reduce debt; or
(iii) provide additional capital for the growth of the UPC Established Systems.
UPC also plans to expand its operations by selectively building out cable
infrastructure in certain unserved regions in its existing markets and, where
appropriate, by investing in new development and acquisition opportunities.
UIH holds a 46.3% interest in a Hungarian company ("Monor Communications")
that is building a fiber-optic telecommunications network in the Monor region of
Hungary with approximately 85,000 homes passed and approximately 62,200
telephony subscribers and 26,200 cable television subscribers as of December 31,
1997.
ASIA/PACIFIC OPERATIONS
The Company, through its 98%-owned subsidiary UIH Asia/Pacific Communications,
Inc. ("UAP"), is a leading provider of multi-channel television services in
Australia and the Asia/Pacific region. Through Austar, in which it holds a 100%
economic interest, UAP is the second largest provider (based on subscribers) of
multi-channel television services in Australia and the largest provider of
multi-channel television services in regional Australia, operating MMDS
networks and marketing a DTH service in franchise areas encompassing
approximately 1.6 million television homes, or approximately 25% of the total
Australian market. Austar began marketing its services in late 1995 and has
developed its subscriber base from approximately 5,200 subscribers as of
December 31, 1995 to approximately 211,000 subscribers as of May 31, 1998.
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Austar recently signed new programming agreements that give it access to all
of Australia's most popular channels, including channels that were previously
unavailable to it. In addition, these new agreements, which involve
arrangements with both Foxtel Management Pty Limited ("Foxtel") and Optus Vision
Pty Limited ("Optus"), allow Austar to tier certain channels and thereby more
effectively segment its market. Austar's agreement with Optus includes the
creation of a 50/50 joint venture for the ownership and operation of a satellite
distribution platform that currently provides satellite transmission services to
Austar. As a result of these programming agreements, Austar believes it has
several economic and contractual advantages over potential competing multi-
channel television providers in its markets.
UAP, through its 65%-owned New Zealand subsidiary Saturn Communications
Limited ("Saturn"), is constructing a wireline cable and telephony system in
Wellington, New Zealand, a market with approximately 141,000 television homes.
In addition, Telemondial Holdings, Inc. ("Sun Cable"), from which UAP holds a
note convertible (subject to certain local regulatory restrictions) into a 40%
ownership interest therein, owns and operates cable television systems in 15
markets in the Philippines with an aggregate of approximately 66,000 subscribers
and a total of approximately 600,000 television homes in its operating areas as
of December 31, 1997. In April 1998, Sun Cable and SkyCable formed a joint
venture that created the second largest multi-channel television operator in the
Philippines and the largest outside of Manila. UAP owns a 20% interest in this
joint venture. See "Business--UIH Asia/Pacific Communications, Inc.--
Philippines: Sun Cable." UAP's other businesses include (i) a 25% interest in
XYZ Entertainment Pty. Ltd. ("XYZ"), a programming company that provides five
channels to the Australian multi-channel television market, and has a total of
approximately 592,100 subscribers as of May 31, 1998) and (ii) up to a 90%
economic interest in Telefenua S.A. ("Telefenua"), the only provider of multi-
channel television services in Tahiti, with MMDS in a market with approximately
31,000 television homes. UIH is evaluating the sale of its interest in
Telefenua.
The Company believes that UAP is well-positioned to capitalize on the demand
for multi-channel television and other telecommunications services in its
markets. As of December 31, 1997, UAP's multi-channel television operating
systems had an aggregate of approximately 1.8 million television homes
serviceable and approximately 271,700 subscribers, compared to approximately
324,000 television homes serviceable and approximately 29,000 subscribers as of
December 31, 1995 (with the substantial majority of such growth resulting from
Austar's build out and subscriber marketing). During this same period,
subscribers to XYZ's programming increased from approximately 65,000 to
approximately 577,200. For the year ended December 31, 1997, UAP and its
subsidiaries had consolidated revenues of approximately $69.0 million. While
the Company expects that a substantial portion of UAP's growth will come from
the continued development of Austar, the Company also is anticipating growth by
UAP's other operating companies, which the Company believes have significant
opportunities to increase their subscribers, revenues and cash flows by
continuing to market within their respective existing franchise areas.
LATIN AMERICAN OPERATIONS
Through UIH Latin America, Inc. ("UIHLA"), a wholly owned subsidiary of the
Company, UIH owns interests in and operates multi-channel television
distribution systems in Chile, Brazil, Mexico and Peru. The Company believes
that many countries in Latin America are characterized by rapidly growing
economies, increasing political stability, declining inflation and low multi-
channel television penetration. In addition, many Latin American countries are
placing an emphasis on privatization of businesses. UIHLA's current strategy is
to (i) increase the subscribers, revenues and cash flows of its existing, larger
core operating companies and (ii) purchase significant or majority ownership
positions in new multi-channel television operating companies and/or development
projects in Latin America.
UIHLA's primary operating company is VTRH, the largest cable television
operator in Chile, serving an estimated 57% of the total subscribers in Chile as
of December 31, 1997. UIHLA owns a 34% interest in VTRH, which ownership
interest will be adjusted based upon a valuation currently being conducted by
VTRH's shareholders and their respective advisors. VTRH operates in several
regions throughout Chile, including Santiago, Chile's largest city, and has
substantially completed an upgrade of its network to a 750 MHz hybrid fiber
coaxial system. As a result of the network upgrade, VTRH began offering cable
telephony service to its customers in June 1997. As of December 31, 1997, VTRH
had approximately 372,700 subscribers (representing an increase of approximately
15.8% compared to December 31, 1996) and for the year ended December 31, 1997,
VTRH had revenues and Adjusted EBITDA of $114.3 million and
- --------------------------------------------------------------------------------
8
<PAGE>
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$21.3 million, respectively, representing 29.3% and 52.1% increases over the
comparable periods in the prior year, respectively. VTRH's strategy is to
improve its current penetration of 24.9% (as of December 31, 1997) by
aggressively marketing its multi-channel television and cable telephony
services. As of May 31, 1998, VTRH had approximately 7,000 subscribers to its
recently launched cable telephony service.
UIHLA is currently evaluating its ownership positions in (i) its 49% interest
in Tele Cable de Morelos S.A. de C.V. ("Megapo"), a system located in Mexico,
which it currently plans to divest in order to reduce debt and (ii) its 46.3%
interest in TV Cabo e Communicacoes in Jundiai ("Jundiai"), a system located in
Jundiai, Brazil.
UIH ASSET RATIONALIZATION
During the past two years, UIH has focused on opportunities to rationalize its
operations. Management believes that this strategy has several advantages for
UIH, including: (i) increasing the scale of its operations (from December 31,
1995 to December 31, 1997, UIH increased its equity subscribers from
approximately 659,000 to approximately 2.0 million) while reducing the number of
operating companies in which it participates; (ii) realizing gains on its
investments and redeploying capital to its majority-owned and/or higher growth-
opportunity operating companies (during the past two years, UIH has realized net
proceeds of approximately $313.2 million from asset sales, compared to its total
investment of approximately $147.1 million in such systems, including $77.0
million drawn under a UIHLA bank credit facility); (iii) reducing the debt of
its operating companies; and (iv) reducing the need for the Company to raise
capital from outside parties or to make contributions to fund the operations of
its subsidiaries and affiliates.
This asset rationalization has consisted primarily of: (i) acquiring
significant and/or controlling ownership interests in several operating
companies; (ii) selling selected assets for cash, generally at significant gains
on the Company's invested capital; (iii) obtaining equity partners for certain
other companies; and (iv) merging or swapping selected assets in order to obtain
larger or controlling ownership interests in other companies or interests in
larger, combined companies. Through the completion of a series of such
transactions, UIH has been able to increase its subscriber base significantly
and acquire majority ownership of most of its major operating systems.
Following is a summary of the major transactions that UIH has completed during
the past two years:
ASSET SALES
. Sale of Interests in Two Brazilian Cable Operations. In 1996, UIH sold its
34% interest in Cabodinamica TV Cabo Sao Paulo, S.A for approximately $78.1
million in cash and its 25% interest in TV-Cabo Rio Telecommunicacoes, S.A.
for approximately $13.5 million. UIH had invested a total of approximately
$24.4 million in these two companies prior to the sale, and recognized an
aggregate net gain of approximately $77.1 million (after recognizing
cumulative operating losses of approximately $9.9 million).
. Sale of Minority Interest in New Zealand Cable/Telephony Operator to
Strategic Partner. In July 1997, Saturn, UAP's wholly owned New Zealand
subsidiary, sold a 35% interest to a subsidiary of Saskatchewan
Telecommunications Holding Corporation ("Sasktel"), a Canadian
telecommunications company with substantial experience in constructing and
operating telephone networks, for approximately $19.5 million in cash
(implying a value for UAP's remaining 65% stake of approximately $36.2
million). Saturn is using the proceeds to build out its hybrid fiber
coaxial dual network (cable/telephony) in Wellington. UIH had invested a
total of approximately $28.4 million in Saturn prior to the transaction.
. Sale of Argentinean Cable Operations. In October 1997, UIH sold all of its
Argentinean cable operations (the "Argentina Transaction") for
approximately $211.1 million in cash, subject to finalization of certain
post-closing adjustments currently under negotiation. This purchase price
represented a value of approximately $1,500 per subscriber. UIH had
invested approximately $110.8 million in Argentina and had net borrowings
outstanding of approximately $24.4 million prior to the sale, and the
Company recognized a net gain of approximately $90.0 million (after
recognizing cumulative operating losses and other items).
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9
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CONSOLIDATIONS, SWAPS AND ACQUISITIONS
. Acquisition of Norwegian Cable Operator. In January 1997, UPC acquired
from Helsinki Media Company ("Helsinki Media") a 70.2% interest in Janco
Kabel-TV A/S ("Janco"), a Norwegian cable operator with approximately
160,900 subscribers as of December 31, 1997. See "Business--United Pan-
Europe Communications N.V.--UPC Acquisitions." In November 1997, UPC
merged the Janco operations with its existing Norwegian cable subsidiaries'
operations, thereby creating Janco Multicom AS ("Janco Multicom"), the
largest cable television operator in Norway. UPC holds an 87.3% interest
in Janco Multicom. From an economic perspective, UPC has all the rights
and obligations of full ownership of Janco Multicom and UPC consolidates
100% of the financial results therefrom, although Helsinki Media has been
granted certain minority shareholder rights. UPC expects to realize
economies of scale as a result of the merger. UPC has the right to
acquire, and Helsinki Media has the right to put to UPC, the remaining
interest in Janco Multicom by July 2, 2001 for approximately NKr165.9
million ($22.5 million as of December 31, 1997), subject to certain
adjustments. UPC has in place a letter of credit facility to fund fully
the purchase of the remaining interest in Janco Multicom.
. Acquisition of Controlling Interest in European Operations. In December
1997, the Company and UPC acquired (the "UPC Acquisition") the debt and
equity interests in UPC and 3.17 million shares of the Company's Class A
Common Stock owned by several subsidiaries of Philips Electronics N.V.
(collectively, "Philips"), for approximately $425.2 million, thereby making
UPC effectively a wholly owned subsidiary (subject to certain employee
equity incentive compensation arrangements, representing approximately 8.4%
of the outstanding shares of UPC), and giving the Company control over the
majority of its European operations. See "Management's Discussion and
Analysis of Financial Condition--Subsidiary Credit Facilities."
. Acquisition of Netherlands Cable Operator. Effective January 1, 1998, UPC
acquired the cable television systems surrounding Eindhoven, The
Netherlands ("Combivisie"), a market in which UPC currently operates, for a
purchase price of approximately NLG180.8 million ($89.5 million as of
December 31, 1997). At December 31, 1997, Combivisie had approximately
137,000 subscribers and a 96.5% penetration rate.
. UPC Dutch Asset Consolidation. In April 1998, UPC and a Dutch energy
company ("NUON") entered into a definitive agreement to combine their
interests in broadband cable and wirebound telecommunications networks in
The Netherlands. Consummation of the transaction is conditioned upon
receipt of regulatory approval, among other conditions. UPC and NUON will
initially own 51% and 49%, respectively, of the entity holding their
combined interests ("United Telekabel Holding"), although the parties will
maintain equal voting rights on certain matters. UPC has a call option to
purchase, and NUON has a put option to sell, 50% of NUON's interest in
United Telekabel Holding. Upon consummation, UPC will contribute its equity
interests in A2000, and its KTE, Combivisie and Son en Breugel systems, and
NUON will contribute its equity interests in systems in Friesland,
Flevoland and Gelderland. Together, these operating systems served
approximately 1.3 million subscribers as of December 31, 1997.
. Kabelkom Transaction. In April 1998, UPC and Home Box Office ("HBO"), a
division of Time Warner Entertainment Company, L.P. ("TWE"), signed a
memorandum of understanding ("MOU") providing for UPC to acquire TWE's
interest in the Hungary cable television systems owned by UPC and TWE
through their 50/50 partnership, Kabelkom Holding Co. ("Kabelkom"), and TWE
and its partners to acquire UPC's interest in the Hungary programming
ventures owned through Kabelkom as well as UPC's ownership in a Czech
programming business. The purchase price for TWE's Hungary cable television
system interests, net of UPC's Hungary and Czech programming interests, is
approximately $9.5 million. The transaction is conditioned on, among other
things, the receipt of governmental and lender approvals.
. UII Partnership Transaction. In May 1998, the Company, UPC and Tele-
Communications International, Inc. ("TINTA"), UPC's 50% partner in the
United International Investments ("UII") partnership that holds interest in
multi-channel television systems in Israel, Ireland and Malta, signed an
MOU pursuant to which the Company and UPC have agreed to purchase TINTA's
interests through UII in cable television systems in Israel and Malta, and
TINTA has agreed to purchase UPC's interests through UII in the multi-
channel television systems
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10
<PAGE>
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in Ireland. As a result of this transaction, which is subject to a number
of conditions, the Company will increase its interest in the Israel and
Malta systems to 46.6% and 50.0%, respectively. The purchase price for
TINTA's Israel and Malta interests, net of UPC's Ireland interest, is
approximately $71.0 million. UPC has received a preliminary commitment from
Discount Investment Corporation and PEC Israel Economic Corporation, the
48.5% owner of Tevel, for a convertible loan to assist in financing the
transaction.
There can be no assurance that any of the pending transactions described above
will occur, or if they occur, that the terms of any such transaction will be as
stated.
OTHER
The Company was incorporated in 1989 as a Delaware corporation. The principal
executive office of the Company is located at 4643 South Ulster Street, Suite
1300, Denver, Colorado 80237, and its telephone number is (303) 770-4001. Unless
the context otherwise requires, the terms "UIH" and the "Company" refer to
United International Holdings, Inc. and its subsidiaries and non-majority owned
affiliates and their respective predecessors.
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11
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THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Class A Common Stock offered by the
Selling Stockholders........................... 3,000,000 shares
Common Stock outstanding after the Offering:
Class A Common Stock.......................... 29,588,741 shares (1)(2)
Class B Common Stock.......................... 9,910,795 shares (1)
Total........................................... 39,499,536 shares (1)(2)
Voting Rights................................... Holders of Class A Common
Stock are entitled to one
vote per share on all matters
submitted to a vote of
stockholders, and holders of
Class B Common Stock are
entitled to ten votes per
share. Both classes vote
together as a single class on
all matters, except where
class voting is required by
the Delaware General
Corporation Law. Immediately
following the Offering, the
Class A Common Stock
outstanding will have
approximately 23.0% of the
combined voting power of the
Company's outstanding common
stock (23.3% if the
Underwriters' overallotment
option is exercised).
Use of Proceeds................................. The Company will receive no
proceeds from the Offering,
unless the Underwriters'
overallotment option is
exercised, in which case the
Company plans to use such
proceeds for general
corporate purposes.
NASDAQ Symbol................................... "UIHIA"
</TABLE>
________________
(1) Common Stock outstanding as of June 2, 1998, assuming conversion of the
Class B Common Stock by the Selling Stockholders into Class A Common Stock
immediately prior to the Offering. Includes 3.17 million shares of Class A
Common Stock held by a wholly owned subsidiary of UPC that are pledged to
secure UPC's obligations under the Tranche B Facility. Does not include
potential dilution from: (i) 3,207,476 shares of Class A Common Stock that
are issuable upon exercise of stock options outstanding as of February 28,
1998; (ii) 1,441,739 shares of Class A Common Stock issuable upon conversion
of 317,930 outstanding warrants; and (iii) approximately 1,860,000 shares of
Class A Common Stock issuable upon conversion of 170,513 shares of Series A
Convertible Preferred Stock, based upon a liquidation value of approximately
$32.6 million as of February 28, 1998.
(2) If the Underwriters' overallotment option is exercised, 30,038,741 shares of
Class A Common Stock and 39,949,536 shares of Common Stock would be
outstanding. If the Underwriters exercise the over-allotment option, the
shares of Class A Common Stock issued by the Company pursuant thereto will
be approved for listing on the Nasdaq National Market/sm/.
RISK FACTORS
This Offering involves a high degree of risk. See "Risk Factors."
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12
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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following summary historical consolidated financial data have been derived
from the Company's audited consolidated financial statements incorporated by
reference herein. The Company's consolidated financial statements do not
consolidate the operating results of its minority-owned affiliates, including
UPC prior to December 11, 1997. Upon consummation of the UPC Acquisition on
December 11, 1997, the Company began consolidating the results of UPC. The data
set forth below are qualified by reference to and should be read in conjunction
with the audited consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company incorporated by reference into this Prospectus and
also with "Pro Forma Consolidated Condensed Financial Information of the
Company."
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
February 28, February 29, February 28, February 28, 1998
-------------------------
1995 1996 1997 Actual Pro Forma(1)
------------ -------------- ------------ -------------------------
<S> <C> <C> <C> <C> <C>
(In thousands)
(unaudited)
STATEMENT OF OPERATIONS DATA:
Service and other revenue................................ $ 701 $ 2,363 $ 30,244 $ 98,047 $ 243,819
Operating expense........................................ (1,651) (4,224) (26,251) (65,631) (111,532)
Selling, general and administrative expense.............. (18,299) (22,483) (54,020) (91,356) (140,936)
Depreciation and amortization............................ (1,701) (2,331) (38,961) (91,656) (170,828)
Equity in loses of affiliated companies, net............. (6,106) (48,635) (47,575) (68,645) (24,295)
Gain on sale of investments in affiliated
companies.......................................... -- 16,013 65,249 90,020 --
Interest expense, net.................................... (2,787) (27,628) (66,330) (116,482) (165,076)
Provision for loss on marketable equity securities and
investment related costs................................ (2,865) (6,055) (5,859) (14,793) (14,793)
Net loss before extraordinary charge..................... (30,614) (91,311) (138,825) (263,441) (395,723)
Extraordinary charge for early retirement of debt........ -- -- -- (79,091) (79,091)
Net loss................................................. (30,614) (91,311) (138,825) (342,532) (474,814)
Net loss per common share:
Basic and diluted loss before extraordinary
charge................................................ $ (1.10) $ (2.69) $ (3.59) $ (6.75) $ (11.02)
Extraordinary charge.................................. -- -- -- (2.02) (2.19)
--------- -------- --------- --------- ---------
Basic and diluted net loss............................ $ (1.10) $ (2.69) $ (3.59) $ (8.77) $ (13.21)
========= ======== ========= ========= =========
Weighted-average number of common shares
outstanding........................................... 27,802 34,018 39,036 39,212 36,042
OTHER DATA (AT END OF PERIOD)(2):
Homes in service area(3)................................ 6,140 8,463 9,834 9,886
Homes passed(4).......................................... 2,440 4,705 6,997 7,651
Subscribers(5)........................................... 1,059 2,426 2,745 3,137
Equity subscribers(6).................................... 169 659 1,023 1,955
</TABLE>
<TABLE>
<CAPTION>
As of February 28, 1998
-------------------------
(In thousands)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments............... $ 337,172
Investments in and advances to affiliated companies............. 318,437
Property, plant and equipment, net.............................. 440,735
Goodwill and other intangible assets............................ 432,005
Total assets.................................................... 1,679,835
Total debt...................................................... 1,866,096
Total stockholders' deficit..................................... (392,280)
</TABLE>
(1) Pro forma for the UPC Acquisition and the Argentina Transaction, as if each
had occurred on March 1, 1997.
(2) This data does not take into account the Company's proportionate ownership
interest in its less than wholly owned operating systems (with the exception
of equity subscribers).
(3) Number of homes within the Company's areas of service. All of these homes
are not necessarily capable of receiving the Company's multi-channel
television signal.
(4) Number of homes within the Company's areas of service that are capable of
receiving the Company's multi-channel television signal.
(5) Number of homes passed that subscribe to the Company's basic cable service.
(6) Calculated as the sum of the subscribers of each of UIH's systems multiplied
by UIH's net equity interest in each system.
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13
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ADDITIONAL FINANCIAL DATA FOR THE COMPANY'S MAJOR OPERATING SYSTEMS
The financial information presented below has been derived from financial
information of the respective operating companies and is not adjusted for the
ownership percentage of the Company. Some of the information presented below
has been derived from financial statements prepared in accordance with foreign
generally accepted accounting principles which differ from United States
generally accepted accounting principles. In addition, certain amounts for the
year ended December 31, 1997 have been converted to dollars using December 31,
1997 exchange rates for the convenience of translation.
<TABLE>
<CAPTION>
Revenues
----------------------------------------------------------------------------
Convenience UIH Net Equity
Functional Currency Translation Ownership
------------------------------------------------------------- -----------
Year Ended Interest
Years Ended December 31, December 31, At December 31,
-------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1997
--------- --------- --------- ------- --------- ----------- --------
(In thousands) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAJOR SYSTEMS:
Austria(1)............ AS 869,700 908,800 921,000 985,338 1,018,095 $ 80,603 95.0%
Belgium(2)............ BEF 619,100 662,800 681,539 693,990 710,521 19,170 100.0
Netherlands(3)
A2000................ NLG 67,248 72,747 75,030 89,893 101,450 50,062 50.0
KTE.................. NLG 14,809 15,894 16,544 17,932 20,669 10,199 100.0
Combivisie........... NLG 19,586 22,761 25,661 27,143 29,294 14,456 100.0
Norway(4)
Norkabel............. NKr 193,221 213,233 216,062 215,076 -- --
Janco................ NKr 84,822 95,321 101,488 101,699 -- --
Janco Multicom....... NKr -- -- -- -- 332,192 45,108 87.3
Australia(5).......... A$ -- -- 594 26,852 86,470 56,230 98.0
Chile(6).............. US$ -- 7,035 16,947 88,423 114,318 114,318 34.0
</TABLE>
<TABLE>
<CAPTION>
Adjusted EBITDA/(7)/
------------------------------------------------
Convenience UIH Net Equity
Functional Currency Translation Ownership
------------------------------------------------ -----------
Year Ended Interest
Years Ended December 31, December 31, At December 31,
------------------------------------------------
1993 1994 1995 1996 1997 1997 1997
-------- -------- -------- -------- -------- ---------- ------
(In thousands) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAJOR SYSTEMS:
Austria(1)........... AS 486,200 498,100 468,200 512,356 503,522 $ 39,864 95.0%
Belgium(2)........... BEF 223,900 240,100 255,000 268,232 277,667 7,491 100.0
Netherlands(3)
A2000............... NLG 38,150 38,083 34,841 40,829 33,765 16,662 50.0
KTE................. NLG 9,581 9,917 9,948 11,298 12,719 6,276 100.0
Combivisie.......... NLG 14,031 16,286 17,948 19,816 19,177 9,463 100.0
Norway(4)
Norkabel............ NKr 41,602 62,652 67,939 68,446 -- --
Janco............... NKr 30,979 35,142 38,009 39,619 -- --
Janco Multicom...... NKr -- -- -- -- 134,023 18,199 87.3
Australia(5)......... A$ -- -- (9,390) (29,765) (26,027) (16,925) 98.0
Chile(6)............. US$ -- 481 4,500 13,950 21,348 21,348 34.0
</TABLE>
________________
(1) The Austrian schilling (AS) is the functional currency for the Austria
systems. The financial statements of the Austria systems for 1995, 1996 and
1997 have been prepared in accordance with Dutch GAAP, which differ from
those of the United States, although not materially different with respect
to the calculation of revenues and Adjusted EBITDA. The financial statements
of the Austria systems for 1993 and 1994 have been prepared in accordance
with Austrian GAAP, which differ from those of the United States.
(2) The Belgian franc (BEF) is the functional currency for the Belgium systems.
The financial statements of the Belgian systems for 1995, 1996 and 1997 have
been prepared in accordance with Dutch GAAP, which differ from those of the
United States, although not materially different with respect to the
calculation of revenues and Adjusted EBITDA. The financial statements of
the Belgium systems for 1993 and 1994 have been prepared in accordance with
Belgium GAAP, which differ from those of the United States.
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(3) The Dutch guilder (NLG) is the functional currency for The Netherlands
systems. The financial statements of A2000, Eindhoven and Combivisie have
been prepared in accordance with Dutch GAAP, which differ from those of the
United States, although not materially different with respect to the
calculation of revenues and Adjusted EBITDA. The Company acquired the
Combivisie systems effective January 1, 1998.
(4) In 1997, Norkabel and Janco were merged to form Janco Multicom. The
Norwegian kroner (NKr) is the functional currency for the Norway systems.
The financial statements of the Norway systems have been prepared in
accordance with Norwegian GAAP, which differ from those of the United
States.
(5) The Australian dollar (A$) is the functional currency for the Australia
systems. The financial statements of the Australia systems have been
prepared in accordance with Australian GAAP, which differ from those of the
United States, although not materially different with respect to the
calculation of revenues and Adjusted EBITDA. The Australia systems commenced
operations in late 1995.
(6) The dollar is the reporting currency for the Chile systems. The financial
statements of the Chile systems have been prepared in accordance with United
States GAAP. The Company acquired its initial interest in its Chile system
in 1994. In 1996, it combined its assets with those of another operator. See
"Business--UIH Latin America, Inc.--Chile: VTR Hipercable."
(7) Adjusted EBITDA represents net income (loss) as determined using generally
accepted accounting principles for Austria, Belgium, The Netherlands,
Norway, Chile and Australia (which differ from those used in the United
States, although not materially different with respect to the calculation of
revenues and Adjusted EBITDA) plus net interest expense, income tax expense,
depreciation, amortization, minority interest, management fee expense
payable to the Company, currency exchange gains (losses) and other non-
operating income (expense) items. Industry analysts generally consider
Adjusted EBITDA to be an appropriate measure of the performance of multi-
channel television operations. Adjusted EBITDA should not be considered as
an alternative to net income or cash flows or to any other GAAP measurement
of performance or liquidity, or as an indicator of an entity's operating
performance.
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15
<PAGE>
ADDITIONAL OPERATING DATA FOR THE COMPANY'S MAJOR OPERATING SYSTEMS
Below is certain operating information for the Company's major systems.
