Telewest Global, Inc. ("Telewest") (NASDAQ: TLWT) today announces
third quarter financial results for 2005. Highlights -- Adjusted
EBITDA growth of 16% over Q3 04 -- Operating income increased 230%
over Q3 04 -- Consumer sales division revenue growth of 5% over Q3
04 -- Triple play penetration increased by 10.6 percentage points
over Q3 04 to 35.0% -- Revenue Generating Units grew by 81,000 in
the quarter; RGUs per customer grew from 2.00 at Q3 04 to 2.14 at
Q3 05 -0- *T Financial highlights (unaudited in GBP m) Q3 2005 Q2
2005(a) Q3 2004 Revenue 404 381 328 Operating income 33 48 10
Adjusted EBITDA 142 158 122 Net income/(loss) 5 19 (29) Free cash
flow 50 64 39 Operational highlights Q3 2005 Q2 2005 Q3 2004
Customer net adds 11,000 15,000 17,000 Broadband net adds 67,000
66,000 70,000 RGU net adds 81,000 89,000 92,000 Triple play
percentage 35.0% 32.8% 24.4% (a) Includes GBP 16m of Revenue, GBP
20m of Operating income, GBP 20m of Adjusted EBITDA, GBP 22m of Net
income, and GBP 22m of Free cash flow resulting from a GBP 16m VAT
recovery with related interest of GBP 2m and a GBP 4m rates (local
government tax) rebate. *T Barry Elson, Acting Chief Executive
Officer of Telewest Global, Inc., commented: "Telewest's third
quarter results demonstrate strong financial and operational
performance. Customer growth continued at our consumer division and
ARPU increased to GBP 45.17. Revenues at our business division have
stabilised in an extremely competitive market and Flextech
continues its impressive growth. Our VOD rollout and broadband
speed upgrades are well advanced and we have today given details of
our planned launch of DVR and HDTV services. As a result, cable
will be the first TV platform in the UK to offer the full range of
TV services from free-to-air, basic and premium channels, through
to VOD, DVR and HDTV, giving us a real competitive advantage over
other platforms. As can be seen from these results, we have been
operating effectively and driving growth. We believe that our
performance demonstrates continued strength in both strategy and
execution and we are confident that our team will contribute to the
success of the combined company on completion of our recently
announced proposed merger with NTL Inc." OPERATIONAL REVIEW Cable
segment Consumer sales division The consumer sales division had
gross customer additions of 89,000 in the quarter, representing an
increase of 10,000 both from the previous quarter and from the same
quarter last year, resulting from more effective marketing, selling
and promotions. There was a net increase of 11,000 customer
relationships in the quarter. As expected, churn at 1.4% was higher
than the previous quarter as it continued to be affected by a high
level of house movers, including student churn, as well as non-pay
churn. Non-pay churn has continued to be impacted as a result of
higher acquisition levels in recent periods. Churn has reduced
since the end of the quarter and we now expect it to be 1.2% for
the fourth quarter. Household ARPU was GBP 45.17 in the quarter, up
from GBP 44.86 in the previous quarter, excluding the second
quarter revenue impact of a GBP 16 million VAT recovery. This
increase was principally attributable to selective TV price
increases and continued growth in triple play penetration,
partially offset by declines in broadband and telephony ARPU. ARPU
in the fourth quarter will be impacted by price reductions on our
top broadband tier and wireless broadband offerings as a
consequence of our broadband speed upgrades. RGUs per customer grew
to 2.14 and triple play penetration grew to 35.0%. This reflects
our successful focus on profitable growth and on selling bundled
products. Triple play growth over the last few quarters has been
stronger than we had planned and as a result we believe we will now
achieve our 40% triple play penetration target in 2006 - a year
earlier than our previous guidance. Consumer internet We
experienced good growth in the number of broadband subscribers,
with 67,000 net additions in the quarter, which was slightly higher
than in the previous quarter. Growth continued to be strongest in
our lowest broadband tier. This impacted the mix of broadband
subscribers and broadband ARPU, which fell GBP 0.36 to GBP 19.03 as
compared to the previous quarter. However, the rate of ARPU decline
slowed in the quarter. Broadband continued to be successful in
attracting new customers to Telewest - 37% of broadband
installations in the quarter were for customers who were not
already existing customers. Multi-service penetration remained high
in broadband, with 70% of all broadband internet customers
subscribing to the full triple play and 94% subscribing to at least
one other product. In September, we began implementing further
broadband speed increases. As at November 10, approximately 60% of
broadband customers had been upgraded to the higher speeds. We
expect that approximately 80% of broadband customers will be
upgraded by the end of the year, with the remainder expected to be
upgraded in the first quarter of 2006. These speed upgrades will
increase the speed of our lowest tier from 512Kb to 2Mb, the speed
of our existing 1Mb to 4Mb and the speeds of our existing 2Mb and
4Mb tiers to 10Mb. These upgrades are at no extra charge to
customers and our 4Mb customers will receive a GBP 15 per month
price reduction when they migrate to the 10Mb tier. Consumer
television The total number of TV subscribers grew by 17,000 in the
quarter compared to 11,000 in the previous quarter. This represents
the best performance for fifteen quarters, demonstrating the
success we are having in driving Pay-TV penetration in a
competitive market. The number of digital TV subscribers rose by
39,000. As a result, 91% of our TV subscribers now take our digital
service and we estimate that we will be fully digital by the end of
2006. This will free up significant amounts of bandwidth in our
network, which will allow extra capacity for Video-On-Demand (VOD),
High Definition TV (HDTV), broadband speed increases and other
services. TV ARPU increased to GBP 20.89 compared to GBP 20.78 in
the previous quarter, primarily due to selected prices rises,
partially offset by a reduction in premium revenue. Our VOD
roll-out is continuing and is now available to around 62% of our
digital TV subscribers. We plan to complete the national roll-out
by the end of this year, earlier than initially anticipated. The
service is branded "Teleport" and we have recently expanded the
content available, including an increase in the number of movie
titles to well over 300. We expect to launch a music on demand
service later this month. We are planning to pilot a Digital Video
Recorder (DVR) service with a number of customers in early December
2005. At the same time, we will be pre-registering customers on our
website, ahead of the full national commercial launch early in the
first quarter of 2006. We have branded the service "TV Drive" and
it will be charged at GBP 10 to GBP 15 per month. TV Drive
customers will receive a 160Gb, three tuner, HDTV compatible
Scientific Atlanta DVR. For an extra GBP 5 per month, customers can
use their existing digital set-top box as a second box in the home
(additional outlet), representing a GBP 10 discount on current
pricing. We plan to launch HDTV at the same time, becoming the
first platform in the UK to offer HDTV to our DVR customers. We
have recently secured HDTV content from the BBC and others and we
plan to extend this over the coming months. Cable will be the first
TV platform in the UK to offer the full range of TV services from
free-to-air, basic and premium channels, through to VOD, DVR and
HDTV, which we believe will give us a real competitive advantage
over other platforms. Consumer telephony The number of telephony
subscribers decreased by 3,000 in the quarter. Acquisition was
impacted as marketing and promotions during the quarter focused
more on our broadband and television services. Telephony remains an
important element of our bundled offering and is likely to have
increased focus in future marketing campaigns. Telephony ARPU was
GBP 22.35 in the quarter, down slightly from GBP 22.42 in the
previous quarter. This reduction was principally due to the
continued impact of declining telephony usage due to mobile
substitution, partially offset by some selected price increases. We
have continued our strategy of migrating subscribers to flat rate
packages to reduce the impact of declining telephony usage. As a
result 39% of all telephony subscribers now subscribe to one of our
two main "Talk" packages - "Talk Unlimited" or "Talk Evenings and
Weekends". In July 2005 we migrated all of our existing "3-2-1"
subscribers to "Talk Weekends" which gives subscribers free local
and national calls at weekends. This package is charged at GBP
10.50 per month compared to GBP 10 per month for the "3-2-1"
service. Business sales division Our business sales division had
another solid quarter with revenues of GBP 64 million in the
quarter, up GBP 1 million as compared to the previous quarter.
