Ntl (NASDAQ:NTLI)
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NTL Incorporated (NASDAQ: NTLI) announces results for
the quarter ended June 30, 2006 - the first full quarter since NTL
merged with Telewest Global, Inc. on March 3, 2006. This earnings
release contains historical financial information on both an actual
reported basis and a pro forma basis. The pro forma results for the
quarter ended March 31, 2006 assume that the merger took place on
January 1, 2006 and the pro forma results for 2005 quarterly periods
assume that the merger took place on January 1, 2005.
Quarterly highlights(1)
-- Strong OCF and consumer revenue growth
-- Strong operating income growth
-- ARPU of GBP 42.21, up GBP 0.71 vs Q1-06
-- RGU per customer of 2.12, up from 2.09 at Q1-06
-- Triple play penetration of 37.1%, up from 34.9% at Q1-06
-- Estimated GBP 15m of synergy savings achieved in quarter
-- Virgin Mobile acquisition - first true quad-play to be offered
-- Virgin brand licence agreed, enabling rebranding of entire
consumer business
1 - operational statistics for prior periods prepared on a pro
forma basis
-0-
*T
(GBP millions) (unaudited) Reported Pro forma Reported
-------- -------- --------
Q2 2006 Q1 2006 Q1 2006
-------- -------- --------
Revenue
Consumer 644.7 636.7 461.4
Business 160.1 165.6 122.8
-------- -------- --------
Total Cable 804.8 802.3 584.2
Content 79.5 86.5 27.2
-------- -------- --------
Total Revenue 884.3 888.8 611.4
OCF 293.3 277.0 198.4
Operating income/(loss) 6.3 (0.9) 3.9
*T
OCF in the second quarter of 2006 has been negatively impacted by
costs relating to the merger with Telewest, including GBP 13.7m of
merger integration costs (pro forma Q1-06: GBP 5.8m) such as third
party costs for planning and implementing the merger integration and
costs of our internal "merger office". Costs like these will recur as
we continue our drive to realize merger synergies. We also incurred an
estimated GBP 5.5m of additional stock based compensation expense
arising from the revaluation of Telewest stock options on the merger
(pro forma Q1-06: GBP 2.8m). For further discussion, please see
Operational Review. OCF is operating income before depreciation,
amortization and other charges and is a non-GAAP measure. The pro
forma presentation set forth above and elsewhere in this earnings
release is non-GAAP financial information. Please see Appendix F for
reconciliation of non-GAAP terms to their nearest GAAP equivalents.
Steve Burch, Chief Executive Officer of NTL, said:
"We are delighted with today's strong operational and financial
results. They show continued evidence of improvements in our consumer
business. Consumer revenue, OCF, ARPU, RGU per customer and triple
play penetration have all improved sharply as we focused our strategy
on acquiring profitable quality customers. As expected, this did
impact overall customer levels slightly. We also achieved GBP 15
million of estimated synergy cost savings in this quarter, which puts
us firmly on track to achieve the GBP 250 million run rate as promised
by the end of 2007.
Now that we have closed the Virgin Mobile transaction, we can
really start to reap the benefits of being able to exploit our
bundling, branding and network strengths along with new channels to
market. The launch of quad-play and Free TV bundles will provide more
opportunities to offer our consumers unbeatable value and service,
whatever their communication and entertainment needs.
By continuing to exploit our competitive strengths, delivering on
the growth opportunities in our markets, and capturing substantial
merger synergies, we believe we can drive significant free cash flow
generation going forward. This will provide us with excellent
financial flexibility and improved capital deployment options."
OPERATIONAL REVIEW
The commentary below refers to financial results prepared on both
an actual reported and pro forma basis. The historical actual reported
results consolidate Telewest from March 3, 2006, the date of the
closing of the merger between NTL and Telewest. The pro forma
financial information for the first quarter of 2006 assumes that the
merger with Telewest occurred on January 1, 2006. The pro forma
results for 2005 quarterly periods assume that the merger occurred on
January 1, 2005. All historical references to operational statistics
including customer and subscriber figures, ARPU and churn are on a pro
forma basis. The pro forma financial information is non-GAAP financial
information that management believes facilitates a comparative
analysis of developments in the Company's business.
Total revenue in the quarter was GBP 884.3 million, up GBP 272.9
million sequentially compared with the first quarter of 2006 and up
GBP 401.8 million compared to the second quarter of 2005, due mainly
to the acquisition of Telewest.
Total revenue in the quarter was down GBP 4.5 million compared to
the pro forma previous quarter, principally due to reduced Business
and sit-up revenue, partially offset by growth in Consumer and
Flextech. Total revenue was up GBP 24.4 million compared to the pro
forma second quarter of 2005 due mainly to Telewest's acquisition of
sit-up in May 2005.
Cable Segment
Consumer
Consumer revenue in the second quarter was GBP 644.7 million, up
GBP 183.3 million sequentially compared with the first quarter and GBP
265.8 million compared to the second quarter of 2005, due mainly to
the acquisition of Telewest.
Consumer revenue was up GBP 8.0 million sequentially compared to
the pro forma first quarter primarily due to a sharp increase in ARPU
to GBP 42.21 from GBP 41.50 in the previous quarter.
As expected, customer growth has been affected by our strategy to
integrate the two cable businesses and to share best practices across
the group's operations. This has improved ARPU, RGU per customer and
triple play penetration but has had an impact on overall customer
levels. We expect this impact will continue into the second half as we
continue to focus on improving our operational performance, targeting
more profitable consumers, and delivering a better experience to our
customers.
We anticipated that customer net additions would be lower than the
first quarter, and this was borne out in the results. Net customer
disconnects were 18,900 in the second quarter, compared to 25,800 net
customer additions in the previous quarter and to 62,500 net customer
additions in the same quarter last year. Specific reasons for this
impact include an increased focus on quality growth at old NTL, some
increase in competitive pressure and a higher level of house moves
than has been typical historically.
To focus on better quality growth, we have more closely aligned
old NTL up-front credit policies with those of old Telewest, with the
effect of reducing gross customer acquisition levels in old NTL. When
Telewest implemented a similar policy change in 2003, it experienced
two quarters of customer losses before churn benefits were realized.
This effort is intended to promote quality growth rather than overall
customer growth, and is being demonstrated in improved ARPU, as
described above. ARPU growth reflects our successful focus on selling
profitable product bundles, on cross-sell and up-sell to existing
customers as well as selected price increases. This is reflected in
growth in RGU per customer from 2.09 to 2.12 and in triple play
penetration which grew from 34.9% to 37.1% during the quarter. The
success of this focus was most apparent in old NTL where ARPU grew by
GBP 0.93 to GBP 40.21 n the quarter.
Competitive activity has had some impact on overall acquisition
levels. In response to our aggressive and ambitious move into the
quad-play arena with the prospect of the Virgin brand, competition in
our sector has intensified. However, we are confident in our ability
to compete on value, quality, technology, service and brand. As a
result, this pressure from increased competition may be expected to
have some impact, but we believe it should lessen over time. Any
estimate of the impact on customer acquisition is inherently
subjective, however we estimate that roughly 10,000 to 15,000 of the
reduction in gross customer additions relates to increased competitive
pressure. We are addressing this with the launch of our new offers
including Free TV bundles and quad-play and remain confident that our
expertise in marketing triple play will result in consumer demand for
simple, accessible and good value products.
Customer growth was also impacted by higher churn at 1.5%, which
was up from 1.3% in the previous quarter and up from 1.4% for the
second quarter of 2005. As anticipated, churn rose due to seasonal
factors such as increased house moves and student churn as well as
being impacted by the credit policy changes. We believe that the
percentage of house moves was higher than the same quarter last year.
We do not believe that churn was materially impacted by increased
competition due to the costs of moving from cable broadband to DSL.
Positive customer net additions in old Telewest areas were
outweighed by net disconnections in old NTL areas. We expect this to
occur again in the third quarter due to the credit policy changes we
have made at old NTL. (As mentioned above, when Telewest underwent
similar policy changes in 2003, it had two quarters of customer losses
before churn benefits were realized.) In addition, as part of our
focus on quality profitable growth, we are managing a shift to more
profitable sales channels, which will lead to reduced acquisitions
from our direct sales channels. As a result of the above, positive
customer growth will continue to be challenging in the third quarter.
Net RGU additions were 91,700 in the second quarter, compared to
205,100 in the first quarter and to 196,100 in the second quarter of
2005. RGU growth was lower in the second quarter compared to the
previous quarter for the reasons outlined above relating to overall
customer growth.
During the quarter, we instituted a post-merger review of our
customer and RGU reporting across all four of our existing billing
systems. As a result of data cleanse and alignment of customer and RGU
definitions across the two companies, our customer count has been
reduced by approximately 0.7% (or 36,200) and RGU count by
approximately 0.7% (or 69,000.) We are planning to integrate old NTL's
three existing billing systems onto the existing system used by
Telewest over the next fifteen months. As a result, it is probable
that further adjustments to customer numbers will take place at the
time of those conversions. These adjustments in raw customer numbers
and RGU numbers do not have any impact on revenue or OCF.
Broadband
We continue to experience good growth in the number of broadband
subscribers, with net additions of 104,900 in the quarter, compared to
191,400 in the previous quarter and 149,800 in the same quarter last
year. In the second quarter of last year, broadband growth had been
boosted by the introduction in old NTL of a GBP 9.99 standalone
broadband offer, which has not been repeated. Broadband penetration
stands at 24.7% of our homes marketable, leaving significant room for
further growth.