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------
1993 1994 1995 1996 1997
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MAJOR SYSTEMS:
Austria(1)
Subscribers......................................... 380,190 401,578 414,775 428,453 435,859
Penetration Rate.................................... 65.0% 68.7% 68.2% 68.8% 49.0%
Avg. Monthly Service Rev. per Subscriber(2)......... $ 12.98 $ 13.22 $ 13.06 $ 13.62 $ 13.65
Belgium
Subscribers......................................... 129,923 128,641 127,843 127,815 127,529
Penetration Rate.................................... 97.0% 96.7% 96.1% 96.1% 95.9%
Avg. Monthly Service Rev. per Subscriber(2)......... $ 8.63 $ 9.31 $ 8.98 $ 9.04 $ 9.25
Netherlands
A2000
Subscribers....................................... 477,500 479,859 488,631 523,940 518,160
Penetration Rate.................................. 97.0% 94.1% 95.4% 94.3% 91.6%
Avg. Monthly Service Rev. per Subscriber(2)....... $ 5.92 $ 5.92 $ 6.39 $ 6.39 $ 6.54
KTE(3)
Subscribers....................................... 82,535 83,794 83,408 84,660 90,671
Penetration Rate.................................. 95.0% 98.0% 94.5% 95.0% 95.0%
Avg. Monthly Service Rev. per Subscriber(2)....... $ 7.25 $ 7.25 $ 8.19 $ 8.73 $ 8.84
Combivisie(4)
Subscribers....................................... 105,905 126,157 130,429 133,775 139,249
Penetration Rate.................................. 95.0% 95.4% 95.6% 96.2% 98.1%
Avg. Monthly Service Rev. per Subscriber(2)....... $ 7.48 $ 7.21 $ 7.72 $ 7.99 $ 8.68
Norway
Norkabel
Subscribers....................................... 141,735 147,344 152,257 156,915 158,708
Penetration Rate.................................. 67.3% 67.4% 70.1% 70.9% 68.2%
Avg. Monthly Service Rev. per Subscriber(2)....... $ 16.29 $ 17.38 $ 17.11 $ 16.02 $ 16.67
Janco
Subscribers....................................... 157,787 157,419 159,210 160,331 160,946
Penetration Rate.................................. 71.7% 71.6% 71.6% 71.3% 71.5%
Avg. Monthly Service Rev. per Subscriber(2)....... $ 6.37 $ 7.07 $ 7.50 $ 7.50 $ 8.42
Australia(5)
Subscribers......................................... -- -- 5,204 103,447 196,205
Penetration Rate.................................... -- -- 2.2% 6.8% 12.3%
Avg. Monthly Service Rev. per Subscriber(2)......... -- -- NM $ 26.70 $ 30.54
Chile(6)
Subscribers......................................... -- 38,498 89,349 321,730 372,673
Penetration Rate.................................... -- 21.4% 30.4% 21.7% 24.9%
Avg. Monthly Service Rev. per Subscriber(2)......... -- $ 17.13 $ 20.99 $ 23.57 $ 24.30
</TABLE>
_______________
(1) In 1997, upon acquiring a controlling interest in UPC, the Company conducted
an operational audit of many of UPC's operating companies, including the
Austria operating systems. As a result of this audit, UPC concluded that
there were approximately 260,000 additional homes within franchise areas
that could be served, but had not been offered services in the past. The
Austrian systems have begun actively marketing services to these previously
unserved homes, but have not yet estimated the cost to provide service to
these additional homes.
(2) Average Monthly Revenue per Subscriber for the years ended December 31,
1993, 1994, 1995, 1996 and 1997 using a convenience translation as of
December 31, 1997. This figure represents the service revenue (excluding
installation revenue) of the operating system for the respective period
divided by the weighted average number of subscribers during the period.
(3) These numbers include the Son en Breugel system, acquired by UPC in July
1997.
(4) UPC acquired the Combivisie system in February 1998. See "Business--United
Pan-Europe Communications N.V.--UPC Acquisitions."
(5) The Company launched operations in Australia in August 1995 and full-scale
marketing for these operations began in early 1996.
(6) In September 1996, the Company merged its then existing Chilean operations
with VTR S.A. See "Business--UIH Latin America, Inc.--Chile: VTR
Hipercable."
16
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following Risk Factors,
as well as the other information set forth in or incorporated into this
Prospectus, before making an investment in the shares of Class A Common Stock.
This Prospectus and the documents incorporated herein by reference contain
statements that constitute forward-looking statements within the meaning of
Section 27A of the Securities Act. When used in, or incorporated by reference
into this Prospectus, the words "believes," "anticipates," "expects," "plans,"
"intends" and similar expressions are intended to identify forward-looking
statements. Forward-looking statements and statements of expectations, plans and
intent are subject to a number of risks and uncertainties. Actual results in the
future could differ materially from those described in the forward-looking
statements as a result of the risk factors set forth below and the matters set
forth in, or incorporated by reference into, the Prospectus. The Company
undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances. The Company cautions the reader, however, that this list of
risk factors and other cautionary language contained herein may not be
exhaustive.
History of Losses. The Company has experienced significant losses since
its inception. As of February 28, 1998, the Company had an accumulated deficit
of approximately $646.1 million. The Company had net losses of $91.3 million,
$138.8 million and $342.5 million for fiscal years 1996, 1997 and 1998,
respectively, and expects to incur substantial additional losses for the
foreseeable future. There can be no assurance that such losses will not continue
indefinitely. Continuing net operating losses could have a material adverse
effect on the Company's results of operations and increase the Company's need
for additional capital in the future. See "--Capital-intensive Business."
Leverage. The Company is highly leveraged. As of February 28, 1998, the
Company had consolidated debt of approximately $1.9 billion and a stockholders'
deficit of approximately $392.3 million. The Company's earnings have been
insufficient to cover its fixed charges in each of the last five years. During
the year ended February 28, 1998, the Company accrued approximately $110.6
million of non-cash interest expense and incurred $13.7 million of cash interest
expense. On a pro forma basis, assuming that the Company's offering of 10 3/4%
Senior Secured Discount Notes due 2008 (the "Senior Notes") had been consummated
as of the beginning of fiscal 1998, the Company's pro forma earnings on a
consolidated basis would have been inadequate to cover its pro forma fixed
charges for the year ended February 28, 1998 by $269.7 million. The Company is
required to begin paying interest on the Senior Notes in 2003. To the extent the
Company is unable to satisfy interest payment obligations under the Notes, the
Company will be in default under the Indenture governing the Senior Notes, which
default would also constitute a default under other agreements to which the
Company is a party, giving the holders thereof the right to declare all such
obligations to become immediately due and payable. The Company has secured its
obligations under the Senior Notes with all of its stock in United International
Properties, Inc. ("UIPI") and UIH Europe, Inc. ("UIHE"), the intermediate
holding companies through which the Company holds substantially all of its
assets and conducts all of its business.
Capital-intensive Business. The development, construction and operation of
multi-channel television and telephony systems require substantial capital
investment. In addition, many of the Company's operating companies are expanding
and upgrading their respective networks to increase channel capacity and to be
able to offer additional services. As technology changes in the multi-channel
television and telephony industry, additional system upgrades may be necessary
for the Company's operating systems to compete effectively in their respective
markets. While the Company believes it has capital available to it from cash on
hand, existing credit facilities and cash to be generated from operations that
is sufficient for its planned operations, and in certain systems construction
and rebuilding projects involving its existing systems, there can be no
assurance that the Company's future activities will not require more capital
than currently anticipated or that the Company's resources will be sufficient
for its future capital needs. The Company's inability to continue upgrading its
operating systems' networks or to make its other planned capital expenditures
could adversely affect the Company's operations and competitive position.
To the extent the Company pursues new acquisition or development
opportunities, the Company would likely need to raise additional capital, either
through asset sales, issuances of debt or equity securities or through operating
company borrowings. There can be no assurance the Company will be able to raise
additional capital through any such methods.
17
<PAGE>
Dependence on Key Personnel. The success of the Company and its growth
strategy depends in large part on the ability of the Company to attract and
retain key management, marketing and operating personnel, both at the corporate
and operating company levels. Retaining a successful international management
team may be particularly difficult because key United States employees may be
required to live and work overseas and because experienced local managers are
often unavailable. There can be no assurance that the Company will be able to
attract and retain the qualified personnel needed for its business.
Risks Inherent in Foreign Investment. The Company has invested its
resources outside of the United States and intends to continue to make
international investments in the future. Risks inherent in foreign operations
include loss of revenue, property and equipment from expropriation,
nationalization, war, insurrection, terrorism and other political risks, risks
of increases in taxes and governmental royalties and fees and involuntary
renegotiation of contracts with foreign governments. The Company carefully
considers those risks when evaluating investment opportunities and insures
against risks where possible in circumstances where its assessment of the costs
and risks involved justifies obtaining insurance. Only a portion of such risks
may be insured. The Company is also exposed to the risk of changes in foreign
and domestic laws and policies that govern operations of foreign-based
companies.
Foreign Currency Exchange Rate and Conversion Risks. Although the
Company's operating companies have attempted, and will continue to attempt, to
match costs and revenues and borrowings and repayments in terms of their
respective local currencies, payment for a majority of purchased equipment has
been, and may continue to be, required to be made in dollars. In addition, the
value of the Company's investment in an operating company is partially a
function of the currency exchange rate between the dollar and the applicable
local currency. In general, the Company and certain of its 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 with respect to its holdings solely as a
result of foreign currency exchange rate fluctuations, which include foreign
currency devaluations against the dollar. Furthermore, certain of the Company's
operating companies have notes payable and notes receivable that are denominated
in a currency other than their own functional currency or loans linked to the
dollar. The Company may also experience economic loss and a negative impact on
earnings related to these monetary assets and liabilities. The countries in
which the Company's primary operating companies now conduct business generally
do not restrict the removal or conversion of local or foreign currency; however,
there can be no assurance this situation will continue. The Company also may
acquire equity interests in companies that operate in countries where the
removal or conversion of currency is restricted.
Possible Inability to Control Certain Operating Companies. The Company
holds a controlling interest in the majority of its operating companies,
including most of its primary systems. In certain circumstances, however,
financial, regulatory and operational considerations have required the Company
to invest with financial and strategic partners in operating systems. Although
the Company is actively involved in the management of the operating companies in
which it has a minority ownership interest and intends to invest in the future
primarily in operating companies in which it can control or at least participate
in management, its existing minority voting positions may preclude it from
affirmatively controlling certain of the companies in which it has an interest.
In particular, the Company may not be able to cause these operating companies to
pay dividends and other distributions and its lack of control may inhibit the
Company's ability to implement strategies that it favors. The Company has an
effective 100% interest in Austar, its Australian operating company and believes
that through the securities it holds it has the right to designate all the
directors of Austar. While the transactions pursuant to which the Company
acquired its interest in Austar did not require any advance notification or
approval under Australian law, the Treasurer of Australia has the power to
review such transactions under provisions of the Australian Foreign Acquisition
and Takeovers Act of 1975, as amended ("FATA"). If the Treasurer determines the
ownership structure is in violation of the FATA, the Treasurer could require the
voting structure of Austar to be changed such that the Company would be entitled
to appoint only three of the six directors of Austar.
Regulation. Multi-channel television operations and programming services
are subject to governmental regulation, which may change from time to time.
Changes in applicable laws and regulations could increase the costs of the
Company. There can be no assurance that material and adverse changes in the
regulation of the Company's existing operating systems will not occur in the
future. Regulation can take the form of price controls, service requirements,
programming content restrictions and foreign ownership restrictions, among
others. Delays in obtaining any required regulatory approvals could adversely
affect the Company's ability to offer some or all of its proposed range of
services
18
<PAGE>
in certain of its markets. Moreover, not all countries have regulatory regimes
that provide for exclusive licenses to provide multi-channel television services
within a geographic area. Operators may have to compete with each other for
contracts to provide services to apartments, hotels and other multi-unit
buildings, as well as with providers of other multi-channel televisions services
via other distribution technologies. The lack of a regulatory framework and the
terms upon which such contracts are available may limit the ability to add
subscribers to developing systems and, if such contracts and licenses are not
renewed, may limit the long-term appreciation in the value of the systems
involved. In addition, certain countries may impose interconnection obligations
and other regulatory controls with respect to the telecommunications services
offered by the Company's operating systems.
General Risks of Multi-Channel Television Operations. A substantial
portion of the Company's initial investments have been in cable television.
Cable television, as an industry, could become technologically obsolete upon the
introduction of technologies that do not currently exist or the substantial
improvement of existing competing technologies. In some markets, only a limited
amount of indigenous programming may be available in which case the Company's
systems must repackage available programming in the local language. Limited
availability of competitive programming may adversely affect subscriber demand
for multi-channel television services and thereby the operations of the
Company's systems. There can be no assurance that adequate programming will
continue to be available for all systems in which the Company has an ownership
interest.
Ability to Procure Additional Programming Services. The Company's success
is largely dependent upon management's ability to procure programming that is
attractive to its customers at reasonable commercial rates. The Company is
dependent upon third parties for the development and delivery of programming
services. These programming suppliers will charge the operating companies for
the right to distribute the channels to the operating companies' customers. The
costs to the operating companies for additional services will be determined
through negotiations between the operating companies and these programming
suppliers. Management believes that the availability of sufficient programming
on a timely basis will be critical to the Company's future success. There can be
no assurance that the operating companies will have access to additional
programming services or that management can secure rights to such programming on
commercially acceptable terms.
Competition. The multi-channel television and telephony industries in many
of the markets in which the Company operates are competitive and often are
rapidly changing. The Company recognizes that in the future it is likely to
encounter increased competition as new entrants with competing technologies,
including, but not limited to, DTH, SMATV, MMDS and local multipoint
distribution service, enter its markets and launch new services. Multi-channel
television also competes with the direct reception of broadcast television
signals and, in varying degrees, with other communications and entertainment
media. The success of the Company's existing operating systems is dependent, in
part, on their ability to provide services and programming not otherwise
available to subscribers. The Company may also have to compete initially in
certain areas with unlicensed operators. In many of the Company's markets, the
Company competes with other multi-channel television and telephony operators,
many of which have substantially more resources than the Company.
Construction Risks. Many of the Company's operating systems are currently
upgrading their physical plants. Construction activity may require the Company
to obtain qualified subcontractors, the availability of which varies
significantly from country to country. Construction projects are subject to cost
overruns and delays not within the control of the Company or its subcontractors,
such as those caused by acts of governmental entities, financing delays and
catastrophic occurrences. Delays also can arise from design changes and material
or equipment shortages or delays in delivery. Services to buildings passed by
the operating systems can be delayed if the operating companies or their
subcontractors have difficulty in obtaining necessary easements or rights-of-
way. Failure to complete construction on a timely basis could jeopardize a
system's subscriber contracts, franchises and licenses or the system's ability
to preempt its competition, and failure to complete the upgrades on a timely
basis could delay the Company's timetable for the launching of its new services.
Introduction of New Services. The multi-channel television and
telecommunications services industry is characterized by changing technology and
regulatory requirements, each of which influences the demand for the Company's
products and services. Acceptance of new products and services may be affected
by the adoption of new government regulations. The Company's ability to
anticipate changes in technology and regulatory standards and to
19
<PAGE>
develop and introduce new and enhanced products successfully on a timely basis
will be a factor in the Company's ability to continue to grow and to remain
competitive. Upon completion of the upgrade of certain of its systems, the
Company intends to offer a range of new services in many of its markets
including the provision of additional channels and tiers, impulse pay-per-view
services, high speed data services, Internet access and telephony. There can be
no assurance that the Company will be able to achieve the technological advances
that may be necessary for it to remain competitive. In addition, the Company is
subject to the risks generally associated in all of its markets with new product
introductions and applications, including lack of market acceptance, delays in
development or failure of products to operate properly. There is no proven
market for certain of the advanced services referred to above and there can be
no assurance that sufficient demand will develop for such telephony and enhanced
services in each of the Company's markets.
Limited Insurance Coverage. The Company's operating companies obtain
insurance of the type and amount customary for the property in their systems.
Consistent with industry practice in the United States, however, they do not
insure the entire cable portion of multi-channel television systems.
Accordingly, any catastrophe affecting a significant portion of a system's cable
could result in substantial uninsured losses.
International Tax Risks. In general, a United States corporation may claim
a foreign tax credit against its federal income tax expense for foreign taxes
paid and accrued. Because the Company must calculate its foreign tax credit
separately for dividends received from each foreign corporation in which the
Company owns 10% to 50% of the voting stock and because of certain other
limitations, the Company's ability to claim a foreign tax credit may be limited,
particularly with respect to dividends paid out of earnings subject to a high
rate of foreign tax. This limitation and the inability of the Company to offset
losses in one foreign jurisdiction against income earned in another foreign
jurisdiction could result in a high effective tax rate on the Company's
earnings. The Company has acquired ownership interests and may acquire
additional ownership interests in operating companies located in countries with
which the United States does not have income tax treaties, in which case the
Company may be subject to increased withholding taxes on distributions and other
payments from those operating companies and also may be subject to double
taxation with respect to income generated in such countries.
Inflation Risks. Certain of the operating companies in which the Company
holds an interest operate in countries where the rate of inflation is extremely
high relative to that in the United States. While the Company's affiliated
companies attempt to increase their subscription rates to offset increases in
operating costs, there is no assurance that they will be able to do so.
Therefore, operating costs may rise faster than associated revenue, resulting in
a material negative impact on reported earnings.
Control of the Company by Class B Stockholders. The Company's voting stock
is divided into two classes with different voting rights, which allows for the
maintenance of control of the Company by the holders of the Class B Common
Stock. Holders of Class A Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of the Company, and the holders
of Class B Common Stock are entitled to ten votes per share. Both classes vote
together as a single class on all matters, except where class voting is required
by the Delaware General Corporation Law ("DGCL"). Shares of Class B Common Stock
may be converted, at the option of the holder, into shares of Class A Common
Stock on a one-for-one basis. Apollo Cable Partners, L.P. (together with its
affiliates, "Apollo") and certain stockholders of the Company (the "Founders")
have agreed that their Class B Common Stock will be converted to Class A Common
Stock in connection with certain transfers of Class B Common Stock. Following
the Offering, holders of the Class B Common Stock will have approximately 77.0%
of the combined voting power of the outstanding common stock (76.7% if the
Underwriters' overallotment option is exercised) and have the voting power to
control all matters requiring the approval of the Company's stockholders voting
as a single class. Pursuant to a stockholders' agreement among the parties (the
"Stockholders' Agreement"), Apollo has agreed to vote the Company's common stock
held by it for the election of up to nine persons nominated to be directors of
the Company by the Founders, and the Founders have agreed to vote the Company's
common stock held by them for up to three persons nominated to be directors of
the Company by Apollo.
Potential Adverse Effect of Shares Eligible for Future Sale. Following
this Offering, approximately 9.9 million shares of the Class A Common Stock
issuable upon conversion of the Class B Common Stock may be sold freely, subject
to, for affiliates of the Company, any resale limitations including those of
Rule 144 adopted under the Securities Act.
20
<PAGE>
Sales of substantial numbers of the shares of Class A Common Stock, including
those issuable upon conversion of the Class B Common Stock, could adversely
affect the market price of the Class A Common Stock.
Volatility of Stock Price. The market price of the Company's Class A
Common Stock in the past has been and may in the future be volatile. A variety
of events, including quarter-to-quarter variations in operating results, news
announcements, trading volume, general market trends and other factors, has
resulted and could continue to result in wide fluctuations in the market price
of the Class A Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from this Offering, unless the
Underwriters' overallotment option has been exercised. Expenses expected to be
incurred by the Company in connection with this Offering are estimated at
approximately $225,000. If the Underwriters exercise their overallotment option,
the Company will receive proceeds, net of underwriting discounts and commissions
and expenses of the Offering, of approximately $5.9 million (based on the
$14.1875 closing price of the Class A Common Stock as reported on the Nasdaq
National Market/sm/ on June 23, 1998), which it plans to use for general
corporate purposes.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its common stock.
The Company's Indenture governing the Senior Notes generally prohibits the
payment of dividends. The Company does not intend to pay dividends for the
foreseeable future.
MARKET PRICES OF COMMON STOCK
The Company's Class A Common Stock trades on the Nasdaq Stock Market/sm/
under the symbol "UIHIA." The following table sets forth the range of high and
low sale prices reported on the Nasdaq Stock Market/sm/ for the periods
indicated:
<TABLE>
<CAPTION>
HIGH LOW
---------------------
Fiscal 1999:
<S> <C> <C>
Second Quarter (through June 23, 1998)........ $ 16 7/16 $ 13 10/16
First Quarter................................. 18 9/16 14 9/16
Fiscal 1998:
Fourth Quarter................................ 14 9/16 10 3/8
Third Quarter................................. 13 3/4 10 5/16
Second Quarter................................ 11 1/2 9 3/4
First Quarter................................. 10 1/4 8 1/4
Fiscal 1997:
Fourth Quarter................................ 14 1/8 10 1/8
Third Quarter................................. 13 63/64 12
Second Quarter................................ 16 10 1/2
First Quarter................................. 16 3/4 13 1/2
</TABLE>
21
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of February 28, 1998. The table should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
As of
February 28, 1998
------------------
(in thousands)
<S> <C>
Cash, cash equivalents and short term investments....................... $ 337,172
==========
Notes payable and other debt--current(1)................................ 163,325
Long-term debt:
Bank Facilities and other debt(2).................................... 575,008
` UIH Australia/Pacific, Inc. 14% Senior Discount Notes due 2006(3).... 309,123
10.75% Senior Secured Discount Notes due 2008........................ 818,640
----------
Total long-term debt.............................................. 1,702,771
----------
Minority interest in subsidiary......................................... 15,186
----------
Convertible Preferred Stock, Series A, stated at liquidation value(4)... 32,564
----------
Stockholders' deficit:
Common Stock......................................................... 392
Additional paid-in capital........................................... 352,253
Treasury stock....................................................... (33,074)
Cumulative translation adjustments................................... (66,075)
Other, net........................................................... 309
Accumulated deficit.................................................. (646,085)
----------
Total stockholders' deficit...................................... (392,280)
----------
Total capitalization............................................. $1,521,566
==========
</TABLE>
_______________
(1) Primarily consists of UPC's Tranche B Facility (defined below) in
conjunction with the closing of the UPC Acquisition with total availability
of $125.0 million, all of which was drawn as of December 31, 1997. In March
1998, the Company repaid $63.0 million of the Tranche B Facility. The
Tranche B Facility matures December 5, 1998, which maturity date is
extendable to June 5, 1999 under certain conditions. See "Management's
Discussion and Analysis of Financial Condition--Subsidiary Credit
Facilities."
(2) Primarily consists of two facilities: (i) UPC's Tranche A Facility (defined
below) with total availability of NLG1.1 billion ($544.6 million, as of
December 31, 1997), of which approximately NLG883.9 million ($437.6 million
as of December 31, 1997) was drawn as of December 31, 1997, and (ii)
approximately A$110.0 million ($71.5 million as of December 31, 1997) drawn
as of December 31, 1997 by Austar on its bank credit facility, which has
total availability of approximately A$200.0 million ($130.1 million as of
December 31, 1997) upon Austar having achieved certain minimum subscriber
and operating cash flow levels. See "Management's Discussion and Analysis of
Financial Condition--Subsidiary Credit Facilities."
(3) From May 15, 1997 until such time as UIH Australia/Pacific, Inc. ("UIH A/P")
effects a sale of equity resulting in gross proceeds of at least $70.0
million ("UIH A/P Equity Sale"), the rate at which these notes accretes is
14.75%. As of December 31, 1997, the Company has funded approximately $15.7
million of such $70 million requirement.
(4) All unconverted shares of the Series A Preferred Stock are subject to a
mandatory redemption on June 19, 2000 and are convertible into shares of
Class A Common Stock at $17.50 per share. The liquidation value on the
mandatory redemption date will be approximately $35.7 million.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected annual consolidated financial data includes portions of
selected consolidated financial data incorporated by reference in this
Prospectus and have been derived from the Company's audited consolidated
financial statements. The Company's consolidated financial statements do not
consolidate the operating results of its minority-owned affiliates, including
UPC historically. Upon consummation of the UPC Acquisition on December 11,
1997, the Company began consolidating the results of UPC. The data set forth
below are qualified by reference to and should be read in conjunction with the
audited consolidated financial statements and notes thereto of the Company
incorporated by reference into this Prospectus and also with "Management's
Discussion and Analysis of Financial Condition."
<TABLE>
<CAPTION>
Years Ended Year Ended Years Ended
February 28, February 29, February 28,
------------------------------- ---------------- ------------------------------
1994 1995 1996 1997 1998
------------- ------------- ---------------- ------------ -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service and other................ $ -- $ 701 $ 2,363 $ 30,244 $ 98,047
Management fee income from
related parties................. 746 912 507 1,311 575
Operating expense................ -- (1,651) (4,224) (26,251) (65,631)
Selling, general and
administrative expense.......... (10,126) (18,299) (22,483) (54,020) (91,356)
Depreciation and amortization.... (182) (1,701) (2,331) (38,961) (91,656)
-------- -------- -------- --------- ----------
Net operating loss............... (9,562) (20,038) (26,168) (87,677) (150,021)
Equity in losses of affiliated
companies, net.................. (2,551) (6,106) (48,635) (47,575) (68,645)
Gain on sale of investments in
affiliated companies.......... 356 -- 16,013 65,249 90,020
Interest income (expense), net... 1,034 (2,787) (27,628) (66,330) (116,482)
Provision for loss on marketable
equity securities and investment
related costs................. (2,754) (2,865) (6,055) (5,859) (14,793)
Other............................ (407) 1,182 1,162 3,367 (3,520)
-------- -------- -------- --------- ----------
Net loss before extraordinary
charge........................... (13,884) (30,614) (91,311) (138,825) (263,441)
Extraordinary charge for early
retirement of debt.............. -- -- -- -- (79,091)
-------- -------- -------- --------- ----------
Net loss......................... $(13,884) $(30,614) $(91,311) $(138,825) $ (342,532)
======== ======== ======== ========= ==========
Net loss per common share:
Basic and diluted net loss
before extraordinary charge.. $(0.68) $(1.10) $(2.69) $(3.59) $(6.75)
Extraordinary charge for early
retirement of debt........... -- -- -- -- (2.02)
-------- -------- -------- --------- ----------
Basic and diluted net loss.... $(0.68) (1) $(1.10) $(2.69) (2) $(3.59) (2) $(8.77) (2)
======== ======== ======== ========= ==========
Weighted-average number of common
shares outstanding.............. 20,345 (1) 27,802 34,018 39,036 39,212
</TABLE>
<TABLE>
<CAPTION>
Years Ended Year Ended Years Ended
February 28, February 29, February 28,
------------------------------- -------------- -------------------------------
1994 1995 1996 1997 1998
------------- ------------- -------------- ------------ -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments......... $ 65,260 $130,102 $147,910 $ 139,143 $ 337,172
Investments in and advances to
affiliated companies........... 10,114 85,280 272,205 253,108 318,437
Property, plant and equipment,
net............................ 2,989 13,741 31,102 219,342 440,735
Goodwill and other intangible
assets, net.................... -- -- 45,629 132,636 432,005
Total assets.................... 107,312 370,290 580,206 819,936 1,679,835
Total debt...................... 4,504 202,416 371,374 667,394 1,866,096
Stockholders' equity (deficit).. 93,836 138,870 151,976 15,096 (392,280)
</TABLE>
__________________
(1) The Company has presented unaudited pro forma net loss per share information
for the year ended February 28, 1994 to reflect shares issued subsequent to
February 28, 1993 in connection with the investment in the Company by Apollo
and the cancellation of amounts due to the Company, as if they were issued
on March 1, 1994.
(2) Net loss per common share amounts include the accrual of dividends on
convertible preferred stock, which are recorded directly to additional paid-
in capital.
23
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION OF THE COMPANY
The following unaudited pro forma consolidated condensed statement of
operations for the year ended February 28, 1998, gives effect to the UPC
Acquisition and the Argentina Transaction, as if each had occurred as of the
beginning of fiscal 1998. The pro forma consolidated condensed financial
information and notes thereto do not purport to represent what the Company's
results of operations would actually have been if such transactions had in fact
occurred on such dates.
