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Prospectus Supplement Filed Pursuant to Rule 424(b)(5)
Supplement Registration No. 333-90997
(To Prospectus Dated
November 22, 1999)
[LOGO]
397,333 Shares Class A Common Stock
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UnitedGlobalCom:
. We are the largest provider, in terms of subscribers, of broadband
communications services outside the United States, including multi-channel
television, telephone and high-speed Internet/data services.
. UnitedGlobalCom, Inc.
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237
(303) 770-4001
The Offering:
. This prospectus is being used to register 397,333 shares of our Class A
common stock which will issue upon the exercise of options to purchase shares
of our Class A common stock.
Common Stock:
. Our Class A common stock is traded on the Nasdaq National Stock Market under
the symbol ``UCOMA.'' On May 26, 2000, the last reported sales price was
$40.25 per share.
This investment involves risk. See ``Risk Factors'' beginning on page S-2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
May 30, 2000
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SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, including
incorporated documents include forward-looking statements within the meaning of
the federal securities laws. We base forward-looking statements on our
reasonable beliefs, assumptions and expectations of our future economic
performance, taking into account information currently available to us. However,
forward-looking statements involve risks and uncertainties which could cause
actual outcomes and results to differ materially from the expected outcomes and
results expressed or implied in such forward-looking statements. Some of the
risks and uncertainties which could cause actual outcomes and results to differ
materially from our expectations include:
. the impact of general economic conditions;
. industry-wide market factors, including competition;
. our ability to identify and complete acquisitions and successfully
integrate the operating philosophies and practices of the businesses we
acquire;
. financial performance of start-up operations;
. capital expenditure requirements;
. regulatory developments affecting our operations, acquisitions and
dispositions;
. interest rates;
. taxes; and
. access to capital markets.
The words ``believes,'' ``anticipates,'' ``expects'' and similar expressions are
intended to identify such forward-looking statements. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or other factors.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
<S> <C>
Page
Special Note on Forward-Looking Statements.................................................... S-i
The Company................................................................................... S-1
Risk Factors.................................................................................. S-2
Use of Proceeds............................................................................... S-13
Plan of Distribution.......................................................................... S-13
</TABLE>
S-ii
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THE COMPANY
This prospectus supplement highlights information contained elsewhere
in, or incorporated by reference into, the prospectus delivered herewith. This
prospectus supplement is not complete and does not contain all of the
information that you should consider before investing in the securities. You
should read the entire prospectus and prospectus supplement carefully, including
the ``Risk Factors'' sections and the documents incorporated by reference. All
references in this prospectus supplement to ``dollars'' and ``$'' are to United
States dollars. We have converted foreign currency amounts to United States
dollars using March 31, 2000 exchange rates.
UnitedGlobalCom, Inc. (formerly known as United International Holdings, Inc.,
together with its majority-owned subsidiaries, the "Company" or "United") is a
leading broadband communications provider outside the United States. We provide
multi-channel television services in 23 countries worldwide and telephone and
Internet/data services in a growing number of our international markets. Our
operations are grouped into three major geographic regions: Europe, Asia/Pacific
and Latin America. Our European operations are held through our majority-owned,
publicly traded subsidiary, United Pan-Europe Communications N.V. ("UPC"), which
is the largest Pan-European broadband communications company providing multi-
channel television, telephone and Internet/data services to 12 countries in
Europe and Israel. Our Asia/Pacific operations are primarily held through our
majority-owned, publicly traded subsidiary, Austar United Communications,
Limited ("Austar United"), which owns the largest provider of multi-channel
television services in regional Australia, various Australian programming
interests and the only full service provider of broadband communications in New
Zealand. Our primary Latin America operation is our 100% owned VTR Global Com
S.A. ("VTR"), Chile's largest multi-channel television provider and a growing
provider of telephone services.
We were incorporated in 1989 as a Delaware corporation. Our main offices are
located at 4643 South Ulster Street, Suite 1300, Denver, Colorado 80237. Our
telephone number is (303) 770-4001. Our fax number is (303) 770-4207.