As an end-to-end network owner, we have competitive strengths in
the quality of broadband service that we offer. Customers can receive
consistent speeds no matter where they live on our network and our top
speeds of 10Mb are available throughout our addressable areas. We are
also increasing our entry level speed in old NTL areas to 2Mb in
September which will then be the consistent entry tier across the
entire group.
Television
Digital television net additions were 73,800, compared to 70,600
in the previous quarter and to 57,100 in the second quarter of 2005.
Total TV net additions, which includes analog television, were 8,300
in the quarter compared to 5,600 in the previous quarter and to 13,200
in the same quarter last year.
Our roll-out of exciting new television products continues.
Video-on-demand (VOD) is now available to around 80% of our digital
subscribers and digital video recorders (DVR) and high definition TV
(HDTV) are available in old Telewest areas where we currently have
34,000 subscribers with the HD compatible DVR box. We continue to add
to our line-up of VOD and HDTV content. Cable was the first platform
in the UK to launch HDTV and was the only TV platform in the UK to
offer all broadcasted World Cup football matches in HDTV.
Television remains a focus for ARPU enhancements. In old Telewest,
we increased the price of our top two basic packages and Sky premium
channels in March, 2006 and in old NTL we increased some basic package
prices in July, 2006, and plan to increase certain premium channel
prices in September, 2006. Our HDTV/DVR service is charged at GBP 10
per month for customers on the top basic service.
Our wide and comprehensive range of television services allows us
to retain a competitive advantage over competing platforms.
Telephony
Telephony net disconnections were 21,600 in the quarter, compared
to 8,100 net additions in the previous quarter and to 33,100 net
additions in the same quarter last year.
We have continued our strategy of migrating subscribers to flat
rate packages to reduce the impact of declining fixed line telephony
usage. We have recently launched a unique new bundled minutes phone
package, Talk Anywhere, offering all domestic, international, internet
and even mobile phone calls for a single fixed price.
In addition, we acquired Virgin Mobile Holdings (UK) plc, or
Virgin Mobile, on July 4, 2006. This exciting transaction, amongst
other things, will allow us to cross-sell Virgin Mobile products and
services to our fixed-line telephone subscribers.
We increased the price of telephony line rental from GBP 10.50 to
GBP 11.00 in June.
Off-net
Consumer off-net revenue was GBP 16.3 million in the second
quarter, compared to GBP 18.0 million in the previous quarter and GBP
17.6 million in the same quarter last year. These revenues are largely
from Virgin.net, our wholly owned broadband ISP. As at the quarter
end, Virgin.net had 205,300 broadband subscribers.
Business
Business revenue in the second quarter was GBP 160.1 million, up
GBP 37.3 million sequentially and up GBP 56.5 million compared to the
second quarter of 2005 due mainly to the acquisition of Telewest.
Business revenue was down GBP 5.5 million compared to the pro
forma previous quarter mainly due to reductions in wholesale and other
contract renewals.
In line with our continued focus on corporate and mid-market
customers, we have experienced a shift in revenue mix, with data
revenues growing compared to the pro forma second quarter last year
and constituting a higher percentage of total Business revenues.
In the short term, we believe business voice and data services
remain a challenging market in the UK. However, we believe we are well
positioned for long-term growth, with a lower unit network cost than
our competitors, a strong capable network and a substantial increase
in scale from the Telewest merger, which should enable us to take on
our competition with greater success.
Cable Segment OCF
Cable segment OCF in the quarter was GBP 284.5 million, up GBP
120.3 million as compared to the same quarter last year, and up GBP
89.1 million compared to the previous quarter due mainly to the merger
with Telewest.
The cable segment's OCF in the quarter was up GBP 16.9 million as
compared to the pro forma second quarter due mainly to the
non-recurrence of certain costs relating to the merger with Telewest,
detailed further below.
Content Segment
The Content segment consists of two businesses, Flextech and
sit-up. Content revenue, after inter segment elimination, in the
second quarter was GBP 79.5 million, comprising GBP 34.4 million from
Flextech and GBP 45.1 million from sit-up, compared to GBP 27.2
million Content revenue in the prior quarter and GBP nil Content
revenue in the second quarter of 2005, due entirely to the acquisition
of Telewest on March 3, 2006.
Flextech has historically sold programming to NTL, as well as to
Telewest. For pro forma consolidation purposes therefore, these
amounts have been eliminated.
Total Content revenue, after inter segment elimination, was up GBP
26.2 million on the pro forma second quarter of 2005 due to the
acquisition of sit-up by Telewest in May 2005. Content revenue was
down GBP 7.0 million on the pro forma previous quarter mainly due to a
reduction in sit-up revenues.
Flextech revenue, after inter segment elimination, was GBP 34.4
million in the quarter, relatively flat as compared to the pro forma
previous quarter and up 17.8% on the pro forma second quarter of 2005.
Flextech advertising revenue was GBP 21.0 million in the second
quarter, down GBP 1.0 million on the pro forma previous quarter but up
GBP 5.3 million on the pro forma same quarter last year, resulting
primarily from increased share of the advertising revenue market due
to the prior year growth in commercial impacts. Flextech subscription
revenue before inter segment elimination was relatively flat compared
to the pro forma previous quarter at GBP 14.6 million, but up 6.6% on
the same quarter last year, due to increased multi-channel
penetration.
Sit-up revenue was GBP 45.1 million in the quarter, relatively
flat as compared to the same quarter last year (as reported by sit-up
under UK GAAP before its acquisition by Telewest.) Revenue was down
GBP 6.8 million from the previous quarter on a pro forma basis, due
principally to the seasonal downturn associated with Easter and weak
viewing and demand during the World Cup.
Content segment OCF in the quarter was GBP 8.8 million after inter
segment eliminations, up GBP 8.8 million as compared to the same
quarter last year and up GBP 5.8 million compared to the prior quarter
due to the merger with Telewest. The content segment's OCF in the
quarter, before inter segment eliminations of GBP 14.5 million, was up
GBP 3.2 million as compared to the pro forma same quarter last year
and down by GBP 0.2 million from the pro forma prior quarter.
Operating income before depreciation, amortization and other
charges (OCF)
OCF in the second quarter was GBP 293.3 million, up GBP 94.9
million sequentially compared to the first quarter and up GBP 129.1
million compared to the second quarter of 2005, mainly due to the
merger with Telewest.
OCF in the second quarter was up GBP 16.3 million from the pro
forma previous quarter, mainly due to the non-recurrence of certain
transaction costs relating to the Telewest merger transaction, such as
investment banking fees and insurance costs.
Second quarter OCF was also impacted negatively by other costs
associated with the merger integration. Some of these costs can be
expected to recur as we continue our drive to realize synergies from
the Telewest merger. These costs include:
-- Third party costs of GBP 10.8 million principally for planning
and implementing the merger integration, compared to GBP 3.6
million in the first quarter of 2006.
-- Estimated additional selling, general and administrative
expense (SG&A) of approximately GBP 2.9 million due to the
costs of our internal "merger office", a department staffed by
employees working predominantly on the integration of the two
businesses. This compares to GBP 2.2 million in the first
quarter of 2006.
-- An estimated GBP 5.5 million of additional stock-based
compensation expense (SBCE) from the revaluation at the time
of the merger of stock options issued to Telewest personnel.
For the first quarter of 2006, the amount was GBP 2.8 million
on a pro forma basis.
OCF in the second quarter benefited from approximately GBP 11
million of estimated synergy cost savings resulting from the merger.
This was offset, however, by the total merger implementation costs
incurred in the quarter of GBP 14 million. We expect implementation
costs to roughly equal the synergy savings in the third quarter.
We continue to expect to achieve a run rate of GBP 250 million of
synergy savings by the end of 2007, consisting of GBP 200m of
operational expenditure savings and GBP 50 million of capital
expenditure savings. The implementation costs to achieve this are
expected to be GBP 250 million in total, with just over half being
incurred in 2006, split roughly as to two-thirds of operating
expenditure and one-third of capital expenditure.
We expect OCF in the third quarter to be impacted by some extra
costs including increased marketing expenditure, increased investment
in customer care, increased SBCE costs relating to senior management,
and the cost of the Virgin brand trade license.
OCF and pro forma OCF are non-GAAP measures. See Appendix F for
reconciliation of non-GAAP measures to their nearest GAAP equivalents.
Operating income, loss from continuing operations and net loss
Operating income in the second quarter was GBP 6.3 million,
compared to GBP 6.4 million in the second quarter of 2005. The
increase in OCF arising from the acquisition of Telewest was offset by
additional depreciation and amortization, also arising from the
acquisition of Telewest, together with an increase in other charges.
Other charges of GBP 12.1 million in the second quarter represent old
NTL employee termination and property exit costs in connection with
the merger integration restructuring program.
Loss from continuing operations in the second quarter was GBP
195.8 million, compared to GBP 66.1 million in the second quarter of
2005. The increased loss was driven primarily by an increase in
interest expense from the indebtedness incurred to acquire Telewest
and an increase of GBP 81.3 million in foreign currency transaction
losses.
Net loss was GBP 195.8 million in the second quarter compared to
net income of GBP 73.5 million in the same quarter last year, which
included a GBP 141.4 million gain on the disposal of our Ireland
business.
Capital Expenditure
Fixed asset additions (accrual basis) in the quarter were GBP
133.9 million, an increase of GBP 16.1 million as compared to the
previous quarter, and an increase of GBP 63.7 million as compared to
the second quarter of 2005, due mainly to the acquisition of Telewest.
