OpTel: From The Ashes Of Bankruptcy
By Larry Kessler, InteliCable Group

Neither OpTel nor property owners have any delusions about the work to be done. The Company certainly has many fences to mend and holes to plug. Reality dictates that not all fences will be mended and not all holes will be plugged. However, OpTel has picked itself up and is working to dust away the dark past in hopes of a bright future. The Company's plan is to regain its pre bankruptcy status as an industry leader.

OpTel's emergence from Chapter 11 Bankruptcy will require a tremendous amount of capital, technology and long days if they are to shine this once prized gem. But the Company has secured its capital, cleaned out the executive ranks and is fortunately listening to property owners, very closely. More importantly since the bankruptcy, video and broadband Internet technologies, their cost and the level of service these can provide are facilitating better economics and allowing a more substantial internal rate of return (IRR); a more sustainable business model.

Trumpet's Sounding

OpTel's rising out of the ashes is sending signals from the Federal Communications Commission (FCC) all the way down to apartment residents. This is the first time a competitive video or broadband service provider specializing in the multifamily property marketplace has successfully emerged from bankruptcy. It signals changes in the availability of improved business models. It is a response to the demand for digital video and broadband Internet competition on multifamily properties. It is evidence of the availability of institutional lending and venture capital. And the timing of OpTel's reemergence could not have been more opportune. It comes at a time when the Bells and franchise cable have become too large, overly confident and in many cases bad business partners for multifamily property owners.

TVMAX

Jim Brumleve, Vice President Enterprise Development states, "The reorganized OpTel companies will operate under the name of TVMAX, and will be a leading provider of private cable television services to multiple dwelling units ("MDUs") in the United States. At the Effective Date of the Plan, TVMAX will serve approximately 150,000 cable television subscribers in approximately 326,000 MDUs in 11 principal markets." The overall penetration of the Company's service is beginning with 46%. It's 11 principal markets are currently Houston, Dallas, Phoenix, Denver, San Francisco, Miami, Tampa, Atlanta, Chicago, Indianapolis, and Washington, D.C.

In response to the demand from property owners to create a more competitive video product, the Company is deploying digital television service. During 2001 it converted over 11,000 MDUs (3.4% of its passings) using the WSNet Hits2Home® product. Properties experiencing this conversion report positive responses from residents. TVMAX will continue launching its digital television services to the properties it
serves during 2002, but the Company will not yet commit to the percentage of its portfolio that will be converted by the end of 2002.

Brumleve states, "Regarding broadband Internet access, the Company is currently in the process of evaluating multiple vendor proposals for expansion of its high speed Internet access services, currently serving 20,000 of 326,000 MDUs, with 1,300 subscribers. As expected, we will be capitalizing on the use of the coaxial cable infrastructure for this service, competing with franchise cable's cable modem service." The Company's broadband service penetration of 6.5% is well within the range experienced by the local Bell and franchise cable operators, who are reporting average figures of 5-10%.

Brumleve continues by stating, "For those property owners currently served by OpTel and who are owed revenue sharing for the periods prior to the Chapter 11 filing, TVMAX will begin processing payments for these obligations after the Effective Date of the Plan."

Property owners with questions regarding existing contract obligations of both OpTel and the property owner or other contract or relationship issues, including digital video services or broadband Internet services should contact Jim Brumleve, Vice President Enterprise Development, (214)634-3825, jim.brumleve@optelinc.com, or their local market's General Manager; and for revenue sharing owed prior to the Chapter 11 filing - Tim Prendergast, Controller, (214) 634-3852. tim.prendergast@optelinc.com.