The pro forma adjustments are based upon currently available information and
upon certain assumptions that management believes are reasonable. The unaudited
pro forma consolidated condensed financial information and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and the
related notes thereto, and other financial information pertaining to the Company
including "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
Year Ended February 28, 1998
----------------------------------------------------------------
Pro Forma Adjustments
------------------------------------
The Argentina The UPC
Historical Transaction(1) Acquisition(2) Pro Forma
----------------------------------------------- -------------
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS:
Service and other revenue............................... $ 98,047 $(17,627) $163,399 $ 243,819
Management fee income from related parties.............. 575 -- -- 575
Operating expense....................................... (65,631) 8,886 (54,787) (111,532)
Selling, general and administrative expense............. (91,356) 5,626 (55,206) (140,936)
Depreciation and amortization........................... (91,656) 3,288 (82,460) (170,828)
--------- -------- -------- ---------
Net operating loss................................... (150,021) 173 (29,054) (178,902)
Equity in income (losses) of affiliated companies, net.. (68,645) 203 44,147 (24,295)
Gain on sale of investment in affiliated company........ 90,020 (90,020) -- --
Interest expense, net................................... (116,482) 7,046 (55,640) (165,076)
Provision for loss on marketable equity securities and
investment related costs............................. (14,793) -- -- (14,793)
Other................................................... (3,520) 1,089 (10,226) (12,657)
--------- -------- -------- ---------
Net loss before extraordinary charge.................... (263,441) (81,509) (50,773) (395,723)
Extraordinary charge for early retirement of debt....... (79,091) -- -- (79,091)
--------- -------- -------- ---------
Net loss................................................ $(342,532) $(81,509) $(50,773) $(474,814)
========= ======== ======== =========
Net loss per common share (3)........................ $ ( 8.77) $ (13.21)
========= =========
Weighted-average number of common shares
outstanding....................................... 39,212 36,042
</TABLE>
____________
(1) Represents elimination of historical Argentina results of operations and
elimination of the gain recorded on sale due to the Argentina Transaction.
(2) Represents the net effect of the UPC Acquisition. On December 11, 1997, the
Company and UPC acquired Philips' entire interest in UPC. In addition to
purchasing Philips' interest in UPC at closing, (i) UPC purchased 3.17
million shares of the Company's Class A Common Stock held by Philips, (ii)
UPC repaid to Philips the accreted amount of UPC's pay-in-kind convertible
notes not acquired directly by UIH, and (iii) UPC made a payment to Philips
in lieu of issuing a previously negotiated stock appreciation right. In
connection with the UPC Acquisition, UPC refinanced all of its existing
consolidated debt, except for approximately NLG123.4 million ($61.1 million
as of December 31, 1997) of project financing and other notes payable. The
UPC Acquisition was financed with (i) approximately NLG813.9 million ($404.0
million as of December 11, 1997) drawn under the Tranche A Facility and
$111.2 million drawn under the Tranche B facility and an approximately
$162.5 million cash investment by UIH. The following consolidated condensed
financial statements of UPC give effect to the above transaction:
(3) Net loss per common share amounts include the accrual of dividends on
convertible preferred stock, which are recorded directly to additional paid-
in capital.
24
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments to UPC Adjustments to UIH
Historical(a) Balances Balances Pro Forma
----------------- ------------------- ------------------ ------------
(In Thousands)
(unaudited)
<S> <C> <C> <C> <C>
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997:
Service and other revenue.............................. $163,399 $ -- $ -- $ 163,399
Operating expense...................................... (54,787) -- -- (54,787)
Selling, general and administrative expense............ (55,206) -- -- (55,206)
Depreciation and amortization.......................... (72,382) (10,078) (b) -- (82,460)
-------- ---------- ---------- ---------
Net operating loss................................... (18,976) (10,078) -- (29,054)
Equity in income of affiliated companies, net.......... 1,643 -- 42,504 (c) 44,147
Interest expense, net.................................. (53,176) (2,464) (d) -- (55,640)
Other.................................................. (10,226) -- -- (10,226)
-------- ---------- ---------- ---------
Net (loss) income.................................... $(80,735) $ (12,542) $ 42,504 $ (50,773)
======== ========== ========== =========
</TABLE>
________________
(a) Represents UPC historical statement of operations balances for the period
from January 1, 1997 to December 10, 1997, prepared in accordance with
United States generally accepted accounting principles.
(b) Represents additional depreciation and amortization as a result of the step-
up in basis of property, plant and equipment, license rights and goodwill.
(c) Represents elimination of the Company's historical equity in losses related
to UPC.
(d) Represents the following:
<TABLE>
<S> <C>
Elimination of historical interest expense on the pay-in-kind convertible notes..................................... $ 14,554
Elimination of historical interest on the refinanced credit facilities.............................................. 15,546
Additional interest expense on the Tranche A Facility (assuming borrowings of $400,000 at an interest rate of 5.5%). (22,000)
Additional interest expense on the Tranche B Facility (assuming borrowings of $111,200 at an interest rate of 9.5%). (10,564)
--------
Total............................................................................................................. $ (2,464)
========
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
The following discussion and analysis of financial condition of the Company
is an excerpt from the Company's Annual Report on Form 10-K for the year ended
February 28, 1998 and should be read in conjunction with the complete
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Company's consolidated financial statements and related notes
thereto contained in the Company's Annual Report on Form 10-K for the year ended
February 28, 1998. Such consolidated financial statements provide additional
information regarding the Company's financial activities and condition.
INTRODUCTION
The Company was formed in 1989 for the purpose of developing, acquiring and
managing foreign multi-channel television, programming and telephony operations
outside the United States. The Company currently, through UPC, owns interests
in multi-channel television operating systems in 11 countries in Europe and in
Israel. The Company has historically accounted for UPC under the equity method.
Beginning December 11, 1997, the Company consolidated the operations of UPC
including its consolidated subsidiaries (the Austria, Belgium, Czech Republic,
France, Netherlands (KTE), Norway, Romania and Slovak Republic operating
systems). The Company, through UIHLA and UAP, holds interests in multi-channel
television operating systems and related business development projects in Chile,
Brazil, Mexico, Peru, Australia, New Zealand, Tahiti, the Philippines and China.
Prior to the Argentina Transaction, the Company consolidated the results of the
Bahia Blanca, Argentina system. The Company also holds interests in a telephony
project in Hungary as well as programming companies for the Australia, Spain,
Portugal, Ireland and Latin America markets.
The Company's consolidated financial statements do not consolidate the
operating results of its minority-owned operating companies. Historically, the
only revenue reflected on the Company's consolidated statements of operations
other than revenue of consolidated subsidiaries was management fees from related
parties and certain operating entities. General and administrative costs include
salaries, employee benefits, rent and other routine overhead expenses of the
Company as well as legal, accounting and consulting fees.
The Company accounts for its share of the income or loss of its operating
companies based on the calendar year results of each operating company. This
creates a two-month delay in reporting the operating company results in the
Company's consolidated results for its fiscal year-end. Based on reported
historical results and the activities of the operating companies, the Company
believes this two-month delay has not had and will not have a significant impact
on reported operating results of the Company.
For those investments in companies in which the Company's ownership
interest is 20% to 50%, its investments are held through a combination of voting
common stock, preferred stock, debentures or convertible debt and the Company
exerts significant influence through board representation and management
authority, or in which majority control is deemed to be temporary, 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 affiliates, limited to the extent of the Company's
investment in and advances to the affiliates, including any debt guarantees or
other contractual funding commitments. The Company's proportionate share of net
earnings or losses of affiliates includes the amortization of the excess of cost
over net tangible assets acquired.
The cost method of accounting is used for other holdings in which the
Company's voting interest is less than 20% and where the Company does not exert
significant influence, except for its holdings of marketable equity securities.
For holdings of marketable equity securities in which the Company's voting
interest is less than 20% and where the Company does not exert significant
influence, the holdings are carried at fair market value.
The Company is continually reviewing and evaluating the capitalization of,
and its ownership position in, its operating companies, as well as the possible
acquisition of new operations and the related financings of such transactions.
Although the Company has no such plans currently, the Company routinely
considers seeking, and may in the future seek, to raise capital through the
sale, publicly or privately, of debt or equity securities of its operating
companies.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations, its
development opportunities and its investments in and development of its
operating systems primarily through the
26
<PAGE>
sale of equity and debt securities as well as through the sale of appreciated
assets. Since 1989, the Company has raised total gross cash proceeds of
approximately $287.3 million from the sale of its common equity in a series of
private transactions and public offerings and approximately $606.3 million from
the sale of Senior Notes, net of $531.8 million used to redeem previous note
offerings.
OBLIGATIONS
From November 1994 through February 1996, the Company raised total gross
proceeds of approximately $325.9 million from the public and private offerings
of $599.4 million aggregate principal amount at maturity of 14% senior secured
discount notes (the "Pre-1998 Senior Notes"). In February 1998, the Company
raised total gross proceeds of $812.2 million from a private offering of senior
secured discount notes (the "1998 Notes"). The Company used $531.8 million of
the proceeds (which included approximately $65.6 million for tender premiums and
associated costs) to repurchase the Pre-1998 Senior Notes. The Senior Notes were
issued at a significant discount from their aggregate principal amount at
maturity and will accrete at a rate of 10.75% per annum, compounded semi-
annually to an aggregate principal amount on February 15, 2003 of $1.375
billion. Cash interest will commence to accrue on the 1998 Notes on February 15,
2003. Commencing August 15, 2003, cash interest on the Senior Notes will be
payable on February 15 and August 15 of each year until maturity at a rate of
10.75% per annum. The Senior Notes will mature on February 15, 2008, and will be
redeemable at various premiums to par at the option of the Company, on or after
February 15, 2003. The Senior Notes are secured by a first priority lien on the
capital stock and intercompany notes to the Company of UIPI and UIHE. The
Company will hold its future investments in, and conduct its future operations
through, UIPI and UIHE.
In December 1995, in connection with the Company's acquisition of an
additional 40% economic interest in Austar, the Company issued 170,513 shares of
its Convertible Preferred Stock, Series A ("Series A Preferred Stock"), having a
liquidation value at issuance of approximately $29.8 million as partial
consideration for the 40% interest it acquired in Austar (increasing its
interest at that time to 90%). In June 2000, the Company will be required to
redeem the Series A Preferred Stock not previously converted at the then
liquidation value. Assuming that none of the Series A Preferred Stock is
converted prior to redemption, the total cost to the Company of redeeming the
Series A Preferred Stock would be approximately $35.7 million.
SUBSIDIARY CREDIT FACILITIES
Since its formation in July 1995, UPC has funded the construction,
upgrading and operations of its operating companies and development projects
through cash from operations, proceeds from debt facilities of certain of its
operating companies and cash contributed by UIH upon formation of UPC. As part
of the UPC Acquisition, (i) UPC purchased 3.17 million shares of Class A Common
Stock of the Company held by Philips, (ii) UIH purchased part of the accreted
amount of UPC's 9.96% Series A and 10.03% Series B Convertible Pay-in-Kind Notes
(the "PIK Notes") and redeemed them for shares of UPC, (iii) UPC repaid to
Philips the remaining accreted amount of the PIK Notes, (iv) UPC purchased
Philips' interest in UPC and (v) the Company made a payment to UPC, with UPC in
turn making a payment to Philips, in lieu of the issuance of a stock
appreciation right by UPC. The Company effectively owns 100% of UPC as a result
of the UPC Acquisition, except for shares held by a foundation benefiting UPC
employees and management, pursuant to UPC's equity incentive plans. The final
purchase price (excluding transaction-related costs) was $425.2 million,
comprised of $168.7 million for the purchase by the Company and repayment by UPC
of UPC's PIK Notes, $33.2 million allocated to the purchase by UPC of 3.17
million shares of the Company's Class A Common Stock and $223.3 million
allocated to the purchase of Philips' interest in UPC. The UPC Acquisition was
funded by a long-term revolving credit facility through UPC with a syndicate of
banks (the "Tranche A Facility") ($151.5 million), a bridge bank facility
through a subsidiary of UPC (the "Tranche B Facility") ($111.2 million) and a
cash investment by the Company of $162.5 million. The maximum amount available
under the Tranche A Facility is approximately NLG1.1 billion ($544.6 million as
of December 31, 1997), of which approximately NLG479.0 million ($237.1 million
as of December 31, 1997) was used to repay existing debt of UPC in conjunction
with the UPC Acquisition. UPC plans to use any additional borrowings under such
facility for general corporate purposes, including capital expenditures, working
capital requirements of its subsidiaries and acquisitions.
In addition to contributions from the Company, UAP has funded its
operations, primarily in Australia, through private debt offerings by UIH A/P.
In 1996 and 1997, UIH A/P raised total gross proceeds of approximately
27
<PAGE>
$255.0 million from the sale of its 14% senior discount notes due 2006 (the "UIH
A/P Notes"). The UIH A/P Notes currently accrete interest at a rate of 14.75%
compounded semi-annually. Upon the sale by UIH A/P of equity securities
generating gross proceeds of at least $70.0 million, the UIH A/P Notes will
accrete interest at a rate of 14%. In addition, Austar has in place an A$200.0
million ($130.1 million as of December 31, 1997) senior bank facility (the
"Austar Bank Facility"), proceeds of which are being used to finance the
installation of equipment for new subscribers 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. This term loan facility will be
available to the extent that any drawdown, if added to the existing aggregate
outstanding balance under sub-facilities (i) and (ii), would not exceed five
times annualized cash flows (as defined), and upon Austar having achieved and
maintained total subscribers of at least 200,000. The working capital facility
is fully repayable on June 30, 2000. The cash advance facility is fully
repayable pursuant to an amortization schedule beginning December 31, 2000 and
ending June 30, 2004. As of December 31, 1997, Austar had drawn the entire
amount of the working capital facility and the cash advance facility totaling
A$110.0 million ($71.5 million as of December 31, 1997). Although management
does not expect to meet the requirements for drawing down the term loan facility
during 1998, they have engaged the lender under the Austar Bank Facility in a
discussion regarding an amendment to the Austar Bank Facility. If approved, such
an amendment would allow Austar to draw all or a portion of the A$90.0 million
term loan facility in advance of the time period currently envisioned. There can
be no assurance, however, that such an amendment will ultimately be approved.
UIHLA has funded its operations through $110.0 million drawn under a bank
credit facility in April 1997. The credit facility was repaid in full in
October 1997 with proceeds from the Argentina Transaction. Subsequent to the
Argentina Transaction, UIHLA arranged a $40.0 million short-term bank facility
with Toronto Dominion (Texas), Inc. (the "UIHLA Revolving Credit Facility"), due
November 25, 1998. The outstanding balance under this facility as of February
28, 1998 was $33.0 million.
The indentures and credit agreements associated with the Senior Notes, the
UIH A/P Notes, the Tranche A Facility and Tranche B Facility at UPC, the UIHLA
Revolving Credit Facility and the Austar Bank Facility place restrictions on the
Company and its restricted subsidiaries with respect to incurring additional
debt and paying dividends.
CASH SOURCES
The Company had $337.2 million of unrestricted cash, cash equivalents and
short-term investments on hand as of February 28, 1998. The Company advanced
approximately $94.7 million to subsidiaries subsequent to February 28, 1998,
which was utilized primarily to repay existing subsidiary level credit
facilities. The Company believes that this cash balance, combined with
internally generated cash flow and amounts available under the existing credit
facilities of its subsidiaries, will provide it with sufficient capital to meet
the growth plans of its existing subsidiaries and affiliates for the foreseeable
future. In addition, UIH is considering the sale of a number of its operations.
If the Company completes any such sales, it intends to use the proceeds from
such sales to reduce debt and finance the growth of its existing operations. To
the extent the Company pursues new acquisition or development opportunities, the
Company would need to raise additional capital, either through issuances of its
debt or equity securities or through operating company borrowings.
In conjunction with the issuance of the November 1994 14% Senior Notes, the
Company issued 394,000 warrants to purchase a total of 1,786,699 shares of Class
A Common Stock at a price of $15 per share. Holders of the warrants required
the Company to purchase a total of 76,070 warrants during a put option period in
February 1996. The remaining 317,930 outstanding warrants (representing
1,441,739 shares of Class A Common Stock) are exercisable at any time before
November 15, 1999, and would result in proceeds to the Company of approximately
$21.6 million, if exercised. On November 17, 1997, pursuant to the terms of the
indentures governing the UIH A/P Notes, UIH A/P issued warrants to purchase a
total of 488,000 shares of its common stock, which represented 3.4% of its
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. There can be no assurance that
any of the warrants will be exercised.
28
<PAGE>
Because the Company does not currently generate positive operating cash
flow, its ability to repay its obligations on the 1998 Notes at maturity in 2008
as well as any other obligations that become due before such time will be
dependent on developing one or more additional sources of cash. The Company does
not expect any operating company to pay dividends in the foreseeable future and
accordingly does not expect any distributions to be made by any affiliates, many
of whom are restricted due to existing loan agreements. The Company plans to
develop additional cash flow through the addition of revenue generating services
to many of its systems, as well as by obtaining controlling ownership of systems
whose cash flows it will be able to access, subject to existing credit facility
restrictions. There can be no assurance that the Company will be able to
generate additional cash flow through this strategy.
CURRENCY CONVENIENCE TRANSLATION
Certain foreign currency amounts have been converted to U.S. dollars based
on the following convenience translations as of December 31, 1997:
<TABLE>
<CAPTION>
CONVENIENCE
TRANSLATION RATE
COUNTRY CURRENCY PER US$1.00
------- -------- ----------------
<S> <C> <C>
Austria................ Austrian schilling (AS) 12.6310
Australia.............. Australian dollar (A$) 1.5378
Belgium................ Belgian franc (BEF) 37.0650
Czech Republic......... Czech koruna 34.4380
France................. French franc (FF) 6.0135
Ireland................ Irish punt 0.7018
Israel................. New Israel shekel (NIS) 3.5342
Malta.................. Maltese lira (M(Pounds)) 0.3910
Mexico................. Mexican peso 8.0700
Netherlands............ Dutch guilder (NLG) 2.0265
New Zealand............ New Zealand dollar (NZ$) 1.7161
Norway................. Norwegian kroner (NKr) 7.3643
Philippines............ Philippine peso 39.9000
Romania................ Romanian leu 7,983.0000
Slovak Republic........ Slovak koruna 34.8100
</TABLE>
29
<PAGE>
BUSINESS
The Company, through its subsidiaries and affiliates, is a leading provider
of multi-channel television services outside the United States, owning and
operating systems in over 20 countries around the world. UIH operates systems in
three geographic regions: (i) Europe, primarily through UPC, which is one of
Europe's largest privately owned multiple system operators; (ii) Asia/Pacific,
including through its indirect 98%-owned interest in Austar, which is the
largest provider of multi-channel television services in regional Australia; and
(iii) Latin America, including through its 34% interest in VTR Hipercable, which
is the largest multi-channel television provider in Chile. These operating
systems served an aggregate of approximately 3.1 million subscribers and passed
approximately 7.7 million of the approximately 9.9 million homes in their
respective service areas at December 31, 1997. UIH's equity interest as of such
date in those subscribers, homes passed and homes in the Company's service areas
was approximately 2.0 million, 4.9 million and 6.1 million, respectively.
Below is a description of the Company's operating companies.
- --------------------------------------------------------------------------------
SUMMARY OPERATING DATA FOR THE COMPANY'S OPERATING SYSTEMS
The financial and other operating data set forth below reflect aggregate
statistics of multi-channel television operating systems in which the Company
has an ownership interest. See "--United Pan-Europe Communications N.V.," "--
UIH Asia/Pacific Communications, Inc." and "--UIH Latin America, Inc."
<TABLE>
<CAPTION>
At
For the Year Ended December 31,
At December 31, 1997 December 31, 1997 1997
---------------------------------------------------- ----------------------- ---------------
Homes Basic UIH Net Equity
In Service Homes Basic Pene- Adjusted Ownership
Area Passed Subscribers tration Revenues EBITDA (1) Interest
---------- ----------- -------------- --------- ---------- ------------ ---------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
UPC(2):
UPC ESTABLISHED SYSTEMS
Austria................. 1,064,000 890,305 435,859 49.0% $ 80,603 $ 39,864 95.0%
Belgium................. 133,000 133,000 127,529 95.9 19,170 7,491 100.0
Netherlands
A2000................ 572,000 565,740 518,160 91.6 50,062 16,662 50.0
KTE.................. 98,393 95,442 90,671 95.0 10,199 6,276 100.0
Combivisie(3)........ 150,000 142,000 139,249 98.1 14,456 9,463 100.0
Norway.................. 529,924 457,551 319,654 69.9 45,108 18,199 87.3
---------- --------- --------- -------- --------
Subtotal............ 2,547,317 2,284,038 1,631,122 219,598 97,955
---------- --------- --------- -------- --------
UPC DEVELOPMENT
PROJECTS
Czech Republic.......... 271,100 145,650 51,571 35.4 3,501 (3,144) 100.0
France.................. 86,000 28,267 6,758 23.9 1,257 (2,305) 99.6
Romania................. 150,000 69,620 40,188 57.7 990 628 90.0(4)
Slovak Republic......... 36,239 22,193 18,476 83.3 768 (401) 75.0(5)
---------- --------- --------- -------- --------
Subtotal............ 543,339 265,730 116,993 6,516 (5,222)
---------- --------- --------- -------- --------
UPC EQUITY INVESTMENTS
Hungary................. 300,000 290,690 266,775 91.8 25,706 7,987 50.0
Ireland................. 355,000 350,989 136,160 38.8 34,270 12,586 20.0
Israel.................. 360,000 350,392 241,874 69.0 98,419 50,898 23.3
Malta................... 179,000 153,917 58,033 37.7 12,038 5,049 25.0
---------- --------- --------- -------- --------
Subtotal............ 1,194,000 1,145,988 702,842 170,433 76,520
---------- --------- --------- -------- --------
OTHER UIH EUROPE:
Hungary................. 85,000 84,037 88,455(6) 14,403 7,903 46.3
---------- --------- --------- -------- --------
Total Europe............. 4,369,656 3,779,793 2,539,412 410,950 177,156
---------- --------- --------- -------- --------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At
For the Year Ended December 31,
At December 31, 1997 December 31, 1997 1997
----------------------------------------------------------- ------------------------- ---------------
Homes Basic UIH Net Equity
in Service Homes Basic Pene- Adjusted Ownership
Area Passed Subscribers tration Revenue EBITDA (1) Interest
--------------- ------------ --------------- ----------- ---------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
UAP(7):
Australia.............. 1,635,000 1,589,000 196,205 12.3% $ 56,230 $(16,925) 98.0%
New Zealand............. 141,000 23,518 3,059 13.0 422 (6,014) 63.7
Philippines............. 600,000 175,414 66,112 37.7 5,589 1,220 39.2(8)
Tahiti.................. 31,000 20,128 6,304 31.3 4,118 229 88.2
---------- --------- --------- -------- --------
UAP Total............ 2,407,000 1,808,060 271,680 66,359 (21,490)
---------- --------- --------- -------- --------
UIHLA:
Chile.................. 2,321,000 1,495,527 372,673 24.9 114,318 21,348 34.0
Brazil
TV Show Brasil......... 387,000 387,000 11,232 2.9 6,469 307 40.0(9)
Jundiai.............. 70,000 55,270 20,278 36.7 8,571 2,815 46.3
Peru................... 140,000 33,179 6,644 20.0 1,462 (1,154) 99.2(10)
Mexico.................. 341,600 173,309 54,349 31.4 10,483 2,965 49.0
---------- --------- --------- -------- --------
UIHLA Total.......... 3,259,600 2,144,285 465,176 141,303 26,281
---------- --------- --------- -------- --------
UIH Total........... 10,036,256 7,732,138 3,276,268 618,612 181,947
========== ========= ========= ======== ========
</TABLE>
_________________
(1) Adjusted EBITDA represents profit (loss) as determined using GAAP of the
reporting country, which differ from those of the United States, although
not materially with respect to the calculation of revenues and Adjusted
EBITDA, plus net interest expense, income tax expense, depreciation,
amortization, minority interest, management fee expense payable to the
Company and other non-operating income (expense) items.
(2) Approximately 8.4% of UPC's outstanding shares are registered in the name
of a foundation administering UPC's employee equity incentive plan to
support stock issuances. As of the date hereof, awards equivalent to
approximately 5.5% of UPC's outstanding shares have been granted to
employees under the plan.
(3) UPC acquired the Combivisie system effective January 1, 1998. See "--United
Pan-Europe Communications N.V.--The Netherlands (Eindhoven): KTE and
Combivisie."
(4) Varying ownership percentages ranging from 90.0% to 100.0%.
(5) Varying ownership percentages ranging from 75.0% to 100.0%.
(6) Includes 62,224 cable television subscribers and 26,231 cable telephony
subscribers.
(7) UIH holds a 98% interest in UAP.
(8) UAP currently holds a convertible loan, which upon full conversion, if and
when allowed by law, would provide UAP with a 40.0% ownership interest in
the Philippines operating company. In April 1998, this system and another
operator contributed their respective properties to a joint venture in
which UAP holds a 20% interest.
(9) In January 1998, the Company increased its ownership in TV Show Brasil to
45% and in April 1998, exercised its option to purchase the remaining 55%
interest for approximately $12.0 million, subject to receipt of the
required regulatory approvals.
(10) Varying ownership percentages ranging from 99.2% to 100.0%.
- --------------------------------------------------------------------------------
UNITED PAN-EUROPE COMMUNICATIONS N.V.
OVERVIEW
Through UPC, UIH is one of the largest private sector multi-channel cable
television operators in Europe, with interests in well-established systems, as
well as systems under construction, in 11 countries in Europe and in Israel.
UIH effectively holds all of the voting control of UPC and owns all of its
issued and outstanding shares, other than approximately 8.4% of such shares,
which have been registered in the name of a foundation to support UPC's employee
equity incentive plan. The UPC Established Systems consist primarily of large,
developed systems, including systems in Austria, Belgium, The Netherlands and
Norway. With the continued liberalization of the communications market in
Europe, the Company believes UPC is well-positioned within its markets to
exploit anticipated opportunities for growth in video services, Internet/data
services and cable telephony services. As of December 31, 1997, UPC's operating
systems passed a total of approximately 3.6 million homes and had an aggregate
of approximately 2.3 million subscribers and, on an equity basis, UPC's
operating systems passed approximately 2.4 million homes and had approximately
1.5 million subscribers.
31
<PAGE>
The UPC Established Systems have been characterized by very high penetration
rates (ranging from 49.0% to 95.9% as of December 31, 1997), low net churn rates
(a monthly average of approximately 0.625% for the year ended December 31, 1997)
and stable positive cash flow. All of the UPC Established Systems (each of
which has been operating for more than ten years) and many of its other systems
have long-term licenses to provide cable television services in their operating
areas. Although the UPC Established Systems have high penetration rates and low
churn rates, the cash flow per subscriber of these systems has been
significantly lower than levels achieved in the United States and many other
countries in which UIH operates. UPC has been installing fiber optic two-way
digital networks in many of its systems in an attempt to increase revenue and
cash flow per subscriber by offering enhanced communications services such as
impulse pay-per-view, Internet/data services and, where permitted, cable
telephony. UPC also plans to expand its operations by selectively building out
cable infrastructure in certain unserved regions in its existing markets and,
where appropriate, by investing in new development and acquisition
opportunities.
The Company does not expect to contribute additional capital to UPC for its
on-going operating or development requirements, as UPC will finance its
operating systems and development opportunities with its operating cash flow,
asset sales, and possible equity and debt financings, including additional
amounts available under its Tranche A Facility.
AUSTRIA: TELEKABEL
UPC owns 95% of Telekabel, which provides communications services to the
Austrian cities of Vienna, Klagenfurt, Graz, Baden and Wiener Neustadt and is
the largest multi-channel distribution system in Austria with over 40% market
share. Telekabel's largest subsidiary, Telekabel Wien, which serves the city of
Vienna and represents over 87% of Telekabel's total subscribers, is one of the
larger clusters of cable systems in the world, passing approximately 782,800
homes with more than 378,820 subscribers as of December 31, 1997.
UPC is capitalizing on Telekabel's strong market position by expanding
Telekabel's service offerings as its network is upgraded to full two-way
capability. The upgraded network, which passed approximately 339,900 homes or
38% of the total homes passed as of December 31, 1997, allowed Telekabel to
launch an expanded basic service, impulse pay-per-view services and
Internet/data services in 1997. The launch of Telekabel's tiered and pay-per-
view services in Vienna was the first launch of such services by an Austrian
cable television company. In addition, Telekabel plans to launch the initial
phase of cable telephony service in 1998.