Revenue in the quarter benefited from a GBP 1 million settlement
received from BT Group plc in respect of rates being applied to
Special Rate Services calls during prior periods. We are encouraged
that our business revenues have been relatively stable over the
past several quarters in extremely challenging market conditions.
As a result of key competitive advantages we believe we are well
placed to compete in this challenging market. In particular,
because we own our own local network infrastructure, we keep more
data and telephony traffic on our network producing higher margins
and greater cash flow than would be possible without ownership of
the local network infrastructure. We also have strong customer
relationship management with locally based account managers and
customer support teams. In line with our continued focus on
corporate and mid-market customers, we have experienced a shift in
revenue mix, with data revenues up 18% compared to the same quarter
last year, while voice revenues have remained flat. We are
countering usage declines in the voice market through the
introduction of new services such as SRS Advance Solutions, which
help customers manage their incoming calls and we are also
trialling multimedia over the internet. Content segment Overall
revenue in the content segment was GBP 33 million in the quarter,
up 22% on the third quarter of 2004, and up GBP 1 million on the
previous quarter. Advertising revenue was up 29% on the same
quarter last year, and up GBP 2 million on the previous quarter at
GBP 18 million, resulting primarily from an increase in market
share, driven by improved commercial impacts on Flextech's
channels. Subscription revenue was up 10% on the same quarter last
year, and flat on the previous quarter at GBP 11 million, due to
increased multi-channel penetration and improved pricing. The
content segment's Adjusted EBITDA in the quarter was GBP 9 million
before inter-company eliminations, up GBP 5 million from the same
quarter last year. The content segment's Adjusted EBITDA in the
quarter was GBP 6 million after inter-company eliminations. We
expect that the content segment's Adjusted EBITDA in the fourth
quarter of 2005 will be impacted by extra programming costs. We
expect programming costs in the fourth quarter to increase by more
than GBP 10 million as compared to the third quarter, as we invest
in enriched programming in common with other UK broadcasters to
drive advertising revenue growth in 2006. As a result, we expect
Adjusted EBITDA to be at a similar level to the fourth quarter of
2004, when it showed a loss of GBP 1 million. Following this
investment in programming and the increased costs of the Christmas
season, we would expect an increase in revenue and Adjusted EBITDA
in the first quarter of 2006 compared to the fourth quarter of
2005, as we have experienced historically. sit-up segment Revenue
at sit-up, our recently acquired television home shopping business,
was GBP 58 million in the quarter, up 16% from the same quarter
last year (as reported by sit-up under UK GAAP), due to growth in
multi-channel penetration and the ability of its innovative
auction-based shopping channels to attract new customers. On a pro
forma basis, revenue was up GBP 12 million from the previous
quarter. However, year-on-year revenue growth has slowed and
Adjusted EBITDA was only GBP 1 million in the quarter, down from
GBP 4 million (as reported by sit-up under UK GAAP) in the same
quarter last year. Adjusted EBITDA increased by GBP 1 million
compared to the previous quarter. sit-up has been affected by the
difficult operating conditions currently being experienced in the
UK retail market. As a result, sit-up has experienced pressure on
product margins, which has impacted Adjusted EBITDA. Adjusted
EBITDA was also impacted during the quarter by extra supply chain
costs incurred in advance of the Christmas season, sit-up's prime
selling period. If these retail conditions persist in the fourth
quarter we would expect fourth quarter Adjusted EBITDA to be below
the GBP 8 million (as reported by sit-up under UK GAAP) in the
fourth quarter of 2004. -0- *T FINANCIAL RESULTS GAAP Financial
Measures 3 months ended (unaudited in GBP millions) Sep. 30, 2005
2004
----------------------------------------------------------------------
Operating income 33 10 Net income/(loss) 5 (29) Net cash provided
by operating activities 110 72
----------------------------------------------------------------------
*T Operating income for the third quarter of 2005 was GBP 33
million, up from GBP 10 million for the third quarter of 2004, due
principally to revenue growth in our cable and content segments,
lower cable segment expenses and cable segment SG&A, and lower
depreciation. The improvement from net loss of GBP 29 million for
the third quarter of 2004 to net income of GBP 5 million for the
third quarter of 2005 was due principally to our enhanced operating
income and reduced interest costs following the refinancing of our
bank debt in December 2004. Net cash provided by operating
activities increased from GBP 72 million for the third quarter of
2004 to GBP 110 million for the third quarter of 2005. This
increase arose principally as a result of improvements in net
income, partially offset by increases in working capital. -0- *T
Non-GAAP Financial Measures 3 months ended (unaudited in GBP
millions) Sep. 30, 2005 2004
----------------------------------------------------------------------
Adjusted EBITDA 142 122 Free cash flow 50 39
----------------------------------------------------------------------
*T Adjusted EBITDA (earnings before interest, taxation,
depreciation, amortization and financial restructuring expenses)
for the third quarter of 2005 was GBP 142 million, up 16% as
compared to the third quarter of 2004. This increase reflects
increased revenues in the cable and content segments, and lower
operating costs and expenses in the cable segment, partially offset
by higher operating costs and expenses in the content segment.
Adjusted EBITDA margin (Adjusted EBITDA as a percentage of revenue)
has decreased from 37.2% to 35.1%. Whilst Adjusted EBITDA margins
in the third quarter of 2005 in the cable and content segments
increased, (from 39.9% to 43.1% and from 7.4% to 18.2%,
respectively) the overall margin has been impacted by the
acquisition of sit-up, which operates on significantly lower
margins than our cable and content segments. Free cash flow (cash
flow from operating activities excluding financial restructuring
expenses less capital expenditure) for the three months ended
September 30, 2005 was GBP 50 million, compared with GBP 39 million
for the three months ended September 30, 2004. The increase was
primarily due to increased Adjusted EBITDA and reduced interest
payments, partially offset by increases in working capital and
increased capital expenditure. Reconciliations of these and other
non-GAAP financial measures to the most directly comparable GAAP
financial measures are explained and shown on pages 19 to 22.
Selling, general and administrative expenses (SG&A) SG&A of
GBP 128 million for the quarter was up GBP 11 million from the
third quarter of 2004 primarily due to the consolidation of GBP 13
million of sit-up segment SG&A, partially offset by a decrease
in cable segment SG&A of GBP 2 million. Debt and Capital
Resources Capital expenditure was GBP 60 million for the quarter an
increase of GBP 10 million compared to the third quarter of 2004.
