Billing-services vendor CSG Systems International Inc. was hammered last week following an arbitrator's judgment in its contractual dispute with key customer Comcast Corp.
The arbitrator said CSG must pay a Comcast unit $120 million to compensate for higher fees than CSG should have charged, per "most favored nation" provisions in the services contract Comcast acquired along with AT&T Broadband.
CSG maintained billing-services exclusivity at former AT&T cable subscribers in the ruling — but did not win exclusive billing dibs on Comcast's other customers.
The Philadelphia-based MSO 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 statement.
CSG officials found positives in keeping the right to serve former AT&T systems, maintaining exclusivity in those properties and keeping monthly minimum fees in place.
They expressed disappointment at the $120 million award, and at losing an exclusivity claim on all Comcast subscribers.
CSG called the $120 million judgment "miscalculated" and said it would try to get it reduced by as much as $50 million. CSG said insurance and cash on hand would cover the judgment award.
The two parties sparred over whether the arbitrator determined Comcast could terminate the CSG contract at any time by paying $44 million.
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," CEO Neal Hansen said.
CSG said Comcast would get a "significant price decrease", which will reduce CSG's quarterly revenue by an estimated $8 million to $14 million. Cash flow will drop by $5 million to $8 million each quarter, CSG said.
Comcast's business generates about half of CSG's profits. About 16 million Comcast customers get their bills from CSG. Comcast also deals with billing providers DST Innovis Inc. and Convergys Corp.
CSG and TCI signed a 15-year exclusive billing contract in 1997. A key portion of that deal was CSG's agreement to pay TCI $159 million to buy out a billing platform the operator had developed in-house.
AT&T Corp. bought TCI in 1999, and in 2000 sought arbitration to alter terms of the contract. The matter carried over to Comcast after it merged with AT&T Broadband.
On Oct. 7, the day before the ruling came out, CSG's stock price on NASDAQ closed at $15.50. The next day it closed at $9.28, down 40%. It closed last Thursday at $8.95.