Ntl (NASDAQ:NTLI)
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NTL Incorporated (NASDAQ: NTLI) announces results for the quarter ended
September 30, 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 with Telewest 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. No pro forma financial information has been presented
in respect of the acquisition of Virgin Mobile, which closed on July 4,
2006.
Quarterly highlights
Announced rebranding to Virgin Media, to begin in Q1-07
19% growth in cable gross additions reflecting reinvigorated
marketing
Strong OCF growth
Estimated £28m of synergy savings
achieved in quarter
Cable ARPU of £42.48, up £0.27
vs Q2-06
Operating loss up due mainly to increased restructuring charges
(£millions)(unaudited)
Q3 2006
Q2 2006
Revenue
Cable
Consumer
642.8
644.7
Business
162.3
160.1
805.1
804.8
Mobile
140.4
-
Content
79.4
79.5
Total Revenue
1,024.9
884.3
OCF
Cable
296.3
284.5
Mobile
16.0
-
Content
5.5
8.8
Total OCF
317.8
293.3
Operating (loss)/income
(9.6)
6.3
OCF is operating income before depreciation, amortization and
other charges and is a non-GAAP financial measure. Please see
Appendix F for reconciliation of non-GAAP financial measures to
their nearest GAAP equivalents.
Steve Burch, Chief Executive Officer of NTL, said:
“On the day we are announcing that our new
company name will become Virgin Media, I am pleased to announce
continued improvement in our results with strong growth in OCF. Cable
ARPU, RGU per customer and triple play penetration have all improved due
to our strategy of focusing on quality customers. Gross additions also
increased sharply, reflecting the success of our reinvigorated marketing
and we have a firm plan in place to address our historical churn issues.
We remain firmly on track to achieve an annual £250
million synergy run rate by the end of 2007 and we realized estimated
savings of £28 million during the quarter.
Today, we are announcing a change in our company name to Virgin Media
and our plans to rebrand our existing consumer division early next year,
backed up by a significant media campaign. Virgin Media will exploit its
unique ability to offer a “quad-play”
of digital TV, broadband, mobile and home phone services to deliver an
unrivalled choice of high quality content and communication packages. We
believe this will significantly enhance our competitiveness and growth
opportunities in 2007.”
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 and consolidate Virgin Mobile
from July 4, 2006, the date of the closing of its acquisition. 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 with Telewest
occurred on January 1, 2005. No pro forma financial information has been
presented in respect of the acquisition of Virgin Mobile. The pro forma
financial information is non-GAAP financial information that management
believes facilitates a comparative analysis of developments in the
Company’s business. Please see Appendices E
and F for a discussion of our pro forma financial information.
Unless otherwise indicated, all historical references to operational
statistics including customer and subscriber figures, ARPU and churn are
on a pro forma basis assuming the merger with Telewest and the
acquisition of Virgin Mobile occurred on January 1, 2005.
Revenue
Total revenue in the quarter was £1,024.9
million, up £140.6 million sequentially
compared with the second quarter of 2006, due to the acquisition of
Virgin Mobile. Total revenue was up £542.2
million compared to the third quarter of 2005, due to the merger with
Telewest and the acquisition of Virgin Mobile.
Cable Segment Revenue
Consumer
Consumer revenue in the third quarter was £642.8
million, down £1.9 million sequentially
compared with the second quarter, primarily due to customer losses
offsetting an increase in ARPU to £42.48 from £42.21.
Consumer revenue was up £16.8 million
compared to the pro forma third quarter of 2005 due to an increase in
ARPU, reflecting our drive to encourage triple play bundling and a focus
on better quality customers.
Cable ARPU has grown in the quarter due to an increase in RGU per
customer from 2.12 to 2.14 and an increase in triple play penetration
from 37.1% to 38.7%, as we have focused on acquiring new bundled
customers and on cross-selling to existing customers. A full quarter’s
effect of a price rise in telephony line rental also contributed to the
increase.
Gross customer additions in the quarter increased by 19% to 229,200 due
to reinvigorated marketing and compelling offers. We have aligned our
marketing plans across both old NTL and old Telewest areas, and have
been leading with a “Cable - If You Can, You
Should” advertising campaign to highlight the
strengths and value of our products and services. Key promotional
messages during the quarter centered on our “3
for £30” and “2
for £20” campaigns
as well as our Free TV offer, which launched at the start of September.
At the end of the quarter, we launched our first quad-play offer of “4
for £40”. The
strong growth in gross additions is very encouraging given the
heightened competitive environment, particularly in broadband, and
suggests that our strategy, marketing messages and competitive strengths
continue to succeed.
We will be rebranding our Consumer division and all its TV, telephony
and broadband business to Virgin in the first quarter of 2007, backed by
a significant advertising campaign. At that point the current consumer
brands of NTL and Telewest will be phased out rapidly. We believe that
the unique flavor and customer focus of the Virgin brand, which is one
of the best known and most respected brands in the UK, will give our
growth fresh impetus.
As anticipated, we experienced negative net customer growth in the
quarter due to increased movers churn and non-pay churn driven by policy
changes. Customer losses were 37,300 in the quarter.
Customer disconnections increased by 55,000 as compared to the second
quarter. It is not possible to precisely identify the cause of each
customer’s churn, however, we have estimated
the churn impact as follows:
There was an increase of approximately 37,000 disconnections due to
customers moving out of our addressable areas. Of this, approximately
8,000 was due to a change in our internal process for disconnecting
movers.
We typically experience the peak of house moves in the third quarter
and UK Land Registry statistics show a 24% increase in house moves
between the first and third quarter of 2006.
Non-pay disconnections increased by approximately 15,000 as we
continued to align credit policies and compliance in old NTL areas
with Telewest and remove non-paying customers from our systems. This
is in line with our strategy of promoting quality customer growth.
Telewest credit policies were more strict than old NTL policies.
Voluntary churn increased by only approximately 3,000 disconnections,
implying that we have not seen a significant increase in customers
churning to competitors.
We are planning to migrate old NTL’s three
existing billing systems onto the existing system used by Telewest over
the next twelve months. We will begin the first of these around the end
of November 2006. When complete, these migrations should allow us to
have greater data integrity and to further improve our customer service
experience. Given the nature of the exercise, it is probable that some
adjustments to customer and RGU numbers will take place at the time of
those conversions. These adjustments in raw customer and RGU numbers
should not have any material impact on revenue or OCF.
Gross additions in the fourth quarter will be impacted by our first
billing migration, as we will cease all installation activity for one
week. We also expect a low level of installations in the second half of
December due to the holiday season. It is also likely that some of the
churn issues identified above, as a result of alignment of policies,
processes and compliance, will also impact customer growth. We believe
the short term negative impact is worth the long term improvements.
Broadband
We continue to experience strongest growth in the number of broadband
subscribers. Gross additions were 265,000, an increase of 13% over the
previous quarter, driven by our reinvigorated marketing and compelling
offers.
Net additions were 78,100 in the quarter, down from 104,900 in the
second quarter. This reduction was driven by an increase in churn, with
disconnects growing by 58,000. Of this, 47,000 disconnects were in old
NTL areas. The number of disconnections was impacted by the customer
churn issues discussed above. Churn was also impacted by a high number
of disconnections from customers who had joined old-NTL in the third
quarter of 2005 on a £9.99 stand-alone
broadband offer, who have now come to the end of their promotional
period.
Broadband penetration stands at 25.2% of our marketable homes, 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
speed of 10Mb is available throughout our broadband addressable areas.
In November, we will be launching a commercial trial of a 50Mb broadband
service to paying customers.
Television
Our wide and comprehensive range of television services allows us to
retain a competitive advantage over other TV platforms.
Digital television net additions were 85,800, compared to 73,800 in the
previous quarter. Total TV net additions, which includes analog
television, were 22,200 in the quarter, compared to 8,300 in the
previous quarter.
Our roll-out of exciting new television products continues.
Video-on-demand (VOD) is now available to approximately 98% of our
digital subscribers and we have recently expanded the content available
with key popular content from Channel 4, one of the major and most
innovative terrestrial broadcasters in the UK.
Digital video recorders (DVR) and high definition TV (HDTV) are
available in old Telewest areas where we currently have 40,000
subscribers with the HD compatible DVR box. We currently have over 150
hours of HD content and will be expanding this range. We will be
launching DVR and HDTV in NTL areas during the fourth quarter. Our
HDTV/DVR service is charged at £10 or £15
per month depending on the customer’s basic
package.
Telephony
Telephony gross additions were 180,600 in the quarter, up 6,100 compared
to the previous quarter. However, due to an increase in churn as
discussed above, telephony net disconnections were 54,600 in the
quarter, compared to 21,600 in the previous quarter. As our most highly
penetrated product, telephony suffers more from customer churn than
either broadband or television.
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.
Off-net
Consumer off-net revenue was £17.6 million in
the third quarter, compared to £16.3 million
in the previous quarter and £17.3 million in
the same quarter last year. These revenues are largely from Virgin.net,
our wholly owned broadband ISP which offers broadband and telephony
services using BT Group’s wholesale products
rather than our own cable network. As at the quarter end, we had 242,800
off-net broadband subscribers and 42,800 off-net telephony subscribers.
We plan to use Virgin.net as the incubator for the development of a more
aggressive off-net proposition. Building on the success of Virgin.net,
we will be making a modest investment in our platform and product
capability to deliver an off-net quad-play to complement our current
cable business. This will leverage off our new national Virgin Media
brand and marketing activities. Our off-net proposition will provide
many benefits to the Company including being able to offer a Virgin
branded quad-play to cable customers who churn because they are moving
out of our addressable areas. During the third quarter, we estimate that
we had 129,000 disconnections due to customers moving out of our cable
areas. We have appointed Philip Snalune, Group Strategy Director and
formerly Director of Products and Marketing at Telewest, to lead the
implementation of our off-net strategy.
Business
Business revenue in the third quarter was £162.3
million, up £2.2 million compared to the
second quarter due to one-off wholesale circuit installations and an
increase in the volume of LAN solutions contracts in the quarter.