Telekabel owns the complete cable system infrastructure for each of its
systems from the headend to the home. Under Austria's new telecommunications
law, however, the owner of a telecommunications network must permit other users
to access its network if certain thresholds are satisfied. In early 1992,
Telekabel Wien initiated the rebuild and upgrade of its existing cable network
in Vienna. The rebuild and upgrade of the network includes the overlay of trunk
lines with fiber optic technology, as well as the replacement of all 45,000 UHF
amplifiers and 60,000 passive network components. The headend is also being
upgraded concurrently with the installation of 200 additional fiber nodes. The
upgrade is expected to be fully completed by mid-1999 and will allow the
operating systems to have full two-way capability, which will enable Telekabel
to increase its channel capacity from 45 to 85 analog channels. Telekabel's new
high capacity 860 MHz two-way network will also provide sufficient bandwidth in
the upstream and downstream to provide the capability for future digital
services as well as enhanced video and communications services.
Telekabel's cable systems compete with a DTH service that is available
throughout Austria. Currently, DTH penetration of the Austrian market is
approximately 33%, concentrated primarily in the rural areas of the country.
DTH penetration in Vienna is approximately 11%. Telekabel competes with DTH
service on the basis of quality of service and superior programming selection.
BELGIUM: RADIO PUBLIC
Radio Public, a 100%-owned subsidiary of UPC, primarily provides
communications services in selected areas of Brussels and nearby Leuven in
Belgium. Radio Public, which currently has over 95% penetration, plans to grow
through the introduction of new services that are not subject to the price
regulations applicable to basic cable services. In late 1996, Radio Public
began phase one of a three-phase program to upgrade its network through fiber
optic overlay of its trunk lines and replacement of all amplifiers. Phase one
is scheduled to be completed by the end of 1998. The
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implementation of full two-way capability will enable Radio Public to increase
its channel capacity from 56 to 72 analog channels.
As Radio Public upgrades portions of its network to full two-way capability,
it plans to introduce new services such as impulse pay-per-view. Radio Public's
management believes that there is a strong demand for such services within its
market as evidenced by the success of Radio Public's expanded basic service,
which was launched in October 1996. In the same month, Radio Public launched a
tiered service of nine channels, the first cable provider in Belgium to launch
such a service, by providing subscribers with advanced analog decoder boxes at a
monthly rental. Introduction of Internet/data service occurred in September
1997. When the upgrade is fully completed in early 1999, Radio Public will also
be in a position to introduce cable telephony services.
Radio Public currently pays copyright fees at the rate of 15% of its basic
services revenue to cover the cost of 15 programs (principally those produced by
public broadcasters). Since 1996, the assembled collecting agencies attempted
to increase copyright fees by 40% but to date, all operators have refused to pay
such an increase. Radio Public believes a limited increase in fees is likely to
occur, and in the past Radio Public has been able to pass such cost increases
through to customers.
With the exception of Etterbeek (15,000 subscribers), where Radio Public has
an agreement with the municipality scheduled to expire in 2016 to operate the
network, Radio Public owns the complete cable system infrastructure for each of
its systems from the headend to the home. Radio Public currently employs 860
MHz distribution technology.
Radio Public currently faces limited competition, the most significant of
which is DTH service. Within Radio Public's service area, however, DTH
competition is limited as local authorities apply a restrictive policy in terms
of building permits and levy taxes on the ownership of satellite dishes. A
second license has been granted to another cable operator in the city of Leuven,
which started operations in 1998. In addition, Radio Public has now applied for
a license outside its current territory in areas where other operators are
present. Radio Public currently competes and will continue to compete primarily
on the basis of the quality and content of its programming packages, as well as
its pricing.
NORWAY: JANCO MULTICOM
Since its acquisition of control, UPC's strategy for its Norway systems has
been to integrate more fully its operating subsidiaries to take advantage of
economies of scale in implementing the technical, operational and marketing
expertise offered by UPC. In an effort to increase its position in the
Norwegian cable television market, UPC acquired from Helsinki Media in January
1997, 70.2% of Janco, a cable system with a non-exclusive license to provide
cable television service in Oslo, Norway. In November 1997, UPC merged
Norkabelgruppen AS ("Norkabel") into Janco forming Janco Multicom, following
which merger UPC retained an 87.3% interest in Janco Multicom. From an economic
perspective, UPC has all the rights and obligations of full ownership of Janco
Multicom, and UPC consolidates 100% of Janco Multicom's financial results. UPC
has the right to acquire on or before July 2, 2001, and Helsinki Media has the
right to put to UPC on July 2, 2001, the remaining interest in Janco Multicom,
for a purchase price of approximately NKr165.9 million ($22.5 million as of
December 31, 1997), subject to certain adjustments based upon the operating
results of Janco Multicom. UPC has deposited NLG47 million ($24.0 million at
December 31, 1997) as collateral against the purchase of the remaining interest
in Janco Multicom.
As a result of the merger, Janco Multicom is Norway's largest cable television
operator with approximately 47% of the total Norwegian cable television market
as of December 31, 1997. Janco Multicom owns and operates 16 cable television
systems located primarily in southeastern Norway and along the southwestern
coast, as well as its main network in Oslo, Norway. The well-established
Norwegian cable television market has high penetration, approximately 70% as of
December 31, 1997, primarily due to poor over-the-air reception in much of
Norway and significant demand for television entertainment. UPC's goals are to
continue to increase Janco Multicom's subscriber base, to improve revenue per
subscriber by providing additional programming and services and to increase per
subscriber revenue in the former Janco Kabel TV systems to equal or exceed the
per subscriber revenue the Company currently receives from the former Norkabel
systems. UPC plans to launch Internet/data services in 1998 and cable telephony
service in 1999.
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Janco Multicom owns the complete cable system infrastructure for each of its
systems from the headend to the home, except for cable and plant located on
housing association property, which is legally owned by the association. Janco
Multicom uses a total of 16 CATV headends and 39 SMATV headends to operate its
cable television systems. Janco Multicom's systems have security devices to
scramble signals to prevent unauthorized receipt of its services. UPC's plan is
to upgrade the network in Norway to full two-way capability, with the exception
of 75,000 homes in southern rural areas. Initially, fiber will extend to nodes
of 2,000 homes; however, the network upgrade has been planned such that each
node can be split further to 500 homes at relatively little incremental cost
should demand for services require it.
All Norwegian cable television companies offer similar levels of service;
therefore, Janco Multicom competes primarily on the basis of price. The DTH
market in Norway is also beginning to grow, as DTH companies, particularly
Telenor, are competing more effectively on price and entrance costs for
subscribers are declining. Janco Multicom's cable television systems also
compete with private SMATV systems. Janco Multicom's systems generally offer
more channels of programming to subscribers and provide better picture quality
than SMATV systems. UPC believes that the quantity and quality of SMATV
programming offered are important to Janco Multicom's competitive position.
THE NETHERLANDS (AMSTERDAM): A2000
A2000, a 50/50 joint venture between UPC and U S WEST, currently enjoys basic
penetration rates of approximately 92% in its two systems that serve Amsterdam,
Landsmeer, Purmerend, Zaanstad and Ouder-Amstel and Hilversum, The Netherlands.
As a result of this high penetration and the rate regulation of basic cable
services in A2000's franchise areas, A2000 has focused its efforts on increasing
its per subscriber revenue growth through the introduction of new services.
A2000 has pursued this strategy, launching a nine channel expanded basic tier in
October 1996, impulse pay-per-view services in April 1997, a cable telephony
service in July 1997 and Internet/data services in October 1997. UPC intends to
draw on the experience it has gained in A2000 as it rolls out enhanced
communications services in its other systems.
The basic programming service content is overseen by a programming council in
each municipality. The programming council retains the right to request the
removal or addition of certain programming in the basic tier as it deems
necessary. The council has no authority over any services beyond the basic
tier. While tariffs for basic programming services are regulated by local
governmental authorities, the recently amended Dutch Media Act provides that the
maximum tariffs may be determined by Dutch governmental order.
A2000 owns the complete cable system infrastructure for each of its systems
from the headend to the home. A2000 is currently in the process of upgrading
its cable network with a fiber optic overlay and is replacing all of its
amplifiers and passive network components. A2000 had in excess of 165,000 homes
rebuilt with full two-way capability at December 31, 1997, with total rebuild
expected to be complete by the end of the third quarter of 1999. The upgrade of
the headend and network will enable A2000 to increase its channel capacity in
its systems from 45 to 85 channels. A2000's initiation of the new 860 MHz two-
way network should also provide sufficient bandwidth in the upstream and
downstream to allow for the capacity of future digital services, as well as
enhanced video and communications services.
To date, the A2000 systems have maintained stable, high penetration rates and
competition from off-air television signals, DTH and local SMATV systems has
been limited. In July 1997, the A2000 systems began offering cable telephony
services on a limited basis in direct competition with the Dutch PTT ("KPN") and
other providers of cable telephony services. UPC believes that A2000 has
negotiated reasonable interconnect agreements, leased line agreements and other
agreements necessary for the cable telephony services the A2000 systems
currently provide.
UPC and U S WEST each currently own 50% of the ordinary share capital of
A2000. A2000 holds 100% ownership in Kabeltelevisie Amsterdam B.V. ("KTA"),
which operates cable systems in Amsterdam, Landsmeer, Purmerend, Zaanstad and
Ouder-Amstel, and holds a 100% ownership in A2000 Hilversum B.V. ("KTH"), which
operates a cable system in Hilversum. The Municipality of Amsterdam owns one
priority share in KTA. UPC's interest in A2000 is expected to be contributed to
United Telekabel Holdings. See "--UPC Acquisitions--UPC Dutch Asset
Rationalization."
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The boards of A2000, KTA and KTH consist of an even number of directors: one
half appointed by U S WEST and one half appointed by UPC. Certain major
decisions require approval by the shareholders with a qualified majority of at
least 75%. The A2000, KTA and KTH management boards consist of at least a chief
executive officer, appointed by UPC, and a chief financial officer, appointed by
U S WEST, as well as other members appointed by both. Certain major decisions
affecting KTA, such as approval of business plans and annual budgets, require
approval of the majority of the supervisory board of KTA, one member of which is
appointed by the Municipality of Amsterdam.
THE NETHERLANDS (EINDHOVEN): KTE AND COMBIVISIE
In Eindhoven, The Netherlands, UPC operates the KTE system, which has basic
penetration of approximately 95%. In July 1997, UPC acquired Kabeltelevisie Son
en Breugel B.V. ("Son en Breugel"), a 5,000-subscriber system in the Eindhoven
cluster. Effective January 1, 1998, UPC acquired certain assets, including the
cable systems of Combivisie. The Company believes it has thus created a large,
densely-populated system with the critical mass necessary to introduce
economically new communications services. Subsequent to the transaction, KTE
and Combivisie became operating subsidiaries of the newly formed Cable Network
Brabant Holding BV ("CNBH"). UPC expects to contribute CNBH to United Telekabel
Holding. See "Prospectus Summary--UIH Asset Rationalization--Consolidations,
Swaps and Acquisitions."
KTE introduced an expanded basic service in October 1996, and expects to
launch impulse pay-per-view services in May 1998 and Internet/data services in
1998 and 1999. UPC intends to roll out these services simultaneously to the
Combivisie system. In addition, UPC plans to introduce the initial phase of
cable telephony services in these systems in early 1999.
KTE owns the complete cable system infrastructure for each of its systems from
the headend to the home. During 1994, KTE upgraded its fiber network by
replacing all of its coaxial trunk with a fiber optic trunk. The new technology
incorporates 860 MHz capability that provides sufficient bandwidth in the
upstream and downstream to allow for the introduction of digital services, as
well as enhanced video and communications services. This upgrade also included
the municipalities for which KTE operates a cable network, representing an
additional 16,000 subscribers, which KTE has agreed to acquire. KTE recently
completed the replacement of its amplifiers and passive network components to
accommodate full two-way capability. UPC expects the Combivisie system to be
fully two-way capable during 1999.
To date, KTE and Combivisie have maintained a high level of penetration
(approximately 95%) and competition from off-air television signals, DTH and
local SMATV systems has been limited.
UPC EQUITY INVESTMENTS (ISRAEL, IRELAND, MALTA AND HUNGARY)
UPC has non-consolidated equity investments in systems in Israel, Ireland,
Malta and Hungary. The Company believes that these systems, which in the
aggregate had approximately 703,000 subscribers at December 31, 1997, have
significant value. As part of the Company's focus on rationalizing its
operations, UPC has recently agreed to acquire additional interests in its
Israel, Malta and Hungary multi-channel television systems and to divest its
interests in the Ireland operating system and programming companies in Hungary
and the Czech Republic.
UII. UII, a Colorado general partnership formed in 1991, holds interests in
multi-channel distribution systems in Israel, Ireland and Malta. UPC and TINTA
each hold a 50% partnership interest in UII. As a consequence of a difference
in capital contributions upon the acquisition by UII of its equity interests in
the entities referred to below, the interests of UPC and TINTA in such entities
cannot directly be deduced from the 50% partnership interest. UPC's current
indirect economic interest in these systems is as follows: 20% in the Ireland
system, 23.3% in the Israel system and 25% in the Malta system. The recently
signed MOUs with TINTA provides for UPC to acquire TINTA's interests in Israel
and Malta and to sell UPC's interest in Princes Holdings to TINTA for a net
payment to TINTA of approximately $71.0 million.
Israel: Tevel. Tevel has exclusive cable television broadcasting franchises
for the entire Tel Aviv metropolitan area, the region of Ashdod-Ashkelon (30
miles south of Tel Aviv) and the Jezreel Valley (80 miles northeast of Tel
Aviv). In April 1998, Tevel acquired a cable television system with franchises
in areas adjacent to Tevel's existing operations. These franchise areas cover
approximately 200,000 homes, giving Tevel a substantial share of the Israeli
multi-channel
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television market. Tevel's growth strategy is to further increase its subscriber
base by completing line extensions within existing franchise areas and to
increase penetration rates by offering a wider variety of programming, including
multimedia and Internet/data services. Future growth in revenues will depend
upon increased penetration rates in built and unbuilt franchise areas,
acquisition and distribution of additional programming that will justify
increases in service rates and increased sales of additional services, such as
impulse pay-per-view services.
Tevel, together with three of the four other Israeli cable television
companies, owns a programming company, I.C.P. Israel Cable Programming Company
Limited ("ICP"). ICP purchases programming rights for subsequent sale to cable
television operators in Israel and produces two cable-exclusive channels: a
general entertainment channel and a movie channel. A children's channel, a
sports channel and a channel showing nature, science and art documentaries are
produced by third parties.
The Company believes that the current pricing of Tevel's pay-per-view services
are competitive with the home video cassette rental and motion picture
entertainment alternatives in Israel. The DTH market in Israel is very small,
as the Company estimates only approximately 10,000 households in the country had
satellite dishes as of December 31, 1997. The Company does not believe that
present DTH services compete with Tevel's systems because Israel is not in the
general transmission path of existing European programming satellites and
equipment capable of receiving those distant signals is relatively expensive.
The Israeli government recently declared, however, its intention to open DTH for
competition in late 1998 or early 1999. Such service, if widely available, may
affect Tevel's existing operations and the price structure of its services.
Ireland: Princes Holdings. Princes Holdings, through two wholly owned
subsidiaries and one 96%-owned subsidiary (collectively, the "PHL Operating
Companies"), owns interests in established cable television systems and has
exclusive franchises through 2001 to construct and operate MMDS networks for
areas covering approximately 355,000 homes, or approximately 69% of all
potential MMDS homes in Ireland. Given the strong demand for more programming
options as evidenced by high subscription rates in existing cable television
systems in Ireland, including those owned by Princes Holdings, the Company
believes that the expansion of multi-channel television services into recently
activated franchise areas presents an opportunity for significant growth in the
number of subscribers. As these franchises are developed, Princes Holdings
expects to become the largest multi-channel television provider in Ireland,
holding franchises covering a service area containing over 32% of the country's
television households. Princes Holdings is currently the largest MMDS operator
in Ireland.
Princes Holdings is currently focusing on improving subscriber penetration
through increased marketing and sales efforts. Princes Holdings plans to offer
additional programming and tiered and packaged services over time to increase
the revenues generated from each subscriber.
Malta: Melita. Melita holds an exclusive franchise to deliver cable
television services for Malta, a group of islands located in the Mediterranean
Sea between Italy and North Africa with a population of approximately 375,000.
The license expires in 2006 and is renewable upon application to and review by
the government. Melita's network currently passes over 86% (approximately
154,000) of the homes on the islands. Because English is widely spoken in
Malta, Melita is able to take advantage of the abundant supply of English
language programming available for licensing from various programming companies.
Melita's growth strategy is to continue to market its services to homes in its
franchise areas, as well as to provide an increased amount of programming to
increase its appeal to subscribers. In 1996, Melita created a "live" sports
channel showing English Premier League Football and, in 1997, Melita introduced
a second "live" sports channel featuring Italian soccer, as well as four other
new channels.
Hungary: Kabelkom. UCI and TWE formed Kabelkom, a Delaware general
partnership, to invest in and further develop cable opportunities in Hungary.
Kabelkom, through its wholly owned subsidiary Kabelkom Kabeltelevizio Kft, to
date has purchased an ownership interest in ten existing Hungarian cable
television systems located in different cities throughout the country, with the
most recent acquisition occurring in August 1996. Kabelkom has substantially
completed the rebuilding and upgrading of its cable infrastructures to support
increased channel capacity. UPC has
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succeeded in increasing revenues per subscriber as it upgrades the systems and
adds new services in step with the growth of Hungary's economy.
In September 1991, Kabelkom launched a pay movie channel (HBO Hungary) to
supply its systems with additional programming as well as for sale to other
cable television operators. The channel currently offers programming consisting
of a broad mix of U.S., European and Hungarian films. Kabelkom licenses HBO
Hungary to other operating systems in addition to the operating systems in which
it has an ownership interest. In February 1995, Kabelkom launched its second
channel of Hungarian language programming, "Spektrum TV," a science and nature
channel. In June 1997, a third channel of Hungarian music was launched.
UPC's ownership interest in Kabelkom was originally held through UCI. In
September 1996, UPC purchased Telewest Europe Group's interest in UCI,
increasing its ownership in Kabelkom from 3.9% to 50%. Generally, UPC and TWE
share distributions in proportion to their respective capital contributions
until each partner has received an amount equal to the capital contributed by it
plus a return on such contributions at an annual rate of 12%. On the basis of
these capital contributions, the respective economic interests currently are
47.2% for UPC and 52.8% for TWE. With respect to ownership in each of the ten
systems, Kabelkom formed local joint ventures with private enterprises or the
municipality that owned and operated the systems. As of December 31, 1997,
Kabelkom held net ownership interests ranging from 70% to 100% in nine of the
ten local Hungarian cable television systems and a minority interest in the
remaining system.
In April 1998, UPC and TWE signed an MOU providing for UPC to acquire TWE's
interest in the Hungary cable television systems owned through Kabelkom, and TWE
and its partners to acquire UPC's ownership interest in the Hungary programming
ventures owned through Kabelkom as well as UPC's ownership in a Czech
programming business. The purchase price for TWE's Hungary cable television
system interests, net of UPC's Hungary and Czech programming interests, is
approximately $9.5 million. The transaction is conditioned on, among other
things, the receipt of governmental and lender approvals, and there can be no
assurance that it will be consummated on these terms, if at all.
UPC DEVELOPMENT PROJECTS
UPC is currently pursuing various development projects throughout Europe,
including projects in the Czech Republic, France, Romania and the Slovak
Republic. UPC is currently building out its franchises and has initiated cable
television operations in each of these countries. Although these development
projects will require more time to realize returns comparable to the returns
generated by the UPC Established Systems, they provide the potential for UPC to
expand beyond its established base. In pursuing development opportunities, UPC
searches for projects that, once developed, would provide clustering and scale
effects comparable to the UPC Established Systems.
OTHER EUROPE
UIH also holds interests in several other operations in Europe, which it
plans to transfer to UPC. These operations include (i) a 46.3% interest in
Monor, a company that is building a fiber-optic telecommunications network in
the Monor region of Hungary with approximately 145,000 homes passed and
approximately 62,000 telephony subscribers and 26,000 cable television
subscribers as of December 31, 1997; (ii) a 33.5% interest in a programming
venture in Spain that had approximately 485,000 subscribers as of December 31,
1997 and (iii) a 75% interest in a programming venture with the Irish national
broadcasting company, producing a general entertainment channel for U.K.
subscription television that had approximately 362,000 subscribers as of
December 31, 1997.
UIH ASIA/PACIFIC COMMUNICATIONS, INC.
OVERVIEW
The Company, through its 98%-owned subsidiary UAP, is a leading provider of
multi-channel television services in Australia and the Asia/Pacific region.
Through its wholly owned subsidiary, Austar, UAP is the second largest
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provider (based on subscribers) of multi-channel television services in
Australia and largest provider of multi-channel television services in regional
Australia, operating MMDS networks and marketing a DTH service in franchise
areas encompassing approximately 1.6 million television homes, or approximately
25% of the total Australian market. UAP, through its 65%-owned New Zealand
subsidiary Saturn, is constructing a wireline cable and telephony system in
Wellington, New Zealand, a market with approximately 141,000 television homes.
In addition, Sun Cable, in which UAP holds a note convertible (subject to local
restrictions) into a 40% ownership interest, owns and operates cable television
systems in 15 markets in the Philippines with an aggregate of approximately
66,000 subscribers and a total of approximately 175,000 television homes in its
operating areas as of December 31, 1997. In April 1998, Sun Cable and SkyCable
formed a joint venture that created the second largest MSO in the Philippines
and the largest MSO outside Manila. UAP holds a 20% interest in this joint
venture. UAP's other businesses include (i) a 25% interest in XYZ Entertainment,
a programming company that provides five channels to the Australian multi-
channel television market, four of which are part of the eight-channel
programming package which includes two movie channels and one sports channel
(the "Core Package") (with a total of approximately 577,000 programming
subscribers as of December 31, 1997) and (ii) up to a 90% economic interest in
Telefenua, the only provider of multi-channel television services in Tahiti,
with MMDS in a market with approximately 31,000 television homes. UIH is
evaluating the sale of its interest in Telefenua.
The Company believes that UAP is well-positioned to capitalize on the
strong demand for multi-channel television and other telecommunications services
in its markets. As of December 31, 1997, UAP's multi-channel television
operating systems had an aggregate of approximately 1.8 million television homes
passed and approximately 272,000 subscribers (excluding programming
subscribers), compared to approximately 324,000 television homes passed and
approximately 29,000 subscribers as of December 31, 1995 (with a substantial
majority of such growth resulting from Austar's build out and subscriber
marketing). During this same period, subscribers to XYZ Entertainment's
programming increased from approximately 65,000 to approximately 577,000.
AUSTRALIA: AUSTAR
Austar is the largest provider of multi-channel television services in
regional Australia (areas outside Australia's six largest cities). Through
1997, Austar had launched MMDS in all of its metropolitan markets and DTH
service in non-metropolitan markets. These markets represent 1.6 million
franchise television homes. Due to the relatively small size and low housing
densities which characterize the markets in its franchise areas, Austar is
primarily utilizing MMDS and DTH wireless technologies to deliver its service.
In addition, Austar has constructed a wireline cable network in Darwin, a market
containing approximately 27,000 serviceable homes, where dense vegetation makes
an MMDS service impractical.
The deployment of MMDS networks in combination with DTH has allowed Austar
to roll out its service quickly and achieve rapid subscriber growth in its
franchise areas. Austar began marketing its services in late 1995 and has grown
its subscriber base from approximately 5,200 subscribers as of December 31, 1995
to approximately 196,000 subscribers as of December 31, 1997. Austar believes
that the ability to be the first provider of multi-channel television services
in each of its markets has allowed Austar to establish a significant market
presence and strong brand awareness. Austar is currently the only provider of
multi-channel television services in substantially all of its franchise areas.
As of December 31, 1997, Austar had launched service in all of its metropolitan
and non-metropolitan markets.
For the year ended December 31, 1997, Austar spent $78.8 million for
construction of MMDS headend facilities, transmission facilities and subscriber
premises equipment for all of its operating systems. Variable installation and
equipment costs for each MMDS and DTH subscriber are currently approximately
$338 and $634 per subscriber, respectively. These subscriber costs are
partially offset by the Company's metropolitan and non-metropolitan installation
charges of $13 to $32 and $130, respectively. Austar retains ownership of all
MMDS and DTH customer premises equipment.
Austar is currently providing the eight-channel Core Package, the most
widely-distributed programming package in Australia, plus three to five
additional channels of programming as its basic package at a monthly rate of
approximately $29, with a one-time installation charge ranging from
approximately $13 to $32 for metropolitan subscribers and $130 for non-
metropolitan DTH subscribers. Austar also integrates all available off-air
channels into its basic channel line up at no additional charge. In March 1996,
Austar began offering its first premium channel, World
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Movies, which consists primarily of foreign movies, art films and features.
Austar is charging approximately $5 per month for World Movies. As of December
31, 1997, Austar had 21,332 subscribers for its World Movies premium channel.
The Core Package is currently the most widely-distributed programming
package in Australia and is the core programming offering of Austar and Foxtel
Management Pty Limited ("Foxtel"). Management believes that approximately 75% of
Australia's multi-channel television subscribers subscribe to the Core Package.
The channels in the Core Package were developed exclusively for the Australian
market by several of the world's leading programming companies, including
Paramount, Sony, Universal, Fox and Viacom. The Core Package consists of the
following eight channels:
<TABLE>
<CAPTION>
CORE CHANNEL PROGRAMMING GENRE
------------ -----------------
<S> <C>
Showtime..................... premium feature movies
Encore....................... library movies
Fox Sports................... sports
TV-1......................... general entertainment
Discovery.................... documentary, adventure, history and lifestyle
Nickelodeon/Nick at Nite..... children's and family entertainment
Arena........................ general entertainment
Channel [V].................. music video
</TABLE>
Austar recently signed new programming agreements that give it access to
all of Australia's most popular channels, including channels that were
previously unavailable to it. In addition, these new agreements, which involve
arrangements with both Foxtel and Optus, allow Austar to tier certain channels
and thereby more effectively segment its market. Austar's agreement with Optus
includes the creation of a 50/50 joint venture for the ownership and operation
of a satellite distribution platform that currently provides satellite
transmission services to Austar. As a result of these programming agreements,
Austar believes it has several economic and contractual advantages over
potential competing multi-channel television providers in its markets.
Also as of May 19, 1998, Austar was granted additional programming rights
by Optus which would permit the carriage of certain channels of programming not
previously available to Austar. The specific packages of service to be offered
by Austar pursuant to these arrangements has not yet been concluded.
Under the terms of the Austar Bank Facility, the termination of Austar's
franchise agreements with Australis is an event of default if (i) the
termination is initiated by Austar, (ii) the termination is not rectified within
seven days and (iii) the termination would likely have a material adverse effect
on Austar. Austar received the advance consent of the lenders under the Austar
Bank Facility to terminate its franchise agreement with Australis, and such
banks have not given notice that a termination would constitute a material
adverse effect. Austar believes that, based upon its successful migration to
the signal platform and programming agreements described above, there will be no
such material adverse effect.
Austar's monthly "churn" (calculated as total disconnects as a percentage
of average subscribers) averaged 5.4% during 1996 and declined to 4.2% during
1997. Austar believes that this ratio is likely to continue to decline in the
future due to several factors, although there can be no such assurances. Austar
plans to focus more on rural, non-metropolitan growth in future years.
Approximately 33% of Austar's total serviceable homes are in its non-
metropolitan franchise area, but only 21% of its total subscribers are rural
customers. Because non-metropolitan customers normally pay a higher installation
rate, churn is generally less than the churn for metropolitan subscribers.
During 1997, Austar's average monthly churn rate in its non-metropolitan markets
was approximately 2%. Furthermore, Austar has implemented several operational
plans to decrease churn, including direct debit banking for customers, customer
retention and loyalty programs, and complimentary installs on customer transfers
within the same service region. Finally, the Company is in the process of
improving the breadth and quality of its programming package through the
negotiation and launch of additional sports and other programming products.
