Shares in CSG Systems International plummeted almost 40 percent in mid-day trading Wednesday as investors learned that an independent arbitrator ruled that the billing and customer care vendor must pay Comcast Corp. as much as $120 million in Most Favored Nations (MFN) damages.

The damages stem from a dispute between CSG and AT&T Broadband. Comcast inherited the complaint when it purchased AT&T Broadband in November 2002.

CSG Chairman and CEO Neal Hansen told reporters and analysts Wednesday that he felt both "vindicated" and "stunned" after weighing the arbitrator's decisions.

On a positive note, CSG's contract with Comcast remains in place, Hansen said, though the exclusive high-speed data and video billing CSG enjoys will only apply to former AT&T Broadband customers.

Comcast, however, could walk away from the deal altogether by paying CSG a $44 million penalty.

Hansen said he was "disappointed" and "quite frankly stunned" upon hearing that the arbitrator awarded Comcast MFN damages of $120 million, but did not place value on the $150 million that CSG paid Tele-Communications Inc. back in 1997 to secure the original contract, which was transferred to AT&T Broadband in 1999 upon its purchase of TCI.

CSG is expected to seek a modification of that ruling, believing that the judge made a mathematical error. If the judge agrees to it, the modification could reduce the MFN damages by up to $50 million, CSG said.

There also appears to be disagreement in the interpretation of the arbitrator's ruling. CSG believes Comcast does not have the right to terminate its Master Subscriber Agreement with the billing vendor. Comcast, in a release, said it could terminate the contract at any time with the $44 million payment.

What's easier to interpret is the financial damage the ruling will have on CSG's bottom line. For starters, it will result in Comcast receiving a "significant price decrease" for billing and customer care services provided by CSG.

In hard numbers, CSG estimates its Comcast revenues will drop to between $8 million and $14 million per quarter. CSG received $37.8 million in revenues from Comcast in the second quarter of 2003. The vendor also expects cash flow from operations to drop by $5 million to $8 million per quarter.

CSG was adamant in explaining that all of its eggs aren't in the Comcast basket, noting that it its annual revenue, excluding Comcast, is greater than $450 million.

Hansen said CSG retains a good relationship with Comcast and hopes to move forward on a restructured contract that's favorable to both parties.

CSG shares were down $6.18 (39.89 percent) to $9.31 apiece in mid-day trading Wednesday.