Fixed asset additions (accrual basis) in the quarter were down GBP
24.4 million as compared to the pro forma previous quarter, and up GBP
4.7 million as compared to the second quarter of 2005.
Fixed asset additions (accrual basis) and pro forma fixed asset
additions (accrual basis) are non-GAAP financial measures. See
Appendix F for reconciliation of non-GAAP measures to their nearest
GAAP equivalents.
Net Debt
As of June 30, 2006, net debt was GBP 5,396 million. This
consisted of GBP 4,400 million outstanding on the company's Senior
Credit Facilities, GBP 567 million of Senior Bridge financing, GBP 760
million of Senior notes, and GBP 110 million of capital leases and
other, offset by GBP 441 million of cash and cash equivalents.
The acquisition of Virgin Mobile Holdings (UK) plc took place
following the quarter end on July 4, 2006. NTL paid for the
acquisition through the issuance of 34.4 million shares of NTL common
stock and GBP 418 million of cash.
Since the end of the quarter, NTL has completed the refinancing of
its debt following the acquisitions of both Telewest and Virgin
Mobile. As a result, gross debt was GBP 6,326 million. This consisted
of three tranches of Senior Credit Facilities, a GBP 3,525 million "A"
tranche, a GBP 1,340 million "B" tranche and a GBP 300 million "C"
tranche of Senior Credit Facilities, GBP 757 million of existing
Senior Notes, $550 million of new Senior Notes and GBP 110 million of
capital leases and other.
Net debt is a non-GAAP financial measure. See Appendix F for
reconciliation of non-GAAP measures to their nearest GAAP equivalents.
"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: (1) the
failure to obtain and retain expected synergies from the merger with
Telewest and the acquisition of Virgin Mobile; (2) rates of success in
executing, managing and integrating key acquisitions, including the
merger with Telewest and the acquisition of Virgin Mobile; (3) the
ability to achieve business plans for the combined company; (4) the
ability to manage and maintain key customer relationships; (5) the
ability to fund debt service obligations through operating cash flow;
(6) the ability to obtain additional financing in the future and react
to competitive and technological changes; (7) the ability to comply
with restrictive covenants in NTL's indebtedness agreements; (8) the
ability to control customer churn; (9) the ability to compete with a
range of other communications and content providers; (10) the effect
of technological changes on NTL's businesses; (11) the functionality
or market acceptance of new products that NTL may introduce; (12)
possible losses in revenues due to systems failures; (13) the ability
to maintain and upgrade NTL's networks in a cost-effective and timely
manner; (14) the reliance on single-source suppliers for some
equipment and software; (15) the ability to provide attractive
programming at a reasonable cost; and (16) the extent to which NTL's
future earnings will be sufficient to cover its fixed charges.
These and other factors are discussed in more detail under "Risk
Factors" and elsewhere in NTL's Form 10-K and NTL Holdings Inc.'s Form
10-K that were filed with the SEC on February 28, 2006 and March 1,
2006, respectively. We assume no obligation to update our
forward-looking statements to reflect actual results, changes in
assumptions or changes in factors affecting these statements.
NTL-Telewest Merger
On March 3, 2006, NTL Holdings Inc, (formerly known as NTL
Incorporated) merged with a subsidiary of NTL Incorporated (formerly
known as Telewest Global, Inc.). Because this transaction is accounted
for as a reverse acquisition, the actual reported financial
information included in this release is of the corporation now known
as NTL Holdings Inc. for the period through March 3, 2006 and
thereafter it reflects the reverse acquisition of Telewest Global,
Inc. The pro forma financial information treats the merger as if it
occurred at the beginning of the relevant year.
Virgin Mobile Acquisition
On July 4, 2006. NTL Incorporated completed the acquisition of
Virgin Mobile Holdings (UK) plc, or Virgin Mobile. Virgin Mobile is
the UK's leading virtual mobile network operator with approximately
4.3 million customers and the UK's fifth largest provider of mobile
communications services. We have entered into a long-term exclusive
license agreement with Virgin Enterprises Limited pursuant to which we
intend to re-brand our combined consumer business with the Virgin
brand.
Virgin Mobile's summary financial information IFRS financial
results for the year ended March 31, 2006 has been made available in
Appendix G for background information only. We did not own Virgin
Mobile during this period. We do not take responsibility for the
information in these financial statements which are not prepared in
accordance with or reconciled to US GAAP.
Non-GAAP Financial Measures
We use non-GAAP measures with a view to providing 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-GAAP
financial measures, including (i) operating income before
depreciation, amortization and other charges (OCF), (ii) fixed asset
additions (accrual basis) and (iii) net debt, as we believe these are
important measures of the operational strength of our business. Since
these measures are not calculated in accordance with GAAP, they should
not be considered as substitutes for operating income (loss), purchase
of fixed assets and total liabilities, respectively, as indicators of
our operating performance, expenditure for fixed assets and total
liabilities.
Please see Appendix F for a discussion of our use of non-GAAP
financial measures.
Pro Forma Financial Information
The pro forma presentation of our financial results contained
herein is non-GAAP financial information. We have included the pro
forma information to provide a useful basis for evaluating
developments in our business over time, but it should not be viewed as
a substitute for our GAAP financial information. Please see Appendix
E.
Appendices:
A) Financial Statements
-- Condensed Consolidated Statement of Operations
-- Condensed Consolidated Balance Sheet
-- Condensed Consolidated Statement of Cashflows
-- Quarterly Condensed Consolidated Statement of Operations
B) Residential Operations statistics
C) Segmental Analysis
D) Fixed Asset Additions (accrual basis)
E) Pro Forma Combined Condensed Financial Information
F) Use of non-GAAP Financial Measures and Reconciliations to GAAP
G) Virgin Mobile Financial and Operational Results
Appendices
A) Financial Statements
-0-
*T
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in GBP millions, except per share data) (unaudited)
Three months Six months
ended ended
June 30, June 30,
--------------- -----------------
2006 2005 2006 2005
------- ------- --------- -------
Revenue 884.3 482.5 1,495.7 980.3
Costs and expenses
Operating costs (exclusive of
depreciation shown separately
below) (367.5) (196.0) (622.4) (402.9)
Selling, general and
administrative expenses (223.5) (122.3) (381.6) (242.1)
Other charges (12.1) (0.7) (20.5) (1.1)
Depreciation (219.3) (129.6) (368.6) (259.9)
Amortization (55.6) (27.5) (92.4) (54.9)
------- ------- --------- -------
Total costs and expenses (878.0) (476.1) (1,485.5) (960.9)
------- ------- --------- -------
Operating income 6.3 6.4 10.2 19.4
Other income (expense)
Interest income and other, net 8.6 8.3 17.2 14.8
Interest expense (135.6) (58.4) (219.4) (128.5)
Share of income from equity
investments 3.1 0.2 4.5 0.2
Foreign currency transaction
losses (94.1) (12.8) (104.1) (16.8)
Loss on extinguishment of debt - - (32.4) -
Gains (losses) on derivative
instruments 5.7 - (3.5) -
------- ------- --------- -------
Loss from continuing operations
before income taxes,
minority interest and cumulative
effect of change in accounting
principle (206.0) (56.3) (327.5) (110.9)
Income tax benefit (expense) 9.9 (9.8) 9.9 (21.1)
Minority interest income 0.3 - 0.7 -
Cumulative effect of change in
accounting principle - - 1.2 -
------- ------- --------- -------
Loss from continuing operations (195.8) (66.1) (315.7) (132.0)
------- ------- --------- -------
Discontinued operations
(Loss) income from discontinued
operations before income taxes - (1.8) - 5.5
Gain on disposal of assets - 141.4 - 656.0
Income tax expense - - - (0.2)
------- ------- --------- -------
Income from discontinued
operations 0.0 139.6 0.0 661.3
------- ------- --------- -------
------- ------- --------- -------
Net (loss) income (195.8) 73.5 (315.7) 529.3
======= ======= ========= =======
Basic and diluted (loss) from (GBP (GBP (GBP (GBP
continuing operations per share 0.68) 0.31) 1.20) 0.62)
======= ======= ========= =======
Basic and diluted income from GBP GBP
discontinued operations per share - 0.66 - 3.08
======= ======= ========= =======
Basic and diluted net (loss) income (GBP GBP (GBP GBP
per share 0.68) 0.35 1.20) 2.47
======= ======= ========= =======
Average number of shares
outstanding 287.9 212.8 262.4 214.5
======= ======= ========= =======
CONDENSED CONSOLIDATED BALANCE SHEET
(in GBP millions)
December
June 30, 31,
2006 2005
---------- --------
(Unaudited) (See
Note)
Assets
Current assets
Cash and cash equivalents 441.7 735.2
Restricted cash 7.5 3.4
Marketable securities - 96.9
Accounts receivable - trade, less allowance for doubtful
accounts of GBP 44.1 (2006)
and GBP 41.7 (2005) 340.8 191.8
Inventory for re-sale 11.9 -
Programming inventory 42.6 -
Prepaid expenses and other current assets 101.3 112.4
---------- --------
Total current assets 945.8 1,139.7
Fixed assets, net 6,133.0 3,294.9
Goodwill 1,420.0 -
Reorganization value in excess of amounts allocable
to identifiable assets 193.0 193.0
Customer lists, net 919.9 247.6
Other intangible assets, net 64.0 2.4
Investments in and loans to affiliates, net 363.4 -
Other assets, net of accumulated amortization of
GBP 25.1 (2006) and GBP 32.2 (2005) 138.9 110.9
---------- --------
Total assets 10,178.0 4,988.5
========== ========
Liabilities and shareholders' equity
Current liabilities
Accounts payable 287.4 176.9
Accrued expenses and other current liabilities 586.2 291.1
Interest payable 27.8 37.8
Deferred revenue 227.6 103.2
Current portion of long-term debt 49.8 0.8
---------- --------
Total current liabilities 1,178.8 609.8
Long-term debt, net of current portion 5,788.1 2,279.2
Deferred revenue and other long-term liabilities 168.5 134.3
Defered income taxes 127.9 9.2
---------- --------
Total liabilities 7,263.3 3,032.5
---------- --------
Commitments and contingent liabilities
Minority Interest 0.3 1.0
Shareholders' equity
Common stock 1.6 1.2
Additional paid-in capital 3,758.2 2,671.0
Treasury stock - (114.0)
Accumulated other comprehensive income 120.7 45.5
Accumulated deficit (966.1) (648.7)
---------- --------
Total shareholders' equity 2,914.4 1,955.0
---------- --------
Total liabilities and shareholders' equity 10,178.0 4,988.5
========== ========
Note: The balance sheet at December 31, 2005 has been derived from the
audited financial statements at that date.
