NTL Incorporated (NASDAQ: NTLI) today reported its third quarter
results for 2005. -- RGUs up 7 per cent to 6.3m vs. Q3 2004 --
Triples up 21 per cent vs. Q3 2004; triple play penetration of 25.4
per cent -- Record quarter of 218,600 gross additions -- Strong
total net additions of 53,900 -- Strong broadband growth of 165,600
-- Continued improvement in sequential OCF margin -- Reduced
operating loss vs. Q3 2004 -0- *T Financial Highlights NOTE: ALL
figures in GBP unless otherwise stated (GBP millions) Q3 2005 Q3
2004 ---------- ---------- Revenue Consumer 377.5 377.5 Business
105.2 121.0 ---------- ---------- Total Revenue 482.7 498.5
Operating income before depreciation, amortization and other
charges (OCF) (1) 166.3 171.4 OCF margin (%) (2) 34.5% 34.4%
Operating (loss) (4.7) (7.8) (Loss) from continuing operations
(53.5) (77.4) ========== ========== (1) Please see Appendix D for
reconciliation of non-US GAAP terms such as OCF (2) OCF margin is
OCF as a percentage of revenue *T Commenting on the results, Simon
Duffy, Chief Executive Officer of ntl, said: "Following the major
restructuring we underwent in 2004, our focus on operational
improvements in 2005 is beginning to show results with strong
operational metrics for the second quarter in a row and robust
growth in RGUs and customers of 140,500 and 53,900 respectively. As
we have intensified our focus on RGU growth and triple-play
penetration, with an increased emphasis on quality and value of
acquisitions, we are delivering more services at the point of sale
than at any time in our history. Complemented by our cross-sell and
up-sell initiatives, this has yielded an additional 147,100
triple-play customers, which bodes well for revenue and ARPU growth
in subsequent periods. Total broadband growth of 484,400 and on-net
growth of 372,800 over the past 12 months have been particularly
strong and we are upping our guidance for on-net broadband growth
in 2005 from 20-25 percent to 25-30 per cent." Q305 Review Revenue
Third quarter revenue was GBP 482.7 million, down 3.2 per cent
compared to the prior year period. The decrease is primarily due to
lower Business revenue, which is discussed below. Consumer Consumer
revenue in the third quarter was GBP 377.5 million, with strong
broadband revenue offsetting lower revenue in telephony and TV. Net
residential customers increased by 53,900 (41,400 on-net) to end
the quarter with 3.32 million customers (3.10 million on-net), a
6.9 per cent increase over Q3 2004 (2.8 per cent on-net). ntl added
140,500 net RGUs (121,300 on-net), ending the quarter with 6.32
million RGUs (6.09 million on-net), a 7.0 per cent increase over Q3
2004 (4.5 per cent on-net). On-net RGUs per customer improved to
1.96, up from 1.93 in the same period last year. This strong
performance reflects the success of targeted offers and bundled
packages with superior value over standalone offers. As expected,
churn was up sequentially due to seasonality and is expected to
return to customary ranges in the fourth quarter. Strong RGU
growth, particularly in broadband, which increased by 484,400 or
41.2 per cent (372,800 on-net or 31.8 per cent) compared to the
same period last year, was offset by weakness in telephony revenue,
which was down due to reduced usage, and lower TV revenue resulting
from fewer Sky premium subscribers and lower second set-top box
revenue. Over the past two quarters ntl has increased subscribers
in telephony, broadband and DTV, adding 16,300 telephony RGUs
(26,900 on-net) and 21,400 DTV RGUs, which were offset by a decline
of 41,400 ATV RGUs. More significantly, we added 277,400 (221,400
on-net) broadband RGUs, bringing our total broadband customer base
to 1.72 million (1.55 million on-net), the largest of any
residential broadband provider in the U.K. Customers taking all
three services increased 21.1 per cent from the third quarter of
last year, and 8.4 per cent sequentially, bringing triple customer
penetration to 27.2 per cent on-net. ntl is also continuing to
benefit from the success of the "3 for GBP 30" offer which has
increased our bundle penetration at the point of sale. Video on
Demand (VoD) deployment continues on schedule and ntl anticipates
the service will be available to 600,000 customers by year-end.