Business revenue was up £57.1 million
compared to the third quarter of 2005 due to the acquisition of Telewest.
In the short term, we believe the UK market for business voice and data
services remains challenging. 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. This should enable us to take on our
competition with greater success.
Cable Segment OCF
Cable segment OCF in the quarter was £296.3
million, up £11.8 million compared to the
previous quarter due mainly to the realization of cost synergies arising
from the Telewest merger. Cable segment OCF was up £130.0
million as compared to the same quarter last year due mainly to the
merger with Telewest.
Mobile Segment
Virgin Mobile was acquired on July 4, 2006 and we have consolidated its
results of operations from that date. Total mobile revenue for the
period since acquisition was £140.4 million,
of which £132.5 million was service revenue
and £7.9 million was equipment revenue.
Net customer additions in the quarter were 122,700, compared to 57,400
in the previous quarter and 44,200 in the same quarter last year.
Customer growth was strong due to the success of a “Summer
of Free Texts” promotion, the relaunch of our
web sales channel and continued expansion into the market for contract
customers.
Mobile OCF was £16.0 million in the quarter.
Customer growth is expected to be strong in the fourth quarter, but the
impact of Christmas volume on subscriber acquisition costs means that
fourth quarter Mobile OCF is expected to be over £10
million lower than in the third quarter.
Content Segment
The Content segment consists of two businesses, Flextech and Sit-up.
Content revenue, after inter segment elimination of £5.9
million, was £79.4 million in the third
quarter, comprising £31.9 million from
Flextech and £47.5 million from Sit-up. This
total compared to £79.5 million in total in
the prior quarter. We did not have a Content segment prior to the merger
with Telewest.
Flextech has historically sold programming to NTL, as well as to
Telewest. For consolidation purposes therefore, these amounts have been
eliminated.
Flextech revenue, after inter segment elimination, was £31.9
million in the quarter, down £2.5 million
from the previous quarter, due mainly to a decrease in advertising
revenue from £21.0 million to £19.1
million. Advertising revenue fell because of a decline in the overall TV
advertising market. Subscription revenue remained flat at £8.9
million.
Flextech revenue, after inter segment elimination, was up £1.1
million compared to the pro forma third quarter of 2005 due to increases
in both advertising revenue and subscription revenue.
Sit-up revenue was £47.5 million in the
quarter, up £2.4 million from the previous
quarter as the third quarter is usually seasonally stronger than the
second. Revenue was down by £10.0 million as
compared to the pro forma third quarter of 2005 due to increased
competition from other transactional TV channels and heightened
competition in the retail market.
Content segment OCF in the quarter contributed £5.5
million, down £3.3 million from the prior
quarter due mainly to a decline in advertising revenue in the quarter.
Content segment OCF was down £2.3 million
from the same pro forma quarter last year due mainly to the revenue
decline at Sit-up.
Content segment OCF in the fourth quarter is expected to be negatively
impacted due to higher programming costs at Flextech as we invest in
enriched programming in common with other UK broadcasters to drive
advertising revenue growth in 2007. Due to increased competition at
Sit-up, we are not expecting a material seasonal uplift in OCF from that
business.
Operating Income before Depreciation, Amortization and Other Charges
(OCF)
OCF in the third quarter was £317.8 million,
up £24.5 million sequentially compared to
the second quarter primarily due to the acquisition of Virgin Mobile and
realization of cost synergies arising from the merger with Telewest
offset by integration costs. OCF was up £151.5
million compared to the third quarter of 2005, due to the merger with
Telewest and the Virgin Mobile acquisition.
Third quarter OCF was impacted negatively by costs associated with the
Telewest merger integration and the rebranding of the group. Some of
these costs will recur as we continue our drive to realize synergies
from the Telewest merger and the Virgin Mobile integration. These costs
include:
Third party costs of £11.2 million
principally for planning and implementing the merger integration,
compared to £10.8 million in the second
quarter of 2006.
Estimated additional selling, general and administrative expense
(SG&A) of approximately £3.0 million
due to the costs of our internal “merger
office”, a department staffed by employees
working predominantly on the integration. This compares to £2.9
million in the second quarter of 2006.
Costs of approximately £2 million with
respect to the license fees payable for the Virgin rebranding. This
compares to £0.8 million in the second
quarter where the payment was only for one month. The terms of the
license agreement provide for the royalty payment in advance of the
rebranding date.
OCF in the third quarter benefited from approximately £20
million of estimated synergy cost savings resulting from the merger.
This was partially offset, however, by the total integration and
rebranding costs incurred in the quarter of £16.6
million as described above.
We continue to expect to achieve a run rate of approximately £250
million of estimated synergy savings by the end of 2007, consisting of £200
million of operational expenditure savings and £50
million of capital expenditure savings. The implementation costs to
achieve this are expected to be in the region of £250
million in total, with over half being incurred in 2006.
We expect OCF in the fourth quarter to be positively impacted by an
increase in realized merger synergies. However, OCF will also be
negatively impacted by a seasonal reduction in Content OCF and a
reduction in Virgin Mobile OCF due to the upfront write-off of
subscriber acquisition costs in relation to expected strong customer
growth. We will also incur approximately £5
million of rebranding costs in addition to the recurring license fee in
the fourth quarter.
In the first quarter of 2007, we will begin the marketing campaign
behind our new Virgin brand. We expect this to increase our marketing
and communication costs by around £20
million in 2007, weighted towards the first half of the year.
OCF is a non-GAAP financial measure. See Appendix F for reconciliation
of non-GAAP financial measures to their nearest GAAP equivalents.
Operating Loss and Net Loss
Operating loss in the third quarter was £9.6
million compared to £4.7 million in the
third quarter of 2005 mainly due to higher depreciation and amortization
following the merger with Telewest and the acquisition of Virgin Mobile.
Net loss was £104.2 million in the third
quarter, up from £53.5 million in the same
quarter last year due mainly to higher interest charges as a result of
higher borrowings to finance the merger with Telewest and the
acquisition of Virgin Mobile.
Capital Expenditure
Fixed asset additions (accrual basis) in the quarter were £147.3
million, an increase of £13.4 million as
compared to the previous quarter. There was an increase of £71.0
million as compared to the third quarter of 2005, due mainly to the
merger with Telewest.
Fixed asset additions (accrual basis) benefited from approximately £8
million of estimated synergy cost savings resulting from the merger.
This was offset, however, by the fixed asset merger integration expense
incurred in the quarter of £17.3 million.
The total purchase of fixed assets was £133.6
million in the quarter, compared to £128.1
million in the previous quarter and £71.9
million in the same quarter last year.
Fixed asset additions (accrual basis) is a non-GAAP financial measure.
See Appendix F for reconciliation of non-GAAP financial measures to
their nearest GAAP equivalents.
Net Debt
As of September 30, 2006, net debt was £5,905
million. This consisted of £5,042 million
outstanding under the Senior Credit Facility, £1,049
million of Senior Notes, and £116 million of
capital leases and other, offset by £302
million of cash and cash equivalents. Total liabilities as of September
30, 2006 were £7,843 million.
During the third quarter the Company issued $550 million 9.125% Senior
Notes due 2016, and also borrowed an additional £300
million under its Senior Credit Facility. The proceeds of both were used
to refinance the remaining element of the short-term Bridge funding used
to acquire Telewest in March 2006. In addition, the acquisition of
Virgin Mobile in July 2006 was partly funded by a further £475
million of additional borrowings under the Senior Credit Facility. These
transactions represent the final stage of securing long-term financing
following the Telewest and Virgin Mobile acquisitions.
Net debt is a non-GAAP financial measure. See Appendix F for
reconciliation of non-GAAP financial 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 of the legacy
NTL and Telewest businesses 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 filed with the SEC on February 26, 2006, NTL Holdings Inc.’s
Form 10-K filed with the SEC on March 1, 2006 and NTL’s
Forms 10-Q filed with the SEC on May 10, 2006 and August 9, 2006. 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 largest
mobile virtual network operator in the United Kingdom, with
approximately 4.5 million customers. We have entered into a long-term
trademark license agreement with Virgin Enterprises Limited pursuant to
which we intend to re-brand our existing consumer division with the
Virgin brand in the first quarter of 2007.
Non-GAAP Financial Measures
We use non-GAAP financial 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 and reconciliations to their nearest GAAP equivalents.