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RISK FACTORS
An investment in the securities offered hereby is subject to a number of
risks. You should consider carefully the following risk factors, as well as the
more detailed descriptions cross-referenced to the body of this prospectus
supplement, all of the other information in this prospectus, the accompanying
prospectus and the information in the documents incorporated by reference.
We could be prevented from paying dividends on shares of our common stock
Under Delaware law we can make dividend payments only from our ``surplus''
(the excess of our total assets over the sum of our liabilities plus the par
value of our outstanding capital stock) or net income. We cannot assure you
that we will have any surplus or net income. Without surplus, we cannot pay
dividends on shares of our common stock.
We have no significant assets other than stock of our subsidiaries and the
proceeds generated from sales of our securities; once these proceeds are spent,
we will depend on our subsidiaries to generate the funds needed to operate our
business
All of our operations are conducted through our subsidiaries. Our only
material assets consist of the stock of our subsidiaries and the proceeds raised
from the sale of our equity and debt securities, all of which we have loaned or
contributed, or intend to loan or contribute, to our subsidiaries. We will have
to rely upon dividends and other payments from our subsidiaries to generate the
funds necessary to make cash dividend payments, if any. Our subsidiaries,
however, are legally distinct from us and have no obligation, contingent or
otherwise, to make funds available for dividend payments to us. The ability of
our subsidiaries to make dividend and other payments to us is subject to, among
other things, the availability of funds, the terms of our subsidiaries'
indebtedness and applicable state laws. There are significant restrictions on
the payment of dividends to us contained in the instruments governing the
obligations of our subsidiaries. As many of our subsidiaries are currently in
early stages of development, they likely will not have the ability to make such
payments to us regardless of any restrictions in debt instruments for the
foreseeable future.
Our ability to issue senior preferred stock in the future could adversely affect
the rights of holders of our common stock
We are authorized to issue preferred stock in one or more series on terms that
may be determined at the time of issuance by our Board of Directors. A series of
preferred stock could include voting rights, preferences as to dividends and
liquidation, conversion and redemption rights senior, in all instances, to our
common stock. The future issuance of preferred stock could adversely affect our
common stock.
The exercise or conversion of our outstanding options and other convertible
securities into common stock will dilute the percentage ownership of our other
stockholders; the sale of such common stock in the open market could adversely
affect the market price of our common stock
There are outstanding options to purchase approximately 4,806,000 million
shares of our common stock as of March 31, 2000 and more options will be granted
in the future under our employee and non-employee director benefit plans.
Additionally, our outstanding preferred stock, as of March 31, 2000, is
convertible into approximately 17,119,000 million shares of our common stock. A
large number of the shares of common stock underlying such securities are or
will be registered for resale under the Securities Act. The exercise or
conversion of outstanding
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stock options or other convertible securities and the payment of common stock as
dividends or otherwise on our preferred stock will dilute the percentage
ownership of our other stockholders, including you. In addition, any sales in
the public market of shares of our common stock issuable upon the exercise or
conversion of such stock options or convertible securities, or the perception
that such sales could occur, may adversely affect the prevailing market price of
our common stock.
The sale of a substantial number of shares of our common stock in the public
market could adversely affect the market price of our common stock
Substantially all of our currently outstanding shares of common stock have
been registered for sale under the Securities Act, are eligible for sale under
an exemption from the registration requirements or are subject to registration
rights pursuant to which holders may require us to register such shares in the
future. Sales or the expectation of sales of a substantial number of shares of
our common stock could adversely affect the prevailing market price of our
common stock.
Our substantial indebtedness could adversely affect our financial health
We are highly leveraged. As of March 31, 2000 we had consolidated long-term
debt of approximately $7.5 billion which includes parent company debt of
approximately $1.2 billion and subsidiary level debt of approximately $6.3
billion.