Capital expenditure for the full year is now expected to be
approximately GBP 230 million. This is at the higher end of earlier
guidance and reflects our faster than expected VOD and broadband
speed upgrade roll-outs and increased capital expenditures relating
to strong TV growth. As at September 30, 2005, net debt was GBP
1,665 million. This consisted of GBP 1,811 million drawn down on
our credit facilities (comprising GBP 1,701 million in respect of
TCN Group bank facilities and GBP 110 million in respect of
Flextech Group bank facilities) and GBP 114 million of leases and
other loans, offset by cash balances of GBP 260 million. The GBP
1,701 million drawn amount includes US$150 million and Euro100
million. Net cash interest is expected to be approximately GBP 110
million, which is at the lower end of previous guidance. Principal
affiliate -0- *T UKTV (unaudited in GBP millions) 3 months ended
Sep. 30, ---------------- 2005 2004
----------------------------------------------------------------------
Share of net income of UKTV 5 3 Cash inflow from UKTV, being
interest received, repayment of loans made, net, and dividends
received 9 6
----------------------------------------------------------------------
*T Telewest owns 50% of the companies that comprise UKTV, a group
of joint ventures formed with BBC Worldwide. UKTV offers a
portfolio of multi-channel television channels based on the BBC's
program library. Telewest accounts for its interest in UKTV under
the equity method and recognized its share of net income of GBP 5
million for the three months ended September 30, 2005. This
compares with GBP 3 million share of net income for the three
months ended September 30, 2004. UKTV is funded by a loan from
Telewest, the balance of which was GBP 173 million at September 30,
2005. Total cash interest and repayments received in respect of
this loan by Telewest were GBP 8 million in the third quarter of
2005. Telewest's cash interest receipts from UKTV are recorded in
free cash flow but not in Telewest's Adjusted EBITDA. During the
three months ended September 30, 2005, we received GBP 1 million of
dividends from UKTV. We expect to continue to receive dividends
from UKTV as it continues to generate cash. Subsequent events On
October 2, 2005, NTL Incorporated ("NTL"), and Telewest Global,
Inc. entered into a definitive Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which a subsidiary of NTL will
merge with and into Telewest, with Telewest continuing as the
surviving corporation and as a wholly owned subsidiary of NTL (the
"Merger"). Under the terms of the Merger Agreement, Telewest
shareholders are to receive $16.25 in cash plus 0.115 shares of NTL
stock for each Telewest share held. Further details relating to the
Merger and the Merger Agreement are included in a Form 8-K filed by
the Company with the Securities and Exchange Commission on October
6, 2005. -0- *T Telewest Global, Inc. Consolidated Statements of
Operations (amounts in GBP millions, except share and per share
data) (unaudited) Three months ended Sep. 30, -----------------
2005 2004 -------- -------- Revenue Consumer Sales Division 249 238
Business Sales Division 64 63
----------------------------------------------------------------------
Total Cable Segment 313 301 Content Segment 33 27 sit-up Segment 58
-
----------------------------------------------------------------------
Total revenue 404 328
----------------------------------------------------------------------
Operating costs and expenses Cable segment expenses 71 72 Content
segment expenses 19 17 sit-up segment expenses 44 - Depreciation 99
103 Amortization 10 9 Selling, general and administrative expenses
128 117
----------------------------------------------------------------------
371 318
----------------------------------------------------------------------
Operating income 33 10 Other income/(expense) Interest income 6 6
Interest expense (38) (49) Foreign exchange losses, net (1) - Share
of net income of affiliates 4 4
----------------------------------------------------------------------
Income/(loss) before income taxes 4 (29) Income tax
benefit/(charge) 1 -
----------------------------------------------------------------------
Net income/(loss) 5 (29)
----------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of common stock GBP
0.02 GBP(0.12) Weighted average number of shares of common stock -
(millions) 245 245
----------------------------------------------------------------------
Telewest Global, Inc. Consolidated Statements of Operations
(amounts in GBP millions, except share and per share data)
(unaudited) Nine months Nine months Nine months Six months ended
ended ended ended Sep. 30, Sep. 30, Sep. 30, Jun. 30, 2005 2004
2004 2004 ----------- --------- ----------- ----------- Reorganized
Combined Reorganized Predecessor Company Companies Company Company
----------------------------------------------------------------------
Revenue Consumer Sales Division 757 708 238 470 Business Sales
Division 188 193 63 130
----------------------------------------------------------------------
Total Cable Segment 945 901 301 600 Content Segment 96 81 27 54
sit-up Segment 82 - - -
----------------------------------------------------------------------
Total revenue 1,123 982 328 654
----------------------------------------------------------------------
Operating costs and expenses Cable segment expenses 210 225 72 153
Content segment expenses 56 51 17 34 sit-up segment expenses 61 - -
- Depreciation 301 287 103 184 Amortization 28 9 9 - Selling,
general and administrative expenses 362 361 117 244
----------------------------------------------------------------------
1,018 933 318 615
----------------------------------------------------------------------
Operating income 105 49 10 39 Other income/(expense) Interest
income 17 21 6 15 Interest expense (including amortization of debt
discount) (108) (279) (49) (230) Foreign exchange (losses)/gains,
net (8) 40 - 40 Share of net income of affiliates 17 12 4 8 Other,
net 1 (1) - (1)
----------------------------------------------------------------------
Income/(loss) before income taxes 24 (158) (29) (129) Income tax
benefit/(charge) 1 (1) - (1)
----------------------------------------------------------------------
Net income/(loss) 25 (159) (29) (130)
----------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of common stock GBP
0.10 GBP (0.12) Weighted average number of shares of common stock -
(millions) 245 245
----------------------------------------------------------------------
The Consolidated Statement of Operations for Combined Companies for
the nine months ended September 30, 2004 represents the
Consolidated Statement of Operations for Telewest Global, Inc.
("Reorganized Company") for the nine months ended September 30,
2004, together with the Consolidated Statement of Operations for
Telewest Communications plc ("Predecessor Company") for the six
months ended June 30, 2004, prior to its financial restructuring.
The Consolidated Statement of Operations for Combined Companies for
the nine months ended September 30, 2004 is not in accordance with
GAAP but our management considers Combined Companies' financial
information an important indicator of the performance of the
business as compared to future and prior periods. Our management
also considers Combined Companies' financial information important
to our investors. The Consolidated Statement of Operations for the
Combined Companies for the nine months ended September 30, 2004
excludes the Predecessor Company's Statement of Operations for July
1, 2004, the date of adoption of Fresh-start reporting. Telewest
Global, Inc. Consolidated Balance Sheets (amounts in GBP millions,
except share and per share data) (unaudited) Sep. 30, Dec. 31, 2005
2004 ----------- ----------- Reorganized Reorganized Company
Company
----------------------------------------------------------------------
Assets Cash and cash equivalents 260 68 Restricted cash 15 26 Trade
receivables 118 108 Other receivables 31 33 Prepaid expenses 38 17
Inventory for re-sale, net 18 - Other assets 6 -
----------------------------------------------------------------------
Total current assets 486 252 Investments accounted for under the
equity method 284 304 Property and equipment, net 2,856 2,974
Intangible assets, net 286 314 Reorganization value in excess of
amounts allocable to identifiable assets 426 425 Goodwill 142 -
Programming inventory 31 24 Deferred financing costs (net of
amortization of GBP 5 million; 2004: GBP 0 million) 50 51
----------------------------------------------------------------------