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) Group 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
Appendices:
A) Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in £millions, except per share data)
(unaudited)
Three months ended
Nine months ended
September 30,
September 30,
2006
2005
2006
2005
Revenue
1,024.9
482.7
2,520.6
1,463.0
Costs and expenses
Operating costs (exclusive of depreciation shown separately below)
(440.0)
(200.2)
(1,062.4)
(603.1)
Selling, general and administrative expenses
(267.1)
(116.2)
(648.7)
(358.3)
Other charges
(30.9)
(1.3)
(51.4)
(2.4)
Depreciation
(222.6)
(142.3)
(591.2)
(402.2)
Amortization
(73.9)
(27.4)
(166.3)
(82.3)
Total costs and expenses
(1,034.5)
(487.4)
(2,520.0)
(1,448.3)
Operating (loss)income
(9.6)
(4.7)
0.6
14.7
Other income(expense)
Interest income and other, net
7.1
6.8
24.3
21.6
Interest expense
(113.2)
(51.7)
(332.6)
(180.2)
Share of income(loss) from equity investments
3.9
(0.2)
8.4
-
Foreign currency transaction gains(losses)
6.3
(13.1)
(97.8)
(29.9)
Loss on extinguishment of debt
(0.5)
(2.0)
(32.9)
(2.0)
Gains(losses) on derivative instruments
1.6
-
(1.9)
-
Loss from continuing operations before income taxes, minority
interest and cumulative effect of change in accounting principle
(104.4)
(64.9)
(431.9)
(175.8)
Income tax benefit(expense)
0.9
12.4
10.8
(8.7)
Minority interest
(0.7)
(1.0)
-
(1.0)
Cumulative effect of change in accounting principle
-
-
1.2
-
Loss from continuing operations
(104.2)
(53.5)
(419.9)
(185.5)
Discontinued operations
Income from discontinued operations before income taxes
-
-
-
5.5
Gain on disposal of assets
8.1
1.4
8.1
657.4
Income tax expense
-
-
-
(0.2)
Income from discontinued operations
8.1
1.4
8.1
662.7
Net (loss)income
(96.1)
(52.1)
(411.8)
477.2
Basic and diluted loss from continuing operations per share
(£0.32)
(£0.25)
(£1.49)
(£0.87)
Basic and diluted income from discontinued operations per share
£0.02
£0.01
£0.03
£3.10
Basic and diluted net (loss)income per share
(£0.30)
(£0.24)
(£1.46)
£2.23
Average number of shares outstanding
322.0
212.8
282.5
214.0
CONDENSED CONSOLIDATED BALANCE SHEET
(in £millions)
September 30,
December 31,
2006
2005
(Unaudited)
(See Note)
Assets
Current assets
Cash and cash equivalents
302.2
735.2
Restricted cash
6.7
3.4
Marketable securities
-
96.9
Accounts receivable - trade, less allowances for doubtful accounts
of £58.9 (2006) and £41.7
(2005)
409.7
191.8
Inventory for re-sale
12.1
-
Programming inventory
55.5
-
Prepaid expenses and other current assets
94.7
112.4
Total current assets
880.9
1,139.7
Fixed assets, net
6,088.6
3,294.9
Goodwill
2,273.1
-
Reorganization value in excess of amounts allocable to identifiable
assets
193.0
193.0
Customer lists, net
1,129.4
247.6
Other intangible assets, net
66.5
2.4
Equity investments
387.5
-
Other assets, net of accumulated amortization of £15.7
(2006) and £32.2 (2005)
173.9
110.9
Total assets
11,192.9
4,988.5
Liabilities and shareholders' equity
Current liabilities
Accounts payable
369.8
176.9
Accrued expenses and other current liabilities
637.8
291.1
Interest payable
94.4
37.8
Deferred revenue
263.2
103.2
Current portion of long-term debt
151.5
0.8
Total current liabilities
1,516.7
609.8
Long-term debt, net of current portion
6,055.5
2,279.2
Deferred revenue and other long-term liabilities
194.1
134.3
Defered income taxes
77.0
9.2
Total liabilities
7,843.3
3,032.5
Commitments and contingent liabilities
Minority Interest
1.0
1.0
Shareholders' equity
Common stock
1.8
1.2
Additional paid-in capital
4,285.8
2,671.0
Treasury stock
-
(114.0)
Accumulated other comprehensive income
126.6
45.5
Accumulated deficit
(1,065.6)
(648.7)
Total shareholders' equity
3,348.6
1,955.0
Total liabilities and shareholders' equity
11,192.9
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 £millions) (unaudited)
Nine months ended
September 30,
2006
2005
Net cash provided by operating activities
512.2
239.6
Investing activities
Purchase of fixed assets
(397.0)
(216.3)
Income from equity investments
7.3
-
Acquisition of Telewest, net of cash acquired
(2,024.2)
-
Acquisition of Virgin Mobile, net of cash acquired
(423.5)
-
Proceeds from the sale of fixed assets
0.9
2.6
Decrease in restricted cash
5.1
12.2
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
(2,831.4)
1,243.7
Financing activities
Proceeds from employee stock option exercises
35.2
4.8
Purchase of stock
-
(114.0)
New borrowings
9,046.1
-
Principal payments on long-term debt
(7,038.0)
(781.7)
Financing fees
(122.2)
-
Capital lease payments
(26.7)
(0.6)
Dividends paid
(5.1)
-
Net cash provided by (used in) financing activities
1,889.3
(891.5)
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
(3.1)
14.2
(Decrease) increase in cash and cash equivalents
(433.0)
587.6
Cash and cash equivalents, beginning of period
735.2
125.2
Cash and cash equivalents, end of period
302.2
712.8
QUARTERLY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in £millions, except per share data)
(unaudited)
Three months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2006
2006
2006
2005
2005
Revenue
1,024.9
884.3
611.4
484.6
482.7
Costs and expenses
Operating costs (exclusive of depreciation shown separately below)
(440.0)
(367.5)
(254.9)
(205.2)
(200.2)
Selling, general and administrative expenses
(267.1)
(223.5)
(158.1)
(124.7)
(116.2)
Other charges
(30.9)
(12.1)
(8.4)
(22.4)
(1.3)
Depreciation
(222.6)
(219.3)
(149.3)
(139.5)
(142.3)
Amortization
(73.9)
(55.6)
(36.8)
(27.2)
(27.4)
Total costs and expenses
(1,034.5)
(878.0)
(607.5)
(519.0)
(487.4)
Operating (loss)income
(9.6)
6.3
3.9
(34.4)
(4.7)
Other income (expense)
Interest income and other, net
7.1
8.6
8.6
7.8
6.8
Interest expense
(113.2)
(135.6)
(83.8)
(55.6)
(51.7)
Share of income(loss) from equity investments
3.9
3.1
1.4
0.9
(0.2)
Foreign currency transaction gains(losses)
6.3
(94.1)
(10.0)
35.2
(13.1)
Loss on extinguishment of debt
(0.5)
-
(32.4)
-
(2.0)
Gains(losses) on derivative instruments
1.6
5.7
(9.2)
-
-
Loss from continuing operations before income taxes, minority interest
and cumulative effect of change in accounting principle
(104.4)
(206.0)
(121.5)
(46.1)
(64.9)
Income tax benefit(expense)
0.9
9.9
-
(10.1)
12.4
Minority interest
(0.7)
0.3
0.4
-
(1.0)
Cumulative effect of change in accounting principle
-
-
1.2
-
-
Loss from continuing operations
(104.2)
(195.8)
(119.9)
(56.2)
(53.5)
Discontinued operations
Income from discontinued operations before income taxes
-
-
-
0.2
-
Gain on disposal of assets
8.1
-
-
(0.2)
1.4
Income tax expense
-
-
-
-
-
Income from discontinued operations
8.1
0.0
0.0
0.0
1.4
Net (loss)income
(96.1)
(195.8)
(119.9)
(56.2)
(52.1)
Basic and diluted loss from continuing operations per share
(£0.32)
(£0.68)
(£0.49)
(£0.26)
(£0.25)
Basic and diluted income from discontinued operations per share
£0.02
£0.00
£0.00
£0.00
£0.01
Basic and diluted net loss per share
(£0.30)
(£0.68)
(£0.49)
(£0.26)
(£0.24)
Average number of shares outstanding
322.0
287.9
245.5
212.8
212.8
B) GROUP RESIDENTIAL OPERATIONS STATISTICS
(data in 000's)
Group (1)
Q3-06
Q2-06
Q1-06
Q4-05
Q3-05
Group RGUs
Opening RGUs
15,100.0
15,015.3
14,805.6
14,432.3
14,166.2
Data Cleanse (2)
-
(69.0)
-
(43.1)
-
Adjusted Opening RGUs
15,100.0
14,946.3
14,805.6
14,389.2
14,166.2
Net RGU adds
171.4
153.7
209.7
428.7
266.1
Reduction to customer count (3)
-
-
-
(12.3)
-
Closing Group RGUs
15,271.4
15,100.0
15,015.3
14,805.6
14,432.3
Group RGUs
On-net Telephone
4,178.3
4,233.0
4,268.1
4,260.0
4,285.0
On-net TV
3,315.4
3,293.1
3,315.9
3,310.3
3,288.7
On-net Broadband
2,980.4
2,902.3
2,821.7
2,630.3
2,466.5
Total On-net
10,474.1
10,428.4
10,405.7
10,200.6
10,040.2
Off-net Telephone
42.8
47.6
53.2
60.3
64.4
Off-net Broadband
242.8
235.0
224.8
198.7
174.3
Total Off-net
285.6
282.6
278.0
259.0
238.7
Mobile
4,511.7
4,389.0
4,331.6
4,346.0
4,153.4
Total RGUs
15,271.4
15,100.0
15,015.3
14,805.6
14,432.3
Net RGU adds
On-net Telephone
(54.6)
(21.6)
8.1
0.8
2.6
On-net TV
22.2
8.3
5.6
23.3
(5.0)
On-net Broadband
78.1
104.9
191.4
191.7
205.1
Total On-net
45.7
91.7
205.1
215.8
202.7
Off-net Telephone
(4.8)
(5.6)
(7.1)
(4.1)
(8.7)
Off-net Broadband
7.8
10.2
26.1
24.4
27.9
Total Off-net
3.0
4.6
19.0
20.3
19.2
Mobile
122.7
57.4
(14.4)
192.6
44.2
Total Net RGU adds
171.4
153.7
209.7
428.7
266.1
Notes
(1)
Subscriber information is on a pro forma combined basis assuming
that the merger with Telewest and the acquisition of Virgin Mobile
had occurred on January 1, 2005.
(2)
Data cleanse activity in Q2-06 resulted in a decrease of 69,000
RGUs, a decrease of approximately 13,500 Telephone, 24,400 Broadband
and 31,100 TV RGUs. Data cleanse activity in Q2-06 is a result of
more closely aligning customer definitions between old NTL and old
Telewest together with the removal of approximately 20,000 inactive
backlog customers in old NTL. Data cleanse activity in Q4-05
resulted in a decrease in old NTL of 43,100 RGUs, a decrease of
approximately 17,700 Telephone, 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 an additional 10,000 customers, representing
approximatley 12,300 RGUs.