We currently believe that cash on hand, cash flow from our future operations,
asset sales and our borrowing capacity will be sufficient to meet our
obligations as they become due. In certain circumstances, some of which may be
beyond our control, we may have to repay the indebtedness prior to when it is
scheduled to be repaid. We may not be able to satisfy all of the conditions
necessary for our lenders to continue to lend us money under our existing credit
facilities. Some of these conditions are beyond our control. We also cannot
assure you that circumstances will not require us to sell assets or obtain
additional equity or debt financing at our level or those of our subsidiaries
and affiliates. We may not at such time be able to sell assets or obtain
additional financing on reasonable terms or at all.
The degree to which we will be leveraged could have important consequences to
you, including, but not limited to, the following:
. a substantial portion of our cash flow from operations will be required to
be dedicated to debt service and will not be available for other purposes,
. our ability to obtain additional financing in the future could be limited,
. certain of our borrowings are at variable rates of interest, which could
result in higher interest expense in the event of increases in interest
rates, and
. our ability to execute our business plan, to compete effectively, to respond
adequately to unforseen events and to take advantage of opportunities could
be limited.
Our acquisitions strategy involves significant inherent risks
A key element of our publicly traded subsidiaries' growth strategy is to
continue acquiring systems near our current systems and to increase the
percentage we own in some systems, allowing us to upgrade and improve our
current services and to achieve economies of scale. We are almost continuously
engaged in discussions or
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negotiations regarding the acquisition of businesses and systems, some
potentially material in relation to our size. Any future acquisitions will be
accompanied by risks such as:
. Difficulty of identifying appropriate acquisitions. Our growth may suffer if
we are not able to identify and acquire cable/telephone systems that are
either near our existing networks or are large enough to serve as the basis
for expanded operations.
. Time of senior management. Our senior management may not be able to devote
their full attention to managing our existing business because of the time
they must spend negotiating agreements and monitoring acquisition
activities.
. Potential regulatory issues. We may not be able to obtain the required
approvals for acquisitions from the relevant regulatory authorities.
. Difficulties in completing acquisitions. We may not be able to satisfy
conditions that sellers of networks may demand in order to close
acquisitions. In addition, there may be significant legal and contractual
issues in connection with acquisitions, such as change of control provisions
in licenses and agreements, that could delay or prevent completion. Finally,
we may not be able to raise the financing necessary to pay for such
acquisitions.
. Entry into new markets. If we consummate acquisitions in markets in which we
have not previously operated, we will have no prior experience in dealing
with local regulators or with local market conditions.
We may not be able to raise sufficient capital to fund our acquisitions strategy
We will need to raise significant capital to consummate and to fund our
acquisitions strategy. We may raise further capital by selling assets, issuing
debt or equity or borrowing funds at either our level or at the level of our
subsidiaries and affiliates. We are not sure whether we will be able to raise
capital through any of these or other methods. If we cannot, we may not be able
to grow by acquiring systems as we intend. In addition, our acquisitions
strategy exposes us to the risk of unanticipated expenditures. For example, we
may be liable for liabilities not disclosed to us in the purchase of such
businesses, or we may have to incur greater capital expenditure than we
intended, in relation to a particular acquisition.
We cannot be certain that we will be successful in integrating acquired
businesses into ours
Our success depends, in part, upon the successful integration of the new
acquisitions and any future acquisitions we make. Although we believe that the
consummation of the new acquisitions will result in significant benefits and
synergies, the integration of these businesses will also present significant
challenges, including:
. realizing economies of scale in interconnection, programming and network
operations, and eliminating duplicate overheads, and
. integrating networks, financial systems and operational systems.
We cannot assure you, with respect to our recent acquisitions as well as
future acquisitions, that we:
. will realize any anticipated benefits, or
. will successfully integrate any acquired business with our operations.
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Failure to raise necessary capital could restrict the development of our network
and the introduction of new services
The video, telephone and Internet/data businesses are capital intensive
because they require extensive telecommunications infrastructure, equipment and
labor; we may not have access to sufficient capital to remain competitive. Lack
of capital could harm our business.