Total assets 4,561 4,344
----------------------------------------------------------------------
Liabilities and shareholders' equity Accounts payable 139 93 Other
liabilities 446 424 Debt repayable within one year 55 21 Capital
lease obligations repayable within one year 62 38
----------------------------------------------------------------------
Total current liabilities 702 576 Other liabilities 9 - Deferred
taxes 105 105 Debt repayable after more than one year 1,761 1,686
Capital lease obligations repayable after more than one year 47 69
----------------------------------------------------------------------
Total liabilities 2,624 2,436
----------------------------------------------------------------------
----------------------------------------------------------------------
Minority interest (1) (1)
----------------------------------------------------------------------
Shareholders' equity Preferred stock - US$0.01 par value;
authorized 5,000,000 shares, issued none (2005 and 2004) - - Common
stock - US$0.01 par value; authorized 1,000,000,000 shares, issued
245,678,524 (2005) and 245,080,629 (2004) 1 1 Additional paid-in
capital 1,965 1,954 Accumulated other comprehensive loss (7) -
Accumulated deficit (21) (46)
----------------------------------------------------------------------
Total shareholders' equity 1,938 1,909
----------------------------------------------------------------------
----------------------------------------------------------------------
Total liabilities and shareholders' equity 4,561 4,344
----------------------------------------------------------------------
Telewest Global, Inc. Consolidated Statements of Cash Flows
(amounts in GBP millions) (unaudited) Nine months ended Sep. 30,
--------------------- 2005 2004 ----------- --------- Reorganized
Combined Company Companies
----------------------------------------------------------------------
Cash flows from operating activities Net income/(loss) 25 (159)
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities: Depreciation 301 287 Amortization 28 9
Amortization of deferred financing costs and debt discount 5 30
Deferred tax charge - 1 Fair value adjustment of interest rate
swaps (10) - Accretion expense 2 - Unrealized losses/(gains) on
foreign currency translation 8 (40) Stock-based compensation
expense 8 3 Share of net income of affiliates (12) (12) Profit on
disposal of assets (1) - Amounts written off investments - 1
Changes in operating assets and liabilities, net of effect of
acquisition of subsidiaries: Change in receivables (6) 2 Change in
prepaid expenses (20) (20) Change in other assets (14) (5) Change
in accounts payable 21 37 Change in other liabilities 15 108 Income
tax paid for unprovided tax contingency at fresh-start (1) -
----------------------------------------------------------------------
Net cash provided by operating activities 349 242
----------------------------------------------------------------------
Cash flows from investing activities Capital expenditure (173)
(177) Proceeds from disposal of fixed assets 2 - Cash paid for
acquisition of subsidiaries, net of cash acquired (108) -
Repayment/(advance) of loans made to affiliates, net 13 2 Disposal
of affiliate - 7 Proceeds from sale and leaseback 13 -
----------------------------------------------------------------------
Net cash used in investing activities (253) (168)
----------------------------------------------------------------------
Cash flows from financing activities Release/(placement) of
restricted cash 11 (20) Proceeds from new debt 110 - Repayment of
debt (6) (160) Cash paid for financing costs (4) (22) Principal
element of capital lease repayments (31) (33) Proceeds from
issuance of common stock 4 - Proceeds from the issue of a
subsidiary's redeemable preferred stock 12 -
----------------------------------------------------------------------
Net cash provided by/ (used in) financing activities 96 (235)
----------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 192 (161) Cash
and cash equivalents at beginning of period 68 427 Cash and cash
equivalents transferred from Predecessor Company to Reorganized
Company - -
----------------------------------------------------------------------
Cash and cash equivalents at end of period 260 266
----------------------------------------------------------------------
Supplementary cash flow information: Cash paid for interest, net
(75) (100) Cash received for income taxes, net 2 2 Nine months Six
months ended ended Sep. 30, Jun. 30, July 1, 2004 2004 2004
----------- ----------- ----------- Reorganized Predecessor
Predecessor Company Company Company
----------------------------------------------------------------------
Cash flows from operating activities Net income/(loss) (29) (130) -
Adjustments to reconcile net income/ (loss) to net cash provided by
operating activities: Depreciation 103 184 - Amortization 9 - -
Amortization of deferred financing costs and debt discount - 30 -
Deferred tax charge - 1 - Fair value adjustment of interest rate
swaps - - - Accretion expense - - - Unrealized losses/(gains) on
foreign currency translation - (40) - Stock-based compensation
expense 3 - - Share of net income of affiliates (4) (8) - Profit on
disposal of assets - - - Amounts written off investments - 1 -
Changes in operating assets and liabilities, net of effect of
acquisition of subsidiaries: Change in receivables (7) 9 - Change
in prepaid expenses 5 (25) - Change in other assets (2) (3) -
Change in accounts payable 10 27 - Change in other liabilities (16)
124 - Income tax paid for unprovided tax contingency at fresh-start
- - -
----------------------------------------------------------------------
Net cash provided by operating activities 72 170 -
----------------------------------------------------------------------
Cash flows from investing activities Capital expenditure (50) (127)
- Proceeds from disposal of fixed assets - - - Cash paid for
acquisition of subsidiaries, net of cash acquired - - -
Repayment/(advance) of loans made to affiliates, net 6 (4) -
Disposal of affiliate - 7 - Proceeds from sale and leaseback - - -
----------------------------------------------------------------------
Net cash used in investing activities (44) (124) -
----------------------------------------------------------------------
Cash flows from financing activities Release/(placement) of
restricted cash 14 2 (36) Proceeds from new debt - - - Repayment of
debt - - (160) Cash paid for financing costs - - (22) Principal
element of capital lease repayments (10) (23) - Proceeds from
issuance of common stock - - - Proceeds from the issue of a
subsidiary's redeemable preferred stock - - -
----------------------------------------------------------------------
Net cash provided by/(used in) financing activities 4 (21) (218)
----------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 32 25 (218)
Cash and cash equivalents at beginning of period - 427 452 Cash and
cash equivalents transferred from Predecessor Company to
Reorganized Company 234 - (234)
----------------------------------------------------------------------
Cash and cash equivalents at end of period 266 452 -
----------------------------------------------------------------------
Supplementary cash flow information: Cash paid for interest, net
(39) (61) - Cash received for income taxes, net - 2 - Telewest
Global, Inc. Selected Quarterly Operating Data - unaudited The
following table sets out certain operating data for the three-month
periods shown. The information represents combined operating
statistics for all of our franchises.
----------------------------------------------------------------------
Sep. 30, Jun. 30, Mar. 31, 2005 2005 2005 Reorganized Company
-------------------------------- Customer Data ------------- Homes
passed and marketed(1) 4,698,067 4,698,510 4,694,480 Total customer
relationships(2) 1,848,096 1,837,191 1,822,530 Customer penetration
39.3% 39.1% 38.8% Customer additions 89,469 79,365 78,695 Customer
disconnections (78,564) (64,704) (55,721) Net customer additions
10,905 14,661 22,974 Revenue Generating Units("RGUs")(3) 3,955,205
3,873,792 3,784,835 RGUs per customer 2.14 2.11 2.08 Net RGU
additions 81,413 88,957 113,433 Average monthly revenue per
customer(4) GBP 45.17 GBP 44.86 GBP 45.34 Average monthly churn(5)
1.4% 1.2% 1.0%
----------------------------------------------------------------------
Bundled customers ----------------- Customers subscribing to two or
more services 1,459,848 1,434,161 1,409,998 Customers subscribing
to three services ("triple play") 647,261 602,430 552,307