RESIDENTIAL CABLE OPERATIONS STATISTICS (excluding Off-net and
Mobile)
(data in 000's except percentages, RGU/Customer and ARPU)
Pro forma new NTL (1)
Q3-06
Q2-06
Q1-06
Q4-05
Q3-05
Customers
Opening Customers
4,928.7
4,983.8
4,958.0
4,945.4
4,893.1
Data Cleanse (2)
-
(36.2)
-
(18.1)
-
Adjusted Opening Customers
4,928.7
4,947.6
4,958.0
4,927.3
4,893.1
Gross customer adds
229.2
192.3
218.1
248.9
271.9
Total Customer disconn- ections
(266.5)
(211.2)
(192.3)
(208.2)
(219.6)
Net customer adds
(37.3)
(18.9)
25.8
40.7
52.3
Reduction to customer count (3)
-
-
-
(10.0)
-
Closing Customers
4,891.5
4,928.7
4,983.8
4,958.0
4,945.4
Monthly customer churn %
1.8%
1.5%
1.3%
1.4%
1.5%
Cable RGUs
Opening RGUs
10,428.4
10,405.7
10,200.6
10,040.2
9,837.5
Data Cleanse (2)
-
(69.0)
-
(43.1)
-
Adjusted Opening RGUs
10,428.4
10,336.7
10,200.6
9,997.1
9,837.5
Net RGU adds
45.7
91.7
205.1
215.8
202.7
Reduction to RGU count (3)
-
-
-
(12.3)
-
Closing RGUs
10,474.1
10,428.4
10,405.7
10,200.6
10,040.2
Net RGU Adds
Telephone
(54.6)
(21.6)
8.1
0.8
2.6
Television
22.2
8.3
5.6
23.3
(5.0)
DTV
85.8
73.8
70.6
85.5
42.9
Broadband
78.1
104.9
191.4
191.7
205.1
Total Net RGU Adds
45.7
91.7
205.1
215.8
202.7
Revenue
Generating
Units
(RGUs)
Telephone
4,178.3
4,233.0
4,268.1
4,260.0
4,285.0
Television
3,315.4
3,293.1
3,315.9
3,310.3
3,288.7
DTV
2,922.0
2,836.2
2,786.5
2,715.9
2,637.5
Broadband
2,980.4
2,902.3
2,821.7
2,630.3
2,466.5
Total RGUs
10,474.1
10,428.4
10,405.7
10,200.6
10,040.2
RGU / Customer
2.14
2.12
2.09
2.06
2.03
Internet Customers
Dial-up and DTV access
97.0
113.3
140.4
181.6
219.0
Broadband
2,980.4
2,902.3
2,821.7
2,630.3
2,466.5
Total Internet
3,077.4
3,015.6
2,962.1
2,811.9
2,685.6
Bundled Customers
Dual RGU
1,798.3
1,838.9
1,939.1
2,033.2
2,114.5
Triple RGU
1,892.1
1,830.4
1,741.4
1,604.6
1,490.2
Percentage of dual or triple RGUs
75.4%
74.4%
73.8%
73.4%
72.9%
Percentage of triple RGUs
38.7%
37.1%
34.9%
32.4%
30.1%
Cable ARPU
£42.48
£42.21
£41.50
£41.27
£41.28
ARPU
calculation:
On-net revenues
£625,400
£628,400
£618,600
£613,400
£608,800
Average customers
4,907.4
4,962.3
4,969.2
4,954.1
4,916.0
Homes
Marketable
On-net
Telephone
12,427.1
12,312.7
12,311.2
12,299.7
12,288.5
ATV
12,505.5
12,661.1
12,656.7
12,652.8
12,633.9
DTV
11,982.2
12,009.7
11,989.2
11,972.3
11,941.7
Broadband
11,815.4
11,766.2
11,745.7
11,613.6
11,583.2
Total homes
12,505.5
12,661.1
12,656.7
12,652.8
12,633.9
Penetration
of Homes
Marketable
On-net
Telephone
33.6%
34.4%
34.7%
34.6%
34.9%
Television - Total
26.5%
26.0%
26.2%
26.2%
26.0%
Television - DTV
24.4%
23.6%
23.2%
22.7%
22.1%
Broadband
25.2%
24.7%
24.0%
22.6%
21.3%
Total Customer
39.1%
38.9%
39.4%
39.2%
39.1%
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
Telephone, 24,400 Broadband and 31,100 TV RGUs. Data cleanse
activity in Q2-06 is a result of more closely aligning customer
definitions between old NTL and old Telewest together with the
removal of approximately 20,000 inactive backlog customers in old
NTL. 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 Telephone, 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 an additional 10,000 customers, representing
approximatley 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 Q1-06, filed with the SEC on
May 9, 2006.
RESIDENTIAL CABLE OPERATIONS STATISTICS (excluding Off-net and
Mobile)
(data in 000's except percentages, RGU/Customer and ARPU)
Old Telewest (1&4)
Old NTL on-net (1)
Q3-06
Q2-06
Q1-06
Q4-05
Q3-05
Q3-06
Q2-06
Q1-06
Q4 05
Q3-05
Customers
Opening Customers
1,886.8
1,886.8
1,868.2
1,848.1
1,837.2
3,042.0
3,097.0
3,089.8
3,097.3
3,055.9
Data Cleanse (2)
-
(3.7)
-
-
-
-
(32.5)
-
(18.1)
-
Adjusted Opening Customers
1,886.8
1,883.1
1,868.2
1,848.1
1,837.2
3,042.0
3,064.5
3,089.8
3,079.2
3,055.9
Gross customer adds
87.9
73.2
79.2
86.1
89.5
141.3
119.2
138.9
162.8
182.4
Total Customer disconn- ections
(80.3)
(69.5)
(60.6)
(66.0)
(78.6)
(186.2)
(141.7)
(131.7)
(142.2)
(141.0)
Net customer adds
7.6
3.7
18.6
20.1
10.9
(44.9)
(22.5)
7.2
20.6
41.4
Reduction to customer count (3)
-
-
-
-
-
-
-
-
(10.0)
-
Closing Customers
1,894.4
1,886.8
1,886.8
1,868.2
1,848.1
2,997.1
3,042.0
3,097.0
3,089.8
3,097.3
Monthly customer churn %
1.4%
1.2%
1.1%
1.2%
1.4%
2.1%
1.6%
1.5%
1.6%
1.6%
Cable RGUs
Opening RGUs
4,212.9
4,164.9
4,059.6
3,955.2
3,873.8
6,215.5
6,240.8
6,141.0
6,085.0
5,963.7
Data Cleanse (2)
-
(4.6)
-
-
-
-
(64.4)
-
(43.1)
-
Adjusted Opening RGUs
4,212.9
4,160.3
4,059.6
3,955.2
3,873.8
6,215.5
6,176.4
6,141.0
6,041.9
5,963.7
Net RGU adds
60.4
52.6
105.3
104.4
81.4
(14.7)
39.1
99.8
111.4
121.3
Reduction to RGU count (3)
-
-
-
-
-
-
-
-
(12.3)
-
Closing RGUs
4,273.3
4,212.9
4,164.9
4,059.6
3,955.2
6,200.8
6,215.5
6,240.8
6,141.0
6,085.0
Net RGU Adds
Telephone
(5.1)
1.2
11.5
0.5
(2.8)
(49.5)
(22.8)
(3.4)
0.3
5.4
Television
17.1
1.2
3.3
19.0
16.8
5.2
7.1
2.3
4.3
(21.8)
DTV
26.3
15.2
21.4
42.6
38.6
59.5
58.6
49.2
42.9
4.2
Broadband
48.5
50.1
90.5
84.9
67.3
29.6
54.8
100.9
106.8
137.7
Total Net RGU Adds
60.4
52.5
105.3
104.4
81.4
(14.7)
39.1
99.8
111.4
121.3
Revenue
Generating
Units
(RGUs)
Telephone
1,693.8
1,698.9
1,698.4
1,686.9
1,686.4
2,484.5
2,534.0
2,569.7
2,573.1
2,598.6
Television
1,387.2
1,370.2
1,370.9
1,367.6
1,348.6
1,928.1
1,922.9
1,945.0
1,942.7
1,940.1
DTV
1,332.1
1,305.8
1,292.2
1,270.8
1,228.2
1,589.9
1,530.4
1,494.3
1,445.1
1,409.3
Broadband
1,192.3
1,143.8
1,095.6
1,005.1
920.2
1,788.1
1,758.5
1,726.1
1,625.2
1,546.3
Total RGUs
4,273.3
4,212.9
4,164.9
4,059.6
3,955.2
6,200.8
6,215.5
6,240.8
6,141.0
6,085.0
RGU / Customer
2.26
2.23
2.21
2.17
2.14
2.07
2.04
2.02
1.99
1.96
Internet Customers
Dial-up and DTV access
29.1
32.3
44.3
57.9
73.2
67.9
81.0
96.1
123.7
145.9
Broadband
1,192.3
1,143.8
1,095.6
1,005.1
920.2
1,788.1
1,758.5
1,726.1
1,625.2
1,546.3
Total Internet
1,221.4
1,176.1
1,139.9
1,063.0
993.4
1,856.0
1,839.5
1,822.2
1,748.9
1,692.2
Bundled Customers
Dual RGU
695.2
721.8
756.9
794.0
812.6
1,103.1
1,117.2
1,182.2
1,239.2
1,301.9
Triple RGU
841.9
802.2
760.6
698.6
647.3
1,050.2
1,028.2
980.8
906.0
842.9
Percentage of dual or triple RGUs
81.1%
80.8%
80.4%
79.9%
79.0%
71.8%
70.5%
69.8%
69.4%
69.2%
Percentage of triple RGUs
44.4%
42.5%
40.3%
37.4%
35.0%
35.0%
33.8%
31.7%
29.3%
27.2%
Cable ARPU
£45.61
£45.46
£45.15
£45.13
£45.11
£40.52
£40.21
£39.28
£38.96
£38.99
ARPU
calculation:
On-net revenues
£258,300
£257,600
£254,300
£251,900
£248,900
£367,100
£370,800
£364,300
£361,500
£359,900
Average customers
1,887.9
1,888.6
1,877.4
1,860.6
1,839.4
3,019.5
3,073.7
3,091.8
3,093.5
3,076.6
Homes
Marketable
On-net
Telephone
4,702.5
4,700.2
4,701.2
4,698.4
4,696.4
7,724.6
7,612.5
7,610.0
7,601.3
7,592.0
ATV
4,706.9
4,704.8
4,702.9
4,700.8
4,698.1
7,798.6
7,956.3
7,953.8
7,952.0
7,935.8
DTV
4,588.9
4,586.5
4,568.5
4,525.2
4,503.9
7,393.3
7,423.2
7,420.7
7,447.1
7,437.8
Broadband
4,588.9
4,586.5
4,568.5
4,525.2
4,503.9
7,226.6
7,179.7
7,177.2
7,088.4
7,079.3
Penetration
of Homes
Marketable
On-net
Telephone
36.0%
36.1%
36.1%
35.9%
35.9%
32.2%
33.3%
33.8%
33.9%
34.2%
Television - Total
29.5%
29.1%
29.1%
29.1%
28.7%
24.7%
24.2%
24.5%
24.4%
24.4%
Television - DTV
29.0%
28.5%
28.3%
28.1%
27.3%
21.5%
20.6%
20.1%
19.4%
18.9%
Broadband
26.0%
24.9%
24.0%
22.2%
20.4%
24.7%
24.5%
24.0%
22.9%
21.8%
Total Customer
40.2%
40.1%
40.1%
39.7%
39.3%
38.4%
38.2%
38.9%
38.9%
39.0%
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 Telephone, 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 Telephone, 22,400 Broadband and 29,200 TV
RGUs. Data cleanse activity in Q2-06 is a result of more closely
aligning customer definitions betwwen old NTL and old Telewest
together with the removal of approximately 20,000 inactive backlog
customers in old NTL. 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 Telephone, 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.