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
(in GBP millions) (unaudited)
Six months ended
June 30,
------------------
2006 2005
--------- --------
Net cash provided by operating activities 243.8 122.6
--------- --------
Investing activities
Purchase of fixed assets (263.4) (144.4)
Investments in and loans to affiliates 13.6 -
Acquisition of subsidiaries, net of cash acquired (2,013.7) -
Proceeds from the sale of fixed assets 0.9 2.2
Decrease (increase) in restricted cash 4.2 (22.6)
Proceeds from sale of broadcast operations, net - 1,229.0
Proceeds from sale of Ireland operations, net - 216.2
--------- --------
Net cash (used in) provided by investing
activites (2,258.4) 1,280.4
--------- --------
Financing activities
Proceeds from employee stock option exercises 30.3 4.3
Purchase of stock - (114.0)
New borrowings 6,769.9 -
Principal payments on long-term debt (4,950.6) (700.0)
Financing fees (104.1) -
Capital lease payments (12.9) (0.4)
Dividends paid (1.6) -
--------- --------
Net cash provided by (used in) financing
activities 1,731.0 (810.1)
--------- --------
Cash flow from discontinued operations
Net cash used by operating activities - (14.3)
Net cash used by investing activities - (4.1)
--------- --------
Net cash used in discontinued operations - (18.4)
--------- --------
Effect of exchange rate changes on cash and cash
equivalents (9.9) 10.4
(Decrease) increase in cash and cash equivalents (293.5) 584.9
Cash and cash equivalents, beginning of period 735.2 125.2
--------- --------
Cash and cash equivalents, end of period GBP GBP
441.7 710.1
========= ========
QUARTERLY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
( GBP millions, except share and per share data) (unaudited)
Three months ended
---------------------------------------
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2006 2006 2005 2005 2005
---------------------------------------
Revenue 884.3 611.4 484.6 482.7 482.5
Costs and expenses
Operating costs (exclusive of
depreciation shown separately
below) (367.5) (254.9) (205.2) (200.2) (196.0)
Selling, general and
administrative expenses (223.5) (158.1) (124.7) (116.2) (122.3)
Other charges (12.1) (8.4) (22.4) (1.3) (0.7)
Depreciation (219.3) (149.3) (139.5) (142.3) (129.6)
Amortization (55.6) (36.8) (27.2) (27.4) (27.5)
------- ------- ------- ------- -------
Total costs and expenses (878.0) (607.5) (519.0) (487.4) (476.1)
------- ------- ------- ------- -------
Operating income (loss) 6.3 3.9 (34.4) (4.7) 6.4
Other income (expense)
Interest income and other,
net 8.6 8.6 7.8 6.8 8.3
Interest expense (135.6) (83.8) (55.6) (51.7) (58.4)
Share of income from equity
investments 3.1 1.4 0.9 (0.2) 0.2
Foreign currency
transaction losses (94.1) (10.0) 35.2 (13.1) (12.8)
Loss on extinguishment of
debt - (32.4) - (2.0) -
Gain (loss) on derivative
instruments 5.7 (9.2) - - -
------- ------- ------- ------- -------
Loss from continuing
operations before income
taxes, minority
interest and cumulative effect
of change in accounting
principle (206.0) (121.5) (46.1) (64.9) (56.3)
Income tax benefit
(expense) 9.9 - (10.1) 12.4 (9.8)
Minority interest income
(charge) 0.3 0.4 - (1.0) -
Cumulative effect of change
in accounting principle - 1.2 - - -
------- ------- ------- ------- -------
Loss from continuing
operations (195.8) (119.9) (56.2) (53.5) (66.1)
------- ------- ------- ------- -------
Discontinued operations
Income from discontinued
operations before income
taxes - - 0.2 - (1.8)
Gain on disposal of assets - - (0.2) 1.4 141.4
Income tax expenses - - - - -
------- ------- ------- ------- -------
Income from discontinued
operations 0.0 0.0 0.0 1.4 139.6
------- ------- ------- ------- -------
Net (loss) income (195.8) (119.9) (56.2) (52.1) 73.5
======= ======= ======= ======= =======
Basic and diluted (loss) from (GBP (GBP (GBP (GBP (GBP
continuing operations per 0.68) 0.49) 0.26) 0.25) 0.31)
share
======= ======= ======= ======= =======
Basic and diluted income from GBP GBP GBP GBP GBP
discontinued operations per 0.00 0.00 0.00 0.01 0.66
share
======= ======= ======= ======= =======
Basic and diluted net (loss) (GBP (GBP (GBP (GBP GBP
income per share 0.68) 0.49) 0.26) 0.24) 0.35
======= ======= ======= ======= =======
Average number of shares
outstanding 287.9 245.5 212.8 212.8 212.8
======= ======= ======= ======= =======
B) RESIDENTIAL OPERATIONS STATISTICS
(data in 000's except percentages, RGU/Customer and ARPU)
Pro forma new NTL (1)
Q2-06 Q1-06 Q4-05 Q3-05 Q2-05
--------- --------- --------- --------- ---------
Customers
Opening Customers 4,983.8 4,958.0 4,945.4 4,893.1 4,830.6
Data Cleanse (2) (36.2) - (18.1) - -
Adjusted Opening
Customers 4,947.6 4,958.0 4,927.3 4,893.1 4,830.6
Gross customer adds 192.3 218.1 248.9 271.9 250.8
Total Customer
disconnections (211.2) (192.3) (208.2) (219.6) (188.3)
Net customer adds (18.9) 25.8 40.7 52.3 62.5
Reduction to
customer count (3) - - (10.0) - -
--------- --------- --------- --------- ---------
Closing Customers 4,928.7 4,983.8 4,958.0 4,945.4 4,893.1
Monthly customer
churn % 1.5% 1.3% 1.4% 1.5% 1.4%
RGUS
Opening RGUs 10,405.7 10,200.6 10,040.2 9,837.5 9,641.4
Data Cleanse (2) (69.0) - (43.1) - -
Adjusted Opening
RGUs 10,336.7 10,200.6 9,997.1 9,837.5 9,641.4
Net RGU adds 91.7 205.1 215.8 202.7 196.1
Reduction to RGU
count (3) - - (12.3) - -
--------- --------- --------- --------- ---------
Closing RGUs 10,428.4 10,405.7 10,200.6 10,040.2 9,837.5
Net RGU Adds
Telephone (21.6) 8.1 0.8 2.6 33.1
Television 8.3 5.6 23.3 (5.0) 13.2
DTV 73.8 70.6 85.5 42.9 57.1
Broadband 104.9 191.4 191.7 205.1 149.8
--------- --------- --------- --------- ---------
Total Net RGU Adds 91.7 205.1 215.8 202.7 196.1
Revenue Generating
Units (RGUs)
Telephone 4,233.0 4,268.1 4,260.0 4,285.0 4,282.4
Television 3,293.1 3,315.9 3,310.3 3,288.7 3,293.6
DTV 2,836.2 2,786.5 2,715.9 2,637.5 2,594.6
Broadband 2,902.3 2,821.7 2,630.3 2,466.5 2,261.4
--------- --------- --------- --------- ---------
Total RGUs 10,428.4 10,405.7 10,200.6 10,040.2 9,837.5
RGU / Customer 2.12 2.09 2.06 2.03 2.01
Internet Customers
Dial-up (metered) 35.5 46.6 56.8 64.5 72.4
Dial-up
(unmetered) 71.8 87.4 117.2 146.6 192.2
DTV Access 6.0 6.4 7.6 8.0 8.4
--------- --------- --------- --------- ---------
Total Dial-up and
DTV access
customers 113.3 140.4 181.6 219.0 273.0
Broadband 2,902.3 2,821.7 2,630.3 2,466.5 2,261.4
--------- --------- --------- --------- ---------
Total Internet 3,015.6 2,962.1 2,811.9 2,685.6 2,534.5
--------- --------- --------- --------- ---------
Bundled Customers
Dual RGU 1,838.9 1,939.1 2,033.2 2,114.5 2,184.6
Triple RGU 1,830.4 1,741.4 1,604.6 1,490.2 1,379.9
Percentage of
dual or triple
RGUs 74.4% 73.8% 73.4% 72.9% 72.8%
Percentage of
triple RGUs 37.1% 34.9% 32.4% 30.1% 28.2%
ARPU
Combined GBP GBP GBP GBP GBP
42.21 41.50 41.27 41.28 41.63
NTL GBP GBP GBP GBP GBP
40.21 39.28 38.96 38.99 39.69
Telewest GBP GBP GBP GBP GBP
45.46 45.15 45.13 45.11 44.84
.