Many of our operating companies are expanding and upgrading their networks to
offer new services. Technological change may make even more upgrades necessary
if our operating companies are to compete effectively in their markets. Our
financial resources, even with the proceeds from this offering, may not be
enough for our capital needs. Also, we plan that equipment vendors will finance
a good part of the cost of the equipment for our new services. This vendor
financing is not yet in place. We may not be able to secure vendor financing on
satisfactory terms, if at all. Not upgrading our operating systems or making
other planned capital expenditures could harm our operations and competitive
position.
The multi-channel television, telephone and Internet/data business is capital
intensive because it requires expensive telecommunications infrastructure,
equipment and labor; we may not have, or have access to, sufficient capital to
remain competitive
The development, construction and operation of multi-channel television,
telephone and Internet/data systems require substantial capital investment. It
requires constructing telecommunications infrastructure by laying cable over
great distances, as well as expensive labor and equipment. In addition, many of
our operating companies are expanding and upgrading their respective networks to
increase channel capacity and to be able to offer additional services. For
example, some of our operating companies are upgrading their existing one-way
video distribution infrastructure to full two-way capability. In some systems we
are buying equipment to offer telephone service. As technology changes in the
multi-channel television, telephone and Internet/data industry, we may need to
make additional system upgrades to compete effectively in our markets beyond
what we currently plan. We may not have enough capital available from cash on
hand, existing credit facilities and cash to be generated from operations for
our future capital needs. Our inability to continue upgrading our networks or to
make our other planned or unplanned capital expenditures could adversely affect
our operations and competitive position.
To the extent we pursue new acquisition or development opportunities, we or
our subsidiaries or other affiliates would likely need to raise additional
capital through asset sales, issuances of debt or equity securities or through
operating company borrowings in addition to the significant amounts we have
raised to consummate recent acquisitions. This could increase our leverage. We
may not be able to raise additional capital through any of these methods.
We expect to continue to experience net losses for the next several years
We have experienced significant losses every year since we started business
until the year ended December 31, 1999. As of March 31, 2000, we had an
accumulated deficit of approximately $.9 billion and expect to have continued
losses. We had net losses of approximately $91.3 million, approximately $138.8
million, approximately $342.5 million, approximately $545.5 million for fiscal
years ended February 29, 1996, February 28, 1997, February 28, 1998, and the ten
months ended December 31, 1998, respectively. We had net income of $636.3
million and a net loss of $244.9 million for the fiscal year ended December 31,
1999 and the three months ended March 31, 2000, respectively. We expect to
incur substantial additional losses for the indefinite future. Continuing net
operating losses could materially harm our results of operations and increase
our need for additional capital in
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the future. See ``--The multi-channel television, telephone and Internet/data
business is capital intensive because it requires expensive telecommunications
infrastructure, equipment and labor; we may not have, or have access to,
sufficient capital to remain competitive.''
The loss of key personnel could weaken our technological and operational
expertise, delay the introduction of our new business lines and lower the
quality of our service
Our success and our growth strategy depends, in large part, on our ability 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 employees may be
required to live and work outside of their home countries and because
experienced local managers are often unavailable. We may not be able to attract
and retain the qualified personnel we need for our business.
We are exposed to numerous risks inherent to foreign investment
We operate our businesses outside of the United States. Risks inherent in
foreign operations include loss of revenue, property and equipment from
expropriation, nationalization, war, insurrection, terrorism, general social
unrest and other political risks, currency fluctuations, risks of increases in
taxes and governmental royalties and fees and involuntary renegotiation of
contracts with foreign governments. We are also exposed to the risk of changes
in foreign and domestic laws and policies that govern operations of foreign-
based companies. In addition, our operations have been, and in the future may
be, adversely affected by downturns in global economic conditions. In recent
times, the economies of many of our markets, especially in emerging markets such
as Eastern Europe and Latin America, have not been as strong as the United
States' economy. Downturns in these economies could hurt our revenues and
profitability.