MOBILE OPERATIONS STATISTICS
(data in 000's except ARPU)
Mobile
Q3-06
Q2-06
Q1-06
Q4-05
Q3-05
Mobile Customers (90 day active) (1 & 2)
Opening Customers
4,389.0
4,331.6
4,346.0
4,153.4
4,109.2
Net customer adds
122.7
57.4
(14.4)
192.6
44.2
Closing Mobile Customers (90 day active)
4,511.7
4,389.0
4,331.6
4,346.0
4,153.4
Mobile monthly ARPU (3)
£10.28
ARPU calculation:
Service revenue
£132,500
Average customers
4,294.8
Notes
(1)
Mobile customer information prior to acquisition has been taken,
without adjustment, from Virgin Mobile's historical information.
(2)
90 day active customers - Prepay customers are defined as active
customers if they have made an outbound event in the preceding 90
days. Contract customers are defined as active customers if they
have been provisioned and have not been disconnected.
(3)
Mobile monthly ARPU is calculated on total US GAAP service revenue
for the period since acquisition divided by the average 90 day
active customers for the period since acquisition, divided by
three.
NTL OFF-NET OPERATIONS STATISTICS
(data in 000's)
Off-net
Q3-06
Q2-06
Q1-06
Q4-05
Q3-05
Off-net RGUs
Opening RGUs
282.6
278.0
259.0
238.7
219.5
Net RGU adds
3.0
4.6
19.0
20.3
19.2
Closing off-net RGUs
285.6
282.6
278.0
259.0
238.7
RGUs
Telephone
42.8
47.6
53.2
60.3
64.4
Broadband
242.8
235.0
224.8
198.7
174.3
Total RGUs
285.6
282.6
278.0
259.0
238.7
Net RGU Adds
Telephone
(4.8)
(5.6)
(7.1)
(4.1)
(8.7)
Broadband
7.8
10.2
26.1
24.4
27.9
Total Net RGU Adds
3.0
4.6
19.0
20.3
19.2
C) SEGMENTAL ANALYSIS
(in £millions) (unaudited)
Actual Reported
Three months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2006
2006
2006
2005
2005
Revenue
Cable segment
Consumer
643.7
645.1
461.7
379.4
377.5
Business
162.3
160.1
122.8
105.2
105.2
Total
806.0
805.2
584.5
484.6
482.7
Inter segment revenue
(0.9)
(0.4)
(0.3)
-
-
805.1
804.8
584.2
484.6
482.7
Mobile segment
Virgin Mobile
140.4
-
-
-
-
Inter segment revenue
-
-
-
-
-
140.4
-
-
-
-
Content segment
Flextech
37.8
40.1
12.8
-
-
Sit-up
47.5
45.1
16.2
-
-
Total
85.3
85.2
29.0
-
-
Inter segment revenue
(5.9)
(5.7)
(1.8)
-
-
79.4
79.5
27.2
-
-
Total revenue
1,024.9
884.3
611.4
484.6
482.7
Segment OCF
Cable segment OCF
296.3
284.5
195.4
154.7
166.3
Mobile segment OCF
16.0
-
-
-
-
Content segment OCF
5.5
8.8
3.0
-
-
OCF (Total)
317.8
293.3
198.4
154.7
166.3
Pro forma (for merger with Telewest)
Three months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2006
2006
2006
2005
2005
Reported
Reported
Pro Forma
Pro Forma
Pro Forma
Revenue
Cable segment
Consumer
643.7
645.1
637.2
631.6
626.7
Business
162.3
160.1
165.6
168.2
169.1
Total
806.0
805.2
802.8
799.8
795.8
Inter segment revenue
(0.9)
(0.4)
(0.5)
(0.4)
(0.7)
805.1
804.8
802.3
799.4
795.1
Mobile segment
Virgin Mobile
140.4
-
-
-
-
Inter segment revenue
-
-
-
-
-
140.4
-
-
-
-
Content segment
Flextech
37.8
40.1
39.9
37.7
36.0
Sit-up
47.5
45.1
51.9
84.1
57.5
Total
85.3
85.2
91.8
121.8
93.5
Inter segment revenue
(5.9)
(5.7)
(5.3)
(5.1)
(5.4)
79.4
79.5
86.5
116.7
88.1
Total revenue
1,024.9
884.3
888.8
916.1
883.2
Segment OCF
Cable segment OCF
296.3
284.5
267.6
283.2
299.5
Mobile segment OCF
16.0
-
-
-
-
Content segment OCF
5.5
8.8
9.4
8.8
7.8
OCF (Total)
317.8
293.3
277.0
292.0
307.3
Notes: Segment OCF includes inter segment revenue and costs as
applicable. OCF (Total) is a non-GAAP financial measure - see
Appendix F.
The pro forma information presented in this schedule in respect of
the three months ended 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
December 31 and September 30, 2005 has been prepared on a basis as
if the merger with Telewest had occurred on January 1, 2005.
D) Fixed Asset Additions (Accrual Basis)
(in £millions) (unaudited)
Three months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2006
2006
2006
2005
2005
NCTA Fixed Asset Additions
CPE
57.8
48.6
40.1
31.6
32.0
Scaleable infrastructure
33.6
36.9
52.1
48.7
27.8
Commercial
16.4
19.6
11.4
6.2
8.2
Line extensions
1.3
1.0
0.5
-
-
Upgrade/rebuild
3.5
4.1
3.8
2.5
2.3
Support capital
26.5
22.6
9.5
7.5
6.3
Total NCTA Fixed Asset Additions
139.1
132.8
117.4
96.5
76.6
Non NCTA Fixed Asset Additions
8.2
1.1
0.4
(1.9)
(0.3)
Total Fixed Asset Additions (accrual basis)
147.3
133.9
117.8
94.6
76.3
Change in capital accruals
(13.7)
(5.8)
17.5
(22.8)
(4.4)
Total Purchase of Fixed Assets
133.6
128.1
135.3
71.8
71.9
Note: NTL is not a member of NCTA and is providing this information
solely for comparative purposes.
Fixed Asset Additions (accrual basis) are from continuing
operations. See Appendix F for a discussion of the use of Fixed
Asset Additions (accrual basis) as a non-GAAP financial measure and
the reconciliation of Fixed Asset Additions (accrual basis) to GAAP
Purchase of Fixed Assets.
E) Proforma Combined Condensed Financial Information
(in £ millions) (unaudited)
Three months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2006
2006
2006
2005
2005
Reported
Reported
Pro Forma
Pro Forma
Pro Forma
Revenue
1,024.9
884.3
888.8
916.1
883.2
Costs and expenses
Operating costs (exclusive of depreciation shown separately below)
(440.0)
(367.5)
(369.0)
(399.1)
(362.0)
Selling, general and administrative expenses
(267.1)
(223.5)
(242.8)
(225.0)
(213.9)
Other charges
(30.9)
(12.1)
(8.9)
(22.4)
(1.3)
Depreciation
(222.6)
(219.3)
(210.4)
(229.2)
(232.0)
Amortization
(73.9)
(55.6)
(58.6)
(59.8)
(60.0)
(1,034.5)
(878.0)
(889.7)
(935.5)
(869.2)
Operating (loss)income
(9.6)
6.3
(0.9)
(19.4)
14.0
Other income (expense)
Interest income and other, net
7.1
8.6
8.3
7.4
6.0
Interest expense
(113.2)
(135.6)
(112.0)
(126.9)
(119.2)
(Loss) on extinguishment of debt
(0.5)
-
(32.4)
-
(2.0)
Other, net
1.6
5.7
(9.2)
4.0
-
Share of income from equity investments
3.9
3.1
5.0
2.5
3.9
Foreign currency transaction (losses) gains
6.3
(94.1)
(8.6)
33.0
(13.9)
(Loss) from continuing operations before income taxes
(104.4)
(206.0)
(149.8)
(99.4)
(111.2)
Income tax benefit (expense)
0.9
9.9
-
(12.6)
12.9
Minority interest
(0.7)
0.3
0.4
-
(1.0)
Cumulative effect of a change in accounting principle
-
-
2.0
-
-
(Loss) from continuing operations
(104.2)
(195.8)
(147.4)
(112.0)
(99.3)
Reconciliation of Pro Forma OCF to Pro Forma Operating income
(loss)
Pro Forma OCF
317.8
293.3
277.0
292.0
307.3
Less:
Other charges
(30.9)
(12.1)
(8.9)
(22.4)
(1.3)
Depreciation
(222.6)
(219.3)
(210.4)
(229.2)
(232.0)
Amortization
(73.9)
(55.6)
(58.6)
(59.8)
(60.0)
Pro Forma Operating income (loss)
(9.6)
6.3
(0.9)
(19.4)
14.0
The pro forma information presented in these schedules in respect
of the three months ended 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 December 31 and September 30, 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 below for further explanation of the adjustments made.