Homes Marketable On-net
Telephone 12,312.7 12,311.2 12,299.7 12,288.5 12,273.1
ATV 12,661.1 12,656.7 12,652.8 12,633.9 12,621.2
DTV 12,009.7 11,989.2 11,972.3 11,941.7 11,926.1
Broadband 11,766.2 11,745.7 11,613.6 11,583.2 11,567.9
Total homes 12,661.1 12,656.7 12,652.8 12,633.9 12,621.2
Penetration of Homes Marketable On-net
Telephone 34.4% 34.7% 34.6% 34.9% 34.9%
Television -
Total 26.0% 26.2% 26.2% 26.0% 26.1%
Television - DTV 23.6% 23.2% 22.7% 22.1% 21.8%
Broadband 24.7% 24.0% 22.6% 21.3% 19.5%
Total Customer 38.9% 39.4% 39.2% 39.1% 38.8%
Notes
(1) Subscriber information is on a pro forma combined basis
assuming that the old Telewest and old NTL merger had occurred
on January 1, 2005 and reflects old Telewest and old NTL
reported on- net with prior periods restated for policy
alignments where applicable.
(2) Data cleanse activity in Q2-06 resulted in a decrease of
36,200 customers and 69,000 RGUs, a decrease of approximately
13,500 Telco, 24,400 Broadband and 31,100 TV RGUs. Data
cleanse activity in Q2-06 is a result of more closely aligning
old NTL up-front credit policies with those of old Telewest,
in order to focus on better quality customer growth. Data
cleanse activity in Q4-05 resulted in a decrease in old NTL of
18,100 customers and 43,100 RGUs, a decrease of approximately
17,700 Telco, 26,600 Broadband and an increase of 1,300 net TV
RGUs.
(3) Review of inactive backlog customers in Q4-05 resulted in an
adjustment to remove 10,000 inactive backlog disconnects,
representing 12,300 RGUs.
(4) A table showing old NTL operational statistics for Q1-06 on an
actual basis reflecting the merger with old Telewest on March
3, 2006 can be found in our Form 10Q for Q 1-06, filed with
the SEC on May 9, 2006.
RESIDENTIAL OPERATIONS STATISTICS
(data in 000's except percentages, RGU/Customer and ARPU)
Old Telewest (1&4)
Q2-06 Q1-06 Q4-05 Q3-05 Q2-05
-------- -------- -------- -------- --------
Customers
Opening Customers 1,886.8 1,868.2 1,848.1 1,837.2 1,822.5
Data Cleanse (2) (3.7) - - - -
Adjusted Opening
Customers 1,883.1 1,868.2 1,848.1 1,837.2 1,822.5
Gross customer adds 73.2 79.2 86.1 89.5 79.4
Total Customer
disconnections (69.5) (60.6) (66.0) (78.6) (64.7)
Net customer adds 3.7 18.6 20.1 10.9 14.7
Reduction to customer
count (3) - - - - -
-------- -------- -------- -------- --------
Closing Customers 1,886.8 1,886.8 1,868.2 1,848.1 1,837.2
Monthly customer churn % 1.2% 1.1% 1.2% 1.4% 1.2%
RGUS
Opening RGUs 4,164.9 4,059.6 3,955.2 3,873.8 3,784.8
Data Cleanse (2) (4.6) - - - -
Adjusted Opening RGUs 4,160.3 4,059.6 3,955.2 3,873.8 3,784.8
Net RGU adds 52.6 105.3 104.4 81.4 89.0
Reduction to RGU count
(3) - - - - -
-------- -------- -------- -------- --------
Closing RGUs 4,212.9 4,164.9 4,059.6 3,955.2 3,873.8
Net RGU Adds
Telephone 1.2 11.5 0.5 (2.8) 11.6
Television 1.2 3.3 19.0 16.8 11.3
DTV 15.2 21.4 42.6 38.6 39.9
Broadband 50.1 90.5 84.9 67.3 66.1
-------- -------- -------- -------- --------
Total Net RGU Adds 52.5 105.3 104.4 81.4 89.0
Revenue Generating Units
(RGUs)
Telephone 1,698.9 1,698.4 1,686.9 1,686.4 1,689.2
Television 1,370.2 1,370.9 1,367.6 1,348.6 1,331.7
DTV 1,305.8 1,292.2 1,270.8 1,228.2 1,189.5
Broadband 1,143.8 1,095.6 1,005.1 920.2 852.8
-------- -------- -------- -------- --------
Total RGUs 4,212.9 4,164.9 4,059.6 3,955.2 3,873.8
RGU / Customer 2.23 2.21 2.17 2.14 2.11
Internet Customers
Dial-up (metered) 9.6 15.4 19.6 23.6 25.0
Dial-up (unmetered) 22.7 28.9 38.3 49.5 65.5
DTV Access - - - - -
-------- -------- -------- -------- --------
Total Dial-up and DTV
access customers 32.3 44.3 57.9 73.2 90.6
Broadband 1,143.8 1,095.6 1,005.1 920.2 852.8
-------- -------- -------- -------- --------
Total Internet 1,176.1 1,139.9 1,063.0 993.4 943.4
-------- -------- -------- -------- --------
Bundled Customers
Dual RGU 721.8 756.9 794.0 812.6 831.7
Triple RGU 802.2 760.6 698.6 647.3 602.4
Percentage of dual or
triple RGUs 80.8% 80.4% 79.9% 79.0% 78.1%
Percentage of triple
RGUs 42.5% 40.3% 37.4% 35.0% 32.8%
ARPU GBP GBP GBP GBP GBP
45.46 45.15 45.13 45.11 44.84
Homes Marketable On-net
Telephone 4,700.2 4,701.2 4,698.4 4,696.4 4,694.0
ATV 4,704.8 4,702.9 4,700.8 4,698.1 4,698.5
DTV 4,586.5 4,568.5 4,525.2 4,503.9 4,501.2
Broadband 4,586.5 4,568.5 4,525.2 4,503.9 4,501.2
Penetration of Homes Marketable
On-net
Telephone 36.1% 36.1% 35.9% 35.9% 36.0%
Television - Total 29.1% 29.1% 29.1% 28.7% 28.3%
Television - DTV 28.5% 28.3% 28.1% 27.3% 26.4%
Broadband 24.9% 24.0% 22.2% 20.4% 18.9%
Total Customer 40.1% 40.1% 39.7% 39.3% 39.1%
Old NTL on-net (1)
Q2-06 Q1-06 Q4 05 Q3-05 Q2-05
-------- -------- -------- -------- --------
Customers
Opening Customers 3,097.0 3,089.8 3,097.3 3,055.9 3,008.1
Data Cleanse (2) (32.5) - (18.1) - -
Adjusted Opening
Customers 3,064.5 3,089.8 3,079.2 3,055.9 3,008.1
Gross customer adds 119.2 138.9 162.8 182.4 171.4
Total Customer
disconnections (141.7) (131.7) (142.2) (141.0) (123.6)
Net customer adds (22.5) 7.2 20.6 41.4 47.8
Reduction to customer
count (3) - - (10.0) - -
-------- -------- -------- -------- --------
Closing Customers 3,042.0 3,097.0 3,089.8 3,097.3 3,055.9
Monthly customer churn % 1.6% 1.5% 1.6% 1.6% 1.5%
RGUS
Opening RGUs 6,240.8 6,141.0 6,085.0 5,963.7 5,856.6
Data Cleanse (2) (64.4) - (43.1) - -
Adjusted Opening RGUs 6,176.4 6,141.0 6,041.9 5,963.7 5,856.6
Net RGU adds 39.1 99.8 111.4 121.3 107.1
Reduction to RGU count (3) - - (12.3) - -
-------- -------- -------- -------- --------
Closing RGUs 6,215.5 6,240.8 6,141.0 6,085.0 5,963.7
Net RGU Adds
Telephone (22.8) (3.4) 0.3 5.4 21.5
Television 7.1 2.3 4.3 (21.8) 1.9
DTV 58.6 49.2 42.9 4.2 17.2
Broadband 54.8 100.9 106.8 137.7 83.7
-------- -------- -------- -------- --------
Total Net RGU Adds 39.1 99.8 111.4 121.3 107.1
Revenue Generating Units
(RGUs)
Telephone 2,534.0 2,569.7 2,573.1 2,598.6 2,593.2
Television 1,922.9 1,945.0 1,942.7 1,940.1 1,961.9
DTV 1,530.4 1,494.3 1,445.1 1,409.3 1,405.1
Broadband 1,758.5 1,726.1 1,625.2 1,546.3 1,408.6
-------- -------- -------- -------- --------
Total RGUs 6,215.5 6,240.8 6,141.0 6,085.0 5,963.7
RGU / Customer 2.04 2.02 1.99 1.96 1.95
Internet Customers
Dial-up (metered) 25.9 31.2 37.2 40.9 47.4
Dial-up (unmetered) 49.1 58.5 78.9 97.0 126.7
DTV Access 6.0 6.4 7.6 8.0 8.4
-------- -------- -------- -------- --------
Total Dial-up and DTV access
customers 81.0 96.1 123.7 145.9 182.5
Broadband 1,758.5 1,726.1 1,625.2 1,546.3 1,408.6
-------- -------- -------- -------- --------
Total Internet 1,839.5 1,822.2 1,748.9 1,692.2 1,591.1
-------- -------- -------- -------- --------
Bundled Customers
Dual RGU 1,117.2 1,182.2 1,239.2 1,301.9 1,352.9
Triple RGU 1,028.2 980.8 906.0 842.9 777.5
Percentage of dual or
triple RGUs 70.5% 69.8% 69.4% 69.2% 69.7%
Percentage of triple
RGUs 33.8% 31.7% 29.3% 27.2% 25.4%
ARPU GBP GBP GBP GBP GBP
40.21 39.28 38.96 38.99 39.69
Homes Marketable On-net
Telephone 7,612.5 7,610.0 7,601.3 7,592.0 7,579.1
ATV 7,956.3 7,953.8 7,952.0 7,935.8 7,922.7
DTV 7,423.2 7,420.7 7,447.1 7,437.8 7,424.9
Broadband 7,179.7 7,177.2 7,088.4 7,079.3 7,066.7
Penetration of Homes Marketable
On-net
Telephone 33.3% 33.8% 33.9% 34.2% 34.2%
Television - Total 24.2% 24.5% 24.4% 24.4% 24.8%
Television - DTV 20.6% 20.1% 19.4% 18.9% 18.9%
Broadband 24.5% 24.0% 22.9% 21.8% 19.9%
Total Customer 38.2% 38.9% 38.9% 39.0% 38.6%
Notes
(1) Subscriber information reflects old Telewest and old NTL
reported on-net with prior periods restated for policy
alignments, where applicable.