During the quarter ntl secured an additional 242 hours of
programming content ranging from movies to music. In addition ntl
has also launched a new TV Hits VoD service, offering over 50 hours
of hit TV shows from the past. Business Business revenue of GBP
105.2 million was down GBP 15.8 million versus the same period last
year, GBP 11.3 million of which reflects loss of wholesale revenue
from virgin.net. Following its acquisition by ntl, virgin.net is no
longer a third party wholesale customer (please see Appendix E for
a summary of the revenue impact related to the acquisition of
virgin.net). The remaining decline in Business revenue is primarily
due to lower wholesale revenue associated with the previously
announced conclusion of our contract with Vodafone. Corporate and
public sector customer wins during the quarter were strong and
include a contract with Salford University to supply converged IP
solutions to enable more effective communications within the
University. The contract forms part of a partnership agreement that
will see ntl and the University continue to develop new systems,
technologies and projects - some of which are already underway - in
buildings across the campus. As part of ntl's local government
activities, ntl was selected by a regional council to provide a new
corporate and education ethernet network connecting over 50 sites
to the ntl ethernet VPN network. ntl also continues to progress
under its existing contract as a tier one supplier for the London
Heathrow Airport Terminal 5 systems project. ntl is delivering an
advanced IP infrastructure which is designed to carry voice, data
and most of the operational systems within the terminal. Operating
income before depreciation, amortization and other charges (OCF) On
reduced revenues OCF decreased by 3.0 per cent to GBP 166.3 million
versus the same period last year. OCF includes GBP 1.8 million of
costs incurred in preparing for the merger with Telewest, without
which OCF margin would have been 34.8 per cent instead of the
reported 34.5 per cent. Higher margin broadband product in Consumer
was offset by adverse product mix in Business, but this was more
than compensated for by overhead cost savings. Please refer to
Appendix D for a discussion of the use of OCF as a non-U.S. GAAP
measure and the reconciliation of OCF to U.S. GAAP operating income
(loss). Operating (loss) and net (loss) Operating loss of GBP 4.7
million in Q3 2005 compared to an operating loss of GBP 7.8 million
during the same period last year. The reduced quarterly loss was
driven by the lower OCF partly offset by lower restructuring
charges as well as a decrease in depreciation due to certain
short-lived assets becoming fully depreciated at the end of 2004.
Loss from continuing operations of GBP 53.5 million improved from a
loss of GBP 77.4 million during the same period last year due
mainly to a reduction in net interest expense and an income tax
benefit, partly offset by the adverse impact of exchange rate
movements. Net loss was GBP 52.1 million versus a net loss of GBP
95.6 million during the same period last year. The year on year
improvement reflects the reduced loss from continuing operations
and the loss in Q304 of GBP 18.2m relating to discontinued
operations. Cash and Cash equivalents and Marketable Securities At
September 30, 2005, cash and cash equivalents and marketable
securities totaled GBP 806.2 million, compared to GBP 149.1 million
at September 30, 2004. The increase is primarily due to the
retained balance of proceeds from the sale of our Broadcast
operations. Other Matters On October 3, 2005, NTL Incorporated and
Telewest Global, Inc. (NASDAQ: TLWT) announced a definitive merger
agreement under which ntl will acquire Telewest, creating the
U.K.'s second largest communications company and leading triple
play service provider with a cable footprint covering more than 50
per cent of the U.K. households. The combination of the two
companies' local access networks, which do not overlap, will
provide a strong platform allowing for product differentiation and
innovation and the delivery of unique packages of service
offerings. The combined company will have nearly 5 million
residential customers. It will be the largest provider of
residential broadband services in the country with 2.5 million
subscribers, the second largest pay TV provider with 3.3 million
subscribers and also the second largest fixed telephony provider
with 4.3 million subscribers. About ntl -- ntl Incorporated offers
a wide range of communications and content distribution services to
residential and business customers throughout the UK. -- ntl is the
UK's largest cable company with 3.3 million residential customers,
and the UK's leading supplier of broadband services to consumers,
with 1.7 million broadband customers. -- ntl's network can service
7.9 million homes in the UK. -- Information on ntl and its products
can be obtained at www.ntl.com. There will be a conference call for
analysts and investors today at 08.30 EDT/ 13.30 UK time. Analysts
and investors can dial in to the presentation by calling +1 334 420
4950 in the United States or + 44 (0) 20 7162 0125 for
international access or via a live webcast of the conference call
and presentation on the Company's website, www.ntl.com/investors.