These pro forma operating results are not necessarily indicative
of the results that would have been achieved if the merger with
Telewest had occurred on January 1, 2006 or January 1, 2005, and
undue reliance should not be placed on this information.
No pro forma financial information has been included in these
schedules in respect of the results of Virgin Mobile prior to its
acquisition.
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.
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.
For the three months ended December 31, and 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.
F) Use of non-GAAP Financial Measures and Reconciliations to
GAAP
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 investors
to review our financial statements and publicly-filed reports in
their entirety and to not rely on any single financial measure.
(i) 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.
(in £millions) (unaudited)
Three months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2006
2006
2006
2005
2005
Reconciliation of operating income before depreciation,
amortization and other charges (OCF) to GAAP operating (loss)income
Operating income before depreciation, amortization and other charges
(OCF)
317.8
293.3
198.4
154.7
166.3
Reconciling items
Other charges
(30.9)
(12.1)
(8.4)
(22.4)
(1.3)
Depreciation and amortization
(296.5)
(274.9)
(186.1)
(166.7)
(169.7)
Operating (loss)income
(9.6)
6.3
3.9
(34.4)
(4.7)
Reconciliation of pro forma operating income before
depreciation, amortization and other charges (OCF) to GAAP
operating (loss)income
Pro forma operating income before depreciation, amortization and
other charges (OCF)
317.8
293.3
277.0
292.0
307.3
Reconciling items
Depreciation and amortization
(296.5)
(274.9)
(186.1)
(166.7)
(169.7)
Other charges
(30.9)
(12.1)
(8.4)
(22.4)
(1.3)
Telewest pro forma operating loss(income)
-
-
4.8
(15.0)
(18.7)
Telewest pro forma depreciation and amortization
-
-
(82.9)
(122.3)
(122.3)
Telewest pro forma other charges
-
-
(0.5)
-
-
Operating (loss)income
(9.6)
6.3
3.9
(34.4)
(4.7)
(ii) 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 or liquidity
reported in accordance with GAAP.
Reconciliation of net debt to GAAP Total liabilities
(in £millions) (unaudited)
Sep 30,
Dec 31,
2006
2005
Net Debt
5,904.8
1,447.9
Cash and cash equivalents
302.2
735.2
Marketable securities
-
96.9
Long-term debt, including current portion
6,207.0
2,280.0
Accounts payable
369.8
176.9
Accrued expenses and other current liabilities
637.8
291.1
Interest payable
94.4
37.8
Deferred revenue and other long-term liabilities
457.3
237.5
Deferred income taxes
77.0
9.2
Total liabilities
7,843.3
3,032.5
(iii) 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
network 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
performance 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 £millions) (unaudited)
Three months ended
Sep 30,
Jun 30,
Mar 31,
Dec 31,
Sep 30,
2006
2006
2006
2005
2005
Reported
Reported
Pro Forma
Pro Forma
Pro Forma
Pro forma Fixed Asset Additions (accrual basis)
£147.3
£133.9
£158.3
£158.6
£144.3
Pre-acquisition Telewest Fixed Asset Additions (accrual basis)
-
-
(40.5)
(64.0)
(68.0)
Fixed Asset Additions (accrual basis)
£147.3
£133.9
£117.8
£94.6
£76.3
Changes in liabilities related to Fixed Asset Additions (accrual
basis)
(13.7)
(5.8)
17.5
(22.8)
(4.4)
Purchase of Fixed Assets
£133.6
£128.1
£135.3
£71.8
£71.9
Conference Call
There will be a conference call for analysts and investors today at 0900
EDT/ 1400 UK time. Analysts and investors can dial in to the
presentation by calling +1 617 213 8892 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 until Wednesday,
November 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: 32682745.
NTL Incorporated (NASDAQ: NTLI) announces results for the quarter
ended September 30, 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 with Telewest 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. No pro forma financial
information has been presented in respect of the acquisition of Virgin
Mobile, which closed on July 4, 2006.
Quarterly highlights
-- Announced rebranding to Virgin Media, to begin in Q1-07
-- 19% growth in cable gross additions reflecting reinvigorated
marketing
-- Strong OCF growth
-- Estimated GBP 28m of synergy savings achieved in quarter
-- Cable ARPU of GBP 42.48, up GBP 0.27 vs Q2-06
-- Operating loss up due mainly to increased restructuring
charges
-0-
*T
(GBP millions)(unaudited)
Q3 2006 Q2 2006
-------- -------
Revenue
Cable
Consumer 642.8 644.7
Business 162.3 160.1
-------- -------
805.1 804.8
Mobile 140.4 -
Content 79.4 79.5
-------- -------
Total Revenue 1,024.9 884.3
OCF
Cable 296.3 284.5
Mobile 16.0 -
Content 5.5 8.8
-------- -------
Total OCF 317.8 293.3
Operating (loss)/income (9.6) 6.3
OCF is operating income before depreciation, amortization and other
charges and is a non-GAAP financial measure. Please see Appendix F
for reconciliation of non-GAAP financial measures to their nearest
GAAP equivalents.
*T
Steve Burch, Chief Executive Officer of NTL, said:
"On the day we are announcing that our new company name will
become Virgin Media, I am pleased to announce continued improvement in
our results with strong growth in OCF. Cable ARPU, RGU per customer
and triple play penetration have all improved due to our strategy of
focusing on quality customers. Gross additions also increased sharply,
reflecting the success of our reinvigorated marketing and we have a
firm plan in place to address our historical churn issues. We remain
firmly on track to achieve an annual GBP 250 million synergy run rate
by the end of 2007 and we realized estimated savings of GBP 28 million
during the quarter.
Today, we are announcing a change in our company name to Virgin
Media and our plans to rebrand our existing consumer division early
next year, backed up by a significant media campaign. Virgin Media
will exploit its unique ability to offer a "quad-play" of digital TV,
broadband, mobile and home phone services to deliver an unrivalled
choice of high quality content and communication packages. We believe
this will significantly enhance our competitiveness and growth
opportunities in 2007."
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 and consolidate Virgin
Mobile from July 4, 2006, the date of the closing of its acquisition.
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
with Telewest occurred on January 1, 2005. No pro forma financial
information has been presented in respect of the acquisition of Virgin
Mobile. The pro forma financial information is non-GAAP financial
information that management believes facilitates a comparative
analysis of developments in the Company's business. Please see
Appendices E and F for a discussion of our pro forma financial
information.
Unless otherwise indicated, all historical references to
operational statistics including customer and subscriber figures, ARPU
and churn are on a pro forma basis assuming the merger with Telewest
and the acquisition of Virgin Mobile occurred on January 1, 2005.
Revenue
Total revenue in the quarter was GBP 1,024.9 million, up GBP 140.6
million sequentially compared with the second quarter of 2006, due to
the acquisition of Virgin Mobile. Total revenue was up GBP 542.2
million compared to the third quarter of 2005, due to the merger with
Telewest and the acquisition of Virgin Mobile.
Cable Segment Revenue
Consumer
Consumer revenue in the third quarter was GBP 642.8 million, down
GBP 1.9 million sequentially compared with the second quarter,
primarily due to customer losses offsetting an increase in ARPU to GBP
42.48 from GBP 42.21. Consumer revenue was up GBP 16.8 million
compared to the pro forma third quarter of 2005 due to an increase in
ARPU, reflecting our drive to encourage triple play bundling and a
focus on better quality customers.
Cable ARPU has grown in the quarter due to an increase in RGU per
customer from 2.12 to 2.14 and an increase in triple play penetration
from 37.1% to 38.7%, as we have focused on acquiring new bundled
customers and on cross-selling to existing customers. A full quarter's
effect of a price rise in telephony line rental also contributed to
the increase.
Gross customer additions in the quarter increased by 19% to
229,200 due to reinvigorated marketing and compelling offers. We have
aligned our marketing plans across both old NTL and old Telewest
areas, and have been leading with a "Cable - If You Can, You Should"
advertising campaign to highlight the strengths and value of our
products and services. Key promotional messages during the quarter
centered on our "3 for GBP 30" and "2 for GBP 20" campaigns as well as
our Free TV offer, which launched at the start of September. At the
end of the quarter, we launched our first quad-play offer of "4 for
GBP 40". The strong growth in gross additions is very encouraging
given the heightened competitive environment, particularly in
broadband, and suggests that our strategy, marketing messages and
competitive strengths continue to succeed.
We will be rebranding our Consumer division and all its TV,
telephony and broadband business to Virgin in the first quarter of
2007, backed by a significant advertising campaign. At that point the
current consumer brands of NTL and Telewest will be phased out
rapidly. We believe that the unique flavor and customer focus of the
Virgin brand, which is one of the best known and most respected brands
in the UK, will give our growth fresh impetus.
As anticipated, we experienced negative net customer growth in the
quarter due to increased movers churn and non-pay churn driven by
policy changes. Customer losses were 37,300 in the quarter.
Customer disconnections increased by 55,000 as compared to the
second quarter. It is not possible to precisely identify the cause of
each customer's churn, however, we have estimated the churn impact as
follows:
-- There was an increase of approximately 37,000 disconnections
due to customers moving out of our addressable areas. Of this,
approximately 8,000 was due to a change in our internal
process for disconnecting movers.
-- We typically experience the peak of house moves in the third
quarter and UK Land Registry statistics show a 24% increase in
house moves between the first and third quarter of 2006.
-- Non-pay disconnections increased by approximately 15,000 as we
continued to align credit policies and compliance in old NTL
areas with Telewest and remove non-paying customers from our
systems. This is in line with our strategy of promoting
quality customer growth. Telewest credit policies were more
strict than old NTL policies.
-- Voluntary churn increased by only approximately 3,000
disconnections, implying that we have not seen a significant
increase in customers churning to competitors.
We are planning to migrate old NTL's three existing billing
systems onto the existing system used by Telewest over the next twelve
months. We will begin the first of these around the end of November
2006. When complete, these migrations should allow us to have greater
data integrity and to further improve our customer service experience.
Given the nature of the exercise, it is probable that some adjustments
to customer and RGU numbers will take place at the time of those
conversions. These adjustments in raw customer and RGU numbers should
not have any material impact on revenue or OCF.