Percentage of dual or triple play customers 79.0% 78.1% 77.4%
Percentage of triple play customers 35.0% 32.8% 30.3%
----------------------------------------------------------------------
Consumer Television ------------------- Television ready homes
passed and marketed 4,698,067 4,698,510 4,694,480 Total subscribers
1,348,572 1,331,742 1,320,487 Quarterly net additions 16,830 11,255
7,662 Television penetration 28.7% 28.3% 28.1% Digital ready homes
passed and marketed 4,503,909 4,501,169 4,451,420 Digital
subscribers 1,228,164 1,189,521 1,149,641 Quarterly net digital
additions 38,643 39,880 27,340 Penetration of digital subscribers
to total subscribers 91.1% 89.3% 87.1% Average monthly churn(5)
1.8% 1.5% 1.4% Average monthly revenue per subscriber(4) GBP 20.89
GBP 20.78 GBP 21.12
----------------------------------------------------------------------
Consumer Telephony ------------------ Telephony ready homes passed
and marketed 4,696,439 4,694,030 4,691,704 "Talk Weekends" (and
previously "3-2-1") telephony subscribers 1,027,271 1,045,139
1,053,226 "Talk Unlimited" and "Talk Evenings and Weekends"
telephony subscribers 659,176 644,073 624,417 Total subscribers
1,686,447 1,689,212 1,677,643 Quarterly net (disconnects)/additions
(2,765) 11,569 17,302 Telephony penetration 35.9% 36.0% 35.8%
Average monthly churn(5) 1.4% 1.2% 1.0% Average monthly revenue per
subscriber(4) GBP 22.35 GBP 22.42 GBP 23.00
----------------------------------------------------------------------
Dec. 31, Sep. 30, 2004 2004 Reorganized Company
--------------------- Customer Data ------------- Homes passed and
marketed(1) 4,686,794 4,686,799 Total customer relationships(2)
1,799,556 1,769,263 Customer penetration 38.4% 37.7% Customer
additions 89,452 78,707 Customer disconnections (59,159) (61,997)
Net customer additions 30,293 16,710 Revenue Generating Units
("RGUs")(3) 3,671,402 3,539,185 RGUs per customer 2.04 2.00 Net RGU
additions 132,217 91,931 Average monthly revenue per customer(4)
GBP 45.13 GBP 45.05 Average monthly churn(5) 1.1% 1.2%
----------------------------------------------------------------------
Bundled customers ----------------- Customers subscribing to two or
more services 1,379,057 1,338,632 Customers subscribing to three
services ("triple play") 492,789 431,290 Percentage of dual or
triple play customers 76.6% 75.7% Percentage of triple play
customers 27.4% 24.4%
----------------------------------------------------------------------
Consumer Television ------------------- Television ready homes
passed and marketed 4,686,794 4,686,799 Total subscribers 1,312,825
1,297,304 Quarterly net additions 15,521 9,032 Television
penetration 28.0% 27.7% Digital ready homes passed and marketed
4,420,388 4,405,162 Digital subscribers 1,122,301 1,078,623
Quarterly net digital additions 43,678 25,768 Penetration of
digital subscribers to total subscribers 85.5% 83.1% Average
monthly churn(5) 1.5% 1.4% Average monthly revenue per
subscriber(4) GBP 20.88 GBP 20.72
----------------------------------------------------------------------
Consumer Telephony ------------------ Telephony ready homes passed
and marketed 4,683,153 4,682,002 "Talk Weekends" (and previously
"3-2-1") telephony subscribers 1,080,893 1,082,125 "Talk Unlimited"
and "Talk Evenings and Weekends" telephony subscribers 579,448
552,534 Total subscribers 1,660,341 1,634,659 Quarterly net
(disconnects)/additions 25,682 13,290 Telephony penetration 35.5%
34.9% Average monthly churn(5) 1.1% 1.2% Average monthly revenue
per subscriber(4) GBP 23.18 GBP 23.53
----------------------------------------------------------------------
Telewest Global, Inc. Selected Quarterly Operating Data - unaudited
(continued) Sep. 30, Jun. 30, Mar. 31, 2005 2005 2005 Reorganized
Company -------------------------------- Consumer Internet
----------------- Broadband ready homes passed and marketed
4,503,909 4,501,169 4,451,420 Total metered dial-up internet
subscribers 23,645 25,048 29,376 Total unmetered dial-up internet
subscribers 49,542 65,516 85,909 Total broadband internet
subscribers 920,186 852,838 786,705 Quarterly net broadband
internet additions 67,348 66,133 88,469 Broadband internet
penetration 20.4% 18.9% 17.7% Average monthly broadband internet
churn(5) 1.5% 1.3% 1.0% Average monthly revenue per broadband
internet subscriber(4) GBP 19.03 GBP 19.39 GBP 19.89
----------------------------------------------------------------------
NCTA Capital expenditure(6) GBP m GBP m GBP m
----------------------------------------------------------------------
Customer premise equipment ("CPE") 30 18 16 Scaleable
infrastructure 9 12 7 Commercial 10 11 8 Line extensions - 1 2
Upgrade/rebuild 5 3 6 Support capital 12 12 13 ----------
---------- ---------- Total NCTA Capital expenditure 66 57 52 Non
NCTA Capital expenditure: Content Segment 1 1 - sit-up Segment 1 1
- Change in capital accruals and leasing (8) - 2
----------------------------------------------------------------------
Total Capital expenditure 60 59 54
----------------------------------------------------------------------
Dec. 31, Sep. 30, 2004 2004 Reorganized Company
---------------------- Consumer Internet -----------------
Broadband ready homes passed and marketed 4,420,388 4,405,162 Total
metered dial-up internet subscribers 33,417 39,196 Total unmetered
dial-up internet subscribers 107,220 127,745 Total broadband
internet subscribers 698,236 607,222 Quarterly net broadband
internet additions 91,014 69,609 Broadband internet penetration
15.8% 13.8% Average monthly broadband internet churn(5) 1.0% 1.3%
Average monthly revenue per broadband internet subscriber(4) GBP
20.23 GBP 21.50(a)
----------------------------------------------------------------------
NCTA Capital expenditure(6) GBP m GBP m
----------------------------------------------------------------------
Customer premise equipment ("CPE") 25 19 Scaleable infrastructure
14 8 Commercial 8 12 Line extensions 1 1 Upgrade/rebuild 10 1
Support capital 7 10 ---------- ---------- Total NCTA Capital
expenditure 65 51 Non NCTA Capital expenditure: Content Segment 1 -
sit-up Segment - - Change in capital accruals and leasing (2) (1)
----------------------------------------------------------------------
Total Capital expenditure 64 50
----------------------------------------------------------------------
(a) The product ARPU for broadband internet in this quarter has
been adjusted to reflect the full value of promotional discounts
offered. (1) The number of homes within our service area that can
potentially be served by our network with minimal connection costs.
Information concerning the number of homes "passed and marketed" is
based on physical counts made by us during network construction or
marketing phases. (2) The number of customers who receive at least
one of our television, telephony or broadband internet services.
(3) Revenue Generating Units ("RGUs"), refer to subscriptions to
each of our analog television, digital television, telephony and
broadband internet services on an individual basis. For example,
when we provide one customer with digital television and broadband
internet services, we record two RGUs. Dial-up internet services,
second telephone lines and additional TV outlets are not recorded
as RGUs although they generate revenue for us. (4) Average monthly
revenue per customer (often referred to as "ARPU" or "Average
Revenue per User") represents the consumer sales division's total
quarterly revenue of residential customers, including installation
revenues (but excluding the recovery of GBP 16 million VAT in the
quarter ended June 30, 2005), divided by the average number of
residential customers in the quarter, divided by three. The same
methodology is used for television, telephony and broadband
internet ARPU. (5) Average monthly churn represents the total
number of customers who disconnected during the quarter divided by
the average number of customers in the quarter, divided by three.
Subscribers who move premises within our addressable areas (known
as "Moves and Transfers") and retain our services are excluded from
this churn calculation. (6) In order to provide comparable data to
the US and UK cable industry, and in accordance with NCTA (National
Cable & Telecommunications Association) reporting guidelines,
Telewest has allocated capital expenditure to the standard
reporting categories as per below. Telewest is not a member of the
NCTA and is providing this information solely for comparative
purposes. CPE - costs incurred at the customer's house to secure
new customers, revenue units and additional bandwidth revenues.