We are exposed to significant foreign currency exchange rate and conversion risk
against which we generally do not hedge
Our operating companies have attempted, and will continue to attempt, to match
costs with revenues and borrowings with repayments in terms of their respective
local currencies. However, payment for a majority of purchased equipment has
been, and may continue to be, required to be made in United States dollars. In
addition, the value of our investment in an operating company is partially a
function of the currency exchange rate between the dollar and the applicable
local currency. In general, we and many of our operating companies do not
execute hedge transactions to reduce our exposure to foreign currency exchange
rate risks. Accordingly, we may experience economic loss and reduced earnings
solely as a result of foreign currency exchange rate fluctuations. For the years
ended February 28, 1997 and 1998, the ten months ended December 31, 1998, and
the year ended December 31, 1999 we had foreign exchange gains (losses) of
approximately ($0.3) million, approximately ($1.4) million, approximately $1.6
million and approximately ($39.5) million, respectively. We also experienced a
change in cumulative translation adjustments (resulting in decreases of
stockholders' equity) of approximately $8.4 million, $50.3 million, $24.7
million and approximately $127.2 million for the years ended February 28, 1997
and 1998, the ten months ended December 31, 1998 and the year ended December 31,
1999.
Some of our operating companies have notes payable and notes receivable that
are denominated in currencies other than their own functional currency or loans
linked to the dollar. We may also experience economic loss and reduced earnings
related to these monetary assets and liabilities.
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Adverse regulation to our multi-channel television, telephone or Internet/data
services could limit our revenues and growth plans and expose us to various
penalties
Our businesses are subject to governmental regulation, which may change from
time to time. Regulation could slow the introduction of our new services.
Changes in applicable laws and regulations could increase our costs. We cannot
assure you that material and adverse changes in the regulation of our 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 hurt our ability to offer some or all of our proposed
range of services in some of our markets.
As European Union (``EU'') member states, Austria, The Netherlands, Belgium
and France are required to enact national legislation which implements
directives issued by the EU Commission and other EU bodies. Although not an EU
member state, Norway has generally implemented the same principles on the same
timetable as EU member states. As a result of EU directives, our Western
European operating companies may establish and provide telecommunications
networks and/or services, including public voice telephone and Internet/data
services, through their cable networks. The EU Commission has started to review
the consequences of the convergence of telecommunications, media and information
technology. This review may result in changes in the current regulatory
framework that may harm our business. Additionally, if any of our operating
companies in the EU with exclusive rights to cable television infrastructure
achieves annual revenue of more than 50 million, it must account separately for
its telecommunications services and any cable television services. A draft EU
Commission directive, if issued, will require member states to enact legislation
directing incumbent telecommunications operators to separate their cable
television and telecommunications operations into distinct legal entities. This
may increase our competition as incumbents focus on specific services. In
addition, certain countries may impose interconnect obligations and other
regulatory controls with respect to the telecommunications services our
operating systems offer.
The primary goal of regulation in the telecommunications sectors in many of
the countries in which we operate is to reduce the monopoly power of incumbent
telecommunications operators. While this has given us the opportunity to enter
the telephone and Internet/data services markets, the regulatory regimes present
some risks. Our operating companies need to retain and obtain licenses and other
regulatory approvals for our existing and new services. There is a risk we may
not succeed in obtaining and retaining such licenses, and there may be long
delays and adverse conditions in connection with them. The regulatory process
may be time-consuming and may impede our ability to offer new services and to
obtain interconnect arrangements with incumbent telecommunications operators in
a timely manner or on favorable terms. Our ability to compete against large
incumbent telecommunications operators depends on the regulation of their
pricing and service offerings to end-users and interconnected carriers, which
may be or become unfavorable to us. New laws and regulations related to
electronic commerce and the Internet could delay and impair our Internet
business. New and existing laws may cover issues such as:
. sales and other taxes,
. user privacy,
. pricing controls,
. characteristics and quality of products and services,
. consumer protection,
. cross-border commerce,
. libel and defamation,
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. copyright and trademark infringement, and
. other claims based on the nature and content of Internet materials.
In most of our markets, regulation of video services takes the form of price
controls and programming content restrictions. Also, in The Netherlands and
Austria, local municipalities have contractual rights that restrict our
flexibility to increase prices, change programming and introduce new services.