39
<PAGE>
The substantial majority of Austar's metropolitan markets are either small
(i.e., approximately 20,000 homes), and/or have relatively low household
densities (generally 25 to 75 homes per square kilometer as compared to 100 to
130 homes per square kilometer in Australia's largest cities). As a result,
Austar believes that its metropolitan markets generally do not have sufficient
density to justify the construction of competitive wireline cable systems.
While UAP believes household densities could potentially support wireline cable
construction in areas representing approximately 20% of Austar's total franchise
homes, the relatively small size of these markets reduces the attractiveness of
constructing a competitive cable network. In addition, Austar, as a licensed
subscription television provider, is authorized to build wireline cable systems
in its markets and, where appropriate, could construct wireline cable systems.
With the exception of the Foxtel cable television system currently extending
into Austar's 116,000-home Gold Coast metropolitan market and a small cable
television system in the 14,000-home market of Mildura, Austar does not
currently have any operational subscription television competitors in its
operating areas. In the Gold Coast, Austar is currently providing 17 channels
of programming as its basic package, which includes the Core Package as well as
nine additional channels, at a monthly rate of approximately $23 with a one-time
installation charge of approximately $13. Foxtel offers the Core Package as
well as 17 other satellite or locally originated channels for a monthly fee of
$28 and an installation charge of $19. At December 31, 1997, Austar had 17,000
subscribers in the Gold Coast and estimates that Foxtel has 8,000 subscribers in
this market.
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 $50.0-$75.0 million to continue on its current expansion path for
the period from April 1, 1998 to December 31, 1998 and approximately $50.0-$75.0
million for similar expansion plans for 1999. The sources of funds for such
expansion may include the raising of private or public equity, continued
investment by UIH, the drawdown of the remaining amount ($58.5 million as of
December 31, 1997) under the Austar Bank Facility (assuming that certain
financial ratios are met, which ratios are not currently being met) or the sale
of non-strategic assets. The Company may or may not be successful in completing
all or any of such financings. The Company believes, however, that its committed
financial support combined with, if necessary, reductions in Austar's planned
capital expenditures are sufficient to sustain Austar's operations through at
least early 1999.
NEW ZEALAND: SATURN
UIH A/P owns 65% of Saturn, which launched cable television service in 1996
and telephony service in April 1998 on the initial portions of its hybrid fiber
coaxial ("HFC") network that will allow it to provide multi-channel television
services as well as business and residential telecommunications services in the
Wellington area, encompassing 141,000 homes. Wellington is New Zealand's
capital and second largest city. The Company launched service in portions of
this system in September 1996 and expects construction to be completed by mid-
1999. Saturn's system will allow the integrated delivery of pay TV, telephony,
Internet access, high speed data and future interactive services. Saturn
recently executed an interconnect agreement that will allow it to provide local
residential and business telephone services. By bundling both subscription
television and telephony services, Saturn will be able to offer pricing
discounts across both services, which management believes will provide an
advantage over competitors that offer only one service. In April 1998, Saturn
launched a full complement of telephone services to both residential and
business markets. Saturn's cable system also passes approximately 6,000 homes
on the Kapiti Coast north of Wellington. As of December 31, 1997, Saturn's
activated networks passed approximately 24,000 homes and serviced approximately
3,000 subscribers. In addition, Saturn has secured additional rights to use
existing poles to attach its network cable in markets representing 500,000
homes, subject to local planning approval, and is exploring the possibility of
expanding its networks and services to these markets.
Saturn competes with four broadcast networks as well as several other free-
to-air regional channels and Sky TV ("Sky"), the largest provider of
subscription television services with a five-channel encrypted UHF subscription
television service. Sky has recently announced a launch of DTH service in the
second half of 1998. Telecom New Zealand ("Telecom"), New Zealand's largest
telecommunications service provider, is the primary competition to Saturn's
planned local loop telephony service.
The Company expects that Saturn will require additional fundings in the
future. Saturn's capital needs include capital for the completion of the
network required by Saturn to offer cable television and telephony services and
the
40
<PAGE>
capital required to install customers. UIH currently estimates that its portion
of the total funding required for Saturn is approximately $50.0-$55.0 million
for the period from April 1, 1998 until Saturn has sufficient cash flows from
operations to cover such needs, although there can be no assurances that further
additional capital will not be required. Of this amount, approximately $35.0
million is required as a fixed cost to complete the construction of the network,
and the remainder is required as a result of the installation of customers. The
sources of funds for such expansion may include the raising of private or public
equity, continued investment by UIH, the raising of equipment and/or bank
financing (where the Company has already commenced discussions with several
potential lenders) or the sale of non-strategic assets. The Company may or may
not be successful in completing all or any of such financings. The Company
believes, however, that its committed financial support combined with, if
necessary, reductions in Saturn's planned capital expenditures, are sufficient
to sustain Saturn's operations through at least early 1999.
AUSTRALIAN PROGRAMMING: XYZ ENTERTAINMENT
Through its 25% interest in XYZ Entertainment, UIH A/P provides four
channels (Discovery, Nickelodeon/Nick at Nite, Channel V and Arena or the "XYZ
Channels") of the eight channels which are distributed as the Core Package, the
most widely-distributed programming package in Australia. During 1997, XYZ
Entertainment also launched another channel, Lifestyle.
PHILIPPINES: SUN CABLE
UAP holds a note in Sun Cable, which, upon certain events, is convertible
(subject to certain local regulatory restrictions) into a 40% equity interest in
Sun Cable, the third largest cable television operator in the Philippines with
wireline cable television systems in 15 markets that had a total of
approximately 600,000 television homes at December 31, 1997. Sun Cable is also
exploring the provision of cable telephony services over its networks, many of
which are HFC. At three lines per 100 persons, the Philippines' telephone
penetration rate is currently one of the lowest in the world.
In April 1998, Sun Cable and SkyCable, the largest multi-channel television
service operator in the Philippines, formed a joint venture into which Sun Cable
contributed its properties and SkyCable contributed its multi-channel television
properties outside of Manila, and in which SkyCable will hold a 51% interest and
Sun Cable will hold a 49% interest. The joint venture is the second largest
multi-channel television operator in the Philippines and the largest outside the
Manila metro area with approximately 160,000 subscribers and approximately 1.3
million franchise homes.
TAHITI: TELEFENUA
UIH A/P has an up to 90% economic interest in Telefenua, which operates a
16 channel MMDS in a franchise area that, as of December 31, 1997, included
approximately 20,000 serviceable homes. The Company and its partners are in the
early stages of negotiations relating to the sale of all or a portion of
Telefenua to a local strategic investor, although there can be no assurance that
the Company will conclude such a transaction.
UAP DEVELOPMENT OPPORTUNITIES
UAP is engaged in the origination and development of new opportunities to
construct, acquire or distribute multi-channel television systems and services
in newly emerging markets throughout the Asia/Pacific region. These development
projects include potential investments and/or acquisition opportunities in
Taiwan, Japan, Indonesia and Malaysia.
UIH LATIN AMERICA, INC.
OVERVIEW
Through UIHLA, a wholly owned subsidiary of the Company, UIH owns interests
in and operates multi-channel television distribution systems in Chile, Brazil,
Mexico and Peru. The Company believes that many countries in Latin
41
<PAGE>
America are characterized by rapidly growing economies, increasing political
stability, declining inflation and low multi-channel television penetration. In
addition, many Latin American countries are placing an emphasis on privatization
of businesses. UIHLA's current strategy is to (i) increase the subscribers,
revenues and cash flows of its existing, larger core operating companies and
(ii) purchase significant or majority ownership positions in new multi-channel
television operating companies and/or development projects in Latin America.
UIHLA currently owns a 34% interest in VTRH, the largest cable television
operator in Chile, serving an estimated 57% of the total subscribers in Chile as
of December 31, 1997. UIHLA is currently evaluating for sale its ownership
positions in (i) systems in Mexico, which it currently plans to divest in order
to reduce debt and (ii) Jundiai, a system located in Jundiai, Brazil. The
Company anticipates that a portion of the proceeds of any such sales will be
used to repay certain UIHLA indebtedness.
CHILE: VTRH
As of December 31, 1997, VTRH passed a total of approximately 1,478,900
cable homes and had approximately 369,200 total pay television subscribers. In
June 1997, VTRH launched cable telephony operations in one 18,000-home area of
Santiago, and as of December 31, 1997, VTRH had passed approximately 16,700
cable telephony homes with approximately 3,500 cable telephony subscribers. VTRH
expects that its packaging of video, Internet/data and cable telephony services
will position it as a fully integrated provider of telecommunications services.
VTRH, which distributes television signals through the use of wireline and
wireless cable, is currently the only operator of MMDS in the Santiago
metropolitan area (where 40% of the Chilean population resides) and is the only
operator of DTH in Chile. VTRH has upgraded approximately 80% of its network to
technology that will eventually support cable telephony operations and should
enable the Company to offer other interactive services such as Internet/data
access and impulse pay-per-view.
Historically, VTRH's basic cable service has included all programming,
including soccer matches, movie channels and special events, in a single package
for a basic monthly fee. The fee for the package is not constant, but rather
varies depending on the geographic area of the subscriber, the market size, the
number of channels being provided and the level of competition. More recently,
however, VTRH has introduced tiered services with premium channels sold on an a
la carte basis. Like most Latin American operators, VTRH's programming relies
mainly on international sources such as the United States, Europe, Argentina and
Mexico to compile their channel lineups. Domestic cable TV programming is
beginning to develop, however, particularly around local sporting events, such
as soccer matches.
VTRH has budgeted approximately $48 million for capital expenditures in
1998 primarily for the equipment necessary to upgrade certain portions of the
network for cable telephony services and for additional cable infrastructure.
VTRH expects to fund these expenditures from operations and project financing.
The Chilean cable television market has only two dominant providers of
cable television (i) VTRH with approximately a 60% market share and (ii)
Metropolis-Intercom S.A. ("Metropolis-Intercom"), a joint venture between
Tele-Communications, Inc. ("TCI") and the local telephony provider, with
approximately a 40% market share. As of December 31, 1997, Metropolis-
Intercom had approximately 250,000 subscribers, 1.4 million homes passed, a
18% penetration and 7 headends, while as of the same date, VTRH had
approximately 373,000 subscribers, 1.5 million homes passed, a 25%
penetration and 36 headends. Because Metropolis-Intercom leases most of its
network from the local telephony provider, the Company understands that
Metropolis-Intercom is prohibited from offering telephony services.
UIHLA owns a 34% interest in VTRH, which ownership interest will be
adjusted upward (not in excess of 50%) based upon a valuation currently being
conducted by VTRH's shareholders and their respective advisors, although there
is no assurance that any upward adjustment will be significant. In connection
with the formation of VTRH, UIHLA, VTR S.A. and Compania Nacional de Telefonos
and Telefonica del Sur S.A., VTRH's other shareholders, agreed
to reset ownership percentages based upon independent valuations of the
respective assets each party contributed as of December 31, 1997. Following such
ownership percentage adjustments, if any, UIHLA, at its sole election, may
increase its ownership to 50% at a purchase price based upon the appraised value
of VTRH.
42
<PAGE>
BRAZIL: JUNDIAI AND TVSB
UIHLA currently has ownership interests in two systems in Brazil: (i) a
46.3% interest in Jundiai, which holds nonexclusive cable television licenses
for the city of Jundiai and (ii) a 45.0% interest in TVSB, an owner and operator
of a 31 channel exclusive license MMDS networks. As of December 31, 1997,
UIHLA's Brazilian operations passed a total of approximately 442,300 homes and
had estimated total subscribers of approximately 31,500. UIHLA is currently
evaluating a sale of its 46.3% interest in Jundiai to them in order to focus all
of its cable operations on the new license tender process. In January 1998,
UIHLA increased its interest in TVSB to 45%, and in April 1998, exercised its
option to purchase the remaining 55% interest for approximately $12.0 million,
subject to receipt of the required regulatory approvals.
MEXICO: MEGAPO
UIHLA and its Mexican partner recently engaged an investment bank to
explore the possible sale of the Mexican operations. UIHLA plans to use proceeds
of any such sale to reduce indebtedness at UIHLA. UIHLA has a 49% interest in
subsidiaries of Megapo in Mexico, one of the largest multi-channel television
markets in Latin America with over 14.6 million television households and two
million multi-channel television households. As of December 31, 1997, Megapo
owned and operated cable television systems with approximately 54,400
subscribers, approximately 341,600 homes under franchise, and a total of
approximately 173,300 households passed in Acapulco, Cuernavaca, Oaxaca and
Chilpacingo, Mexico. Although UIHLA is restricted by Mexican law to a maximum
49% ownership interest in Megapo, UIHLA's agreement with Megapo provides that
UIHLA may appoint two of the five directors for each of the six operating
subsidiaries and one of the two management committee members for each operating
subsidiary. Generally, most significant actions of an operating subsidiary
require the approval of at least four board members, giving UIHLA veto power
over such actions. Additionally, four of the operating subsidiaries have
entered into technical assistance agreements with a subsidiary of the Company to
provide assistance relating to the design and construction of the cable systems
network, marketing of services and the management of subscriber and information
systems.
In Mexico, cable operators were generally granted exclusive operating
licenses for a given territory although under Mexico's new Telecommunications
Law, exclusive cable franchises were phased out by the end of 1997, opening up
the industry to overbuilds. Cable operators also have faced increased
competition from MMDS operators and DTH, which was introduced in 1997.
PERU: CABLE STAR AND TACNA
UIHLA is currently involved in the development of two cable systems in
Peru: Cable Star, located in Arequipa, Peru's second largest city, in which
UIHLA holds a 99.2% interest, and Tacna, which has a license to provide cable
television services to 30,000 franchise homes in the cities of Tacna and Alto De
La Alianza, in which UIHLA holds a 100% interest. At December 31, 1997, Cable
Star passed approximately 27,100 homes and served approximately 5,200
subscribers representing a basic penetration rate of 19.2%, and Tacna passed
approximately 6,100 homes and had 1,400 subscribers representing a basic
penetration rate of 23.0%.
PROGRAMMING VENTURE: UFC
In 1997, UIHLA and International Family Entertainment ("IFE") created UFC
which was owned 50% by UIHLA and 50% by IFE. In July 1997, UFC launched two
channels of Spanish and Portuguese language family-oriented programming
distributed via satellite throughout Latin America. In September 1997, Fox Kids
International acquired IFE, and UIHLA funded 100% of the cash requirements of
UFC until May 1998. In May 1998, UIHLA acquired the 50% ownership interest from
IFE and then entered into a joint venture with a division of Metro-Goldwyn-
Mayer, Inc. ("MGM") to form MGM Networks Latin America, LLC ("MGM Networks LA").
Under the terms of the joint venture with MGM, UIHLA contributed its 100%
interest in UFC for a 50% interest in MGM Networks LA, and MGM acquired a 50%
interest in MGM Networks LA by contributing the assets of its Brazil channel
(MGM Gold Brazil) and committing to contribute the approximately $9.9 million
(approximately $6.7 million of which was paid at closing). MGM Networks LA has
also entered into a trademark license agreement with MGM for the use of the MGM
brand name and also into a program license agreement to acquire programming from
MGM. As of May 1998, MGM Networks LA distributed its signal to more than 3
million homes in 14 countries throughout Latin America.
43
<PAGE>
THE SELLING STOCKHOLDERS
The following table sets forth certain information regarding the Selling
Stockholders, certain of whom previously served as either officers or directors
of the Company or its affiliates, and the Shares offered by the Selling
Stockholders pursuant to this Prospectus.
<TABLE>
<CAPTION>
Shares of Class A Common Stock
Number of Shares to be Beneficially Owned upon
of Class A Completion of the Offering
---------------------------------
Common Stock Number of Shares Percentage of
Name Beneficially Owned(1) Being Offered Number Common Stock
- ------------------------------------------ --------------------------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C>
Giovanini Investments, Ltd. (2)(3)....... 1,383,572 1,383,572 -- --
Giovanini Properties (3)(4).............. 398,568 398,568 -- --
Joseph E. Giovanini(3)................... 40,000 31,851 8,149 *
William J. Elsner(5)..................... 977,839 787,839 190,000 *
William R. Hudon(6)...................... 257,597 234,472 23,125 *
Bernard G. Dvorak(7)..................... 199,371 163,698 35,673 *
</TABLE>
_____________________
* Less than 1%
(1) The Company and certain of its stockholders, including Messrs. Giovanini and
Elsner, are parties to the Stockholders' Agreement that, among other things,
provides for certain arrangements with respect to voting their respective
shares in the election of directors of the Company. This table does not
reflect any deemed beneficial ownership as a result of such agreement. See
"Security Ownership of Certain Beneficial Owners and Management" contained
in the Company's Annual Report incorporated herein by reference.
(2) Represents 1,383,572 shares of Class B Common Stock to be converted into
shares of Class A Common Stock prior to sale in this Offering.
(3) Giovanini Properties and Giovanini Investments, Ltd. are both entities that
are controlled by Joseph E. Giovanini. Giovanini served as a Director of the
Company from its inception in 1989 until April 1998.
(4) Represents 398,568 shares of Class B Common Stock to be converted into
shares of Class A Common Stock prior to sale in this Offering.
(5) Includes 782,754 shares of Class B Common Stock to be converted into shares
of Class A Common Stock prior to sale in this Offering, and 190,000 shares
of Class A Common Stock that are subject to presently exercisable options.
Mr. Elsner served as Chief Executive Officer of the Company from July 1991
until September 1995, served as a Director of the Company from its inception
in 1989 until March 1998.
(6) Includes 234,472 shares of Class B Common Stock to be converted into shares
of Class A Common Stock prior to sale in this Offering, and 23,125 shares of
Class A Common Stock that are subject to presently exercisable options. Mr.
Hudon served as President of UIH Capital, a division of the Company, from
February 1991 until February 1996.
(7) Includes 63,698 shares of Class B Common Stock to be converted into shares
of Class A Common Stock prior to sale in this Offering, 135,000 shares of
Class A Common Stock that are subject to presently exercisable options and
673 shares of Class A Common Stock that are held in Mr. Dvorak's 401(k)
account. Mr. Dvorak will exercise options for 100,000 shares of Class A
Common Stock prior to sale in this Offering. Mr. Dvorak served as Chief
Financial Officer and Secretary of the Company from June 1992 until December
31, 1996. From June 1989 to June 1992, he was Vice President, Finance of the
Company.
44
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership of
common stock of all classes as of May 22, 1998, by (i) each stockholder who is
known by the Company to own beneficially more than 5% of the outstanding Class A
Common Stock or Class B Common Stock at such date, (ii) each director of the
Company, (iii) each executive officer of the Company and (iv) all directors and
officers of the Company as a group. Certain other stockholders of the Company
are parties to the Stockholders' Agreement that, among other things, provides
for certain arrangements with respect to voting their respective shares in the
election of directors of the Company. This table does not reflect deemed
beneficial ownership of Class A Common Stock or Class B Common Stock resulting
from the voting provisions of the Stockholders' Agreement. See "Security
Ownership of Certain Beneficial Owners and Management" contained in the
Company's Annual Report incorporated herein by reference. A wholly owned
subsidiary of UPC holds approximately 3.17 million shares of Class A Common
Stock, which shares are pledged to secure UPC's obligations under the Tranche B
Facility. The percentages in the table do not reflect such shares as treasury
stock.
<TABLE>
<CAPTION>
Prior to the Offering Following the Offering
------------------------------------------ ----------------------------------------
Class A Common Stock and Class A Common Stock and
Class B Common Stock Class B Common Stock
------------------------------------------ ----------------------------------------
Percent of Percent of
Beneficial Owner Number Percent Total Vote Number Percent Total Vote
---------------- --------- -------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gene W. Schneider (1)(2).............. 2,823,032 7.2% 17.0% 2,823,032 7.2% 20.4%
Curtis W. Rochelle (1)(3)............. 1,190,274 3.0 7.2 1,190,274 3.0 8.7
Mark L. Schneider (1)(4).............. 487,868 1.2 2.0 487,868 1.2 2.8
Lawrence F. DeGeorge (1)(5)........... 398,735 1.0 2.2 398,735 1.0 2.6
Lawrence J. DeGeorge (1)(6)........... 394,152 1.0 2.2 394,152 1.0 2.6
Albert M. Carollo (1)(7).............. 151,210 * * 151,210 * *
Antony P. Ressler (8)................. 40,000 * * 40,000 * *
Bruce H. Spector (9).................. 40,000 * * 40,000 * *
John P. Cole, Jr. (10)................ 833 * * 833 * *
J. Timothy Bryan (11)................. 54,167 * * 54,167 * *
Michael T. Fries (12)................. 215,219 * * 215,219 * *
Nimrod J. Kovacs (13)................. 189,533 * * 189,533 * *
David J. Leonard (14)................. 121,104 * * 121,104 * *
All directors and executive officers
as a group (15 persons).............. 6,149,846 15.6 32.4 6,149,846 15.6 39.0
Apollo Cable Partners L.P. (15)....... 4,261,364 10.8 27.5 4,261,364 10.8 33.1
MacKay-Shields Financial
Corporation (16)..................... 3,519,109 8.9 2.3 3,519,109 8.9 2.7
Everest Capital Limited (17).......... 2,594,200 6.6 1.7 2,594,200 6.6 2.0
Capital Research and Management
Corporation (18)..................... 2,475,000 6.3 1.6 2,475,000 6.3 1.9
Joseph E. Giovanini (19).............. 1,822,140 4.6 11.5 8,149 * *
William J. Elsner (20)................ 977,839 2.5 5.2 190,000 * *
Janet Schneider (21).................. 192,774 * 1.2 192,774 * 1.5
</TABLE>
_________________
* Less than 1%.
(1) The address of Messrs. G. Schneider, Rochelle, M. Schneider, Carollo, L. F.
DeGeorge and L. J. DeGeorge is c/o United International Holdings, Inc.,
4643 South Ulster Street, Suite 1300, Denver, CO 80237.
(2) Includes 214,583 shares of Class A Common Stock that are subject to
presently exercisable options. Also includes 1,531,756 shares of Class B
Common Stock owned by G. Schneider Holdings Co. (c/o United International
Holdings, Inc., 4643 South Ulster Street, Suite 1300, Denver, CO 80237).
(3) Includes 40,000 shares of Class A Common Stock that are subject to
presently exercisable options. Also includes 25,000 shares of Class A
Common Stock and 998,470 shares of Class B Common Stock owned by the Curtis
Rochelle Trust and 15,620 shares of Class A Common Stock and 111,184 shares
of Class B Common Stock owned by Marian Rochelle (Box 996, Rawlins, WY
82301).
(4) Includes 197,500 shares of Class A Common Stock that are subject to
presently exercisable options.
(5) Includes 4,583 shares of Class A Common Stock that are subject to presently
exercisable options.
(6) Includes 40,000 shares of Class A Common Stock that are subject to
presently exercisable options.
(7) Includes 40,000 shares of Class A Common Stock that are subject to
presently exercisable options. Also includes 111,210 shares of Class B
Common Stock owned by the Carollo Company (c/o Sweetwater Television Co.,
P.O. Box 8, 602 Broadway, Rock Springs, WY 82901).
(8) Includes 40,000 shares of Class A Common Stock that are subject to
presently exercisable options.
(9) Includes 40,000 shares of Class A Common Stock that are subject to
presently exercisable options.
(10) Includes 833 shares of Class A Common Stock that are subject to presently
exercisable options.
45
<PAGE>
(11) Includes 54,167 shares of Class A Common Stock that are subject to
presently exercisable options.
(12) Includes 149,063 shares of Class A Common Stock that are subject to
presently exercisable options. Also includes 16,166 shares of Class B
Common Stock owned by Fries Media Assets, Ltd.
(13) Includes 129,375 shares of Class A Common Stock that are subject to
presently exercisable options. Also includes 4,780 shares of Class A Common
Stock and 30,000 shares of Class B Common Stock owned by Kovacs
Communications, Inc.
(14) Includes 120,104 shares of Class A Common Stock that are subject to
presently exercisable options.
(15) Represents 4,261,364 shares of Class B Common Stock owned by Apollo. The
address of Apollo is c/o Apollo Advisors, L.P., Two Manhattanville Road,
Purchase, NY 10577. Apollo Advisors is the managing general partner of AIF
II, L.P., the general partner of Apollo. Messrs. Ressler and Spector,
directors of the Company, are also officers of Apollo Advisors, and each
expressly disclaims beneficial ownership of the shares held by Apollo.
(16) Represents 2,279,700 shares of Class A Common Stock and 1,239,409 shares of
Class A Common Stock which may be acquired upon conversion of the Company's
Series A Preferred Stock. The address of MacKay-Shields Financial
Corporation is 9 West 57th Street, New York, NY 10019.
(17) The address of Everest Capital Limited is The Bank of Butterfield Building,
65 Front Street, 6th Floor, HMJX, Bermuda.
(18) The address of Capital Research and Management Corporation is 333 South
Hope Street, Los Angeles, CA 90071.
(19) Includes 1,383,572 shares of Class B Common Stock owned by Giovanini
Investments Ltd. and 398,568 shares of Class B Common Stock owned by
Giovanini Properties. The address of Mr. Giovanini, Giovanini Investments,
Ltd. and Giovanini Properties is 3745 West Esther Way, Box 607, Teton
Village, WY 83025.
(20) Includes 190,000 shares of Class A Common Stock that are subject to
presently exercisable options. The address of Mr. Elsner is 3200 Cherry
Creek Drive South, Suite 450, Denver, CO 80209.
(21) Includes 192,774 shares of Class B Common Stock owned by The Janet
Schneider Revocable Trust. The address for The Janet Schneider Revocable
Trust and Ms. Schneider is 5500 South Poplar, Casper, WY 82601.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 60,000,000 shares of Class
A Common Stock, 30,000,000 shares of Class B Common Stock and 3,000,000 shares
of preferred stock (including 170,513 shares of Convertible Preferred Stock,
Series A ("Series A Preferred Stock"), all $0.01 par value per share. The
following summary description of the Company's capital stock does not purport to
be complete and is qualified in its entirety by reference to the Company's
Restated Certificate of Incorporation and Bylaws and to Delaware law.
COMMON STOCK
The Company's Class A Common Stock and Class B Common Stock are identical,
except that (i) each share of Class A Common Stock entitle the holder to one
vote, and each share of Class B Common Stock entitles the holder to ten votes,
on each matter to be voted on by the Company's stockholders and (ii) each share
of Class B Common Stock is convertible at the option of the holder into one
share of Class A Common Stock. Class A Common Stock is not convertible into
Class B Common Stock.
Holders of the Class A Common Stock and the Class B Common Stock vote as one
class on all matters, including the election of directors, to be voted on by the
Company's stockholders, with certain exceptions specified by the Delaware
General Corporation Law. Following the offering, holders of the Class B Common
Stock will have the power to control all matters requiring approval of the
Company's stockholders voting as a single class. See "Risk Factors-- Control of
Company by Class B Stockholders."
Holders of the Class A Common Stock and Class B Common Stock are entitled to
receive ratably such dividends, if any, as are declared by the Company's Board
of Directors out of funds legally available for that purpose. In the event of
the liquidation, dissolution or winding up of the Company, holders of Class A
Common Stock and Class B Common Stock are entitled to share ratably in all
assets available for distribution to holders of common stock. Holders of Class
A Common Stock and Class B Common Stock have no preemptive rights. The
Company's Restated Certificate of Incorporation provides that if there is any
dividend, subdivision, combination or reclassification of either class of common
stock, a proportionate dividend, subdivision, combination or reclassification of
the other class of common stock shall simultaneously be made.