Includes connections to previously unserved houses in accordance
with SFAS 51 (Financial Reporting by Cable Television Companies)
and customer premise equipment. Scaleable infrastructure - costs,
not CPE or network related, to secure growth of new customers,
revenue units and additional bandwidth revenues or provide service
enhancements. Commercial - costs to provide high-speed data and
telephony services to businesses and institutions. Includes network
and infrastructure expenditures. Line extensions - network costs
associated with entering new service areas including costs of
fiber, coaxial cable, amplifiers, electronic equipment, make-ready
and design/engineering. Upgrade/rebuild - costs to modify or
replace existing coax and fiber networks. Includes materials,
contract labor, in-house labor, make-ready, design engineering and
other miscellaneous costs associated with all aspects of the
construction of the plant miles along an existing route. Benefits
include added bandwidth and/or reliability/extended life to the
existing plant. Support capital - costs associated with the
replacement or enhancement of non-network assets due to
obsolescence and wear-out, replacement of network assets unrelated
to line extensions, rebuild/upgrade or customer growth. *T Telewest
Global, Inc. Supplemental Analysis -- Forward-Looking Statements --
Additional Information and Where to Find It -- Participants in the
Solicitation -- Fresh-Start Reporting -- Pro forma Consolidated
Statements of Operations -- Quarterly Historical Information --
Segment Information -- Use of Non-GAAP Financial Measures
Forward-Looking Statements Some of the statements in this earnings
release constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial
performance, including, but not limited to, strategic plans, our
proposed merger with NTL Inc., potential growth (including customer
net additions and average monthly revenue per customer), product
introductions and innovation, meeting customer expectations,
planned operational changes (including product improvements and the
impact of price increases), expected capital expenditures, future
cash sources and requirements, liquidity, customer service
improvements, cost savings and the benefits of acquisitions or
joint ventures - potential and/or completed - that involve known
and unknown risks, uncertainties and other factors that may cause
our or our businesses' actual results, levels of activity,
performance or achievements to be materially different from those
expressed or implied by any forward-looking statements. In some
cases, you can identify forward-looking statements by terminology
such as "may," "will," "could," "would," "should," "expect,"
"plan," "anticipate," "intend," "believe," "estimate," "predict,"
"potential," or "continue," or the negative of those terms or other
comparable terminology. There are a number of important factors
that could cause our actual results and future development to
differ materially from those expressed or implied by those
forward-looking statements. These factors include those discussed
under the caption "Risk Factors" in the Annual Report on Form 10-K
for the year ended December 31, 2004 (No. 000-50886) filed by
Telewest Global, Inc. on March 22, 2005 with the United States
Securities and Exchange Commission, although those risk factors may
not be exhaustive. Other sections of this earnings release may
describe additional factors that could adversely impact our
business and financial performance. We operate in a continually
changing business environment, and new risk factors may emerge from
time to time. Management cannot anticipate all of these new risk
factors, nor can they definitively assess the impact, if any, of
new risk factors on us or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those projected in any forward-looking statements.
Accordingly, forward-looking statements should not be relied upon
as a prediction of actual results. Unless otherwise required by
applicable securities laws, we assume no obligation to publicly
update or revise any of the forward-looking statements after the
date of this earnings release to reflect actual results, whether as
a result of new information, future events or otherwise. Additional
Information and Where to Find It This filing may be deemed to be
solicitation material in respect of the proposed merger of NTL and
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
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. 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 favor 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. Fresh-Start Reporting As a
result of the completion of the financial restructuring of Telewest
Communications plc, our predecessor, on July 15, 2004, Telewest
adopted fresh-start reporting in accordance with Statement of
Position 90-7, "Reporting by Entities in Reorganization under the
Bankruptcy Code", ("SOP 90-7"), with effect from July 1, 2004.
Under SOP 90-7, Telewest established a new accounting basis,
recording our predecessor's assets at their fair value and
liabilities at the present value of amounts to be paid. A
reconciliation of our predecessor's balance sheet at June 30, 2004
to the fresh-start balance sheet at July 1, 2004, is included in
Telewest's Annual Report on Form 10-K for the year ended December
31, 2004. As a result of the adoption of fresh-start reporting, our
balance sheets and results of operations subsequent to July 1, 2004
will not be comparable in many material respects to the balance
sheets or results of operations reflected in our predecessor's
historical financial statements for periods prior to July 1, 2004.
-0- *T Telewest Global, Inc. Pro forma Consolidated Statements of
Operations (a) (amounts in GBP millions, except share and per share
data) (unaudited) Nine months ended Sep 30, 2005 -----------
Reorganized Company (a)
----------------------------------------------------------------------
Revenue Consumer Sales Division 757 Business Sales Division 188
----------------------------------------------------------------------
Total Cable Segment 945 Content Segment 96 sit-up Segment 156
----------------------------------------------------------------------
Total revenue 1,197
----------------------------------------------------------------------
Operating costs and expenses Cable segment expenses 210 Content
segment expenses 56 sit-up segment expenses 116 Depreciation 302
Amortization 28 Selling, general and administrative expenses 379
----------------------------------------------------------------------
1,091
----------------------------------------------------------------------
Operating income 106 Other income/(expense) Interest income 17
Interest expense (110) Foreign exchange losses, net (8) Share of
net income of affiliates 16 Other, net 1
----------------------------------------------------------------------
Income before income taxes 22 Income tax benefit 1
----------------------------------------------------------------------
Net income 23
----------------------------------------------------------------------
Basic and diluted earnings per share of common stock GBP 0.09
Weighted average number of shares of common stock - (millions) 245
----------------------------------------------------------------------
(a) To show pro forma effect as if sit-up Limited had been
purchased on January 1, 2005, for the nine months ended September
30, 2005. *T Pro forma adjustments reflect the revenue, segment
expenses, depreciation and SG&A for sit-up for the period
January 1, 2005 to May 11, 2005. Interest income and expense have
been adjusted to reflect the interest income earned by sit-up
during the above period and the additional interest expense that
would have been incurred by Telewest to fund the acquisition at
January 1, 2005. Share of net income of affiliates has been
adjusted to reverse the equity accounting of sit-up for the period
presented. Pro forma financial information for the three months
ended September 30, 2005 has not been presented, as sit-up is a
consolidated subsidiary of the Reorganized Company during the
period, therefore there are no differences as compared to the
Consolidated Statement of Operations. Comparable pro forma
financial information for the three and nine months ended September
30, 2004 has not been presented since such pro forma information
would not be meaningful as a result of the financial restructuring
of the Predecessor Company during 2004. -0- *T Telewest Global,
Inc. Quarterly Historical Information (amounts in GBP millions,
except share and per share data) Three months ended
------------------------- Sep. 30, Jun. 30, Mar. 31, 2005 2005 2005
-------------------------- Reorganized Company
----------------------------------------------------------------------
Revenue Consumer Sales Division 249 262 246 Business Sales Division
64 63 61
----------------------------------------------------------------------
Total Cable Segment 313 325 307 Content Segment 33 32 31 sit-up
Segment 58 24 -
----------------------------------------------------------------------
Total revenue 404 381 338
----------------------------------------------------------------------
Operating costs and expenses Cable segment expenses 71 70 69
Content segment expenses 19 17 20 sit-up segment expenses 44 17 -
Depreciation 99 101 101 Amortization 10 9 9 Selling, general and
administrative expenses 128 119 115
----------------------------------------------------------------------
371 333 314
----------------------------------------------------------------------
Operating income 33 48 24 Other income/(expense) Interest income 6
7 4 Interest expense (38) (41) (29) Foreign exchange
(losses)/gains, net (1) (3) (4) Share of net income of affiliates 4
7 6 Other, net - 1 -
----------------------------------------------------------------------
Income/(loss) before income taxes 4 19 1 Income tax benefit 1 - -
----------------------------------------------------------------------
Net income/(loss) 5 19 1
----------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of common stock GBP
0.02 GBP 0.08 - Weighted average number of shares of common stock -
(millions) 245 245 245