The replay will be available for one week beginning approximately
two hours after the end of the call until Thursday, November 10,
2005. The dial-in replay number for the US is: +1 954 334 0342 and
the international dial-in replay number are: +44 (0) 20 7031 4064,
conference ID: 680476. Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995 Various statements
contained in this document constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation
Reform Act of 1995. Words like "believe," "anticipate," "should,"
"intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions identify these
forward-looking statements, which involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements or industry results to be materially
different from those contemplated, projected, forecasted, estimated
or budgeted whether expressed or implied, by these forward-looking
statements. These factors include: potential adverse developments
with respect to our liquidity or results of operations; our
significant debt payments and other contractual commitments; our
ability to fund and execute our business plan; our ability to
generate cash sufficient to service our debt; interest rate and
currency exchange rate fluctuations; our ability to complete the
integration of our billing systems; the impact of new business
opportunities requiring significant up-front investments; our
ability to attract and retain customers and increase our overall
market penetration; our ability to compete against other
communications and content distribution businesses; our ability to
maintain contracts that are critical to our operations; our ability
to respond adequately to technological developments; our ability to
develop and maintain back-up for our critical systems; our ability
to continue to design networks, install facilities, obtain and
maintain any required governmental licenses or approvals and
finance construction and development, in a timely manner at
reasonable costs and on satisfactory terms and conditions; our
ability to have an impact upon, or to respond effectively to, new
or modified laws or regulations; and factors relating to the
proposed acquisition of Telewest Global, Inc. by ntl. We assume no
obligation to update these forward-looking statements contained
herein to reflect actual results, changes in assumptions or changes
in factors affecting these statements. Non-U.S. GAAP measures The
company's intention is to provide investors with a better
understanding of the operating results and underlying trends to
measure past and future performance and liquidity. We evaluate
operating performance based on several non-US GAAP measures,
including (i) operating income before depreciation, amortization
and other charges (OCF) and the associated term OCF margin and (ii)
fixed asset additions (accrual basis), as we believe these are
important measures of the operational strength of our business.
Since these measures are not calculated in accordance with U.S.
GAAP, they should not be considered as substitutes for operating
income (loss) and purchase of fixed assets, respectively, as
indicators of our operating and cash flow performance and
expenditure for fixed assets. Please see Appendix D for use of
non-U.S. GAAP financial measures. Additional Information and Where
to Find it This information may be deemed to be solicitation
material in respect of the proposed merger of ntl and Telewest
Global, Inc. (Telewest). In connection with the proposed merger,
ntl and Telewest will file a joint proxy statement / prospectus
with the U.S. Securities and Exchange Commission (the "SEC").
INVESTORS AND SECURITY HOLDERS OF NTL AND TELEWEST ARE ADVISED TO
READ THE JOINT PROXY STATEMENT / PROSPECTUS AND ANY OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE
THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER. The final joint proxy statement / prospectus will
be mailed to stockholders of ntl and Telewest. Investors and
security holders may obtain a free copy of the joint proxy
statement / prospectus, when it becomes available, and other
documents filed by ntl and Telewest with the SEC, at the SEC's web
site at http://www.sec.gov. Free copies of the joint proxy
statement / prospectus, when it becomes available, and each
company's other filings with the SEC may also be obtained from the
respective companies. Free copies of ntl's filings may be obtained
by directing a request to ntl Incorporated, 909 Third Avenue, Suite
2863, New York, New York 10022, Attention: Investor Relations. Free
copies of Telewest's filings may be obtained by directing a request
to Telewest Global, Inc., 160 Great Portland Street, London W1W
5QA, United Kingdom, Attention: Investor Relations. This
communication shall not constitute an offer to sell or the
solicitation of an offer to buy securities, not shall there be any
sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such jurisdiction.
Participants in the Solicitation ntl, Telewest and their respective
directors, executive officers and other members of their management
and employees may be deemed to be soliciting proxies from their
respective stockholders in favour of the merger. Information
regarding ntl's directors and executive officers is available in
ntl's proxy statement for its 2005 annual meeting of stockholders,
which was filed with the SEC on April 5, 2005. Information
regarding Telewest's directors and executive officers is available
in Telewest's proxy statement for its 2005 annual meeting of
stockholders, which was filed with the SEC on April 11, 2005.
Additional information regarding the interests of such potential
participants will be included in the joint proxy statement /
prospectus and the other relevant documents filed with the SEC when
they become available. -0- *T Appendices: A) Financial Statements
-- Condensed Consolidated Statement of Operations -- Condensed
Consolidated Balance Sheet -- Condensed Consolidated Statement of
Cashflows B) Fixed Asset Additions (accrual basis) continuing
operations C) Residential Operations statistics D) Use of non-U.S.