PREFERRED STOCK
The Company is authorized to issue 3,000,000 shares of preferred stock. The
Board of Directors is authorized, without any further action by the
stockholders, to determine the voting rights, dividend rights, dividend rates,
liquidation
46
<PAGE>
preferences, redemption provisions, sinking fund terms, conversion or exchange
rights and other rights, preferences, privileges and restrictions of any wholly
unissued series of preferred stock and the number of shares constituting any
such series. In addition, such preferred stock could have other rights,
including economic rights senior to the Class A Common Stock, so that the
issuance of such stock could adversely affect the market value of the Class A
Common Stock, The issuance of preferred stock may also have the effect of
delaying, deferring or preventing a change in control of the Company without any
action by the stockholders. The Company has no current plans to issue any such
shares other than the Series A Preferred Stock currently outstanding.
The Series A Preferred Stock had an initial liquidation value of $175 per
share, which preference increases at a rate of 4% per annum, compounded
quarterly, and was $191 per share at February 28, 1998. Each share of Series A
Preferred Stock is convertible into the number of shares of Class A Common Stock
equal to the liquidation value at the time of conversion divided by $17.50. The
Company is required to redeem the Series A Preferred Stock on June 19, 2000, at
a redemption price equal to its then liquidation value.
CERTAIN U.S. FEDERAL INCOME
TAX CONSEQUENCES TO NON-U.S. PURCHASERS
The following is a general discussion of certain of the expected United
States federal income and estate tax consequences applicable to the ownership
and disposition of Class A Common Stock by an investor that purchases shares of
Class A Common Stock for cash pursuant to the Offering and that, for United
States federal income tax purposes, is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any State, (iii) an
estate the income of which is subject to United States federal income tax,
regardless of its source, or (iv) a trust if (a) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (b) one or more United States persons have the authority to control
all substantial decisions of the trust (such persons are referred to herein as
"Non-U.S. Holders"). This discussion is based on current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations promulgated under the Code (the "Regulations"), and public
administrative and judicial interpretations of the Code and Regulations as of
the date hereof, all of which are subject to change, which change could be
applied retroactively. This discussion does not purport to cover all aspects of
United States federal taxation that may be relevant to, or the actual tax effect
that any of the matters described herein will have on, particular Non-U.S.
Holders, such as Class A Common Stock held by investors subject to special tax
rules (e.g., financial institutions, insurance companies, broker-dealers, and
tax-exempt organizations), and does not address United States state and local or
foreign tax consequences.
THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. EACH PROSPECTIVE
INVESTOR IS URGED TO CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF OWNING AND DISPOSING OF THE CLASS A COMMON STOCK,
INCLUDING THE APPLICABILITY AND EFFECT OF ALL UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX LAWS AND OF ANY CHANGE IN UNITED STATES FEDERAL TAX LAW OR
ADMINISTRATIVE OR JUDICIAL INTERPRETATION THEREOF SINCE THE DATE OF THIS
PROSPECTUS.
DIVIDENDS
Dividends received by a Non-U.S. Holder on Class A Common Stock will
generally be subject to United States federal withholding tax at a 30 percent
rate upon the actual payment of the dividends except as described below and
except where an income tax treaty between the United States and the country of
which the Non-U.S. Holder is a tax resident provides for the elimination or
reduction of such withholding tax. A Non-U.S. Holder generally will be subject
to tax in the same manner as a United States corporation or resident individual
with respect to such income, however, if it is effectively connected with a
trade or business carried on by the Non-U.S. Holder within the United States or,
if an income tax treaty applies, is attributable to a United States permanent
establishment of such Non-U.S. Holder. Such effectively connected income
received by a Non-U.S. Holder that is a corporation may, in certain
circumstances, be subject to an additional "branch profits tax" at a 30 percent
rate or, if applicable, a lower treaty rate.
47
<PAGE>
To determine the applicability of a tax treaty providing for a lower rate
of withholding under the currently effective Regulations (the "Current
Regulations"), dividends paid to an address in a country other than the United
States are presumed to be paid to a resident of that country absent knowledge to
the contrary. Under Regulations issued on October 6, 1997 (the "Final
Regulations"), generally effective for payments made after December 31, 1999,
Non-U.S. Holders (including, in certain cases of Non-U.S. Holders that are
entities, the owner or owners of such entities) will be required to satisfy
certain certification requirements in order to claim a reduced rate of
withholding pursuant to an applicable income tax treaty.
DISPOSITION OF CLASS A COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income or withholding tax on any gain realized in connection with the
disposition of Class A Common Stock unless: (i) the gain is effectively
connected with a trade or business carried on by the Non-U.S. Holder within the
United States or, if a tax treaty applies, the gain is generally attributable to
a United States permanent establishment maintained by the Non-U.S. Holder or
(ii) the Non-U.S. Holder is an individual who holds the Class A Common Stock as
a capital asset and was present in the United States for 183 days or more during
the taxable year of the disposition and certain other conditions are met. If the
gain realized on a disposition of the Class A Common Stock is subject to tax by
reason of clause (i) immediately above, a Non-U.S. Holder generally will be
subject to tax in the same manner as a United States corporation or a resident
individual with respect to such gain. In addition, any such gain realized by a
Non-U.S. Holder that is a corporation may, in certain circumstances, be subject
to the "branch profits tax" described above under the heading "Dividends."
UNITED STATES FEDERAL ESTATE TAXATION
If an individual Non-U.S. Holder owns or is treated as owning Class A
Common Stock at the time of his or her death, such Class A Common Stock will be
includible in his or her gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Dividends paid to Non-U.S. Holders outside the United States that are
subject to the withholding tax described above will generally be exempt from
United States backup withholding, but the payor must report annually to the
United States Internal Revenue Service (the "Service") and to each Non-U.S.
Holder the amount of dividends paid to such holder and the tax withheld from
such payment, regardless of whether withholding was required. Backup withholding
and information reporting generally will apply, however, to dividends paid on
shares of Class A Common Stock to a Non-U.S. Holder at an address in the United
States, if such holder fails to establish an exemption or to provide certain
other information to the payor.
Generally, under the Current Regulations the payor of the dividends may
rely on the payee's address outside the United States (absent knowledge to the
contrary) in determining that the withholding tax discussed above applies, and
consequently, that the backup withholding provisions do not apply.
Under the Current Regulations, the payment of the proceeds of the sale of
Class A Common Stock to or through the United States office of a broker will be
subject to information reporting and possible backup withholding at a rate of 31
percent unless the owner certifies its non-United States status under penalties
of perjury or otherwise establishes an exemption. The payment of the proceeds
of the sale of Class A Common Stock to or through the foreign office of a broker
generally will not be subject to backup withholding, but will be subject to
information reporting if the broker is, for United States federal income tax
purposes, a United States person, a "controlled foreign corporation," or a
foreign person 50 percent or more of whose gross income for a specified period
is derived from activities that are effectively connected with the conduct of a
United States trade or business, or, for payments made after December 31, 1999,
a foreign partnership, in which one or more United States persons in the
aggregate, own more than 50 percent of the income or capital interests in the
partnership or which is engaged in a trade or business in the United States at
any time during its tax year, unless (i) the broker has documentary evidence in
its records that the beneficial owner is a non-United States person and certain
other conditions are met or (ii) the beneficial owner otherwise establishes an
exemption. Under
48
<PAGE>
the Final Regulations, the payment of dividends or the payment of proceeds from
the disposition of Class A Common Stock to a Non-U.S. Holder may be subject to
information reporting and backup withholding unless such recipient satisfies
applicable certification requirements or otherwise establishes an exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or credit against such Non-U.S.
Holder's United States federal income tax liability, provided that the required
information is furnished to the Service.
CERTAIN U.S. FEDERAL TAX CONSEQUENCES TO THE COMPANY
Generally, a cumulative change of greater than 50 percent in the stock
ownership of a corporation within a three-year period (an "ownership change")
will limit the amount of pre-ownership change net operating losses and other
tax attributes ("NOLs") that the corporation may use during the post-ownership
change period under section 382 of the Code (a "Section 382 Limitation"). The
Company does not believe that the sale by the Selling Stockholders of the
Shares will result in an ownership change; however, future equity issuances or
transactions among stockholders may trigger an ownership change. If such an
ownership change were to occur, the imposition of a Section 382 Limitation
would limit the Company's ability to use its NOLs. The amount of this annual
limitation may be increased to take into account certain built-in gains
realized after, but accruing economically before, the ownership change and the
carryover of unused NOLs (as limited by the Section 382 Limitation) from prior
years. In any event, the Company believes that the imposition of a Section 382
Limitation would not materially impact the financial position of the
Company.
49
<PAGE>
UNDERWRITING
Subject to certain terms and conditions of an Underwriting Agreement, dated
_______________, 1998 (the "Underwriting Agreement"), the underwriters named
below (collectively, the "Underwriters"), who are represented by Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"), Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated and Janco Partners, Inc. (collectively, the
"Representatives"), have agreed severally to purchase from the Selling
Stockholders, and the Selling Stockholders have agreed severally to sell to each
of the Underwriters, an aggregate of 3,000,000 shares of Class A Common Stock at
the public offering price per share less the underwriting discounts and
commissions set forth on the cover page of this Prospectus. The number of shares
of Class A Common Stock that each Underwriter has agreed to purchase is set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation................
Goldman, Sachs & Co................................................
Morgan Stanley & Co. Incorporated..................................
Janco Partners, Inc................................................ ---------
Total......................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Class A Common
Stock offered hereby are subject to approval by their counsel of certain legal
matters and to certain other conditions. The Underwriters are obligated to
purchase and accept delivery of all shares of Class A Common Stock offered
hereby (other than those covered by the over-allotment option described below)
if any are purchased.
The Underwriters propose initially to offer the shares of Class A Common
Stock in part directly to the public at the price to the public set forth on the
cover page of this Prospectus and in part to certain dealers (including the
Underwriters) at such price less a concession not in excess of $__ per share.
The Underwriters may allow, and such dealers may re-allow to certain other
dealers, a concession not in excess of $__ per share. After this Offering, the
offering price and other selling terms may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable not
later than 30 calendar days after the date of the Underwriting Agreement, to
purchase from time to time, in whole or in part, up to an aggregate of 450,000
additional shares of Class A Common Stock at the public offering price set forth
on the cover page of this Prospectus, less the underwriting discounts and
commissions. The Underwriters may exercise such option solely to cover over-
allotments, if any, made in connection with this Offering. To the extent that
the Underwriters exercise such option, each Underwriter will become obligated,
subject to certain conditions, to purchase its pro rata portion of such
additional shares based on such Underwriter's percentage underwriting commitment
as indicated in the preceding table.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company and each of the Selling Stockholders and the executive officers
and directors of the Company have agreed subject to certain exceptions, not to:
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Class A Common Stock or any securities convertible into or
exercisable or exchangeable for Class A Common Stock; or (ii) enter into any
swap or other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of any Class A Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Class A Common Stock, or such other
50
<PAGE>
securities, in cash or otherwise) for a period of 90 days after the date of this
Prospectus without the prior written consent of DLJ. In addition, during such
period, the Company has also agreed not to file any registration statement with
respect to, and each of its executive officers, directors and certain
stockholders of the Company (including the Selling Stockholders) have agreed not
to make any demand for, or exercise any right with respect to, the registration
of any shares of Class A Common Stock or any securities convertible into or
exercisable or exchangeable for Class A Common Stock without DLJ's prior written
consent.
Other than in the United States, no action has been taken by the Company,
the Selling Stockholders or the Underwriters that would permit a public offering
of the shares of Class A Common Stock offered hereby in any jurisdiction where
action for that purpose is required. The shares of Class A Common Stock offered
hereby may not be offered or sold, directly or indirectly, nor may this
Prospectus or any other offering material or advertisements in connection with
the offer and sale of any such shares of Class A Common Stock be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of such jurisdiction.
Persons into whose possession this Prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the Offering of the
Class A Common Stock and the distribution of this Prospectus. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
shares of Class A Common Stock offered hereby in any jurisdiction in which such
an offer or a solicitation is unlawful.
In the event the Class A Common Stock does not constitute an excepted
security under the provisions of Regulation M by the Commission, the
Underwriters and dealers may engage in passive market making transactions in
accordance with Rule 103. In general, a passive market maker may not bid for or
purchase shares of Class A Common Stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive market
maker generally may not exceed 30% of its average daily trading volume in the
Class A Common Stock during a specified two-month prior period, or 200 shares,
whichever is greater. A passive market maker must identify passive market making
bids as such on the Nasdaq electronic inter-dealer reporting system. Passive
market making may stabilize or maintain the market price of the Class A Common
Stock above independent market levels. Underwriters and dealers are not required
to engage in passive market making and may end passive market making activities
at any time.
In connection with this Offering, certain Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the Class
A Common Stock. Specifically, the Underwriters may overallot this offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Class A Common Stock in the open market to cover
syndicate short positions or to stabilize the price of the Class A Common Stock.
These activities may stabilize or maintain the market price of the Class A
Common Stock above independent market levels. The Underwriters are not required
to engage in these activities and may end any of these activities at any time.
Each of the Selling Stockholders and the Underwriters has represented and
agreed that (a) it has not offered or sold, and for a period of six months from
the date hereof, will not offer or sell any shares of Class A Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which do not constitute an offer to the public in the United
Kingdom for the purposes of the Public Offers of Securities Regulations 1995,
(b) it has complied and will comply with all applicable provisions of the Public
Offers of Securities Regulations 1995 and the Financial Services Act 1986 with
respect to anything done by it in relation to such shares of Class A Common
Stock in, from or otherwise involving the United Kingdom and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issue or sale of such shares of
Class A Common Stock to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 (as amended) or is a person to whom the document may otherwise lawfully be
issued or passed on.
EXPERTS
The consolidated financial statements of the Company as of February 28,
1998 and 1997 and for the years ended February 28, 1998, February 28, 1997 and
February 29, 1996, incorporated by reference into this Prospectus and elsewhere
in the Registration Statement from the Company's Form 10-K Annual Report for the
year ended February 28, 1998, have been audited by Arthur Andersen
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<PAGE>
LLP, independent public accountants, as indicated in their report with respect
thereto. In that report, that firm states that (i) with respect to the year
ended February 28, 1997, it did not audit the financial statements of Tele Cable
de Morelos S.A. de C.V. ("Megapo"), as of and for the year ended December 31,
1996, and (ii) with respect to the year ended February 29, 1996, it did not
audit the financial statements of XYZ Entertainment Pty Ltd. ("XYZ"), Megapo,
Monor Communications Group, Inc. ("Monor"), Cabodinamica TV Cabo Sao Paulo S.A.
("Net Sao Paulo"), or Telefenua S.A. ("Telefenua") as of and for the year ended
December 31, 1995, investments that are reflected in its consolidated financial
statements using the equity method of accounting (with respect to XYZ, Megapo,
Monor and Net Sao Paulo) or consolidated (with respect to Telefenua). Instead,
its report with regard to those entities is based solely on the reports of other
auditors, namely Coopers & Lybrand (with respect to Telefenua), Deloitte Touche
Tohmatsu (with respect to XYZ), Price Waterhouse Auditores Independentes (with
respect to Net Sao Paulo, which contains an explanatory paragraph relating to
Net Sao Paulo's ability to continue as a going concern as described in Note 1 to
the financial statements), Coopers & Lybrand L.L.P. (with respect to Monor) and
Galaz, Gomez Morfin, Chavero, Yamazaki, S.C. (with respect to Megapo). The
reports referred to above have been incorporated by reference herein in reliance
upon the authority of said firms.
The consolidated financial statements of United International Properties,
Inc. as of February 28, 1998 and 1997 and for the years ended February 28, 1998,
February 28, 1997 and February 29, 1996 incorporated by reference into this
Prospectus and elsewhere in the Registration Statement from the Company's Form
10-K Annual Report for the period ended February 28, 1998, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto. In that report, that firm states that (i) with
respect to the years ended February 28, 1998 and 1997, it did not audit the
financial statements of Megapo, as of and for the years ended December 31, 1997
and 1996, and (ii) with respect to the year ended February 29, 1996, it did not
audit the financial statements of XYZ, Megapo, Monor, Net Sao Paulo, or
Telefenua as of and for the year ended December 31, 1995. Instead, its report
with regard to those entities is based on the reports of other auditors, namely
Coopers & Lybrand (with respect to Telefenua), Deloitte Touche Tohmatsu (with
respect to XYZ), Price Waterhouse Auditores Independentes (with respect to Net
Sao Paulo, which contains an explanatory paragraph relating to Net Sao Paulo's
ability to continue as a going concern as described in Note 1 to the financial
statements), Coopers & Lybrand L.L.P. (with respect to Monor) and Galaz, Gomez,
Morfin, Chavero, Yamazaki S.C. (with respect to Megapo). The reports referred to
above have been incorporated by reference herein in reliance upon the authority
of said firms as experts in giving said reports.
The consolidated financial statements of UIH Europe, Inc. as of February
28, 1998 and 1997 and for the years ended February 28, 1998, February 28, 1997
and February 29, 1996 incorporated by reference into this Prospectus and from
the Company's Form 10-K Annual Report for the period ended February 28, 1998,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein upon the authority of said firm as experts in giving said
report.
The consolidated financial statements of United Pan-Europe Communications
N.V. as at and for the years ended December 31, 1996 and 1997, incorporated by
reference into this Prospectus from the Company's Form 10-K Annual Report for
the period ended February 28, 1998, have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein upon the authority of said
firm as experts in giving said report.
The consolidated financial statements of United and Philips Communications
B.V. as at December 31, 1995 and for the period from inception (July 13, 1995)to
December 31, 1995, incorporated by reference into this Prospectus from the
Company's Form 10-K Annual Report for the period ended February 28, 1998, have
been jointly audited by Arthur Andersen & Co. and KPMG Accountants N.V.,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein upon the authority of said
firms as experts in giving said reports.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Holme Roberts & Owen LLP, Denver, Colorado. Certain legal matters
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom
LLP, Los Angeles, California.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information may be inspected without charge at, and
copies thereof may be obtained at prescribed rates from, the public reference
facilities of the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. The Commission also maintains a web site
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The Company's Class A Common Stock is traded on the Nasdaq
National Markets, and copies of reports, proxy statements and other
information can be inspected at the offices of the National Association of
Securities Dealers, Inc. 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission, a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the securities offered hereby
reference is made to the Registration Statement, including the exhibits and
schedules thereto, which may be inspected at, and copies thereof may be
obtained at prescribed rates from the public reference facilities of the
Commission at the addresses set forth above.
INFORMATION INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended February 28,
1998 (the "Annual Report") has been filed with the Commission (File No. 0-
21974) and is incorporated in this prospectus by reference and made a part
hereof.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering, shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the dates of filing of such
documents.
Any statement contained in the Annual Report shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference in this Prospectus modifies or supersedes
such report. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
prospectus is delivered, upon such person's written or oral request, a copy of
any and all of the information that has been incorporated by reference in this
Prospectus (not including exhibits to such information unless such exhibits are
specifically incorporated by reference into such information). Any such request
should be directed to United International Holdings, Inc., Manager of Financial
Reporting, 4643 South Ulster Street, Suite 1300, Denver, Colorado, 80237
(telephone number: (303) 770-4001).
52
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 16
Use of Proceeds............................................................ 20
Dividend Policy............................................................ 20
Market Price of Common Stock............................................... 20
Capitalization............................................................. 21
Selected Consolidated Financial Data....................................... 22
Pro Forma Consolidated Condensed Financial Information..................... 23
Management's Discussion and Analysis of Financial Condition................ 25
Business................................................................... 29
Selling Stockholders....................................................... 43
Security Ownership of Certain Beneficial Owners and Management............. 44
Description to Capital Stock............................................... 45
Certain U.S. Federal Tax Consequences to Non-U.S. Purchasers............... 46
Certain U.S. Federal Tax Consequences to
the Company............................................................... 48
Underwriting............................................................... 49
Experts.................................................................... 50
Legal Matters.............................................................. 51
Available Information...................................................... 52
Information Incorporated by Reference...................................... 52
</TABLE>
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3,000,000 SHARES
[UNITED INTERNATIONAL HOLDINGS, INC. LOGO]
CLASS A COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
JANCO PARTNERS, INC.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Form of Underwriting Agreement.
4.1 Second Restated Certificate of Incorporation of the Company filed June 4,
1993.(1)
4.2 Certificate of Amendment to the Certificate of Incorporation dated
February 7, 1994.(2)
4.3 Certificate of Designations with respect to Convertible Preferred Stock,
Series A of the Company.(3)
4.4 Restated Bylaws of the Company.(1)
4.5 Specimen of Class A Common Stock certificate of the Company.(1)
5.1 Opinion of Holme Roberts & Owen LLP as to the legality of the issuance of
the Shares.
11.1 Statement re computation of per share earnings.*
23.1 Consent of Independent Public Accountants--Arthur Andersen LLP (United
International Holdings, Inc.).
23.2 Consent of Independent Public Accountants--Arthur Andersen LLP (United
International Properties, Inc.).
23.3 Consent of Independent Public Accountants--Arthur Andersen LLP (UIH
Europe, Inc.).
23.4 Consent of Independent Public Accountants--Arthur Andersen & Co. (United
Pan-Europe Communications N.V.) (for the years ended December 31, 1997
and 1996).
23.5 Consent of Independent Public Accountants--Arthur Andersen & Co. (United
and Philips Communications B.V.) (for the year ended December 31, 1995).
23.6 Consent of Independent Public Accountants--KPMG Accountants N.V. (United
and Philips Communications B.V.) (for the year ended December 31, 1995).
23.7 Consent of Independent Auditors--Deloitte Touche Tohmatsu (XYZ
Entertainment Pty Ltd.).
23.8 Consent of Independent Auditors--Galaz, Gomez Morfin, Chavero, Yamazaki,
S.C. (Tele Cable de Morelos, S.A. de C.V.).
23.9 Consent of Independent Public Accountants--Coopers & Lybrand L.L.P.
(Monor Communications Group, Inc.).
23.10 Consent of Independent Accountants--Price Waterhouse Auditores
Independentes (Cabodinamica TV Cabo Sao Paulo S.A.).
23.11 Consent of Independent Auditors--Coopers & Lybrand Tahiti (Telefenua
S.A.).
23.12 The consent of Holme Roberts & Owen LLP is included in Exhibit 5.1.
24.1 Powers of Attorney.*
______________
* Previously filed.
(1) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-1 (File No. 33-61376) filed with the
Commission on June 23, 1993.
(2) Incorporated by reference from Form 10-K for the year ended February 28,
1994 (File No. 0-21974).
(3) Incorporated by reference from the Form 8-K dated December 21, 1995 (File
No. 0-21974).
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on this 24th day of June,
1998.
United International Holdings, Inc.,
A Delaware corporation
By: /s/ J. Timothy Bryan
-----------------------------------------
J. Timothy Bryan, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Registration Statement to be signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
TITLE/POSITION HELD
SIGNATURE WITH THE REGISTRANT DATE
--------- ------------------- ----
<S> <C> <C>
* Chairman of the Board and Chief June 24, 1998
- ------------------------------
Gene W. Schneider Executive Officer
* Executive Vice President and Director June 24, 1998
- ------------------------------
Mark L. Schneider
/s/ J. Timothy Bryan Chief Financial Officer June 24, 1998
- ------------------------------
J. Timothy Bryan
* Director June 24, 1998
- ------------------------------
Albert M. Carollo
* Director June 24, 1998
- ------------------------------
Lawrence F. DeGeorge
* Director June 24, 1998
- ------------------------------
John P. Cole, Jr.
* Director June 24, 1998
- ------------------------------
Lawrence J. DeGeorge
* Director June 24, 1998
- ------------------------------
John Riordan
* Director June 24, 1998
- ------------------------------
Antony P. Ressler
* Director June 24, 1998
- ------------------------------
Curtis Rochelle
* Director June 24, 1998
- ------------------------------
Bruce H. Spector
* Controller (Principal Accounting June 24, 1998
- ------------------------------
Valerie L. Cover Officer)
/s/ J. Timothy Bryan
- ------------------------------
By: J. Timothy Bryan,
Chief Financial Officer
</TABLE>
II-3
<PAGE>
Exhibit 1.1
3,000,000 Shares
UNITED INTERNATIONAL HOLDINGS, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
June __, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO. INCORPORATED
JANCO PARTNERS
As representatives of the several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Certain stockholders of United International Holdings, Inc., a Delaware
corporation (the "COMPANY"), named in Schedule II hereto (collectively, the
"SELLING STOCKHOLDERS") severally propose to sell to the several underwriters
named in Schedule I hereto (collectively, the "UNDERWRITERS"), an aggregate of
3,000,000 shares of the Class A Common Stock, $0.01 par value per share (the
"FIRM SHARES"), of the Company. Each Selling Stockholder proposes to sell the
amount set forth opposite such Selling Stockholder's name in Schedule II hereto.
The Company also proposes to issue and sell to the several Underwriters not more
than an additional 450,000 shares of its Class A Common Stock, $0.01 par value
per share (the "ADDITIONAL SHARES"), if requested by the Underwriters as
provided in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter referred to collectively as the "SHARES." The shares of common
stock of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the "COMMON STOCK." The
Company and the Selling Stockholders are hereinafter sometimes referred to
collectively as the "SELLERS."
SECTION 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in
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<PAGE>
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"ACT"), a registration statement on Form S-3 (File no. _____), including a
preliminary prospectus, relating to the Shares. The registration statement, as
amended at the time it became effective, including the information (if any)
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Act, is hereinafter referred to as the
"REGISTRATION STATEMENT"; and the prospectus in the form first used to confirm
sales of Shares is hereinafter referred to as the "PROSPECTUS" (including, in
the case of all references to the Registration Statement or the Prospectus,
documents incorporated therein by reference). If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"RULE 462(B) REGISTRATION STATEMENT"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement. The terms "SUPPLEMENT" and "AMENDMENT"
or "AMEND" as used in this Agreement with respect to the Registration Statement
or the Prospectus shall include all documents subsequently filed by the Company
with the Commission pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder (collectively, the
"EXCHANGE ACT") that are deemed to be incorporated by reference in the
Prospectus.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements.
On the basis of the representations and warranties contained in this Agreement,
and subject to its terms and conditions, (i) each Selling Stockholder agrees,
severally and not jointly, to sell the number of Firm Shares set forth opposite
such Selling Stockholder's name in Schedule II hereto and (ii) each Underwriter
agrees, severally and not jointly, to purchase from each Selling Stockholder at
a price per Share of $______ (the "PURCHASE PRICE") the number of Firm Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the total number of Firm Shares to
be sold by such Selling Stockholder as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto bears to the total
number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase up to 450,000 Additional Shares from the Company at the Purchase Price.
Additional Shares may be purchased solely for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. The
Underwriters may exercise their right to purchase Additional Shares in whole or
in part from time to time by giving written notice thereof to the Company within
30 days after the date of this Agreement. Donaldson, Lufkin & Jenrette
Securities Corporation shall give any such notice on behalf of the Underwriters
and such notice shall specify the aggregate number of Additional Shares to be
purchased pursuant to such exercise and the date for payment and delivery
thereof, which date shall be a business day (i) no earlier than two business
days after such notice has been given (and, in any event, no earlier than the
Closing Date (as hereinafter defined)) and (ii) no later than ten business days
after such notice has been given. If any Additional Shares are to be
2
<PAGE>
purchased, each Underwriter, severally and not jointly, agrees to purchase from
the Company the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as you may determine) which bears the same
proportion to the total number of Additional Shares to be purchased from the
Company as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I bears to the total number of Firm Shares.
Each Seller hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 90 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plan and (ii) the Company may
issue shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. The Company also
agrees not to file any registration statement with respect to any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock for a period of 90 days after the date of the Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. In addition, each Selling Stockholder agrees that, for a period of
90 days after the date of the Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, it will not make any demand
for, or exercise any right with respect to, the registration of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock. The Company shall, prior to or concurrently with the execution
of this Agreement, deliver an agreement executed by (i) each Selling
Stockholder, (ii) each of the directors and officers of the Company who is not a
Selling Stockholder and (iii) each stockholder listed on Annex I hereto to the
effect that such person will not, during the period commencing on the date such
person signs such agreement and ending 90 days after the date of the Prospectus,
without the prior written consent of Donaldson, Lufkin & Jenrette Corporation,
(A) engage in any of the transactions described in the first sentence of this
paragraph or (B) make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock.