----------------------------------------------------------------------
Three months ended ------------------ Dec. 31, Sep. 30, 2004 2004
------------------ Reorganized Company
----------------------------------------------------------------------
Revenue Consumer Sales Division 241 238 Business Sales Division 63
63
----------------------------------------------------------------------
Total Cable Segment 304 301 Content Segment 32 27 sit-up Segment -
-
----------------------------------------------------------------------
Total revenue 336 328
----------------------------------------------------------------------
Operating costs and expenses Cable segment expenses 69 72 Content
segment expenses 25 17 sit-up segment expenses - - Depreciation 101
103 Amortization 9 9 Selling, general and administrative expenses
114 117
----------------------------------------------------------------------
318 318
----------------------------------------------------------------------
Operating income 18 10 Other income/(expense) Interest income 5 6
Interest expense (47) (49) Foreign exchange (losses)/gains, net 3 -
Share of net income of affiliates 4 4 Other, net - -
----------------------------------------------------------------------
Income/(loss) before income taxes (17) (29) Income tax benefit - -
----------------------------------------------------------------------
Net income/(loss) (17) (29)
----------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of common stock GBP
(0.07)GBP(0.12) Weighted average number of shares of common stock -
(millions) 245 245
----------------------------------------------------------------------
Telewest Global, Inc. Segment Information (amounts in GBP millions)
Three months Nine months ended Sep. 30, ended Sep. 30,
----------------------- --------------------- 2005 2004 2005 2004
--------------------------------------------- Reorganized
Reorganized Reorganized Combined Company Company Company Companies
----------------------------------------------------------------------
CABLE SEGMENT Consumer Sales Division revenue 249 238 757 708
Business Sales Division revenue 64 63 188 193
----------------------------------------------------------------------
Third party revenue 313 301 945 901 Operating costs and expenses
(before depreciation, amortization and financial restructuring
charges) (181) (183) (534) (552)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment costs 132 118 411 349
Inter-segment costs(1) 3 2 8 7
----------------------------------------------------------------------
Adjusted EBITDA 135 120 419 356
----------------------------------------------------------------------
CONTENT SEGMENT Content Segment revenue 36 29 104 88 Operating
costs and expenses (before depreciation, amortization and financial
restructuring charges) (27) (25) (82) (71)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment revenues 9 4 22 17
Inter-segment revenues(1) (3) (2) (8) (7)
----------------------------------------------------------------------
Adjusted EBITDA 6 2 14 10
----------------------------------------------------------------------
SIT-UP SEGMENT sit-up Segment revenue 58 - 82 - Operating costs and
expenses (before depreciation, amortization and financial
restructuring charges) (57) - (81) -
----------------------------------------------------------------------
Adjusted EBITDA 1 - 1 -
----------------------------------------------------------------------
Reconciliation to operating income Cable Segment Adjusted EBITDA
135 120 419 356 Content Segment Adjusted EBITDA 6 2 14 10 sit-up
Segment Adjusted EBITDA 1 - 1 -
----------------------------------------------------------------------
Adjusted EBITDA 142 122 434 366 Financial restructuring charges - -
- (21) Depreciation (99) (103) (301) (287) Amortization (10) (9)
(28) (9)
----------------------------------------------------------------------
Operating income 33 10 105 49
----------------------------------------------------------------------
Nine months Six months ended ended Sep. 30, Jun. 30, 2004 2004
------------------------ Reorganized Predecessor Company Company
----------------------------------------------------------------------
CABLE SEGMENT Consumer Sales Division revenue 238 470 Business
Sales Division revenue 63 130
----------------------------------------------------------------------
Third party revenue 301 600 Operating costs and expenses (before
depreciation, amortization and financial restructuring charges)
(183) (369)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment costs 118 231 Inter-segment
costs(1) 2 5
----------------------------------------------------------------------
Adjusted EBITDA 120 236
----------------------------------------------------------------------
CONTENT SEGMENT Content Segment revenue 29 59 Operating costs and
expenses (before depreciation, amortization and financial
restructuring charges) (25) (46)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment revenues 4 13 Inter-segment
revenues(1) (2) (5)
----------------------------------------------------------------------
Adjusted EBITDA 2 8
----------------------------------------------------------------------
SIT-UP SEGMENT sit-up Segment revenue - - Operating costs and
expenses (before depreciation, amortization and financial
restructuring charges) - -
----------------------------------------------------------------------
Adjusted EBITDA - -
----------------------------------------------------------------------
Reconciliation to operating income Cable Segment Adjusted EBITDA
120 236 Content Segment Adjusted EBITDA 2 8 sit-up Segment Adjusted
EBITDA - -
----------------------------------------------------------------------
Adjusted EBITDA 122 244 Financial restructuring charges - (21)
Depreciation (103) (184) Amortization (9) -
----------------------------------------------------------------------
Operating income 10 39
----------------------------------------------------------------------
(1) Inter-segment revenues are revenues of our Content Segment
which are costs in our Cable Segment and which are eliminated on
consolidation. The Segment Information for the Combined Companies
for the nine months ended September 30, 2004 excludes the Segment
Information of the Predecessor Company for July 1, 2004. *T
Telewest Global, Inc. Use of Non-GAAP Financial Measures Adjusted
EBITDA Telewest's primary measure of income or loss for each of our
reportable segments is Adjusted EBITDA. Our management, including
our chief operating decision-maker, considers Adjusted EBITDA an
important indicator of the operational strength and performance of
our reportable segments. Adjusted EBITDA for each segment and in
total excludes the impact of costs and expenses that do not
directly affect our cash flows or do not directly relate to the
operating performance of that segment. These costs and expenses
include depreciation, amortization, financial restructuring
charges, interest expense, foreign exchange gains/(losses), share
of net income/(loss) from affiliates and income taxes. It is the
belief of management that the legal and professional costs relating
to our financial restructuring are not characteristic of our
underlying business operations. Furthermore management believes
that some of the components of these charges are not directly
related to the performance of a single reportable segment. Adjusted
EBITDA is not a financial measure recognised under GAAP. This
measure is most directly comparable to the GAAP financial measure
net income/(loss). Some of the significant limitations associated
with the use of Adjusted EBITDA as compared to net income/(loss)
are that Adjusted EBITDA does not reflect the amount of required
reinvestment in depreciable fixed assets, financial restructuring
charges, interest expense, foreign exchange gains or losses, income
taxes expense or benefit and similar items on our results of
operations. We believe Adjusted EBITDA 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-GAAP financial measure reflects an additional
way of viewing aspects of our operations that, when viewed with our
GAAP results and the reconciliations to net income/(loss), shown
below, provide a more complete understanding of factors and trends
affecting our business. Because non-GAAP financial measures are not
standardized, it may not be possible to compare Adjusted EBITDA
with other companies' non-GAAP financial measures that have the
same or similar names. The presentation of this supplemental
information is not meant to be considered in isolation or as a
substitute for net cash provided by operating activities, operating
income/(loss), net income/(loss), or other measures of financial
performance reported in accordance with GAAP. Free cash flow
Telewest's primary measure of cash flow is free cash flow. Free
cash flow is defined as net cash provided by/(used in) operating
activities excluding cash paid for financial restructuring charges,
less capital expenditure. Our management, including our chief
operating decision-maker, considers free cash flow an important
indicator of the operational performance of our business. Free cash
flow is not a financial measure recognized under GAAP. This measure
is most directly comparable to the GAAP financial measure net cash
provided by/(used in) operating activities. The significant
limitation associated with the use of free cash flow as compared to
net cash provided by/(used in) operating activities is that free
cash flow does not consider the amount of cash required to pay
financial restructuring charges. We believe free cash flow is
helpful for understanding our performance and it provides useful
supplemental information to investors. Because non-GAAP financial
measures are not standardized, it may not be possible to compare
free cash flow with other companies' non-GAAP financial measures
that have the same or similar names. The presentation of this
supplemental information is not meant to be considered in isolation
or as a substitute for net cash provided by/(used in) operating
activities, or other measures of financial performance reported in
accordance with GAAP. Net debt Net debt is defined as the sum of
debt repayable, capital lease obligations and accrued interest