GAAP (Generally Accepted Accounting Principles) Financial Measures
and Reconciliations to U.S. GAAP E) virgin.net revenue impact
related to acquisition Appendices A) Financial Statements CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS (unaudited; in millions except
per share data) NOTE: ALL figures in GBP unless otherwise stated
Three months ended Nine months ended Sept 30, Sept 30,
------------------ ------------------- 2005 2004 2005 2004
--------- -------- --------- --------- Revenue 482.7 498.5 1,463.0
1,488.0 Costs and expenses Operating costs (exclusive of
depreciation shown separately below) (200.2) (203.8) (603.1)
(621.8) Selling, general and administrative expenses (116.2)
(123.3) (358.3) (370.7) Other charges (1.3) (3.7) (2.4) (19.0)
Depreciation (142.3) (149.8) (402.2) (440.8) Amortization (27.4)
(25.7) (82.3) (77.1) --------- -------- --------- --------- Total
costs and expenses (487.4) (506.3) (1,448.3) (1,529.4) ---------
-------- --------- --------- Operating (loss) income (4.7) (7.8)
14.7 (41.4) Other income (expense) Interest income and other, net
6.8 1.6 21.6 5.4 Interest expense (51.7) (61.4) (180.2) (206.9)
Loss on extinguishment of debt (2.0) - (2.0) (162.2) Share of
(loss) income from equity investments (0.2) (0.1) - 0.3 Foreign
currency transaction (losses) (13.1) (9.2) (29.9) (16.0) ---------
-------- --------- --------- (Loss) from continuing operations
before income taxesand minority interest (175.8) expense (64.9)
(76.9) (420.8) Income tax expense 12.4 (0.5) (8.7) (2.0) Minority
interest expense (1.0) - (1.0) - --------- -------- ---------
--------- (Loss) from continuing operations (53.5) (77.4) (185.5)
(422.8) --------- -------- --------- --------- Discontinued
operations (Loss) income from discontinued operations before income
taxes - (17.8) 5.5 12.7 Income tax expense - (0.4) (0.2) (1.2) Gain
on disposal, net of tax 1.4 - 657.4 - --------- -------- ---------
--------- Income (loss) from discontinued operations 1.4 (18.2)
662.7 11.5 --------- -------- --------- --------- Net (loss) income
( 52.1) ( 95.6) 477.2 ( 411.3) ========= ======== =========
========= Basic and diluted net (loss) from continuing operations
per share ( 0.63) ( 0.88) ( 2.17) ( 4.85) Basic and diluted net
(loss) income from discontinued operations per share 0.02 ( 0.21)
7.74 0.13 Basic and diluted net (loss) income per share ( 0.61) (
1.09) 5.57 ( 4.72) Average number of shares outstanding 85.1 87.4
85.6 87.1 CONDENSED CONSOLIDATED BALANCE SHEET (unaudited; in
millions, except per share data) NOTE: ALL figures in GBP unless
otherwise stated Sept 30, December 31, 2005 2004 ------------
------------- Assets Current assets Cash and cash equivalents 712.8
125.2 Restricted cash 3.6 15.8 Marketable securities 93.4 11.6
Accounts receivable - trade, less allowance for doubtful accounts
of 58.2 (2005) and 43.4 (2004) 208.8 207.3 Prepaid expenses and
other current assets 51.4 47.8 Current assets held for sale - 50.3
------------ ------------- Total current assets 1,070.0 458.0 Fixed
assets, net 3,339.2 3,531.6 Reorganization value in excess of
amounts allocable to identifiable assets 197.6 200.7 Customer
lists, net 274.3 354.0 Other intangible assets net 2.9 5.5
Investments in and loans to affiliates, net - 0.7 Other assets, net
of accumulated amortization of 32.0 (2005) and 8.0 (2004) 105.0
123.4 Other assets held for sale - 819.4 ------------ -------------
Total assets 4,989.0 5,493.3 ============ ============= Liabilities
and shareholders' equity Current liabilities Accounts payable 149.5
114.0 Accrued expenses and other current liabilities 247.4 300.1
Interest payable 80.9 51.9 Deferred revenue 111.3 109.5 Current
liabilities of discontinued operations - 108.4 Current portion of
long-term debt 0.8 60.9 ------------ ------------- Total current
liabilities 589.9 744.8 Long-term debt, net of current portion
2,262.8 2,952.6 Deferred revenue and other long-term liabilities
135.3 217.2 Long-term liabilities of discontinued operations - 4.2
Minority Interest 1.0 - Shareholders' equity Preferred stock - $0.1
par value; authorized 5.0 (2005 and 2004) shares; issued and
outstanding none - - Common stock - $.01 par value; authorized
400.0 (2005 and 2004) shares; issued 88.4 (2005) and 87.7 (2004)
and outstanding 88.4 (2005) and 87.7 (2004) 0.5 0.5 Additional
paid-in capital 2,691.9 2,670.0 Treasury stock (114.0) - Unearned