(2) Data cleanse activity in Q2-06 resulted in a decrease in old
Telewest of 3,700 customers and 4,600 RGUs, a decrease of
approximately 700 Telco, 2,000 Broadband and 1,900 TV RGUs,
and in old NTL of 32,500 customers and 64,400 RGUs, a decrease
of approximately 12,800 Telco, 22,400 Broadband and 29,200 TV
RGUs. Data cleanse activity in Q2-06 is a result of more
closely aligning old NTL up-front credit policies with those
of old Telewest, in order to focus on better quality customer
growth. Data cleanse activity in Q4-05 resulted in a decrease
in old NTL of 18,100 customers and 43,100 RGUs, a decrease of
approximately 17,700 Telco, 26,600 Broadband and an increase
of 1,300 net TV RGUs.
(3) Review of inactive backlog customers in Q4-05 resulted in an
adjustment to remove 10,000 inactive backlog disconnects,
representing approximately 12,300 RGUs.
(4) Old Telewest operational statistics given above for Q1-06 are
for the full 3 months ended March 31, 2006 on a pro forma
basis including the period prior to the merger with old NTL.
C) SEGMENTAL ANALYSIS
(GBP millions) (unaudited)
Actual Reported
Three months ended
------------------------------
Jun Mar Dec Sep Jun
30, 31, 31, 30, 30,
2006 2006 2005 2005 2005
------------------------------
Revenue
Cable segment
Consumer 645.1 461.7 379.4 377.5 378.9
Business 160.1 122.8 105.2 105.2 103.6
------------------------------
Total 805.2 584.5 484.6 482.7 482.5
Inter segment revenue (0.4) (0.3) - - -
------------------------------
804.8 584.2 484.6 482.7 482.5
------------------------------
Content segment
Flextech 40.1 12.8 - - -
Sit-up 45.1 16.2 - - -
------------------------------
Total 85.2 29.0 - - -
Inter segment revenue (5.7) (1.8) - - -
------------------------------
79.5 27.2 - - -
------------------------------
------------------------------
Total revenue 884.3 611.4 484.6 482.7 482.5
------------------------------
Segment OCF
Cable segment OCF 284.5 195.4 154.7 166.3 164.2
Content segment OCF 8.8 3.0 - - -
------------------------------
OCF (Total) 293.3 198.4 154.7 166.3 164.2
------------------------------
Pro forma
Three months ended
------------------------------
Jun Mar Dec Sep Jun
30, 31, 31, 30, 30,
2006 2006 2005 2005 2005
------------------------------
Revenue
Cable segment
Consumer 645.1 637.2 631.6 626.7 641.2
Business 160.1 165.6 168.2 169.1 166.2
------------------------------
Total 805.2 802.8 799.8 795.8 807.4
Inter segment revenue (0.4) (0.5) (0.4) (0.7) (0.8)
------------------------------
804.8 802.3 799.4 795.1 806.6
------------------------------
Content segment
Flextech 40.1 39.9 37.7 36.0 34.4
Sit-up 45.1 51.9 84.1 57.5 24.1
------------------------------
Total 85.2 91.8 121.8 93.5 58.5
Inter segment revenue (5.7) (5.3) (5.1) (5.4) (5.2)
------------------------------
79.5 86.5 116.7 88.1 53.3
------------------------------
------------------------------
Total revenue 884.3 888.8 916.1 883.2 859.9
------------------------------
Segment OCF
Cable segment OCF 284.5 267.6 283.2 299.5 312.3
Content segment OCF 8.8 9.4 8.8 7.8 6.1
------------------------------
OCF (Total) 293.3 277.0 292.0 307.3 318.4
------------------------------
Note: Segment OCF includes inter segment revenue and costs as
applicable. OCF (Total) is a non-GAAP financial measure - see Appendix
F.
D) Fixed Asset Additions (accrual basis)
(in GBP millions) (unaudited)
Three months ended
--------------------------------
Jun Mar Dec Sep Jun
30, 31, 31, 30, 30,
2006 2006 2005 2005 2005
--------------------------------
NCTA Fixed Asset Additions
CPE 48.6 40.1 31.6 32.0 29.3
Scaleable Infrastructure 36.9 52.1 48.7 27.8 22.2
Commercial 19.6 11.4 6.2 8.2 4.9
Line extensions 1.0 0.5 - - -
Upgrade/Rebuild 4.1 3.8 2.5 2.3 2.8
Support Capital 22.6 9.5 7.5 6.3 10.6
------ ------ ------ ----- -----
Total NCTA Fixed Asset Additions 132.8 117.4 96.5 76.6 69.8
Non NCTA Fixed Asset Additions 1.1 0.4 (1.9) (0.3) 0.4
------ ------ ------ ----- -----
Total Fixed Asset Additions (accrual
basis) 133.9 117.8 94.6 76.3 70.2
Change in capital accruals (5.8) 17.5 (22.8) (4.4) 0.4
------ ------ ------ ----- -----
Total Purchase of Fixed Assets 128.1 135.3 71.8 71.9 70.6
====== ====== ====== ===== =====
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 F for a
discussion of the use of Fixed Asset Additions (accrual basis) as a
non-GAAP measure and the reconciliation of Fixed Asset Additions
(accrual basis) to GAAP Purchase of Fixed Assets.
E) Proforma Combined Condensed Financial Information
(in GBP millions) (unaudited)
Three months ended
----------------------------------------
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2006 2006 2005 2005 2005
------- -------------------------------
Revenue 884.3 888.8 916.1 883.2 859.9
Costs and expenses
Operating costs (exclusive of
depreciation shown separately
below) (367.5) (369.0) (399.1) (362.0) (331.4)
Selling, general and
administrative expenses (223.5) (242.8) (225.0) (213.9) (210.1)
Other charges (12.1) (8.9) (22.4) (1.3) (0.7)
Depreciation (219.3) (210.4) (229.2) (232.0) (219.3)
Amortization (55.6) (58.6) (59.8) (60.0) (60.1)
------- ------- ------- ------- -------
(878.0) (889.7) (935.5) (869.2) (821.6)
------- ------- ------- ------- -------
Operating income (loss) 6.3 (0.9) (19.4) 14.0 38.3
Other income (expense)
Interest income and other, net 8.6 8.3 7.4 6.0 8.0
Interest expense (135.6) (112.0) (126.9) (119.2) (121.4)
(Loss) on extinguishment of
debt - (32.4) - (2.0) -
Other, net 5.7 (9.2) 4.0 - 1.0
Share of income from equity
investments 3.1 5.0 2.5 3.9 7.5
Foreign currency transaction
(losses) gains (94.1) (8.6) 33.0 (13.9) (15.4)
------- ------- ------- ------- -------
(Loss) from continuing
operations before income
taxes (206.0) (149.8) (99.4) (111.2) (82.0)
Income tax benefit (expense) 9.9 - (12.6) 12.9 (9.5)
Minority interest 0.3 0.4 - (1.0) -
Cumulative effect of a change
in accounting principle - 2.0 - - -
------- ------- ------- ------- -------
(Loss) from continuing
operations (195.8) (147.4) (112.0) (99.3) (91.5)
------- ------- ------- ------- -------
Reconciliation of Pro Forma OCF to
Pro Forma Operating income (loss)
Pro Forma OCF 293.3 277.0 292.0 307.3 318.4
Less:
Other charges (12.1) (8.9) (22.4) (1.3) (0.7)
Depreciation (219.3) (210.4) (229.2) (232.0) (219.3)
Amortization (55.6) (58.6) (59.8) (60.0) (60.1)
------- ------- ------- ------- -------
Pro Forma Operating income
(loss) 6.3 (0.9) (19.4) 14.0 38.3
------- ------- ------- ------- -------
The pro forma information presented in these schedules in respect
of the three months ended June 30 and March 31, 2006 has been prepared
on a basis as if the merger with Telewest had occurred on January 1,
2006 and the pro forma information in respect of the three months
ended on each of June 30, September 30 and December 31, 2005 has been
prepared on a basis as if the merger with Telewest had occurred on
January 1, 2005 and includes adjustments to reflect the purchase
accounting impact on our historical results.