SECTION 3. Terms of Public Offering. The Sellers are advised by you
that the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. The Shares shall be represented by
3
<PAGE>
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Shares shall be delivered by or on behalf of the Sellers, with any transfer
taxes thereon duly paid by the respective Sellers, to Donaldson, Lufkin &
Jenrette Securities Corporation through the facilities of The Depository Trust
Company ("DTC"), for the respective accounts of the several Underwriters,
against payment to the Sellers of the Purchase Price therefore by wire-transfer
of Federal or other funds immediately available in New York City. The
certificates representing the Shares shall be made available for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date (as defined below), as the
case may be, at the office of DTC or its designated custodian (the "DESIGNATED
OFFICE"). The time and date of delivery and payment for the Firm Shares shall
be 9:00 A.M., New York City time, on ________, 1998 or such other time on the
same date or such other date as Donaldson, Lufkin & Jenrette Securities
Corporation and the Company shall designate. The time and date of delivery and
payment for the Firm Shares are hereinafter referred to as the "CLOSING DATE."
The time and date of delivery and payment for any Additional Shares to be
purchased by the Underwriters shall be 9:00 A.M., New York City time, on the
date specified in the applicable exercise notice given by you pursuant to
Section 2 or such other time on the same date or such other date as Donaldson,
Lufkin & Jenrette Securities Corporation and the Company shall designate. The
time and date of delivery and payment for any Additional Shares are hereinafter
referred to as the "OPTION CLOSING DATE."
The documents to be delivered on the Closing Date or any Option
Closing Date on behalf of the parties hereto pursuant to Section 9 of this
Agreement shall be delivered at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP at 919 3rd Avenue, New York, New York 10022 and the Shares shall be
delivered at the Designated Office, all on the Closing Date or such Option
Closing Date, as the case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of any change in the Company's condition (financial or otherwise), business,
proposals, properties, net worth or results of operations or the happening of
any event which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires the making of any additions
to or changes in the Registration Statement or the Prospectus in order to make
the statements therein, in light of
4
<PAGE>
the circumstances under which they are made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish you, without charge, signed copies of the Registration
Statement as first filed with the Commission and of each amendment to it,
including all exhibits and documents incorporated therein by reference, and to
furnish to you and each Underwriter designated by you, without charge, such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits but including documents incorporated therein
by reference, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall
be satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the Act;
during the period specified in Section 5(d) below, not to file any further
amendment to the Registration Statement and not to make any amendment or
supplement to the Prospectus of which you shall not previously have been advised
or to which you shall reasonably object after being so advised; and, during such
period, to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or amendment or supplement
to the Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish to each Underwriter and any dealer as many copies of the
Prospectus (and of any amendment or supplement to the Prospectus) and any
documents incorporated therein by reference as such Underwriter or dealer may
reasonably request.
(e) If, after the date hereof, any event shall occur as a result of
which, in the reasonable judgment of the Company or in the reasonable judgment
of the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare and file with the Commission an appropriate amendment or
supplement to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that the Prospectus will comply with
applicable law.
(f) To cooperate with you and your counsel in connection with the
5
<PAGE>
qualification of the Shares under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such qualification; provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation where it is
not now so qualified or to take any action that would subject it to the service
of process in suits or taxation, other than as to matters and transactions
relating to the Prospectus, the Registration Statement, any preliminary
prospectus or the offering or sale of the Shares, in any jurisdiction in which
it is not now so subject.
(g) To mail and make generally available to its stockholders as soon
as practicable an earnings statement covering the twelve-month period ending
__________, 1999 that shall satisfy the provisions of Section 11(a) of the Act,
and to advise you in writing when such statement has been so made available.
(h) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to and in connection with: (i) the
printing, processing, filing, distribution and delivery of the Registration
Statement (including, without limitation, financial statements and exhibits),
any preliminary prospectus, the Prospectus and all amendments and supplements
thereto, (ii) the printing, processing, execution, distribution and delivery of
this Agreement, any memoranda describing state securities or Blue Sky laws and
all other agreements, memoranda, correspondence and other documents printed,
distributed and delivered in connection herewith and with the offer or sale of
the Shares, (iii) the issuance and delivery by the Sellers of the Shares, (iv)
the qualification of the Shares for offer and sale under the securities or Blue
Sky laws of the several states (including, without limitation, the fees and
disbursements of your counsel relating to such registration or qualification and
memoranda relating thereto and any filing fees in connection therewith), (v) the
filing fees and disbursements of counsel for the Underwriters in connection with
the review and clearance of the offering of the Shares by the National
Association of Securities Dealers, Inc., (vi) the fees, disbursements and
expenses of the Company's counsel and accountants and any Selling Stockholder's
counsel (in addition to the Company's counsel) in connection with the
Registration and delivery of the Shares under the Act, all fees and expenses in
connection with the preparation and filing of the registration statement on Form
8-A relating to the Common Stock and all costs and expenses incident to the
listing of the Shares on the Nasdaq National Market, (vii) the preparation of
certificates for the Shares (including, without limitation, printing and
engraving thereof), (viii) the costs and charges of any transfer agent,
registrar and/or depositary, and the performance by the Company and the Selling
Stockholders of their other obligations under this Agreement.
(i) During the period of three years after the date of the Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national
6
<PAGE>
securities exchange on which any class of securities of the Company is listed
and such other publicly available information concerning the Company and its
subsidiaries as you may request.
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq
National Market for a period of three years after the date of this Agreement.
(k) To do and perform all things required to be done and performed
under this Agreement by it on, prior to, or after the Closing Date or any Option
Closing Date, as the case may be, and to use its best efforts to satisfy all
conditions precedent on its part to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
(m) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to Section
10 hereof) or if this Agreement shall be terminated by the Underwriters because
of any failure or refusal on the part of the Sellers or the Company to comply
with the terms or fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Underwriters for all out-of-pocket expenses (including
fees and expenses of counsel) for those reasonably incurred by the Underwriters
in connection with the matters covered by this Agreement.
SECTION 6. Representations and Warranties of the Company. The
Company represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement filed
after the effectiveness of this Agreement will become effective no later than
10:00 P.M., New York City time, on the date of this Agreement; and no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act, (ii) the
Registration Statement (other than any Rule 462(b) Registration Statement to be
filed by the Company after the effectiveness of this Agreement), when it became
effective, did not contain and, as amended, if applicable, will not
7
<PAGE>
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, (iii) the Registration Statement
(other than any Rule 462(b) Registration Statement to be filed by the Company
after the effectiveness of this Agreement) and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Act, (iv) if the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement and any amendments thereto, when they become effective
(A) will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (B) will comply in
all material respects with the Act and (v) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph shall not apply to statements or omissions in the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information relating to you furnished to the Company in writing by you expressly
for use therein. The Company acknowledges for all purposes under this Agreement
that the statements set forth in the ___ paragraph on the cover page, the
stabilization legend appearing as the bold paragraph on page __ and in the
_______ "Plan of Distribution" in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto), or in any
preliminary prospectus constitute the only written information furnished to the
Company by you expressly for use in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto), or in any
preliminary prospectus pertaining to any arrangement or agreement with respect
to any party other than you. No stop order preventing the use of the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto), or in any preliminary prospectus.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in any preliminary prospectus
made in reliance upon and in conformity with information relating to you
furnished to the Company in writing by you expressly for use therein.
(d) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders or the Company)
have been duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive or similar rights; the capital stock of the
Company conforms in all material respects to the description thereof in the
Prospectus; the Shares to be issued and sold by the Company have been
8
<PAGE>
duly authorized and, when issued and delivered to the Underwriters against
payment thereof as provided by this Agreement, will be validly issued, fully
paid and non-assessable, and free of any preemptive or similar rights and the
Company's ownership interest with respect to each of the corporations and
partnerships in which the Company has a direct or indirect material or, with
respect to the equity of such entity, majority, investment (each a "SUBSIDIARY"
and, collectively, the "SUBSIDIARIES") is in all material respects as described
in the Prospectus and the descriptions of contracts and agreements set forth
therein are accurate and complete in all material respects.
(e) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement and to authorize, issue, sell and deliver the Shares as contemplated
by this Agreement.
(f) The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place where
the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the Company
and the Subsidiaries taken as a whole. Such an effect, either singly or in the
aggregate, is referred to in this Agreement as a "MATERIAL ADVERSE EFFECT" and
the word "MATERIAL" shall have a corresponding meaning.
(g) The Subsidiaries that were "significant subsidiaries" (as such
term is defined in Rule 1-02(w) of Regulation S-X) as of February 28, 1998 are
listed in the list of subsidiaries included as an exhibit to the Company's
Annual Report on Form 10-K which is incorporated by reference into the
Prospectus. Each Subsidiary is a corporation or other legal entity duly
organized, validly existing and in good standing in the jurisdiction of its
formation, with full power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a Material Adverse Effect;
except as set forth in the Prospectus, all the outstanding shares of capital
stock or other equity interests of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned
by the Company directly or indirectly through one of the other Subsidiaries,
free and clear of any material lien, adverse claim, security interest, equity or
other encumbrance.
(h) There is (A) no legal, regulatory or governmental action, suit or
proceeding before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending or, to the knowledge of the Company,
threatened or contemplated to which the Company or any of the Subsidiaries is a
party or to which the business or property of the Company or any of the
Subsidiaries is subject, (B) no statute, rule, regulation or order that
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has been enacted, adopted or issued by any governmental agency or that has been
proposed by any governmental body, (C) no injunction, restraining order or order
of any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any of the Subsidiaries is subject issued
that, in the case of clauses (A), (B) and (C) above, (x) might, singly or in the
aggregate, result in a Material Adverse Effect, (y) would interfere with or
adversely affect the issuance of the Shares or (z) in any manner draw into
question the validity of this Agreement.
(i) Neither the Company nor any of the Subsidiaries is in violation of
its certificate or articles of incorporation or by-laws or other organizational
documents, or in material violation of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or in default in any
material respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound.
(j) Neither the issuance and sale of the Shares, the execution and
delivery by the Company of this Agreement, the performance of this Agreement nor
the consummation by the Company of the transactions contemplated hereby (i)
requires any consent, approval, authorization or other order of or registration
or filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official, except such as have been obtained and
made, (ii) conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, the certificate or articles of incorporation or
bylaws, or other organizational documents, of the Company or any of the
Subsidiaries, (iii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party or
by which any of them or any of their respective properties may be bound, or (iv)
violates or will violate any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Company or any of the Subsidiaries
or any of their respective properties, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of the Subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be bound
or to which any of the property or assets of any of them is subject, except in
each case where failure to obtain such consents, approvals, authorizations or
orders or make such registrations or filings or where such conflicts or
violations will not individually or in the aggregate have a Material Adverse
Effect.
(k) The accountants, Arthur Andersen LLP, KPMG Accountants N.V. and
________, each of which has audited certain of the financial statements that are
included, incorporated by reference, or summarized in the Prospectus, are
independent certified public accountants as required by the Act. The financial
statements, together with related schedules and notes, included or incorporated
by reference in the Prospectus (and any amendment or
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supplement thereto) present fairly the respective financial positions, results
of operations and changes in financial positions of the Company and each
Subsidiary, in each case, for which such financial statements are so included or
incorporated by reference, on the basis stated in the Prospectus at the
respective dates or for the respective periods to which they apply; such
financial statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data included in the Prospectus (and
any amendment or supplement thereto) are accurately presented in all material
respects and prepared on a basis consistent with such financial statements and
the books and records of the Company and the Subsidiaries.
(l) The pro forma financial statements and "as adjusted" financial
information and the related notes thereto included or incorporated by reference
in the Prospectus have been prepared in accordance with the applicable
requirement of the Act and on the bases described therein and, in the opinion of
the Company, the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(m) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder or thereunder may be limited by federal
or state securities laws.
(n) Except as disclosed in the Prospectus (or any amendment or
supplement thereto), subsequent to the respective dates as of which such
information is given in the Prospectus (or any amendment or supplement thereto),
neither the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent or entered into any transaction, not in the
ordinary course of business, that is material to the Company on a consolidated
basis, and there has not been any change in the capital stock or material
increase in the short-term debt or long-term debt of the Company, any of the
Subsidiaries, or any change or any development that has, or that may reasonably
be expected to have, a Material Adverse Effect, or any discovery of any change
or development that may be reasonably expected to have any such Material Adverse
Effect.
(o) Except as is not material, each of the Company and each Subsidiary
has good and marketable title to all property (real and personal) described in
the Prospectus as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances (except such as are described in the
Prospectus and all the property described in the Prospectus as being held under
lease by each of the Company and the Subsidiaries is held by it under valid,
subsisting and enforceable leases).
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(p) Each of the Company and each Subsidiary has such material permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("PERMITS") as are necessary to own its respective properties and to
conduct its respective business in the manner described in the Prospectus,
subject to such qualifications as may be set forth in the Prospectus; each of
the Company and each Subsidiary has fulfilled and performed all its material
obligations with respect to such permits and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination thereof
or result in any other material impairment of the rights of the holder of any
such permit, subject in each case to such qualification as may be set forth in
the Prospectus; and, except as described in the Prospectus, none of such permits
contains any restriction that is materially burdensome to the Company or any of
the Subsidiaries. The descriptions contained in the Prospectus of statutes,
rules, regulations and other laws applicable to the Company and the Subsidiaries
are accurate and complete in all material respects.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Shares; no injunction, restraining order or order
of any nature by a federal or state court of competent jurisdiction has been
issued that prevents the issuance of the Shares or suspends the sale of the
Shares in any jurisdiction referred to in Section 5(f) hereof, and no action,
suit or proceeding is pending affecting or, to the knowledge of the Company,
threatened against the Company or any of the Subsidiaries before any court or
arbitrator or any governmental body, agency or official which, if adversely
determined, would prohibit, interfere with or adversely affect the issuance or
marketability of the Shares or in any manner draw into question the validity of
this Agreement; and every request of the Company by any securities authority or
agency of any jurisdiction for additional information has been complied with in
all material respects.
(s) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any employee, agent, co-investor or partner of the Company or
any Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
(t) Each of the Company and each Subsidiary has filed all material tax
returns required to be filed, which returns are complete and correct in all
material respects, and
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neither the Company nor any Subsidiary is in default in the payment of any taxes
which were payable pursuant to said returns or any assessments with respect
thereto.
(u) The Company and the Subsidiaries own or possess all material
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them or any of them or
necessary for the conduct of their respective businesses, and the Company is not
aware of any claim to the contrary or any challenge by any other person to the
rights of the Company and the Subsidiaries with respect to the foregoing.
(v) The Company is not now, and after the sale of the Shares to be
sold by it hereunder and the application of the proceeds from such sale as
described in the Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(w) The Company has complied with all provisions of Florida H.B. 1771
codified as Section 517.075 of the Florida statutes, and all regulations
promulgated thereunder, relating to issuers doing business with the Government
of Cuba or with any person or any affiliate located in Cuba.
(x) Except as described in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, or any
commitment, plan or arrangement to issue, any shares of capital stock of the
Company or any security convertible into or exchangeable or exercisable for
capital stock of the Company.
(y) Except as described in the Prospectus, there is no holder of any
security of the Company or any other person who has the right, contractual or
otherwise, to cause the Company to sell or otherwise issue to them, or to permit
them to underwrite the sale of, the Shares or the right to have any other
securities of the Company included in the Registration Statement or the right to
require registration under the Act of any securities of the Company because of
the execution by the Company of this Agreement or consummation of the
transactions contemplated by this Agreement or otherwise.
(z) Except as set forth in the Prospectus, the Company has no
commitments to fund entities that do not constitute Subsidiaries.
(aa) None of the Company, any Subsidiary or any agent thereof acting
on the behalf of either of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Shares
pursuant to the terms of this Agreement to violate Regulation G (12 C.F.R. Part
207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System, in each case as in effect now or as the same may hereafter be in
effect on the Closing Date.
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(bb) The Company owns 100% of the Equity Interests or other
securities evidencing equity ownership of United Pan-Europe Communications, N.V.
("UPC"), United International Properties, Inc. ("UIPI") and Joint Venture, Inc.
("JVI") free and clear of any security interest, claim, lien or encumbrance
(except as disclosed or incorporated by reference in the Prospectus); and all of
such securities have been duly authorized, validly issued and are fully paid and
nonassessable. Except as disclosed or incorporated by reference in the
Prospectus, there are no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, any such shares of capital
stock or other equity interest of UPC, UIPI or JVI.
(cc) All of the Equity Interests of UPC, UIPI and of JVI and all
intercompany notes of UPC, UIPI and of JVI issued to the Company are owned by
the Company free and clear of any security interest, claim, lien or encumbrance
(except for the existing pledge pursuant to the Amended and Restated Pledge
Agreement dated November 22, 1995, as amended).
The Company acknowledges that the Underwriters and, for purposes of the
opinions to be delivered to the Underwriters pursuant to Section 9 hereof,
counsel to the Company and the Selling Stockholders, and counsel to the
Underwriters, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
SECTION 7. Representations and Warranties of the Selling Stockholders.
Each Selling Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on the
Closing Date will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever.
(b) The Shares to be sold by such Selling Stockholder have been duly
authorized and are validly issued, fully paid and non-assessable.
(c) Such Selling Stockholder has, and on the Closing Date will have,
full legal right, power and authority, and all authorization and approval
required by law, to enter into this Agreement, the Custody Agreement signed by
such Selling Stockholder and ________________________, as Custodian, relating to
the deposit of the Shares to be sold by such Selling Stockholder (the "CUSTODY
AGREEMENT") and the Power of Attorney of such Selling Stockholder appointing
certain individuals as such Selling Stockholder's attorneys-in-fact (the
"ATTORNEYS") to the extent set forth therein, relating to the transactions
contemplated hereby and by the Registration Statement and the Custody Agreement
(the "POWER OF ATTORNEY") and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder in the manner provided herein and
therein.
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(d) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Stockholder.
(e) The Custody Agreement of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding agreement of such Selling Stockholder, enforceable in accordance
with its terms.
(f) The Power of Attorney of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding instrument of such Selling Stockholder, enforceable in accordance
with its terms, and, pursuant to such Power of Attorney, such Selling
Stockholder has, among other things, authorized the Attorneys, or any one of
them, to execute and deliver on such Selling Stockholder's behalf this
Agreement and any other document that they, or any one of them, may deem
necessary or desirable in connection with the transactions contemplated hereby
and thereby and to deliver the Shares to be sold by such Selling Stockholder
pursuant to this Agreement.
(g) Upon delivery of and payment for the Shares to be sold by such
Selling Stockholder pursuant to this Agreement, good and clear title to such
Shares will pass to the Underwriters, free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims whatsoever.
(h) The execution, delivery and performance of this Agreement and the
Custody Agreement and Power of Attorney of such Selling Stockholder by or on
behalf of such Selling Stockholder, the compliance by such Selling Stockholder
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
organizational documents of such Selling Stockholder, if such Selling
Stockholder is not an individual, or any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder or any property of such Selling
Stockholder is bound or (iii) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over such Selling Stockholder or any property
of such Selling Stockholder.
(i) The information in the Registration Statement under the caption
"Selling Stockholders" which specifically relates to such Selling Stockholder
does not, and will not on the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
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<PAGE>
(j) At any time during the period described in Section 5(d), if there
is any change in the information referred to in Section 7(i), such Selling
Stockholder will immediately notify you of such change.
(k) Each certificate signed by or on behalf of such Selling
Stockholder and delivered to the Underwriters or counsel for the Underwriters
shall be deemed to be a representation and warranty by such Selling Stockholder
to the Underwriters as to the matters covered thereby.
SECTION 8. Indemnification and Contribution. (a) The Sellers, jointly
and severally, agree to indemnify and hold harmless (i) each Underwriter, (ii)
each person, if any, who controls such Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and (iii) the respective
officers, directors, partners, employees, representatives and agents of each
Underwriter or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "INDEMNIFIED PERSON") from
and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus, or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with information relating to such
Underwriter furnished to the Company in writing by or on behalf of such
Underwriter expressly for use in connection therewith. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have. Notwithstanding the foregoing, the aggregate liability of any Selling
Stockholder pursuant to this Section 8(a) shall be limited to an amount equal to
the total proceeds (before deducting underwriting discounts and commissions and
expenses) received by such Selling Stockholder from the Underwriters for the
sale of the Shares sold by such Selling Stockholder hereunder.
(b) If any action, suit or proceeding shall be brought against any
Indemnified Person with respect to which indemnity may be sought against any
Seller, such Indemnified Person shall promptly notify such Seller, and such
Seller shall assume the defense thereof, including the employment of counsel and
payment of all fees and expenses. Any Indemnified Person shall have the right
to employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless (i) such Seller has
agreed in writing to pay such fees and expenses, (ii) such Seller has failed to
assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleded parties) include both such
Indemnified Person and such Seller and such Indemnified Person shall have been
advised by its counsel that representation of such Indemnified Person and such
Seller by the
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same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case such Seller shall not have the right to assume the defense of such action,
suit or proceeding on behalf of such Indemnified Person). It is understood,
however, that such Seller shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
such Indemnified Person not having actual or potential differing interests with
such Indemnified Person or among themselves, which firm shall be designated in
writing by such Indemnified Person, and that all such fees and expenses shall be
reimbursed as they are incurred. Such Seller shall not be liable for any
settlement of any such action, suit or proceeding effected without its written
consent, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, such Seller
agrees to indemnify and hold harmless any Indemnified Person, to the extent
provided in the preceding paragraph, from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse such indemnified party for fees and expenses
of counsel as incurred, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 business days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed such indemnified party in accordance with such request
prior to the date of such settlement. The indemnifying party shall not, without
the prior written consent of each indemnified party, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
indemnified party is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each indemnified
party from all liability arising out of such action, claim, litigation or
proceeding.
(c) The Underwriters agree to indemnify and hold harmless the Company,
its directors, its officers who sign the Registration Statement and any person
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, each Selling Stockholder and each person who controls
such Selling Stockholder within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, to the same extent as the foregoing indemnity from each
Seller to each Indemnified Person, but only with respect to information relating
to such Indemnified Person furnished in writing by or on behalf of such
Indemnified Person through you expressly for use in the Registration Statement
(or any amendment thereto), the Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus. If any action, suit or proceeding shall
be brought against the Company, any of its directors, any such officer, or any
such controlling person; or any Selling Stockholder or any such controlling
person based on the Registration Statement (or any amendment thereto), or the
Prospectus (or any amendment or supplement thereto), and in respect of which
indemnity
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may be sought against any Underwriter pursuant to this paragraph (c), such
Underwriter shall have the rights and duties given to the Company by paragraph
(b) above (except that if the Company shall have assumed the defense thereof
such Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Underwriter), and the Company, its
directors, any such officer, and any such controlling person; and any Selling
Stockholder and any such controlling person shall have the rights and duties
given to such Underwriter by paragraph (b) above. The foregoing indemnity
agreement shall be in addition to any liability which such Underwriter may
otherwise have.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers on the one hand and the Underwriter on the other hand from the offering
of the Shares, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Sellers on the one hand and the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Sellers on the
one hand and any Underwriter on the other hand shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Sellers bear to the total underwriting discounts and
commissions received by such Underwriter. The relative fault of the Sellers on
the one hand and any Underwriter on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or by the Underwriters on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by a
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total discounts and commissions received by such Underwriter pursuant to this
Agreement exceeds the amount of any damages which the Underwriter has otherwise
been required to pay
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by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Sellers and of the Underwriters set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of the Underwriters or
any person controlling such Underwriters, the Company, its directors or
officers, or any person controlling the Company, (ii) acceptance of any Shares
and payment therefor hereunder, and (iii) any termination of this Agreement. A
successor to an Underwriter or any person controlling such Underwriter, or to
the Company, its directors or officers, or any person controlling the Company,
shall be entitled to benefits of the indemnity, contribution, and reimbursement
agreements contained in this Section 8.
(g) Each Selling Stockholder hereby designates _________________, as
its authorized agent, upon which process may be served in any action which may
be instituted in any state or federal court in the State of New York by any
Underwriter, any director or officer of any Underwriter or any person
controlling any Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 8, and each Selling Stockholder
will accept the jurisdiction of such court in such action, and waives, to the
fullest extent permitted by applicable law, any defense based upon lack of
personal jurisdiction or venue. A copy of any such process shall be sent or
given to such Selling Stockholder, at the address for notices specified in
Section 12 hereof.
SECTION 9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All of the representations and warranties of the Company contained
in this Agreement shall be true and correct on the date hereof and on the
Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed or
complied with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(b) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance or sale of any of the
Shares; no action, suit or proceeding shall be pending against or affecting or,
to the knowledge of the Company, threatened against, the Company or any of the
Subsidiaries before any court or arbitrator or any governmental body, agency or
official that, if adversely determined, would prohibit, interfere with or
adversely affect
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the issuance or sale of the Shares or would have a Material Adverse Effect or in
any manner draw into question the validity of this Agreement; and no stop order,
injunction, restraining order, or order of any nature preventing the use of the
Prospectus, or any amendment or supplement thereto Act shall have been issued.
(c) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which, would materially
adversely affect the market for the Shares or (ii) any event or development
relating to or involving the Company or any officer or director of the Company
which makes any statement made in the Prospectus untrue in any material respect
which, in the opinion of the Company and its counsel or the Underwriter and
their counsel, requires the making of any addition to or change in the
Prospectus in order to make the statements therein not misleading, if amending
or supplementing the Prospectus to reflect such event or development would in
the opinion of the Underwriters, materially adversely affect the market for the
Shares.
(d) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(e) All the representations and warranties of each Selling Stockholder
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively, and you shall have received on the
Closing Date a certificate dated the Closing Date from each Selling Stockholder
to such effect and to the effect that such Selling Stockholder has complied with
all of the agreements and satisfied all of the conditions herein contained and
required to be complied with or satisfied by such Selling Stockholder on or
prior to the Closing Date.