stock-based compensation (22.1) (17.0) Accumulated other
comprehensive income (loss) 36.2 (9.3) Accumulated (deficit)
(592.5) (1,069.7) ------------ ------------- Total shareholders'
equity 2,000.0 1,574.5 ------------ ------------- Total liabilities
and shareholders' equity 4,989.0 5,493.3 ============ =============
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS (unaudited; in
millions) NOTE: ALL figures in GBP unless otherwise stated Nine
months ended Sept 30, ---------------------- 2005 2004 ----------
---------- Net cash provided by operating activities 300.1 289.7
Investing activities Purchase of fixed assets (220.4) (212.2)
Investments in and loans to affiliates - 2.5 Increase in restricted
cash 12.2 - Purchase of marketable securities (93.3) - Sale of
marketable securities 18.5 - Proceeds from sale of assets 2.6 2.8
Proceeds from sale of Broadcast operations, net 1,229.0 - Proceeds
from sale of Ireland operations, net 216.2 - ---------- ----------
Net cash provided by (used in) investing activites 1,164.8 (206.9)
---------- ---------- Financing activities Proceeds from employee
stock option exercises 4.8 3.6 Proceeds from new borrowings, net -
2,905.1 Principal payments on long-term debt (781.7) (3,288.5)
Purchase of stock (114.0) - Capital lease payments (0.6) -
---------- ---------- Net cash (used in) financing activities
(891.5) (379.8) ---------- ---------- Effect of exchange rate
changes on cash and cash equivalents 14.2 - Increase (decrease) in
cash and cash equivalents 587.6 (297.0) Cash and cash equivalents,
beginning of period 125.2 446.1 ---------- ---------- Cash and cash
equivalents, end of period 712.8 149.1 ========== ========== B)
Fixed Assets Additions (Accrual Basis) NOTE: ALL figures in GBP
unless otherwise stated 3 months 3 months ended ended (in millions)
Sept 30, Sept 30, 2005 2004 ---------- ---------- NCTA Fixed Asset
Additions CPE 32.0 32.6 Scaleable Infrastructure 27.8 17.3
Commercial 8.2 7.9 Upgrade/Rebuild 2.3 5.6 Support Capital 6.3 14.1
---------- ---------- Total NCTA Fixed Asset Additions 76.6 77.5
Non NCTA Fixed Asset Additions (0.3) 0.4 ---------- ----------
Total Fixed Asset Additions (Accrual Basis) 76.3 77.9 ==========
========== Note: ntl is not a member of NCTA and is providing this
information solely for comparative purposes. Fixed asset additions
(accrual basis) are from continuing operations. See Appendix D for
a discussion of the use of fixed asset additions (accrual basis) as
a non-U.S. GAAP measure and the reconciliation of fixed asset
additions (accrual basis) to U.S. GAAP purchase of fixed assets. C)
Residential Operations Statistics (data in 000's except
percentages, RGU/Customer and ARPU) NOTE: ALL figures in GBP unless
otherwise stated ntl Consumer (1) Q3-05 Q2-05 Q1-05 Q4-04 Q3-04
---------------------------------------- Customers Opening
Customers 3,261.5 3,194.9 3,136.8 3,102.8 3,082.1 Virgin.net at
acquisition 61.8 Data Cleanse (2) 0.0 (20.0) 2.7 Adjusted Opening
Customers 3,261.5 3,194.9 3,136.8 3,144.6 3,084.8 Gross customer
adds 218.6 205.5 195.1 185.2 190.7 Total Customer disconnections
(164.7) (138.9) (137.0) (151.0) (148.9) Net customer adds 53.9 66.6
58.1 34.2 41.8 Reduction to customer count (3) 0.0 (42.0) (23.8)
---------------------------------------- Closing Customers 3,315.4
3,261.5 3,194.9 3,136.8 3,102.8 Monthly customer churn % 1.7% 1.4%
1.4% 1.6% 1.6% RGUS Opening RGUs 6,183.1 6,049.9 5,948.4 5,911.9
5,858.5 Virgin.net at acquisition 61.8 Data Cleanse (2) 0.0 (29.3)
1.0 Adjusted Opening RGUs 6,183.1 6,049.9 5,948.4 5,944.4 5,859.5
Gross RGU adds 525.7 472.5 420.0 409.8 429.6 RGU disconnections
(385.2) (339.3) (318.2) (329.3) (341.6) Net RGU adds 140.5 133.2
101.8 80.5 88.0 Reduction to RGU count (3) (0.3) (76.5) (35.6)
---------------------------------------- Closing RGUs 6,323.6
6,183.1 6,049.9 5,948.4 5,911.9 Revenue Generating Units (RGUs)
Telephone 2,663.0 2,666.3 2,646.7 2,638.5 2,681.4 Television
1,940.0 1,961.8 1,960.0 1,979.6 2,056.1 DTV 1,409.3 1,405.1 1,387.9
1,382.5 1,414.7 Broadband 1,720.6 1,555.0 1,443.2 1,330.3 1,174.4
---------------------------------------- Total RGUs 6,323.6 6,183.1
6,049.9 5,948.4 5,911.9 RGU / Customer 1.91 1.90 1.89 1.90 1.91
Talkplan % Telco customers Internet Customers Dial-up (metered)
355.3 436.5 486.5 579.5 144.8 Dial-up (unmetered) 172.2 173.3 202.0
167.6 193.9 DTV Access 8.0 8.4 6.9 7.7 8.2