In addition, laws in Belgium may require us to obtain special authorization for
distributing programming from non-European Union sources (which we are currently
distributing without such authorization), and to distribute certain digital
multiplexed programming (which we are not distributing). In Israel, our
subscription fees and program offerings are restricted by franchise agreements
and are subject to review by governmental agencies, including the Restrictive
Trade Practices Tribunal. We are subject to pending claims in Israel alleging
that we have engaged in certain unlawful acts, including violation of our cable
television franchise agreements. @Entertainment, our Polish operating company,
is currently operating in certain areas without the necessary permits. Failure
to obtain these permits could lead to governmental orders requiring
@Entertainment to stop operating in those areas, the imposition of monetary
penalties, and forfeiture of our cable networks. Poland also has restrictions
with respect to rights to install and operate cable television and DTH
broadcasting networks by entities in which foreign ownership exceeds certain
limits and in which the majority of governing bodies are not Polish citizens
residing in Poland. @Entertainment may not be deemed to be in full compliance
with these or other restrictions or regulations. In addition, @Entertainment's
permits could be revoked or limited in scope upon a direct or indirect change of
control of PTK Operator Sp.z o.o. There is a risk that our acquisition of
@Entertainment constituted an indirect change of control of PTK Operator
Sp.zo.o.
Our ability to offer telephone services depends on having interconnect
arrangements with other telephone providers
In the markets where we offer telephone services we compete with the incumbent
telecommunications operators. All of these operators are more established and
have more resources in their respective markets than we do. To offer telephone
service effectively, we must be able to interconnect with their systems so that
our customers can call customers served by those operators. Regulatory
frameworks in some countries in which we operate may not include the requirement
that other telephone providers interconnect with us. In such cases, we may be
unable to provide telephone service. In addition, if we are able to
interconnect, we may be unable to obtain interconnection on terms that are
acceptable to us.
Changes in technology may limit the competitiveness of our new services;
sufficient demand may not develop for our new services
Technology in our multi-channel television and telecommunications services
industry is changing rapidly. This influences the demand for our products and
services. Our ability to anticipate changes in technology and regulatory
standards and to develop and introduce new and enhanced products successfully on
a timely basis will affect our ability to continue to grow and to remain
competitive. Upon completion of the upgrade of some of our systems, we intend to
offer a range of new services in those systems' markets. For example, we plan to
provide additional channels and tiers of premium channels beyond our basic
package, impulse pay-per-view services, high-speed data services, Internet
access and telephone services. We may not be able to implement the technological
advances that may be necessary for us to remain competitive. We are also subject
in all of our markets to the risks generally associated with new product
introductions and applications. These risks include lack of market acceptance,
delays in development and failure of new products to operate properly or meet
customer expectations. There is no proven market for some of the advanced
services we refer to above. There may not be sufficient demand for our
telephone, Internet/data and other enhanced services.
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Our business is almost entirely dependent on various telecommunications and
media licenses granted and renewed by various national regulatory authorities in
the territories in which we do business and without these licenses, a number of
our businesses could be severely curtailed or prevented
. Licenses are granted for a limited term and they may not be renewed when
they expire.
. Regulatory authorities may have the power, at their discretion, to
terminate a license (or amend any provisions, including those related to
license fees) without cause.
. If we were to breach a license or applicable law, regulatory authorities
could revoke, suspend, cancel or shorten the term of a license or impose
fines.
. Regulatory authorities may grant new licenses to third parties, resulting
in greater competition in territories where we are already licensed.
. New technologies may permit new competitors to compete in areas where we
hold exclusive license.
. National authorities may pass new laws or regulations requiring us to re-
bid or reapply for licenses or interpret present laws against us, adversely
affecting our business.
. Licenses may be granted on a temporary basis, and there is no assurance
that these licenses will be continued on the same terms.
. Licenses may require us to grant access to bandwidth, frequency capacity,
facilities or services to other businesses that compete for our customers.