(f) The Underwriters shall have received on the Closing Date, an
opinion of Holme Roberts & Owen LLP, counsel for the Company, dated the Closing
Date and addressed to you, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware with full
corporate power and authority to own lease and operate its properties and
to conduct its business as described in the Prospectus, (and any amendment
or supplement thereto) and, based solely on certificates from and
correspondence
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with public officials, is qualified to do business and is in good standing
in the states Colorado and Delaware;
(ii) Each of UPC, UIPI and JVI (collectively, the "DESIGNATED
SUBSIDIARIES") and each of the corporate Subsidiaries incorporated in the
United States (the "U.S. SUBSIDIARIES") is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority to own, lease, and operate its
properties and to conduct its business as described in the Prospectus (and
any amendment or supplement thereto); and all the outstanding shares of
capital stock of each of the Designated Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and, except
as set forth in the Prospectus, are owned by the Company directly free and
clear, to the best knowledge of such counsel after reasonable inquiry, of
any security interest, lien, adverse claim, equity or other encumbrance;
(iii) All the outstanding shares of capital stock or other
equity interest of each of the U.S. Subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights (to the best knowledge of
such counsel, after due inquiry, contractually), and, except as set forth
in the Prospectus, are owned by the Company directly, or indirectly through
one of the U.S. Subsidiaries, free and clear, to the best knowledge of such
counsel after due inquiry, of any security interest, lien, adverse claim,
equity or other encumbrance;
(iv) The authorized and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the
Prospectus; and the Company's ownership interest with respect to each of
the Designated Subsidiaries is as described in the Prospectus;
(v) All of the outstanding shares of capital stock of the
Company (including the Shares to be sold by the Selling Stockholders) have
been duly authorized and validly issued, and are fully paid and
nonassessable;
(vi) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated thereby,
including, without limitation, with the corporate power and authority to
issue, sell and deliver the Shares as contemplated by this Agreement and to
perform its obligations hereunder and thereunder;
(vii) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Shares to
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the Underwriters as provided herein, and this Agreement has been duly
authorized, executed and delivered by the Company and by or on behalf of
each Selling Stockholder and is a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as enforcement of rights to indemnity and contribution hereunder and
thereunder may be limited by federal or state securities laws or principles
of public policy and subject to the qualification that the enforceability
of the Company's obligations hereunder and thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium,
and other laws relating to or affecting creditors' rights generally and by
general principles of equity, regardless of whether enforcement is sought
in a proceeding at law or in equity;
(viii) Neither the Company nor any of the Designated Subsidiaries
nor any U.S. Subsidiary is in violation of its respective certificate or
articles of incorporation or bylaws, or other organization documents, or to
the best knowledge of such counsel after reasonable inquiry, is in material
default ir the performance of any obligation, agreement or condition
contained in any permit or any bond, debenture, note or other evidence of
indebtedness, except as may be disclosed in the Prospectus;
(ix) The execution, delivery and performance by the Company of
this Agreement, the issuance and sale of the Shares, and the consummation
of the transactions contemplated hereby and thereby, will not violate,
conflict with or constitute a breach of any of the terms or provisions of,
or a default (or an event that with notice or the lapse of time, or both,
would constitute a default) under, or require consent under, or result in
the imposition of a lien or encumbrance on any assets or properties of the
Company or any of its subsidiaries, or an acceleration of indebtedness
pursuant to, (A) the organizational documents of the Company or any of its
subsidiaries, (B) any bond, debenture, note, indenture, mortgage, deed of
trust, license or other agreement or instrument, known to such counsel
after reasonable inquiry, to which the Company or any of its subsidiaries
is a party or by which any of them or their property is or may be bound,
(C) any U.S. law, statute, rule or regulation applicable to the Company,
any of the U.S. Subsidiaries or any of their assets or properties, or (D)
any judgment, order or decree of any U.S. court or governmental agency or
U.S. authority, known to such counsel after reasonable inquiry, having
jurisdiction over the Company, any of the U.S. Subsidiaries or their assets
or properties, except such conflicts or violations as would not
individually or in the aggregate be reasonably expected to have a Material
Adverse Effect. No consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, any
court or governmental agency, body or administrative agency in the United
States is required for the execution, delivery and performance of this
Agreement, except such as have been obtained prior to the date hereof. In
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rendering the opinions required in this clause (ix), such counsel may rely
on the accuracy of the representations of the Underwriters and the Sellers
contained in this Agreement. No consents or waivers from any other person
are required for the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and thereby,
other than such consents and waivers as have been obtained, or except where
the failure to obtain such consents or waivers would not individually or in
the aggregate be reasonably expected to have a Material Adverse Effect;
(x) To the best knowledge of such counsel, after reasonable
inquiry, no action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any U.S. governmental agency
that prevents the issuance of the Shares, no injunction, restraining order
or order of any nature by a United States federal or state court of
competent jurisdiction has been issued that prevents the issuance of the
Shares and no action, suit or proceeding is pending against or affecting or
threatened against the Company or any of the U.S. Subsidiaries before any
court or arbitrator or any governmental body, agency or official which, if
adversely determined, would prohibit, interfere with or adversely affect
the issuance or marketability of the Shares or in any manner draw into
question the validity of this Agreement;
(xi) To the best knowledge of such counsel after reasonable
inquiry, neither the Company nor any of the U.S. Subsidiaries is in
violation of any law, ordinance, administrative or other governmental rule
or regulation applicable to the Company or any of the U.S. Subsidiaries or
any of the U.S. Subsidiaries or of any decree of any court or governmental
agency or body having jurisdiction over the Company or any of the U.S.
Subsidiaries or any of the U.S. Subsidiaries, except for such violations as
would not individually or in the aggregate be reasonably likely to have a
Material Adverse Effect;
(xii) The statements in the Prospectus, insofar as they are
descriptions of contracts, agreements or other legal documents, or refer to
statements of law or legal conclusions, are accurate and complete in all
material respects and present fairly the information required to be shown,
to the extent governed by the laws of jurisdictions on which such counsel
expresses an opinion;
(xiii) Each of the Company and each Designated Subsidiary and
each U.S. Subsidiary has all necessary governmental authorizations,
approvals, orders, licenses, certificates, franchises and permits of and
from all governmental regulatory officials and bodies (except where the
failure so to have any such authorizations, approvals, orders, licenses,
certificates, franchises or permits, individually or in the aggregate,
would not have a Material
23
<PAGE>
Adverse Effect), to own its properties and to conduct its businesses as now
being conducted, as described in the Prospectus;
(xiv) Neither the Company nor any of its subsidiaries is now,
nor, after the sale of Shares to be sold by it hereunder and the
application of the proceeds from such sales as described in the Prospectus
under the caption "Use of Proceeds," will they be (i) an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act, or (ii) a "holding company" or a
"subsidiary company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended;
(xv) There is (A) to the knowledge of such counsel, after
reasonable inquiry, no legal, regulatory or governmental action, suit or
proceeding before or by any court, arbitrator or governmental agency, body
or official, domestic or foreign, now pending or, to the knowledge of such
counsel, threatened or contemplated to which the Company or any of the U.S.
Subsidiaries is a party or to which the business or property of the Company
or any of the U.S. Subsidiaries is subject, (B) no law, statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body, to
the extent governed by the laws of jurisdictions on which such counsel
expresses an opinion, (C) to the knowledge of such counsel, after
reasonable inquiry, no injunction, restraining order or order of any nature
by a federal or state court of competent jurisdiction to which the Company
or any of the U.S. Subsidiaries is subject issued that, in the case of
clauses (A), (B) and (C) above, (x) might, singly or in the aggregate,
result in a Material Adverse Effect, (y) would interfere with or adversely
affect the issuance of the Shares or (z) in any manner draw into question
the validity of this Agreement;
(xvi) To the best knowledge of such counsel, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement;
(xvii) The Prospectus, as of its date, and each amendment or
supplement thereto, if any, as of its date (except for the financial
statements, including the notes thereto, and supporting schedules and other
financial, statistical, and accounting data included therein or omitted
therefrom, as to which no opinion need be expressed), contains all the
information specified in, and meeting all the requirements of the Act;
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(xviii) To the best knowledge of such counsel after reasonable
inquiry, except as described in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, and such
counsel does not know of any commitment, plan or arrangements to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company;
(xix) The issuance and sale of the Shares pursuant to the
terms of this Agreement will not violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System;
(xx) The statements in the Prospectus under "Risk Factors-
International Tax Risks," insofar as they constitute statements of law or
legal conclusions are accurate in all material respects;
(xxi) the Shares to be issued and sold by the Company
hereunder have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement, will
be validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights;
(xxii) the Registration Statement has become effective under
the Act, no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the best of such counsel's knowledge
after due inquiry, pending before or contemplated by the Commission;
(xxiii) the statements under the captions "_______________,"
"_______________," "_______________," "_______________," "_______________,"
"_______________," "Description of Capital Stock" and "Underwriting" in the
Prospectus and Item 15 of Part II of the Registration Statement, insofar as
such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings; and
(xxiv) neither the Company nor any of its subsidiaries has
violated any Environmental Law, any provisions of the Employee Retirement
Income Security Act of 1974, as amended, or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not
have a material
25
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adverse effect on the business, prospects, financial condition or results
of operation of the Company and its subsidiaries, taken as a whole.
In addition, such counsel shall state that it has generally reviewed
and discussed with certain officers and other representatives of the Company,
representatives of the independent public accountants for the Company, your
representatives and your counsel the preparation of the Prospectus and the
statements contained therein and, although such counsel has not independently
verified the accuracy, completeness or fairness of such statements (except as
indicated above), such counsel advises you that, on the basis of the foregoing,
no facts came to its attention that caused it to believe that the Prospectus (as
amended or supplemented, if applicable) as of the date of the Prospectus or at
the Closing Date, contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Without limiting the foregoing, such counsel may further
state that they assume no responsibility for, and have not independently
verified, the accuracy, completeness or fairness of, and express no view as to,
the financial statements, notes and schedules and other financial or statistical
data included in the Prospectus.
Such opinion may be limited to the federal laws of the United States
and the internal laws of the State of Colorado and the General Corporation Law
of the State of Delaware. In rendering their opinion as aforesaid, counsel may
rely upon an opinion or opinions, each dated the Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other than the
United States or the State of Colorado, provided that (1) each-such local
counsel is acceptable to the Underwriters, (2) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to the Underwriters and is in form and substance satisfactory to it
and its counsel, and (3) counsel shall state in their opinion that they believe
that they and the Underwriters are justified in relying thereon.
(g) The Underwriters shall have received on the Closing Date, an
opinion of ___________________, counsel for the selling Stockholders, dated the
Closing Date and addressed to you, to the effect that:
(i) each Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder pursuant to this Agreement and has
good and clear title to such Shares, free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims whatsoever;
(ii) each Selling Stockholder has full legal right, power and
authority, and all authorization and approval required by law, to enter
into this Agreement and the Custody Agreement and the Power of Attorney of
such Selling Stockholder and to sell, assign, transfer and deliver the
Shares to be sold by such Selling Stockholder in the manner provided herein
and therein;
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(iii) the Custody Agreement of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and is
a valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms;
(iv) the Power of Attorney of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and is
a valid and binding instrument of such Selling Stockholder, enforceable in
accordance with its terms, and, pursuant to such Power of Attorney, such
Selling Stockholder has, among other things, authorized the Attorneys, or
any one of them, to execute and deliver on such Selling Stockholder's
behalf this Agreement and any other document they, or any one of them, may
deem necessary or desirable in connection with the transactions
contemplated hereby and thereby and to deliver the Shares to be sold by
such Selling Stockholder pursuant to this Agreement;
(v) upon delivery of and payment for the Shares to be sold by
each Selling Stockholder pursuant to this Agreement, good and clear title
to such Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests, equities and claims
whatsoever; and
(vi) the execution, delivery and performance of this Agreement
and the Custody Agreement and Power of Attorney of each Selling Stockholder
by such Selling Stockholder, the compliance by such Selling Stockholder
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (A) require any
consent, approval, authorization or other order of, or qualification with,
any court or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states), (B) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, the organizational documents of such Selling Stockholder, if
such Selling Stockholder is not an individual, or any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which such
Selling Stockholder is a party or by which any property of such Selling
Stockholder is bound or (C) violate or conflict with any applicable law or
any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over such Selling
Stockholder or any property of such Selling Stockholder.
(h) The Underwriters shall have received on the Closing Date the
opinions of Stibbe Simont Monahan Duhot (with respect to UPC, A2000, KTA, KTH,
KTE and the laws of The Netherlands), _________________ (with regard to the
Telekabel Group and the laws of Austria), Stibbe Simont Monahan Duhot (with
regard to Radio Public and the laws of
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Belgium, Advokatfirmaet Steestup (with regard to Norkabel and Janco and the laws
of Norway), Freehill Hollingdale & Page (with regard to Austar and the laws of
Australia), Carey y Cia Ltda. (with regard to VTR Hipercable and the laws of
Chile), each dated the Closing Date and addressed to the Underwriters,
substantially to the effect that:
(i) The statements in the Prospectus, insofar as they are
descriptions of contracts, agreements or other legal documents, or refer to
statements of law or legal conclusions, are accurate and complete in all
material respects and present fairly the information purported to be shown,
and the descriptions of the applicable government regulations in each of
such countries are accurate and complete in all material respects;
(ii) Each of UPC, the Telekabel Group companies, Radio Public,
Norkabel, Janco, KTA, KTH, KTE, A2000, CTV Pty. Ltd. and STV Pty. Ltd
("CTV/STV"), Cablevision, STX and VTR Hipercable (collectively, the
"FOREIGN SUBSIDIARIES") is a corporation or other legal entity duly
organized and validly existing in good standing under the laws of the
jurisdiction of its formation, with full power and authority to own, lease,
and operate its properties and to conduct its business as described in the
Prospectus, (and any amendment or supplement thereto); and all the
outstanding shares of capital stock or other equity interest of each of the
Foreign Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and, except as set forth in the Prospectus,
are owned by the Company directly, or indirectly through one of the
Subsidiaries, free and clear, to the best knowledge of such counsel after
reasonable inquiry, of any security interest, lien, adverse claim, equity
or other encumbrance;
(iii) The Company's ownership interest with respect to each of
the Foreign Subsidiaries is as described in the Prospectus;
(iv) None of the Foreign Subsidiaries is in violation of its
respective certificate or articles of incorporation or bylaws, or other
organizational documents; to the best knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the Foreign Subsidiaries
is in material default in the performance of any obligation, agreement or
condition contained in any permit or any bond, debenture, note or other
evidence of indebtedness, except as may be disclosed in the Prospectus;
(v) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement, compliance by the
Company with the provisions hereof and consummation by the Company of the
transactions contemplated hereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws, or other organizational
documents, of any of the Foreign
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Subsidiaries or any agreement indenture, lease or other instrument to which
the Company or any of the Foreign Subsidiaries is a party or by which any
of them or any of their respective properties is bound that is known to
such counsel after reasonable inquiry, or, to the best knowledge of such
counsel after reasonable inquiry, will result in the creation or imposition
of any material lien charge or encumbrance upon any property or assets of
the Company or any of the Foreign Subsidiaries nor will any such action
result in any violation of any existing law, regulation, ruling (assuming
compliance with all applicable state securities and Blue Sky laws),
judgment, injunction, order or decree known to such counsel after
reasonable inquiry, applicable to the Company or the Foreign Subsidiaries
or any of their respective properties, except where such violation would
not have a Material Adverse Effect;
(vi) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the
part of the Company or any Foreign Subsidiary (except as may be required
under state securities or Blue Sky law governing the purchase and
distribution of the Shares) for the valid issuance and sale of the Shares
to the Underwriters as contemplated by this Agreement;
(vii) To the best knowledge of such counsel after reasonable
inquiry, neither the Company nor any of the Foreign Subsidiaries is in
violation of any law, ordinance administrative or governmental rule or
regulation applicable to the Company or any of the Foreign Subsidiaries of
any decree of any court or governmental agency or body having jurisdiction
over the Company or any of the Foreign Subsidiaries, except where such
violation would no have a Material Adverse Effect;
(viii) Each of the Company and each Foreign Subsidiary has all
necessary governmental authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental
regulatory officials and bodies (except where the failure so to have any
such authorizations, approvals, orders, licenses, certificates, franchises
or permits, individually or in the aggregate, would not have a Material
Adverse Effect) to own its properties and to conduct its businesses as now
being conducted, as described in the Prospectus; and
(ix) Each of the Company and each Foreign Subsidiary owns all
licenses and rights described in the Prospectus as being owned by the
Company or the Foreign Subsidiaries and necessary for the conduct of its
businesses, and such counsel is not aware of any claim to the contrary or
any
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challenge by any other person to the rights of the Company or any Foreign
Subsidiary with respect to the foregoing.
(i) The Underwriters shall have received on the Closing Date an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters, dated the Closing Date and addressed to you, in form and substance
reasonably satisfactory to the Underwriters.
(j) The Underwriters shall have received letters addressed to the
Underwriters and dated the date hereof and the Closing Date from Arthur Andersen
LLP, and KPMG Accountants N.V., and others all of which are independent public
accountants, substantially in the forms heretofore approved by the Underwriters.
(k) There shall not have been any change in the capital stock of the
Company (other than as a result of the issuance of shares of Class A Common
Stock of the Company upon the exercise of outstanding warrants or stock options
or upon conversion of shares of Class B Common Stock of the Company) nor any
material increase in the short-term or long-term debt of the Company (other than
in the ordinary course of business) from that set forth or contemplated in the
Prospectus (or any amendment or supplement thereto); (ii) there shall not have
been, since the respective dates as of which information is given in the
Prospectus, (or any amendment or supplement thereto), except as may otherwise be
stated in the Prospectus (or any amendment or supplement thereto), any material
adverse change in the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole; (iii) the Company, the Subsidiaries shall not
have any liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries taken as a whole, other than those reflected in the Prospectus (or
any amendment or supplement thereto); and (iv) all the representations and
warranties of the Company contained in this Agreement shall be true and correct
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date, and you shall have received a certificate, dated the
Closing Date and signed by the chief executive officer and the chief financial
officer of the Company (or such other officers as are acceptable to you), to the
effect set forth in this Section 9(k).
(l) The Company and the Selling Stockholders shall not have failed at
or prior to the Closing Date to have performed or complied with any of its
agreements herein contained and required to be performed or complied with by it
hereunder at or prior to the Closing Date.
(m) The Company shall have furnished or caused to be furnished to you
such further certificates and documents as you shall have requested.
(n) The Company shall have delivered to you the agreements specified
in Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
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(o) The Shares shall have been duly listed for quotation on the
Nasdaq National Market.
(p) You shall have received on the Closing Date, a certificate of
each Selling Stockholder who is not a U.S. Person (as defined under applicable
U.S. federal tax legislation) to the effect that such Selling Stockholder is not
a U.S. Person, which certificate may be in the form of a properly completed and
executed United States Treasury Department Form W-8 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Underwriters and your counsel.
Any certificate or document signed by any officer of the Company or Selling
Stockholder and delivered to the Underwriters, or counsel for the Underwriters,
shall be deemed a representation and warranty by the Company or Selling
Stockholder to the Underwriters as to the statements made therein.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
SECTION 10. Effectiveness of Agreement and Termination. This
Agreement shall become effective upon the execution and delivery of this
Agreement by the parties hereto.
This Agreement shall be subject to termination in the absolute
discretion of the Underwriters, without liability on the part of the Underwriter
to the Company, by notice to the Company, if prior the Closing Date, (i) trading
in securities generally on the New York Stock Exchange, American Stock Exchange
or Nasdaq National Market shall have been suspended or materially limited, (ii)
general moratorium on commercial banking activities in New York or Colorado
shall have been declared by either federal or state authorities, or (iii) there
shall have occurred any outbreak or escalation of hostile or other international
or domestic calamity, crisis or change in political, financial or economic
condition the effect of which on the financial markets of the United States is
such as to make it, in the judgement of the Underwriters impracticable or
inadvisable to commence or continue the offering of the Shares on the terms and
in the manner contemplated in the Prospectus. Notice of such termination may be
given to the Company by telegram, telecopy telephone and shall be subsequently
confirmed by letter.
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<PAGE>
If on the Closing Date any one or more of the Underwriters shall fail
or refuse to purchase the Shares which it or they have agreed to purchase
hereunder on such date and the aggregate number of Shares which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the total number of Shares to be
purchased on such date by all Underwriters, each non-defaulting Underwriter
shall be obligated severally, in the proportion which the number of Shares set
forth opposite its name in Exhibit B bears to the total number of Shares which
all the non-defaulting Underwriters, as the case may be, have agreed to
purchase, or in such other proportion as the Underwriters may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters, as the
case may be, agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Shares and the aggregate number of
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares to be purchased on such date by all Underwriters, and
arrangements satisfactory to the Underwriters and the Company for purchase of
such Shares are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriters and
the Company. In any such case which does not result in termination of this
Agreement, either the Underwriters or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any such
Underwriter under this Agreement.
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each non-
defaulting Underwriter shall be obligated severally, in the proportion which the
number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 10 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters, and arrangements satisfactory to
you, the Company and the Selling Stockholders for purchase of such Firm Shares
are not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter, the Company or
the Selling Stockholders. In any such case which does not result in
termination of this Agreement, either you or the Sellers shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. If, on an
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than
32
<PAGE>
one-tenth of the aggregate number of Additional Shares to be purchased on such
date, the non-defaulting Underwriters shall have the option to (i) terminate
their obligation hereunder to purchase such Additional Shares or (ii) purchase
not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase on such date in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
SECTION 11. Agreements of the Selling Stockholders. Each Selling
Stockholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes payable in
connection with the transfer of the Shares to be sold by such Selling
Stockholder to the Underwriters.
(b) To do and perform all things to be done and performed by such
Selling Stockholder under this Agreement prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares to be sold by
such Selling Stockholder pursuant to this Agreement.
SECTION 12. Miscellaneous. Except as otherwise provided in Sections
4 and 10 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to Company, at the office of the
Company at 4643 South Ulster Street, Denver, Colorado 80237, Attention: Chief
Financial Officer; (ii) if to the Selling Stockholders, [Name of Attorney-in-
Fact] c/o [Address of Attorney-in-Fact]; or (iii) if to the Underwriters, care
of Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New
York, New York 10172.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Shares, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any Underwriter, the officers or
directors of any Underwriter, any person controlling any Underwriter, the
Company, the officers or
33
<PAGE>
directors of the Company, any person controlling the Company, any Selling
Stockholder or any person controlling such Selling Stockholder, (ii) acceptance
of the Shares and payment for them hereunder and (iii) termination of this
Agreement.
If for any reason the Shares are not delivered by or on behalf of any
Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Sellers agree, jointly and severally, to
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Sellers also
agree, jointly and severally, to reimburse the several Underwriters, their
directors and officers and any persons controlling any of the Underwriters for
any and all fees and expenses (including, without limitation, the fees
disbursements of counsel) incurred by them in connection with enforcing their
rights hereunder (including, without limitation, pursuant to Section 8 hereof).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, the Company's directors and the
Company's officers who sign the Registration Statement and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "SUCCESSORS and ASSIGNS" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED
ENTIRELY WITHIN THE STATE OF NEW YORK, EXCLUDING (TO THE GREATEST EXTENT
PERMISSIBLE BY LAW) ANY RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT
34
<PAGE>
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
35
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
UNITED INTERNATIONAL HOLDINGS, INC.
By: ________________________________
Name:
Title:
THE SELLING STOCKHOLDERS NAMED
IN SCHEDULE II HERETO, ACTING
SEVERALLY
By: ________________________________
Attorney-in-fact
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO. INCORPORATED
JANCO PARTNERS
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ____________________________
36
<PAGE>
SCHEDULE I
----------
Number of Firm
Underwriters Shares to be Purchased
- ------------ ----------------------
Donaldson, Lufkin & Jenrette Securities
Corporation.............................
Goldman, Sachs & Co.......................
Morgan Stanley & Co. Incorporated.........
Janco Partners............................
Total........ 3,000,000
=========
S-I
<PAGE>
SCHEDULE II
-----------
Selling Stockholders
--------------------
Number of Firm
Name Shares Being Sold
- ---- -----------------
Joseph E. Giovanini and affiliates.............. 1,813,991
William J. Elsner............................... 787,839
William R. Hudon................................ 234,472
Bernard G. Dvorak............................... 163,698
---------
Total........... 3,000,000
=========
S-II
<PAGE>
Annex I
-------
[Insert names of stockholders of the Company
who will be required to sign lock ups]
A-I
<PAGE>
EXHIBIT 5.1
[Letterhead of Holme Roberts & Owen, LLP]
June 23, 1998
Board of Directors
United International Holdings, Inc.
4643 South Ulster Street, #1300
Denver, Colorado 80237
Re: United International Holdings, Inc.
Registration Statement on Form S-3 (File No. 333-56489)
Ladies and Gentlemen:
As counsel for United International Holdings, Inc., a Delaware corporation (the
"Company"), we have examined the above-referenced Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Registration Statement"),
that the Company is filing with the Securities and Exchange Commission with
respect to the registration of 3,450,000 shares of its Class A Common Stock (the
"Shares").
We have also examined the Company's Certificate of Incorporation, as amended,
By-laws and the record of its corporate proceedings and have made such other
investigation as we have deemed necessary in order to express the opinion set
forth below.
Based on such investigation, it is our opinion that the Shares have been duly
and legally issued and are fully paid and non-assessable.
We hereby consent to all references to us in the Registration Statement and all
amendments to the Registration Statement. We further consent to the use of this
opinion as an exhibit to the Registration Statement. We express no opinion as
to any matters not expressly set forth herein.
HOLME ROBERTS & OWEN LLP
By: /s/ Garth B. Jensen
------------------------
Garth B. Jensen, Partner
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated May 25, 1998 on
United International Holdings, Inc., incorporated by reference from United
International Holdings, Inc.'s Annual Report on Form 10-K for the year ended
February 28, 1998, and to all references to our firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
June 22, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated May 25, 1998 on
United International Properties, Inc., incorporated by reference from United
International Holdings Inc.'s Annual Report on Form 10-K for the year ended
February 28, 1998, and to all references to our firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
June 22, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated May 25, 1998 on UIH
Europe, Inc., incorporated by reference from United International Holdings,
Inc.'s Annual Report on Form 10-K for the year ended February 28, 1998, and to
all references to our firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
June 22, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report, dated April 29, 1998 on
United Pan-Europe Communications N.V. for the years ended December 31, 1997 and
1996, incorporated by reference from United International Holdings, Inc.'s
Annual Report on Form 10-K for the year ended February 28, 1998, and to all
references to our firm included in this Registration Statement.
ARTHUR ANDERSEN & CO.
Amstelveen, The Netherlands
June 22, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report, dated 20 May 1996 on
United and Philips Communications B.V. for the year ended 31 December 1995,
incorporated by reference from United International Holdings, Inc.'s Annual
Report on Form 10-K for the year ended February 28, 1998, and to all references
to our firm included in this Registration Statement.
ARTHUR ANDERSEN & CO.
Amstelveen, The Netherlands
22 June 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated 20 May 1996 on United and Philips Communications
B.V. for the year ended 31 December 1995, into this Registration Statement on
Form S-3, Amendment No. 1. We also consent to the reference to our firm under
the caption "Experts" in this Registration Statement.
KPMG Accountants N.V.
Amstelveen, The Netherlands
22 June 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the incorporation by reference of
our report, dated 15 March 1996 on the consoldiated financial statements of XYZ
Entertainment Pty Limited into this Registration Statement on Form S-3,
Amendment No. 1. We also consent to the reference to our firm under the caption
"Experts" in this Registration Statement.
Deloitte Touche Tohmatsu
Sydney, Australia
22 June 1998
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the incorporation by reference of
our reports, dated March 6, 1998 and March 31, 1997 on the combined financial
statements of Tele Cable de Morelos, S.A. de C.V. and related companies (all of
which are subsidiaries of Megapo Communicaciones de Mexico, S.A. de C.V.) into
this Registration Statement on Form S-3, Amendment No. 1. We also consent to the
reference to our firm under the caption "Experts" in this Registration
Statement.
Galaz, Gomex Morfin, Chavero, Yamazaki, S.C.
Acapulco, Mexico
June 22, 1998
<PAGE>
EXHIBIT 23.9
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent accountants, we hereby consent to the incorporation by reference
of our report, dated March 15, 1996 on the financial statements of Monor
Communications Group, Inc. and Subsidiaries as of December 31, 1995 and 1994 and
for the years then ended, into this Registration Statement on Form S-3,
Amendment No. 1. We also consent to the reference to our firm under the caption
"Experts" in this Registration Statement.
Coopers & Lybrand L.L.P.
Omaha, Nebraska
June 22, 1998
<PAGE>
EXHIBIT 23.10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 of the Registration Statement on Form
S-3 of our report dated March 8, 1996, relating to the financial statements of
Cambodinamica TV Cabo Sao Paulo S.A. as of and for the years ended December 31,
1995 and 1994, which appears on page 55 of the United International Holdings,
Inc. Form 10-K Annual Report for the year ended February 28, 1998. We also
consent to the references to us under the heading "Experts" in such Prospectus.
Price Waterhouse
Auditores Independentes
Sao Paulo, Brazil
June 22, 1998
<PAGE>
EXHIBIT 23.11
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the incorporation by reference of
our report, dated 16 February 1996 on the financial statements of TELEFENUA
S.A., into this Registration Statement on Form S-3, Amendment No. 1. We also
consent to the reference to our firm under the caption "Experts" in this
Registration Statement.
COOPERS & LYBRAND TAHITI
Jean-Pierre GOSSE
Papeete, 22 June 1998