---------------------------------------- Total Dial-up and DTV
access customers 535.5 618.2 695.4 754.8 346.9 Broadband 1,699.1
1,532.1 1,429.6 1,262.5 1,173.5 Virgin.net broadband at acquisition
- 61.8 - Off-net 21.5 22.9 13.6 6.0 0.9
---------------------------------------- Total Broadband Customers
1,720.6 1,555.0 1,443.2 1,330.3 1,174.4
---------------------------------------- Total Internet 2,256.1
2,173.2 2,138.6 2,085.1 1,521.3
---------------------------------------- Bundled Customers Dual RGU
1,322.5 1,366.7 1,374.5 1,386.0 1,429.6 Triple RGU 842.9 777.5
740.3 712.8 695.8 Percentage of dual or triple RGUs 65.3% 65.7%
66.2% 66.9% 68.5% Percentage of triple RGUs 25.4% 23.8% 23.2% 22.7%
22.4% Homes Marketable On-net Telephone ATV DTV Broadband
Penetration of Homes Marketable On-net Telephone Television - Total
Television - DTV Broadband Total Customer ARPU 37.65 38.45 39.55
41.43 40.78 ntl on-net Q3-05 Q2-05 Q1-05 Q4-04 Q3-04
----------------------------------------------- Customers Opening
Customers 3,055.9 3,008.1 2,975.3 3,013.8 2,981.5 Virgin.net at
acquisition Data Cleanse (2) 0.0 (20.0) 2.7 Adjusted Opening
Customers 3,055.9 3,008.1 2,975.3 2,993.8 2,984.2 Gross customer
adds 182.4 171.4 157.0 162.1 187.9 Total Customer disconnections
(141.0) (123.6) (124.2) (141.4) (134.5) Net customer adds 41.4 47.8
32.8 20.7 53.4 Reduction to customer count (3) 0.0 0.0 0.0 (39.2)
(23.8) ----------------------------------------------- Closing
Customers 3,097.3 3,055.9 3,008.1 2,975.3 3,013.8 Monthly customer
churn % 1.5% 1.3% 1.4% 1.5% 1.5% RGUS Opening RGUs 5,963.7 5,856.6
5,784.2 5,822.0 5,757.9 Virgin.net at acquisition Data Cleanse (2)
(29.3) 0.9 Adjusted Opening RGUs 5,963.7 5,856.6 5,784.2 5,792.7
5,758.8 Gross RGU adds 476.5 433.5 378.2 386.7 426.8 RGU
disconnections (355.2) (326.4) (305.5) (321.3) (328.0) Net RGU adds
121.3 107.1 72.7 65.2 98.8 Reduction to RGU count (3) 0.0 0.0 (0.3)
(73.7) (35.6) -----------------------------------------------
Closing RGUs 6,085.0 5,963.7 5,856.6 5,784.2 5,822.0 Revenue
Generating Units (RGUs) Telephone 2,598.6 2,593.2 2,571.7 2,559.3
2,592.4 Television 1,940.1 1,961.9 1,960.0 1,979.6 2,056.1 DTV
1,409.3 1,405.1 1,387.9 1,382.5 1,414.7 Broadband 1,546.3 1,408.6
1,324.9 1,245.3 1,173.5
----------------------------------------------- Total RGUs 6,085.0
5,963.7 5,856.6 5,784.2 5,822.0 RGU / Customer 1.96 1.95 1.95 1.94
1.93 Talkplan % Telco customers 33.8% 32.5% 32.7% 32.9% 32.5%
Internet Customers Dial-up (metered) 40.9 47.4 52.1 54.8 56.7
Dial-up (unmetered) 97.0 126.7 144.8 167.6 193.9 DTV Access 8.0 8.4
6.9 7.7 8.2 ----------------------------------------------- Total
Dial-up and DTV access customers 145.9 182.5 203.8 230.1 258.8
Broadband 1,546.3 1,408.6 1,324.9 1,245.3 1,173.5 Virgin.net
broadband at acquisition Off-net
----------------------------------------------- Total Broadband
Customers 1,546.3 1,408.6 1,324.9 1,245.3 1,173.5
----------------------------------------------- Total Internet
1,692.2 1,591.1 1,528.7 1,475.4 1,432.3
----------------------------------------------- Bundled Customers
Dual RGU 1,301.9 1,352.9 1,368.0 1,383.2 1,428.7 Triple RGU 842.9
777.5 740.3 712.8 695.8 Percentage of dual or triple RGUs 69.2%
69.7% 70.1% 70.4% 70.5% Percentage of triple RGUs 27.2% 25.4% 24.6%
24.0% 23.1% Homes Marketable On-net Telephone 7,592.0 7,579.1
7,569.2 7,739.5 7,730.1 ATV 7,935.8 7,922.7 7,912.6 7,910.4 7,910.0
DTV 7,437.8 7,424.9 7,394.6 7,420.4 7,411.0 Broadband 7,079.3
7,066.7 6,995.9 6,961.9 6,854.9 Penetration of Homes Marketable
On-net Telephone 34.2% 34.2% 34.0% 33.1% 33.5% Television - Total
24.4% 24.8% 24.8% 25.0% 26.0% Television - DTV 18.9% 18.9% 18.8%
18.6% 19.1% Broadband 21.8% 19.9% 18.9% 17.9% 17.1% Total Customer
39.0% 38.6% 38.0% 37.6% 38.1% ARPU 39.08 39.81 40.82 42.39 41.53
(1) Includes on-net, off-net and virgin.net customers acquired in
November 2004. (2) Data cleanse activity, as part of the
harmonisation of billing systems, has periodically resulted in an
adjustment to our customer base. We anticipate that there may be
similar adjustments to customer and RGU numbers as the data cleanse
progresses, although none have been identified in Q3-05. (3) In
Q3-04 and Q4-04 we adjusted customer and RGU numbers following the
implementation of a new credit policy and the resultant
disconnection of inactive backlog customers. D) Use of non-U.S.