payable on notes and debentures less cash and cash equivalents. The
Company's management, including its chief operating decision-maker,
considers net debt an important measure of the financing
obligations undertaken by the Company. Net debt is not a financial
measure recognized under GAAP. This measure is most directly
comparable to the GAAP financial measure, total liabilities. The
significant limitation associated with the use of net debt as
compared total liabilities is that net debt does not consider
current liabilities due in respect of accounts payable and other
liabilities. It also assumes that all of cash and cash equivalents
is available to service debt. Telewest believes net debt is helpful
for understanding its entire net debt funding obligations and it
provides useful supplemental information to investors. Because
non-GAAP financial measures are not standardized, it may not be
possible to compare net debt with other companies' non-GAAP
financial measures that have the same or similar names. The
presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for total liabilities,
or other measures of financial performance reported in accordance
with GAAP. Average monthly revenue per customer or "Household ARPU
(excluding impact of the GBP 16 million VAT recovery)" For a three
month period, Household ARPU (excluding impact of the GBP 16
million VAT recovery) represents the consumer sales division's
total quarterly revenue of residential customers, including
installation revenues, but excluding the recovery of GBP 16 million
VAT, divided by the average number of residential customers in the
quarter, divided by three. Household ARPU (excluding impact of the
GBP 16 million VAT recovery) is not a financial measure recognized
under GAAP. This measure is most directly comparable to the GAAP
financial measure, Household ARPU. The significant limitation
associated with the use of Household ARPU (excluding impact of the
GBP 16 million VAT recovery) as compared to Household ARPU is that
Household ARPU (excluding impact of the GBP 16 million VAT
recovery) does not consider GBP 16 million of revenues received in
respect of recovered VAT. Telewest believes Household ARPU
(excluding impact of the GBP 16 million VAT recovery) is helpful
for understanding the trend in respect of its residential revenues
derived from customers during the period and it provides useful
supplemental information to investors. The VAT recovery is not
expected to recur. Because non-GAAP financial measures are not
standardized, it may not be possible to compare Household ARPU
(excluding impact of the GBP 16 million VAT recovery) with other
companies' non-GAAP financial measures that have the same or
similar names. The presentation of this supplemental information is
not meant to be considered in isolation or as a substitute for
Household ARPU, or other measures of financial performance reported
in accordance with GAAP. Average monthly revenue per television
subscriber or "Television ARPU (excluding impact of the GBP 16
million VAT recovery)" For a three month period, Television ARPU
(excluding impact of the GBP 16 million VAT recovery) represents
the sum of the consumer sales division's total quarterly revenue of
television subscribers, including installation revenues, but
excluding the recovery of GBP 16 million VAT, divided by the
average number of television subscribers in the quarter, divided by
three. Television ARPU (excluding impact of the GBP 16 million VAT
recovery) is not a financial measure recognized under GAAP. This
measure is most directly comparable to the GAAP financial measure,
Television ARPU. The significant limitation associated with the use
of Television ARPU (excluding impact of the GBP 16 million VAT
recovery) as compared to Television ARPU is that Television ARPU
(excluding impact of the GBP 16 million VAT recovery) does not
consider GBP 16 million of revenues received in respect of
recovered VAT. Telewest believes Television ARPU (excluding impact
of the GBP 16 million VAT recovery) is helpful for understanding
the trend in respect of its television revenues derived from
subscribers during the period and it provides useful supplemental
information to investors. The VAT recovery is not expected to
recur. Because non-GAAP financial measures are not standardized, it
may not be possible to compare Television ARPU (excluding impact of
the GBP 16 million VAT recovery) with other companies' non-GAAP
financial measures that have the same or similar names. The
presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for Television ARPU, or
other measures of financial performance reported in accordance with
GAAP. -0- *T Reconciliations of Non-GAAP Financial Measures
(amounts in GBP millions) Three months ended Sep. 30,
--------------------------- 2005 2004 ---------------------------
Reorganized Reorganized Company Company Reconciliation of Adjusted
EBITDA to net income/(loss)
----------------------------------------------------------------------
Adjusted EBITDA 142 122 Financial restructuring charges - -
Depreciation (99) (103) Amortization (10) (9)
----------------------------------------------------------------------
Operating income 33 10 Interest income 6 6 Interest expense
(including amortization of debt discount) (38) (49) Foreign
exchange (losses)/gains, net (1) - Share of net income of
affiliates 4 4 Other, net - - Income tax benefit/(charge) 1 -
----------------------------------------------------------------------
Net income/(loss) 5 (29)
----------------------------------------------------------------------
Reconciliation of free cash flow to net cash provided by operating
activities
----------------------------------------------------------------------
Free cash flow 50 39 Deduct cash paid for financial restructuring
charges - (17) Add capital expenditure 60 50
----------------------------------------------------------------------
Net cash provided by operating activities 110 72
----------------------------------------------------------------------
Free cash flow is reported after cash paid for interest, net, and
cash received for income taxes. Supplementary cash flow
information: Cash paid for interest, net 34 39 Cash received for
income taxes, net (2) - Nine months Three months ended Sep. 30,
ended Jun. 30, ---------------------------------------- 2005 2004
2005 ---------------------------------------- Reorganized Combined
Reorganized Company Companies Company
---------------------------------------- Adjusted EBITDA 434 366
158 Financial restructuring charges - (21) - Depreciation (301)
(287) (101) Amortization (28) (9) (9)
----------------------------------------------------------------------
Operating income 105 49 48 Interest income 17 21 7 Interest expense
(including amortization of debt discount) (108) (279) (41) Foreign
exchange (losses)/gains, net (8) 40 (3) Share of net income of
affiliates 17 12 7 Other, net 1 (1) 1 Income tax benefit/(charge) 1
(1) -
----------------------------------------------------------------------
Net income/(loss) 25 (159) 19
----------------------------------------------------------------------
Reconciliation of free cash flow to net cash provided by operating
activities
----------------------------------------------------------------------
Free cash flow 177 101 64 Deduct cash paid for financial
restructuring charges (1) (36) - Add capital expenditure 173 177 59
----------------------------------------------------------------------
Net cash provided by operating activities 349 242 123
----------------------------------------------------------------------
Free cash flow is reported after cash paid for interest, net, and
cash received for income taxes. Supplementary cash flow
information: Cash paid for interest, net 75 100 29 Cash received
for income taxes, net (2) (2) - The reconciliation items disclosed
above for Combined Companies represent the items for the
Predecessor Company for the six months ended June 30, 2004, prior
to its financial restructuring, together with the items for the
Reorganized Company for the nine months ended September 30, 2004.
Sep. 30, Dec. 31, 2005 2004 ------------------------ Reorganized
Reorganized Company Company
----------------------------------------------------------------------
Reconciliation of net debt to total liabilities Net debt 1,665
1,746 Cash and cash equivalents 260 68
----------------------------------------------------------------------
Total debt 1,925 1,814 Accounts payable 139 93 Other liabilities
455 424 Deferred taxes 105 105
----------------------------------------------------------------------
Total liabilities 2,624 2,436
----------------------------------------------------------------------
Three months ended June 30, 2005
----------------------------------------------------------------------
Reconciliation of Household ARPU to Household ARPU (excluding
impact of the GBP 16 million VAT recovery) Consumer sales division
revenue in the period GBP 262 million Average number of residential
customers in the period 1,830,895 ----------------- Household ARPU
GBP 47.72 ----------------- Consumer sales division revenue in the
period GBP 262 million VAT recovery GBP (16)million
----------------- Consumer sales division revenue (excluding GBP 16
GBP 246 million million VAT recovery) Average number of residential
customers in the period 1,830,895 ----------------- Household ARPU
(excluding impact of the GBP 16 GBP 44.86 million VAT recovery)
----------------- Reconciliation of Television ARPU to Television
ARPU (excluding impact of the GBP 16 million VAT recovery) Consumer
television revenue in the period GBP 98 million Average number of
television subscribers in the period 1,326,317 -----------------
Television ARPU GBP 24.72 ----------------- Consumer television
revenue in the period GBP 98 million VAT recovery GBP (16)million
----------------- Consumer television revenue (excluding GBP 16 GBP
82 million million VAT recovery) Average number of television
subscribers in the period 1,326,317 ----------------- Television
ARPU (excluding impact of the GBP 16 GBP 20.78 million VAT
recovery) ----------------- *T
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