Readers should refer to the notes herein for further explanation
of the adjustments made. The presentation does not include all the
information and footnotes required by generally accepted accounting
principles in the United States to be included in pro forma financial
statements.
These pro forma operating results are not necessarily indicative
of the results that would have been achieved if the merger had
occurred on January 1, 2006 or January 1, 2005, and undue reliance
should not be placed on this information.
Proforma Combined Condensed Financial Information
Three months ended March 31, 2006 (in GBP millions) (unaudited)
NTL Inc. Telewest Pro
As Jan 1 - Total Forma
reported Mar 3 Adjustments Combined
------------------------------- ---------
Revenue 611.4 279.9 (2.5) 888.8
Costs and expenses
Operating costs (exclusive of
depreciation shown
separately below) (254.9) (88.5) (25.6) (369.0)
Selling, general and
administrative expenses (158.1) (110.0) 25.3 (242.8)
Other charges (8.4) (0.5) - (8.9)
Depreciation (149.3) (66.1) 5.0 (210.4)
Amortization (36.8) (8.4) (13.4) (58.6)
------------------------------- ---------
(607.5) (273.5) (8.7) (889.7)
------------------------------- ---------
Operating income (loss) 3.9 6.4 (11.2) (0.9)
Other income (expense)
Interest income and other,
net 8.6 4.0 (4.3) 8.3
Interest expense (83.8) (22.2) (6.0) (112.0)
(Loss) on extinguishment of
debt (32.4) - - (32.4)
Other, net (9.2) - - (9.2)
Share of income from equity
investments 1.4 3.6 - 5.0
Foreign currency transaction
(losses) gains (10.0) 1.4 - (8.6)
------------------------------- ---------
(Loss) from continuing
operations before income
taxes (121.5) (6.8) (21.5) (149.8)
Income tax (expense) benefit - - - -
Minority interest 0.4 - - 0.4
Cumulative effect of a change
in accounting principle 1.2 0.8 - 2.0
------------------------------- ---------
(Loss) from continuing
operations (119.9) (6.0) (21.5) (147.4)
------------------------------- ---------
For the three months ended March 31, 2006, the unaudited pro forma
combined condensed financial information contains the actual combined
operating results of NTL Inc. with the results of Telewest for the
period from January 1, 2006 to March 3, 2006 adjusted to include the
pro forma impact of: the elimination of transactions between the
former NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based on
the preliminary purchase price allocation; the adjustment of interest
income based on the reduced cash balance after the merger transaction;
the adjustment of interest expense based on the refinancing in March
2006 using the new senior credit facility and bridge facility
borrowing rates; to reflect the impact of income taxes on the pro
forma adjustments utilizing NTL's statutory tax rate of 35% and
certain accounting policy alignment adjustments. Readers can refer to
the Unaudited Pro Forma Combined Condensed Financial Data filed on
Form 8 -K/A on May 10, 2006, for detailed descriptions of the
adjustments made to this information.
Proforma Combined Condensed Financial Information
Three months ended December 31, 2005 (in GBP millions) (unaudited)
Pro
Historical Historical Total Forma
NTL Telewest adjustments Combined
---------------------------------- ---------
Revenue 484.6 434.5 (3.0) 916.1
Costs and expenses
Operating costs (exclusive
of depreciation shown
separately below) (205.2) (163.9) (30.0) (399.1)
Selling, general and
administrative expenses (124.7) (133.8) 33.5 (225.0)
Other charges (22.4) - - (22.4)
Depreciation (139.5) (97.9) 8.2 (229.2)
Amortization (27.2) (16.0) (16.6) (59.8)
---------------------------------- ---------
(519.0) (411.6) (4.9) (935.5)
---------------------------------- ---------
Operating income (loss) (34.4) 22.9 (7.9) (19.4)
Other income (expense)
Interest income and other,
net 7.8 6.1 (6.5) 7.4
Interest expense (55.6) (43.1) (28.2) (126.9)
(Loss) on extinguishment
of debt - - - -
Other, net 0.9 3.1 - 4.0
Share of income from
equity investments - 2.5 - 2.5
Foreign currency
transaction (losses)
gains 35.2 (2.2) - 33.0
---------------------------------- ---------
(Loss) from continuing
operations before income
taxes (46.1) (10.7) (42.6) (99.4)
Income tax (expense)
benefit (10.1) (2.5) - (12.6)
Minority interest - - - -
---------------------------------- ---------
(Loss) from continuing
operations (56.2) (13.2) (42.6) (112.0)
---------------------------------- ---------
For the three months ended December 31, 2005, the unaudited pro
forma combined condensed financial information contains the actual
combined operating results of NTL and the former Telewest adjusted to
include the pro forma impact of: the elimination of transactions
between the former NTL and the former Telewest; the adjustment of
amortization of acquired intangible assets and depreciation of fixed
assets based on the preliminary purchase price allocation; the
adjustment of interest income based on the reduced cash balance after
the transaction; the adjustment of interest expense based on the
refinancing in March 2006 using the new senior credit facility and
bridge facility borrowing rates; to reflect the impact of income taxes
on the pro forma adjustments utilizing NTL's statutory tax rate of 35%
and certain accounting policy alignment adjustments. Readers can refer
to the Unaudited Pro Forma Combined Condensed Financial Data filed on
Form 8-K/A on May 10, 2006, for detailed descriptions of the
adjustments made to this information.
Proforma Combined Condensed Financial Information
Three months ended September 30, 2005 (in GBP millions) (unaudited)
Pro
Historical Historical Total Forma
NTL Telewest adjustments Combined
---------------------------------- ---------
Revenue 482.7 403.7 (3.2) 883.2
Costs and expenses
Operating costs (exclusive
of depreciation shown
separately below) (200.2) (133.0) (28.8) (362.0)
Selling, general and
administrative expenses (116.2) (128.5) 30.8 (213.9)
Other charges (1.3) - - (1.3)
Depreciation (142.3) (99.4) 9.7 (232.0)
Amortization (27.4) (9.4) (23.2) (60.0)
---------------------------------- ---------
(487.4) (370.3) (11.5) (869.2)
---------------------------------- ---------
Operating income (loss) (4.7) 33.4 (14.7) 14.0
Other income (expense)
Interest income and other,
net 6.8 5.7 (6.5) 6.0
Interest expense (51.7) (38.9) (28.6) (119.2)
(Loss) on extinguishment
of debt (2.0) - - (2.0)
Other, net - - - -
Share of income from
equity investments (0.2) 4.1 - 3.9
Foreign currency
transaction (losses)
gains (13.1) (0.8) - (13.9)
---------------------------------- ---------
(Loss) from continuing
operations before income
taxes (64.9) 3.5 (49.8) (111.2)
Income tax (expense)
benefit 12.4 0.5 - 12.9
Minority interest (1.0) - - (1.0)
---------------------------------- ---------
(Loss) from continuing
operations (53.5) 4.0 (49.8) (99.3)
---------------------------------- ---------
For the three months ended September 30, 2005, the unaudited pro
forma combined condensed financial information contains the actual
combined operating results of NTL and the former Telewest adjusted to
include the pro forma impact of: the elimination of transactions
between the former NTL and the former Telewest; the adjustment of
amortization of acquired intangible assets and depreciation of fixed
assets based on the preliminary purchase price allocation; the
adjustment of interest income based on the reduced cash balance after
the transaction; the adjustment of interest expense based on the
refinancing in March 2006 using the new senior credit facility and
bridge facility borrowing rates; to reflect the impact of income taxes
on the pro forma adjustments utilizing NTL's statutory tax rate of 35%
and certain accounting policy alignment adjustments. Readers can refer
to the Unaudited Pro Forma Combined Condensed Financial Data filed on
Form 8-K/A on May 10, 2006, for detailed descriptions of the
adjustments made to this information.
Proforma Combined Condensed Financial Information
Three months ended June 30, 2005 (in GBP millions) (unaudited)
Pro
Historical Historical Total Forma
NTL Telewest adjustments Combined
---------------------------------- ---------
Revenue 482.5 380.7 (3.3) 859.9
Costs and expenses
Operating costs (exclusive
of depreciation shown
separately below) (196.0) (104.0) (31.4) (331.4)
Selling, general and
administrative expenses (122.3) (118.6) 30.8 (210.1)
Other charges (0.7) - - (0.7)
Depreciation (129.6) (101.0) 11.3 (219.3)
Amortization (27.5) (9.3) (23.3) (60.1)
---------------------------------- ---------
(476.1) (332.9) (12.6) (821.6)
---------------------------------- ---------
Operating income (loss) 6.4 47.8 (15.9) 38.3
Other income (expense)
Interest income and other,
net 8.3 6.2 (6.5) 8.0
Interest expense (58.4) (40.5) (22.5) (121.4)
(Loss) on extinguishment
of debt - - - -
Other, net - 1.0 - 1.0
Share of income from
equity investments 0.2 7.3 - 7.5
Foreign currency
transaction (losses)
gains (12.8) (2.6) - (15.4)
---------------------------------- ---------
(Loss) from continuing
operations before income
taxes (56.3) 19.2 (44.9) (82.0)
Income tax (expense)
benefit (9.8) 0.3 - (9.5)
Minority interest - - - -
---------------------------------- ---------
(Loss) from continuing
operations (66.1) 19.5 (44.9) (91.5)
---------------------------------- ---------
For the three months ended June 30, 2005, the unaudited pro forma
combined condensed financial information contains the actual combined
operating results of NTL and the former Telewest adjusted to include
the pro forma impact of: the elimination of transactions between the
former NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based on
the preliminary purchase price allocation; the adjustment of interest
income based on the reduced cash balance after the transaction; the
adjustment of interest expense based on the refinancing in March 2006
using the new senior credit facility and bridge facility borrowing
rates; to reflect the impact of income taxes on the pro forma
adjustments utilizing NTL's statutory tax rate of 35% and certain
accounting policy alignment adjustments. Readers can refer to the
Unaudited Pro Forma Combined Condensed Financial Data filed on Form
8-K/A on May 10, 2006, for detailed descriptions of the adjustments
made to this information.