GAAP Financial Measures and Reconciliation to U.S. GAAP Operating
income before depreciation, amortization and other charges (OCF)
Operating income before depreciation, amortization and other
charges, which we refer to as OCF, is not a financial measure
recognised under U.S. GAAP. OCF represents our earnings before
interest, taxes, depreciation and amortisation, other charges,
share of income from equity investments, loss on extinguishment of
debt and foreign currency transaction gains (losses). Our
management, including our chief executive officer who is our chief
operating decision maker, considers OCF as an important indicator
of our operational strength and performance. OCF excludes the
impact of costs and expenses that do not directly affect our cash
flows. Other charges, including restructuring charges, are also
excluded from OCF as management believes they are not
characteristic of our underlying business operations. OCF is most
directly comparable to the U.S. GAAP financial measure operating
income (loss). Some of the significant limitations associated with
the use of OCF as compared to operating income (loss) are that OCF
does not consider the amount of required reinvestment in
depreciable fixed assets and ignores the impact on our results of
operations of items that management believes are not characteristic
of our underlying business operations. We believe OCF is helpful
for understanding our performance and assessing our prospects for
the future, and that it provides useful supplemental information to
investors. In particular, this non-U.S. GAAP financial measure
reflects an additional way of viewing aspects of our operations
that, when viewed with our U.S. GAAP results and the reconciliation
to operating income (loss) shown below, provides a more complete
understanding of factors and trends affecting our business. Because
non-U.S. GAAP financial measures are not standardised, it may not
be possible to compare OCF with other companies' non-U.S. GAAP
financial measures that have the same or similar names.
Reconciliation of Operating Income before Depreciation,
Amortization and other Charges to U.S. GAAP Operating income (loss)
(in millions) NOTE: ALL figures in GBP unless otherwise stated 9
months ended 3 months ended -------------------------------- Sept
30, Sept 30, June 30, March 31, 2005 2005 2005 2005 -------------
---------- ---------- ---------- Revenue 1,463.0 482.7 482.5 497.8
------------- ---------- ---------- ---------- Operating income
before depreciation, amortization and other charges 501.6 166.3
164.2 171.1 Reconciling items: Other charges (2.4) (1.3) (0.7)
(0.4) Depreciation and amortization (484.5) (169.7) (157.1) (157.7)
------------- ---------- ---------- ---------- Operating (loss)
income 14.7 ( 4.7) 6.4 13.0 ============= ========== ==========
========== OCF as a percentage of revenue (OCF margin) 34.3% 34.5%
34.0% 34.4% Operating (loss) income as a percentage of revenue 1.0%
(1.0%) 1.3% 2.6% 9 months ended 3 months ended
-------------------------------- Sept 30, Sept 30, June 30, March
31, 2004 2004 2004 2004 ------------- ---------- ----------
---------- Revenue 1,488.0 498.5 493.8 495.7 ------------
---------- ---------- ---------- Operating income before
depreciation, amortization and other charges 495.5 171.4 164.0
160.1 Reconciling items: Other charges (19.0) (3.7) (14.7) (0.6)
Depreciation and amortization (517.9) (175.5) (171.9) (170.5)
------------ ---------- ---------- ---------- Operating (loss)
income ( 41.4) ( 7.8) ( 22.6) ( 11.0) ============ ==========
========== ========== OCF as a percentage of revenue (OCF margin)
33.3% 34.4% 33.2% 32.3% Operating (loss) income as a percentage of
revenue (2.8%) (1.6%) (4.6%) (2.2%) Fixed Asset Additions (Accrual
Basis) ntl's primary measure of expenditures for fixed assets is
Fixed Asset Additions (Accrual Basis). Fixed Asset Additions
(Accrual Basis) is defined as the purchase of fixed assets as
measured on an accrual basis. ntl's business is underpinned by its
significant investment in network infrastructure and information
technology. Management therefore considers Fixed Asset Additions
(Accrual Basis) an important component in evaluating ntl's
liquidity and financial condition since purchases of fixed assets
