CSG Systems International Inc. shares took a pounding after an arbitrator issued a complex ruling in the vendor’s legal dispute with key customer Comcast Corp.
The arbitrator ruled that Comcast did not have the right to terminate a contract with CSG that the MSO inherited from AT&T Broadband.
But the arbitrator also said Comcast should be awarded $120 million in damages under most-favored-nation pricing provisions in the contract.
CSG closed trading Wednesday at $9.28 per share, down $6.22 apiece, a drop of more than 40%. The stock had fallen as low as $9.18 earlier.
While CSG maintained billing-services exclusivity at former AT&T Broadband subscribers in the ruling, it did not win the right to extend contract terms to Comcast’s other systems.
Comcast said it was pleased. "The arbitrator’s decision brings CSG’s pricing down to market rates and recognizes AT&T Broadband’s most-favored-nations and termination rights," Comcast executive vice president and general counsel Terry Bienstock said in a prepared statement.
CSG officials found positives in keeping the right to serve former AT&T Broadband systems, maintaining exclusivity in those territories and keeping in place monthly minimum fees. They expressed disappointment at the $120 million damage award and at losing the exclusivity claim on Comcast subscribers.
The billing-service vendor maintained that the $120 million judgment was "miscalculated" and said it would seek modifications that could lower that figure by as much as $50 million. CSG said insurance, plus $128 million in cash and investments, would account for the judgment cash.
CSG and Comcast, in press releases, sparred over the contract’s "out" clause.
Comcast said the arbitrator confirmed AT&T Broadband’s right to terminate the CSG contract at any time with a $44 million payment and CSG was obliged to provide transition services.
"There is no new right for Comcast to terminate the agreement," CSG president and chief operating officer Jack Pogge replied. "We do not agree with their interpretation of the clause." The $44 million kicks in if the contract is breached, Pogge added.
CSG said it wants to work with Comcast. "The plan is to work together to improve our relationship going forward and restructure our relationship to meet the needs of both parties," CSG chairman and CEO Neal Hansen said.
The vendor added that Comcast would see a "significant price decrease" for its services as a result of the ruling, which will reduce CSG’s quarterly revenue by an estimated $8 million-$14 million. Cash flow will drop between $5 million-$8 million each quarter, CSG said.