Gross additions in the fourth quarter will be impacted by our
first billing migration, as we will cease all installation activity
for one week. We also expect a low level of installations in the
second half of December due to the holiday season. It is also likely
that some of the churn issues identified above, as a result of
alignment of policies, processes and compliance, will also impact
customer growth. We believe the short term negative impact is worth
the long term improvements.
Broadband
We continue to experience strongest growth in the number of
broadband subscribers. Gross additions were 265,000, an increase of
13% over the previous quarter, driven by our reinvigorated marketing
and compelling offers.
Net additions were 78,100 in the quarter, down from 104,900 in the
second quarter. This reduction was driven by an increase in churn,
with disconnects growing by 58,000. Of this, 47,000 disconnects were
in old NTL areas. The number of disconnections was impacted by the
customer churn issues discussed above. Churn was also impacted by a
high number of disconnections from customers who had joined old-NTL in
the third quarter of 2005 on a GBP 9.99 stand-alone broadband offer,
who have now come to the end of their promotional period.
Broadband penetration stands at 25.2% of our marketable homes,
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
speed of 10Mb is available throughout our broadband addressable areas.
In November, we will be launching a commercial trial of a 50Mb
broadband service to paying customers.
Television
Our wide and comprehensive range of television services allows us
to retain a competitive advantage over other TV platforms.
Digital television net additions were 85,800, compared to 73,800
in the previous quarter. Total TV net additions, which includes analog
television, were 22,200 in the quarter, compared to 8,300 in the
previous quarter.
Our roll-out of exciting new television products continues.
Video-on-demand (VOD) is now available to approximately 98% of our
digital subscribers and we have recently expanded the content
available with key popular content from Channel 4, one of the major
and most innovative terrestrial broadcasters in the UK.
Digital video recorders (DVR) and high definition TV (HDTV) are
available in old Telewest areas where we currently have 40,000
subscribers with the HD compatible DVR box. We currently have over 150
hours of HD content and will be expanding this range. We will be
launching DVR and HDTV in NTL areas during the fourth quarter. Our
HDTV/DVR service is charged at GBP 10 or GBP 15 per month depending on
the customer's basic package.
Telephony
Telephony gross additions were 180,600 in the quarter, up 6,100
compared to the previous quarter. However, due to an increase in churn
as discussed above, telephony net disconnections were 54,600 in the
quarter, compared to 21,600 in the previous quarter. As our most
highly penetrated product, telephony suffers more from customer churn
than either broadband or television.
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.
Off-net
Consumer off-net revenue was GBP 17.6 million in the third
quarter, compared to GBP 16.3 million in the previous quarter and GBP
17.3 million in the same quarter last year. These revenues are largely
from Virgin.net, our wholly owned broadband ISP which offers broadband
and telephony services using BT Group's wholesale products rather than
our own cable network. As at the quarter end, we had 242,800 off-net
broadband subscribers and 42,800 off-net telephony subscribers.
We plan to use Virgin.net as the incubator for the development of
a more aggressive off-net proposition. Building on the success of
Virgin.net, we will be making a modest investment in our platform and
product capability to deliver an off-net quad-play to complement our
current cable business. This will leverage off our new national Virgin
Media brand and marketing activities. Our off-net proposition will
provide many benefits to the Company including being able to offer a
Virgin branded quad-play to cable customers who churn because they are
moving out of our addressable areas. During the third quarter, we
estimate that we had 129,000 disconnections due to customers moving
out of our cable areas. We have appointed Philip Snalune, Group
Strategy Director and formerly Director of Products and Marketing at
Telewest, to lead the implementation of our off-net strategy.
Business
Business revenue in the third quarter was GBP 162.3 million, up
GBP 2.2 million compared to the second quarter due to one-off
wholesale circuit installations and an increase in the volume of LAN
solutions contracts in the quarter. Business revenue was up GBP 57.1
million compared to the third quarter of 2005 due to the acquisition
of Telewest.
In the short term, we believe the UK market for business voice and
data services remains challenging. 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. This should enable us to take on
our competition with greater success.
Cable Segment OCF
Cable segment OCF in the quarter was GBP 296.3 million, up GBP
11.8 million compared to the previous quarter due mainly to the
realization of cost synergies arising from the Telewest merger. Cable
segment OCF was up GBP 130.0 million as compared to the same quarter
last year due mainly to the merger with Telewest.
Mobile Segment
Virgin Mobile was acquired on July 4, 2006 and we have
consolidated its results of operations from that date. Total mobile
revenue for the period since acquisition was GBP 140.4 million, of
which GBP 132.5 million was service revenue and GBP 7.9 million was
equipment revenue.
Net customer additions in the quarter were 122,700, compared to
57,400 in the previous quarter and 44,200 in the same quarter last
year. Customer growth was strong due to the success of a "Summer of
Free Texts" promotion, the relaunch of our web sales channel and
continued expansion into the market for contract customers.
Mobile OCF was GBP 16.0 million in the quarter. Customer growth is
expected to be strong in the fourth quarter, but the impact of
Christmas volume on subscriber acquisition costs means that fourth
quarter Mobile OCF is expected to be over GBP 10 million lower than in
the third quarter.
Content Segment
The Content segment consists of two businesses, Flextech and
Sit-up. Content revenue, after inter segment elimination of GBP 5.9
million, was GBP 79.4 million in the third quarter, comprising GBP
31.9 million from Flextech and GBP 47.5 million from Sit-up. This
total compared to GBP 79.5 million in total in the prior quarter. We
did not have a Content segment prior to the merger with Telewest.
Flextech has historically sold programming to NTL, as well as to
Telewest. For consolidation purposes therefore, these amounts have
been eliminated.
Flextech revenue, after inter segment elimination, was GBP 31.9
million in the quarter, down GBP 2.5 million from the previous
quarter, due mainly to a decrease in advertising revenue from GBP 21.0
million to GBP 19.1 million. Advertising revenue fell because of a
decline in the overall TV advertising market. Subscription revenue
remained flat at GBP 8.9 million.
Flextech revenue, after inter segment elimination, was up GBP 1.1
million compared to the pro forma third quarter of 2005 due to
increases in both advertising revenue and subscription revenue.
Sit-up revenue was GBP 47.5 million in the quarter, up GBP 2.4
million from the previous quarter as the third quarter is usually
seasonally stronger than the second. Revenue was down by GBP 10.0
million as compared to the pro forma third quarter of 2005 due to
increased competition from other transactional TV channels and
heightened competition in the retail market.
Content segment OCF in the quarter contributed GBP 5.5 million,
down GBP 3.3 million from the prior quarter due mainly to a decline in
advertising revenue in the quarter. Content segment OCF was down GBP
2.3 million from the same pro forma quarter last year due mainly to
the revenue decline at Sit-up.
Content segment OCF in the fourth quarter is expected to be
negatively impacted due to higher programming costs at Flextech as we
invest in enriched programming in common with other UK broadcasters to
drive advertising revenue growth in 2007. Due to increased competition
at Sit-up, we are not expecting a material seasonal uplift in OCF from
that business.
Operating Income before Depreciation, Amortization and Other
Charges (OCF)
OCF in the third quarter was GBP 317.8 million, up GBP 24.5
million sequentially compared to the second quarter primarily due to
the acquisition of Virgin Mobile and realization of cost synergies
arising from the merger with Telewest offset by integration costs. OCF
was up GBP 151.5 million compared to the third quarter of 2005, due to
the merger with Telewest and the Virgin Mobile acquisition.
Third quarter OCF was impacted negatively by costs associated with
the Telewest merger integration and the rebranding of the group. Some
of these costs will recur as we continue our drive to realize
synergies from the Telewest merger and the Virgin Mobile integration.
These costs include:
-- Third party costs of GBP 11.2 million principally for planning
and implementing the merger integration, compared to GBP 10.8
million in the second quarter of 2006.
-- Estimated additional selling, general and administrative
expense (SG&A) of approximately GBP 3.0 million due to the
costs of our internal "merger office", a department staffed by
employees working predominantly on the integration. This
compares to GBP 2.9 million in the second quarter of 2006.
-- Costs of approximately GBP 2 million with respect to the
license fees payable for the Virgin rebranding. This compares
to GBP 0.8 million in the second quarter where the payment was
only for one month. The terms of the license agreement provide
for the royalty payment in advance of the rebranding date.
OCF in the third quarter benefited from approximately GBP 20
million of estimated synergy cost savings resulting from the merger.
This was partially offset, however, by the total integration and
rebranding costs incurred in the quarter of GBP 16.6 million as
described above.
We continue to expect to achieve a run rate of approximately GBP
250 million of estimated synergy savings by the end of 2007,
consisting of GBP 200 million of operational expenditure savings and
GBP 50 million of capital expenditure savings. The implementation
costs to achieve this are expected to be in the region of GBP 250
million in total, with over half being incurred in 2006.
We expect OCF in the fourth quarter to be positively impacted by
an increase in realized merger synergies. However, OCF will also be
negatively impacted by a seasonal reduction in Content OCF and a
reduction in Virgin Mobile OCF due to the upfront write-off of
subscriber acquisition costs in relation to expected strong customer
growth. We will also incur approximately GBP 5 million of rebranding
costs in addition to the recurring license fee in the fourth quarter.
In the first quarter of 2007, we will begin the marketing campaign
behind our new Virgin brand. We expect this to increase our marketing
and communication costs by around GBP 20 million in 2007, weighted
towards the first half of the year.
OCF is a non-GAAP financial measure. See Appendix F for
reconciliation of non-GAAP financial measures to their nearest GAAP
equivalents.
Operating Loss and Net Loss
Operating loss in the third quarter was GBP 9.6 million compared
to GBP 4.7 million in the third quarter of 2005 mainly due to higher
depreciation and amortization following the merger with Telewest and
the acquisition of Virgin Mobile.
Net loss was GBP 104.2 million in the third quarter, up from GBP
53.5 million in the same quarter last year due mainly to higher
interest charges as a result of higher borrowings to finance the
merger with Telewest and the acquisition of Virgin Mobile.