are a necessary component of ongoing operations. Fixed Asset
Additions (Accrual Basis) (formerly Capital Expenditure) is most
directly comparable to the U.S. GAAP financial measure purchases of
fixed assets as reported in the Statement of Cash Flows. The
significant limitations associated with the use of Fixed Asset
Additions (Accrual Basis) as compared to purchases of fixed assets
is that Fixed Asset Additions (Accrual Basis) excludes timing
differences from payments of liabilities related to purchases of
fixed assets. Management excludes this amount from Fixed Asset
Additions (Accrual Basis) because timing differences from payments
of liabilities are more related to the cash management treasury
function than to ntl's management of fixed asset purchases for
long-term operational performance and liquidity. Management
compensates for this limitation by separately measuring and
forecasting working capital. Reconciliation of Fixed Asset
Additions (accrual basis) to U.S. GAAP Purchase of Fixed Assets (in
millions) NOTE: ALL figures in GBP unless otherwise stated 9 months
ended 3 months ended -------------------------------- Sept 30, Sept
30, June 30, March 31, 2005 2005 2005 2005 ------------ ----------
---------- ---------- Fixed Asset Additions (accrual basis) 210.6
76.3 70.2 64.1 Other Items: Fixed Asset Additions (accrual basis) -
discontinued operations 5.2 0.0 1.1 4.1 Changes in liabilities
related to Fixed Asset Additions (accrual basis) 4.6 (4.4) 0.4 8.6
------------ ---------- ---------- ---------- Purchase of Fixed
Assets 220.4 71.9 71.7 76.8 ============ ========== ==========
========== 9 months ended 3 months ended
-------------------------------- Sept 30, Sept 30, June 30, March
31, 2004 2004 2004 2004 ------------ ---------- ----------
---------- Fixed Asset Additions (accrual basis) 202.6 77.9 62.3
62.4 Other Items: Fixed Asset Additions (accrual basis) -
discontinued operations 19.9 6.7 7.0 6.2 Changes in liabilities
related to Fixed Asset Additions (accrual basis) (10.3) (0.9) 2.3
(11.7) ------------ ---------- ---------- ---------- Purchase of
Fixed Assets 212.2 83.7 71.6 56.9 ============ ==========
========== ========== The presentation of this supplemental
information is not meant to be considered in isolation or as a
substitute for other measures of financial performance reported in
accordance with U.S. GAAP. These non- U.S. GAAP financial measures
reflect an additional way of viewing aspects of ntl's operations
that, when viewed with ntl's U.S. GAAP results and the accompanying
reconciliations to corresponding U.S. GAAP financial measures,
provide a more complete understanding of factors and trends
affecting ntl's business. Management encourages investors to review
ntl's financial statements and publicly-filed reports in their
entirety and to not rely on any single financial measure. E)
virgin.net revenue impact related to acquisition -- ntl acquired
100 per cent of virgin.net in November 2004. Prior to the
acquisition, virgin.net was a wholesale customer of ntl. Revenue
generated from these wholesale services was reported within our
Business revenue category. As a result of the acquisition, 100 per
cent of virgin.net revenues are now reported in our Consumer
revenue category. -- In Q3 of 2004, Business revenue was GBP 121.0
million in the aggregate, including GBP 11.3 million of wholesale
revenue from virgin.net. In Q3 of 2005, Business revenue was lower
compared with Q3 of 2004 partly because Business no longer includes
wholesale revenue from virgin.net as virgin.net is no longer a
third party customer of ntl. virgin.net's own third party revenue
is now consolidated into ntl's group revenue and is included in
Consumer revenue. -- In Q3 of 2004, Consumer revenue was GBP 377.5
million and did not include any revenue from virgin.net. In Q3 of
2005, Consumer revenue was GBP 377.5 million and included GBP 13.0
million from virgin.net. Accordingly, Consumer revenue in Q3 of
2005 increased as compared against Q3 of 2004 by GBP 13.0 million
in relation to virgin.net. -- virgin.net reported approximately GBP
9.9 million of third party revenue in Q3 of 2004 (unaudited figures
provided by virgin.net's management accounts). This amount was not
included in ntl's consolidated group revenues. *T
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