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AT&T Clash Costs CSG $1M/Quarter

CSG Systems International Inc. will spend $1 million per quarter in its
continuing legal fight with AT&T Broadband and Comcast Corp. over its
billing-services contract.

The Englewood, Colo.-based billing provider gave that estimate as part of its
third-quarter earnings release Monday.

Overall, the quarter was not kind for the company, which saw net profits drop
80 percent to $5.9 million compared with $29.6 million in the third quarter of

In addition to a 33 percent drop in software-license revenues, the quarterly
results were dragged down by a $12 million charge CSG took as it consolidated
its facilities and laid off 300 employees during the quarter. So far, the
company has trimmed 600 employees this year.

The company also spent $700,000 in its legal battle with AT&T Broadband
and Comcast during the quarter. The matter is now before an arbitrator and, as
the process moves forward, CSG will spend about $1 million per quarter.

The AT&T Broadband contract now represents about 28 percent of CSG's
revenue per quarter.

CSG and AT&T Broadband have had a series of legal skirmishes related to
the 15-year billing contract, which was signed in 1997. AT&T Broadband is
trying to terminate that contract, charging that CSG has withheld key customer

CSG earlier this year filed a counterclaim, saying that the MSO conspired to
replace the billing firm and was preventing it from competing fairly for a
billing-aggregation contract.

The vendor also filed a complaint against Comcast, charging that as it moves
to merge with AT&T Broadband, the MSO has unlawfully tried to interfere in
the AT&T Broadband agreement.

CSG president and chief operating officer Jack Pogge told analysts during the
earnings call that there is no estimate as to how long the arbitration process
will last or how many quarters will see a legal cost impact.

He said there were millions of pages of documents that will be reviewed
before the arbitrator issues a ruling. 'We don't know when exactly it is going
to be resolved, but we are moving forward diligently on this,' he added.

But chairman and CEO Neil Hansen downplayed the financial burden. 'We'll keep
generating cash flow to cover the legal costs as far as it has to go,' he