Accordingly, a number of our businesses could be severely curtailed if those
licenses were no longer available or were available at unfavorable terms.
Low demand, competition, unplanned costs, regulation and difficulties with
Interconnection could hinder the profitability of our telephone services
Our telephone services may not become profitable for a number of reasons.
Customer demand could be low, or we may encounter competition and pricing
pressure from incumbent and other telecommunications operators. Our network
upgrade may cost more than planned. In addition, our operating companies need to
obtain and retain licenses and other regulatory approvals for our existing and
new services. They may not succeed. Furthermore, our operating systems need to
interconnect their networks with those of the incumbent telecommunications
operators in order to provide telephone services. Problems in negotiating
interconnection agreements could delay the introduction or impede the
profitability of our telephone services. Not all of our systems have
interconnection agreements in place, and interconnection agreements have limited
duration and may be subject to regulatory and judicial review. We are
negotiating interconnection agreements for our planned telephone markets that do
not yet have them. This may involve time-consuming negotiations and regulatory
proceedings. While incumbent telecommunications operators in the European Union
are required by law to provide interconnection, incumbent telecommunications
operators may not agree to interconnect on a time scale or on terms that will
permit us to offer profitable telephone services. After interconnection
agreements are concluded, we remain reliant upon the good faith and cooperation
of the other parties to these agreements for reliable interconnection. We are
currently involved in a dispute with the Austrian telecommunications operator in
the Austrian courts over our interconnection arrangement there.
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The complexities of the operating systems we need to develop for our new
services could increase their costs and slow their introduction
We only recently began to offer local telephone and advanced Internet/data
services. We may not have planned for or be able to overcome all of the problems
in introducing these new services. Our new services may not meet our financial
expectations. This would impede our planned revenue growth and harm our
financial condition.
The new services involve many operating complexities. We will need to develop
and enhance new services, products and systems, as well as marketing plans to
sell the new services. For example, we intend to introduce a comprehensive new
billing system to support our new telephone and Internet/data businesses. Until
then, however, we plan to employ enhanced versions of our existing customer care
and billing systems for these services. Problems with the existing or new
systems could delay the introduction of the new services, increase their costs,
or slow successful marketing. These complexities and others may cause the new
services not to meet our financial expectations. This could impede our planned
revenue growth and harm our financial condition.
The success of our new telephone and internet/data services depends on whether
we continue to achieve technological advances
Technology in the cable television and telecommunications industry is changing
very rapidly. These changes influence the demand for our products and services.
We need to be able to anticipate these changes and to develop successful new and
enhanced products quickly enough for the changing market. This will determine
whether we can continue to increase our revenues and the number of our
subscribers and be competitive.
We have introduced new services, including:
. additional video channels and tiers
. pay-per-view services with frequent starting times, which are known as
"impulse" pay-per-view
. high speed data and Internet access services, and cable telephone services
The technologies used to provide these services are in operation in some of
our systems as well as systems of other providers. However, we cannot be sure
that demand for our services will develop or be maintained in light of other new
technological advances.
Lack of necessary equipment could delay or impair the expansion of our new
services
If we cannot obtain the equipment needed for our existing and planned
services, our operating results and financial condition may be harmed. For
example, a customer will need a digital set-top box to access the Internet or
receive our other enhanced services through a television set. These boxes are
being developed by several suppliers. If there are not enough affordable set-
top boxes for subscribers, however, we may have to delay our expansion plans.
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Customers may not want our video services if we cannot obtain attractive
programming
Our success depends on obtaining or developing affordable and popular
programming for our video subscribers. We may not be able to obtain or develop
enough competitive programming to meet our needs. This would reduce demand for
our video services, limiting their revenues. We rely on other programming
suppliers for almost all of our programming. In some of our markets, including
Eastern Europe, there is only a limited amount of local language programming
available. In these markets we must repackage other programming in the local
language.