F) Use of non-GAAP Financial Measures and Reconciliations to GAAP
Operating income before depreciation, amortization and other
charges (OCF)
Operating income before depreciation, amortization and
other charges, which we refer to as OCF (or OCF (Total)), is not a
financial measure recognised under GAAP. OCF represents our earnings
before interest, taxes, depreciation and amortization, other charges,
share of income from equity investments, loss on extinguishment of
debt, loss on derivative instruments 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 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- GAAP
financial measure reflects an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the
reconciliation to operating income (loss) shown below, provides a more
complete understanding of factors and trends affecting our business.
Because GAAP financial measures are not standardized, it may not be
possible to compare OCF with other companies' GAAP financial measures
that have the same or similar names.
For a reconciliation of pro forma OCF to pro forma operating
income (loss), See Appendix E.
Reconciliation of operating income before depreciation,
amortization and other charges (OCF) to GAAP operating income (loss)
(in GBP millions)(unaudited)
Three months ended
---------------------------------------
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2006 2006 2005 2005 2005
---------------------------------------
Operating income before depreciation,
amortization and other charges
(OCF) 293.3 198.4 154.7 166.3 164.2
Reconciling items
Other charges (12.1) (8.4) (22.4) (1.3) (0.7)
Depreciation and
amortization (274.9) (186.1) (166.7) (169.7) (157.1)
------- ------- ------- ------- -------
Operating income (loss) 6.3 3.9 (34.4) (4.7) 6.4
======= ======= ======= ======= =======
Net debt
Net debt is defined as long-term debt, including current portion,
less cash and cash equivalents and marketable securities. Our
management, including our chief operating decision-maker, consider net
debt an important measure of our financing obligations.
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 to 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 the cash and cash
equivalents and marketable securities are available to service debt.
We believe net debt is helpful for understanding our entire net debt
funding obligations and 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.
Reconciliation of net debt to GAAP Total liabilities
(in GBP millions) (unaudited)
Jun 30, Dec 31,
2006 2005
--------- ---------
Net Debt 5,396.2 1,447.9
Cash and cash equivalents 441.7 735.2
Marketable Securities - 96.9
--------- ---------
Long-term debt, including current
portion 5,837.9 2,280.0
Accounts payable 287.4 176.9
Accrued expenses and other current liabilities 586.2 291.1
Interest Payable 27.8 37.8
Deferred Revenue and other long-term
liabilities 396.1 237.5
Deferred Income Taxes 127.9 9.2
--------- ---------
Total liabilities 7,263.3 3,032.5
========= =========
Fixed Asset Additions (accrual basis)
Our primary measure of expenditures for fixed assets is Fixed
Asset Additions (accrual basis). Fixed Assets Additions (accrual
basis) is defined as the purchase of fixed assets as measured on an
accrual basis. Our business is underpinned by significant investment
in net work infrastructure and information technology. Our management
therefore considers Fixed Asset Additions (accrual basis) an important
component in evaluating our liquidity and financial condition since
purchases of fixed assets are a necessary component of ongoing
operations. Fixed Asset Additions (accrual basis) is most directly
comparable to the GAAP financial measure Purchase of Fixed Assets, as
reported in the Statement of Cashflows. The significant limitations
associated with the use of Fixed Asset Additions (accrual basis) as
compared to Purchase of Fixed Assets is that Fixed Asset Additions
(accrual basis) excludes timing differences from payments of
liabilities related to purchases of fixed assets. We exclude 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 our management of fixed asset
purchases for long-term operational pereformance and liquidity. We
compensate for the limitation by separately measuring and forecasting
working capital.
Reconciliation of pro forma and reported Fixed Asset Additions
(accrual basis) to GAAP Purchase of Fixed Assets
(in GBP millions) (unaudited) Three months ended
------------------------------------
Jun Mar Dec Sep Jun
30, 31, 31, 30, 30,
2006 2006 2005 2005 2005
-------- ------ ------ ------ ------
Reported Pro Pro Pro Pro
Forma Forma Forma Forma
Pro forma Fixed Asset Additions
(accrual basis) GBP GBP GBP GBP GBP
133.9 158.3 158.6 144.3 129.2
Pre-acquisition Telewest Fixed
Asset
Additions (accrual basis) - (40.5) (64.0) (68.0) (59.0)
-------- ------ ------ ------ ------
Fixed Asset Additions (accrual GBP GBP GBP GBP GBP
basis) 133.9 117.8 94.6 76.3 70.2
Changes in liabilities related to
Fixed
Asset Additions (accrual basis) (5.8) 17.5 (22.8) (4.4) 0.4
-------- ------ ------ ------ ------
Purchase of Fixed Assets GBP GBP GBP GBP GBP
128.1 135.3 71.8 71.9 70.6
======== ====== ====== ====== ======
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 GAAP. These non-GAAP
financial measures reflect an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the
accompanying reconciliations to corresponding GAAP financial measures,
provide a more complete understanding of factors and trends affecting
our business. We encourage invetsors to review our financial
statements and publicly-filed reports in their entirety and to not
rely on any single financial measure.
G)VIRGIN MOBILE HOLDINGS (UK) LIMITED (formerly Virgin Mobile Holdings
(UK) plc)
--------------------------------------------------------------------
The summary financial information set out below has been extracted
from the audited financial statements of Virgin Mobile Holdings (UK)
Limited ("Virgin Mobile") for the year ended 31 March 2006 and has
been made available by NTL for background information only. The
financial statements of Virgin Mobile for the year ended 31 March 2006
were prepared in accordance with International Financial Reporting
Standards as applied in the United Kingdom ("IFRS") and have not been
reconciled to US GAAP. NTL was not involved in the preparation of
these financial statements, which relate to a period prior to NTL's
acquisition of Virgin Mobile and NTL has not completed its review of
them. However, NTL is aware that, as previously disclosed, there are
significant differences between Virgin Mobile's accounting policies
and NTL's accounting policies, including, but not limited to, the
accounting policy in respect of Subscriber Acquisition Costs ("SACs").
Under Virgin Mobile's current accounting policies, SACs for contract
customers are recognised over the length of the contract. If contract
SAC had been expensed in full upon connection, NTL estimates that
Virgin Mobile's operating profit for the year ended 31 March 2006
would have been reduced by approximately GBP 25 million. This estimate
should not be taken to provide any indication of the impact of this
accounting policy difference on future periods.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2006
Year Year
ended ended
31 March 31 March
2006 2005
GBP '000 GBP '000
---------------------------------------------------------- ---------
Revenue
Service 514,609 457,636
Equipment 48,472 63,660
--------- ---------
563,081 521,296
Cost of sales (352,683) (301,624)
---------------------------------------------------------- ---------
Gross profit 210,398 219,672
Administrative expenses (131,119) (151,906)
---------------------------------------------------------- ---------
Operating profit 79,279 67,766
Investment income 732 1,511
Finance costs (14,318) (16,594)
---------------------------------------------------------- ---------
Profit before tax 65,693 52,683
Tax (20,819) (18,242)
---------------------------------------------------------- ---------
Profit for the year 44,874 34,441
---------------------------------------------------------- ---------
---------------------------------------------------------- ---------
Operating profit includes:
Depreciation of property, plant and equipment 3,810 4,011
Amortisation of other intangible assets 11,158 13,425
Operating profit also includes the following one-off
expenses:
NTL bid approach costs 3,757 -
Capital restructuring and IPO related expenses - 6,320
Pre-IPO employee share option costs - 8,869
---------------------------------------------------------- ---------
---------------------------------------------------------- ---------
Purchase of property, plant and equipment 2,401 3,477
Purchase of other intangible assets 10,981 8,025
---------------------------------------------------------- ---------
---------------------------------------------------------- ---------
90 day active customers (000's) 4,331.6 4,031.9
Active customer churn 27.5% 22.6%
Rolling 12 month ARPU GBP 124 GBP 127
---------------------------------------------------------- ---------
Conference Call
There will be a conference call for analysts and investors today
at 0830 EDT/ 1330 UK time. Analysts and investors can dial in to the
presentation by calling +1 617 614 4925 in the United States or + 44
(0) 207 365 8426 for international access, passcode "NTL" for all
participants.
The presentation can also be accessed live via webcast on the
Company's website, www.ntl.com/investors.
The teleconference replay will be available for one week beginning
approximately two hours after the end of the call and will be
available until Tuesday, August 15, 2006. The dial-in replay number
for the US is: +1 617 801 6888 and the international dial-in replay
number is: +44 (0) 207 365 8427, passcode: 72501180.
*T