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SALLIE HOFMEISTER

He's Turned Around a Toughie: TCI

March 24, 1998|SALLIE HOFMEISTER

DENVER — Leo Hindery didn't sign a formal contract when he agreed to become president of the nation's largest cable company about a year ago. The terms he worked out were boiled down to a one-page letter from his new boss, John Malone, the chairman of Tele-Communications Inc.: Hindery would abstain from race car driving as long as he was president of the Englewood, Colo.-based giant; in return, Hindery would not have to stay in the dormitory-style TCI apartment in New York when he traveled there for business.

The pact, partly a joke, between the two friends set the stage for what some on Wall Street are calling the most significant corporate turnaround of the last year--the transformation of the nation's fifth-largest media empire.

Since Hindery's arrival in February 1997, TCI's stock price has nearly tripled from an all-time low, fueling a resurgence of the entire cable sector to record highs. TCI shares closed Monday at $31.87, up 9 cents, on Nasdaq.

"He's the best thing to happen to TCI maybe ever," said Brian Roberts, chief executive of Comcast Corp., who says Hindery had a bigger effect on cable stocks than Microsoft Corp.'s industry-endorsing $1-billion investment in his company last summer.

TCI's health is important to Hollywood, where the company is influential not only as a cable operator but also as an owner of programming through Liberty Media Corp. Liberty controls Starz and Encore, which have multimillion-dollar deals with studios for movies. Liberty also is part owner in a slew of other channels, including fX, Discovery Networks, BET, the Fox regional sports networks and Barry Diller's USA Networks. Liberty recently struck a deal with Sony Corp. to jointly buy Telemundo, the Spanish-language TV group.

This week, analysts, lenders and members of the media will get a more complete picture of the scope of the recovery and TCI's plans for an encore during a three-day conference that starts in Denver today.

Hindery swept TCI's ailing balance sheet clean by a clever restructuring that sacrificed its No. 1 ranking to Time Warner Inc. but reduced its $17-billion debt to manageable levels. After a blistering pace of deal-making, the company has shed nonstrategic assets and spun off subscribers into 25 partnerships with other operators in urban "clusters" that make it easier to deliver new services.

After years of broken promises, TCI is partnering with Microsoft and Sun Microsystems Inc. to deliver advanced digital TV set-top boxes offering hundreds of channels as well as Internet and phone service.

Hindery, who is 50 and says he took the job only out of "a deep affection" for Malone, has changed the personality of the organization from bullying to collegial. Malone, meanwhile, has returned to his preferred role as technology visionary and strategist.

"Leo gets a screaming A-plus," said Robert "Dob" Bennett, the president of Liberty Media. "It's a different company today, both inside and out. The organization is charged up, and no one here can say they are working harder than Leo, who puts in 60% longer days than anyone."

A chronic workaholic, Hindery typically arrives in the office before 5 a.m. and often has a working dinner before returning to his desk at night. He crisscrosses the country twice a week doing deals, meeting local cable franchise authorities and speaking at industry functions as part of a mission to change the perception of TCI and give direction to the industry. Saturdays are reserved for his wife and teenage daughter.

Sources say he has been feverishly negotiating to have an announcement for analysts and lenders this week. Hindery, who has a habit of dropping hints about coming news--sending Wall Street and the media scurrying to solve the mysteries--has promised that if 1997 was the year of the fix, 1998 will be marked by major alliances for new businesses such as telephone service.

TCI, for example, wants AT&T Corp. as a partner in a new effort to use the Internet for phone service. Though talks have bogged down, sources expect some deal to be fashioned.

Perhaps the more difficult negotiation for Hindery was between Primestar Partners and ASkyB, which involved at least eight parties. The resulting agreement removed a cloud over cable stocks by eliminating Rupert Murdoch as a cable competitor. Sources say Hindery was instrumental in persuading Murdoch to abort a merger of his ASkyB satellite upstart with EchoStar Communications last February in favor of joining the cable-owned venture Primestar.

Hindery is widely praised for a deal-making style that has begun stripping away the image of TCI as a secretive and bullying corporation. Years of customer neglect, unkept promises, rate gouging and the piling on of new debt to establish itself as the industry Goliath had left TCI isolated and arrogant--the very embodiment of a cable monopoly.

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