We may be limited in claiming foreign tax credits; we do business in countries
that do not have tax treaties with the United States
In general, a United States corporation may claim a foreign tax credit against
its United States federal income tax expense for foreign income taxes paid or
accrued. A United States corporation may also claim a credit for foreign income
taxes paid or accrued on the earnings of a foreign corporation paid to the
United States corporation as a dividend. Because we must calculate our foreign
tax credit separately for dividends received from certain of our foreign
subsidiaries from those of other foreign subsidiaries and because of certain
other limitations, our ability to claim a foreign tax credit may be limited. We
own operating companies located in countries with which the United States does
not have income tax treaties. Because we lack treaty protection in these
countries, we may be subject to high rates of withholding taxes on distributions
and other payments from these operating companies and may be subject to double
taxation on their income. Limitations on our ability to claim a foreign tax
credit, our lack of treaty protection in some countries, and our inability to
offset losses in one foreign jurisdiction against income earned in another
foreign jurisdiction could result in a high effective United States federal tax
rate on our earnings.
We expect to encounter increased competition
The multi-channel television and telephone industries in many of the markets
in which we operate are competitive and often are rapidly changing. We recognize
that in the future we are likely to encounter increased competition as new
entrants with competing technologies, including but not limited to, direct to
home or DTH, satellite master antenna television, MMDS and local multipoint
distribution service, enter our 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 our existing operating systems is dependent, in part, on
our ability to provide services and programming not otherwise available to
subscribers. We may also have to compete initially in certain areas with
unlicensed operators. In many of our markets, we compete with other multi-
channel television and telephone operators, many of which have substantially
more resources than us.
Some potential losses may not be covered by insurance
Our 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 their multi-
channel television, Internet/data or telephone systems. Should a catastrophe
occur that affects a significant portion of their systems, they could incur
substantial uninsured losses.
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The complexities of our operating systems, large numbers of customers and rapid
growth could disrupt our operations and harm our financial condition
We may not have planned for or be able to overcome all of the problems in
introducing our new local telephone and Internet/data services. Our new services
may not meet our performance expectations. This would impede our planned revenue
growth and materially harm our financial condition. Problems with the existing
or new systems could delay the introduction of the new services, increase their
costs, or slow down successful marketing. We cannot be sure whether our Internet
access business will be able to handle a large number of online subscribers at
high data transmission speeds. As the number of subscribers goes up, we may have
to add more fiber connection points in order to maintain high speeds. This would
require more capital, which we may be unable to raise. If we cannot offer high
data transmission speeds, customer demand for our Internet/data services would
go down. This would harm our Internet/data business, our operating results and
our financial condition. We have not yet tested the technology we plan to use
for telephone services for the numbers of subscribers we expect. It may not
function successfully at these scales. This would harm our telephone operations.
We plan to use back-up batteries for our cable phones for operation during power
failures. These may run out in prolonged power failures. This would interrupt
the service and could lead to customer dissatisfaction. We may not be able to
manage our growth effectively, which would harm our business, operating results
and financial condition.
We are establishing customer care facilities in our relevant markets to
support the launch of our telephone and other new services. We may not be able
to establish well-running facilities staffed with appropriate personnel. This
could harm the introduction of our new services.
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USE OF PROCEEDS
The aggregate exercise price of the options pursuant to which we will issue
397,333 shares of our Class A common stock ranges from $2.25 per share to $7.875
per share. The aggregate proceeds we will receive upon the exercise of all of
these options is approximately $1,950,000. We expect to use these proceeds for
general corporate purposes.
PLAN OF DISTRIBUTION
We are registering 397,333 shares of our Class A common stock which we will
issue upon the exercise of certain of our outstanding options to purchase shares
of our Class A common stock. These shares will be issued upon exercise of the
options pursuant to the terms of the options.
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LOGO
397,333 Shares Class A Common Stock
PROSPECTUS SUPPLEMENT
May 30, 2000
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus supplement or the accompanying prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by UnitedGlobalCom or any of the underwriters. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making the offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this prospectus
supplement and the accompanying prospectus nor any sale made hereunder shall
create any implication that the information contained herein is correct as of
any time subsequent to its date.