Capital Expenditure
Fixed asset additions (accrual basis) in the quarter were GBP
147.3 million, an increase of GBP 13.4 million as compared to the
previous quarter. There was an increase of GBP 71.0 million as
compared to the third quarter of 2005, due mainly to the merger with
Telewest.
Fixed asset additions (accrual basis) benefited from approximately
GBP 8 million of estimated synergy cost savings resulting from the
merger. This was offset, however, by the fixed asset merger
integration expense incurred in the quarter of GBP 17.3 million.
The total purchase of fixed assets was GBP 133.6 million in the
quarter, compared to GBP 128.1 million in the previous quarter and GBP
71.9 million in the same quarter last year.
Fixed asset additions (accrual basis) is a non-GAAP financial
measure. See Appendix F for reconciliation of non-GAAP financial
measures to their nearest GAAP equivalents.
Net Debt
As of September 30, 2006, net debt was GBP 5,905 million. This
consisted of GBP 5,042 million outstanding under the Senior Credit
Facility, GBP 1,049 million of Senior Notes, and GBP 116 million of
capital leases and other, offset by GBP 302 million of cash and cash
equivalents. Total liabilities as of September 30, 2006 were GBP 7,843
million.
During the third quarter the Company issued $550 million 9.125%
Senior Notes due 2016, and also borrowed an additional GBP 300 million
under its Senior Credit Facility. The proceeds of both were used to
refinance the remaining element of the short-term Bridge funding used
to acquire Telewest in March 2006. In addition, the acquisition of
Virgin Mobile in July 2006 was partly funded by a further GBP 475
million of additional borrowings under the Senior Credit Facility.
These transactions represent the final stage of securing long-term
financing following the Telewest and Virgin Mobile acquisitions.
Net debt is a non-GAAP financial measure. See Appendix F for
reconciliation of non-GAAP financial 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 of the
legacy NTL and Telewest businesses 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 filed with the SEC on
February 26, 2006, NTL Holdings Inc.'s Form 10-K filed with the SEC on
March 1, 2006 and NTL's Forms 10-Q filed with the SEC on May 10, 2006
and August 9, 2006. 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 largest mobile virtual network operator in the United Kingdom,
with approximately 4.5 million customers. We have entered into a
long-term trademark license agreement with Virgin Enterprises Limited
pursuant to which we intend to re-brand our existing consumer division
with the Virgin brand in the first quarter of 2007.
Non-GAAP Financial Measures
We use non-GAAP financial 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 and reconciliations to their nearest GAAP
equivalents.
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) Group 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
-0-
*T
Appendices:
---------------------------
A) Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in GBP millions, except per share data) (unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenue 1,024.9 482.7 2,520.6 1,463.0
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (440.0) (200.2) (1,062.4) (603.1)
Selling, general and
administrative
expenses (267.1) (116.2) (648.7) (358.3)
Other charges (30.9) (1.3) (51.4) (2.4)
Depreciation (222.6) (142.3) (591.2) (402.2)
Amortization (73.9) (27.4) (166.3) (82.3)
---------- ---------- ---------- ----------
Total costs and
expenses (1,034.5) (487.4) (2,520.0) (1,448.3)
---------- ---------- ---------- ----------
Operating (loss)income (9.6) (4.7) 0.6 14.7
Other income(expense)
Interest income and
other, net 7.1 6.8 24.3 21.6
Interest expense (113.2) (51.7) (332.6) (180.2)
Share of income(loss)
from equity
investments 3.9 (0.2) 8.4 -
Foreign currency
transaction
gains(losses) 6.3 (13.1) (97.8) (29.9)
Loss on extinguishment
of debt (0.5) (2.0) (32.9) (2.0)
Gains(losses) on
derivative instruments 1.6 - (1.9) -
---------- ---------- ---------- ----------
Loss from continuing
operations before income
taxes, minority interest
and cumulative effect of
change in accounting
principle (104.4) (64.9) (431.9) (175.8)
Income tax benefit(expense) 0.9 12.4 10.8 (8.7)
Minority interest (0.7) (1.0) - (1.0)
Cumulative effect of change
in accounting principle - - 1.2 -
---------- ---------- ---------- ----------
Loss from continuing
operations (104.2) (53.5) (419.9) (185.5)
---------- ---------- ---------- ----------
Discontinued operations
Income from
discontinued
operations before
income taxes - - - 5.5
Gain on disposal of
assets 8.1 1.4 8.1 657.4
Income tax expense - - - (0.2)
---------- ---------- ---------- ----------
Income from
discontinued
operations 8.1 1.4 8.1 662.7
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net (loss)income (96.1) (52.1) (411.8) 477.2
========== ========== ========== ==========
Basic and diluted loss from
continuing operations per
share (GBP 0.32) (GBP 0.25) (GBP 1.49) (GBP 0.87)
========== ========== ========== ==========
Basic and diluted income
from discontinued
operations per share GBP 0.02 GBP 0.01 GBP 0.03 GBP 3.10
========== ========== ========== ==========
Basic and diluted net
(loss)income per share (GBP 0.30) (GBP 0.24) (GBP 1.46) GBP 2.23
========== ========== ========== ==========
Average number of shares
outstanding 322.0 212.8 282.5 214.0
========== ========== ========== ==========
*T
-0-
*T
CONDENSED CONSOLIDATED BALANCE SHEET
(in GBP millions)
September 30, December 31,
2006 2005
------------- -------------
(Unaudited) (See Note)
Assets
Current assets
Cash and cash equivalents 302.2 735.2
Restricted cash 6.7 3.4
Marketable securities - 96.9
Accounts receivable - trade, less
allowances for doubtful accounts of GBP
58.9 (2006) and GBP 41.7 (2005) 409.7 191.8
Inventory for re-sale 12.1 -
Programming inventory 55.5 -
Prepaid expenses and other current assets 94.7 112.4
------------- -------------
Total current assets 880.9 1,139.7
Fixed assets, net 6,088.6 3,294.9
Goodwill 2,273.1 -
Reorganization value in excess of amounts
allocable to identifiable assets 193.0 193.0
Customer lists, net 1,129.4 247.6
Other intangible assets, net 66.5 2.4
Equity investments 387.5 -
Other assets, net of accumulated
amortization of GBP 15.7 (2006) and GBP
32.2 (2005) 173.9 110.9
------------- -------------
Total assets 11,192.9 4,988.5
============= =============
Liabilities and shareholders' equity
Current liabilities
Accounts payable 369.8 176.9
Accrued expenses and other current
liabilities 637.8 291.1
Interest payable 94.4 37.8
Deferred revenue 263.2 103.2
Current portion of long-term debt 151.5 0.8
------------- -------------
Total current liabilities 1,516.7 609.8
Long-term debt, net of current portion 6,055.5 2,279.2
Deferred revenue and other long-term
liabilities 194.1 134.3
Defered income taxes 77.0 9.2
------------- -------------
Total liabilities 7,843.3 3,032.5
------------- -------------
Commitments and contingent liabilities
Minority Interest 1.0 1.0
Shareholders' equity
Common stock 1.8 1.2
Additional paid-in capital 4,285.8 2,671.0
Treasury stock - (114.0)
Accumulated other comprehensive income 126.6 45.5
Accumulated deficit (1,065.6) (648.7)
------------- -------------
Total shareholders' equity 3,348.6 1,955.0
------------- -------------
Total liabilities and shareholders' equity 11,192.9 4,988.5
============= =============
Note: The balance sheet at December 31, 2005 has been derived from the
audited financial statements at that date.
*T
-0-
*T
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
(in GBP millions) (unaudited)
Nine months ended
September 30,
---------------------
2006 2005
---------- ----------
Net cash provided by operating activities 512.2 239.6
---------- ----------
Investing activities
Purchase of fixed assets (397.0) (216.3)
Income from equity investments 7.3 -
Acquisition of Telewest, net of cash acquired (2,024.2) -
Acquisition of Virgin Mobile, net of cash
acquired (423.5) -
Proceeds from the sale of fixed assets 0.9 2.6
Decrease in restricted cash 5.1 12.2
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 (2,831.4) 1,243.7
---------- ----------
Financing activities
Proceeds from employee stock option exercises 35.2 4.8
Purchase of stock - (114.0)
New borrowings 9,046.1 -
Principal payments on long-term debt (7,038.0) (781.7)
Financing fees (122.2) -
Capital lease payments (26.7) (0.6)
Dividends paid (5.1) -
---------- ----------
Net cash provided by (used in) financing
activities 1,889.3 (891.5)
---------- ----------
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 (3.1) 14.2
(Decrease) increase in cash and cash equivalents (433.0) 587.6
Cash and cash equivalents, beginning of period 735.2 125.2
---------- ----------
Cash and cash equivalents, end of period 302.2 712.8
========== ==========
*T
-0-
*T
QUARTERLY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in GBP millions, except per share data) (unaudited)
Three months ended
--------------------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2006 2006 2006 2005 2005
--------------------------------------------------
Revenue 1,024.9 884.3 611.4 484.6 482.7
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (440.0) (367.5) (254.9) (205.2) (200.2)
Selling, general
and administrative
expenses (267.1) (223.5) (158.1) (124.7) (116.2)
Other charges (30.9) (12.1) (8.4) (22.4) (1.3)
Depreciation (222.6) (219.3) (149.3) (139.5) (142.3)
Amortization (73.9) (55.6) (36.8) (27.2) (27.4)
--------------------------------------------------
Total costs and
expenses (1,034.5) (878.0) (607.5) (519.0) (487.4)
--------------------------------------------------
Operating
(loss)income (9.6) 6.3 3.9 (34.4) (4.7)
Other income
(expense)
Interest income and
other, net 7.1 8.6 8.6 7.8 6.8
Interest expense (113.2) (135.6) (83.8) (55.6) (51.7)
Share of
income(loss) from
equity investments 3.9 3.1 1.4 0.9 (0.2)
Foreign currency
transaction
gains(losses) 6.3 (94.1) (10.0) 35.2 (13.1)
Loss on
extinguishment of
debt (0.5) - (32.4) - (2.0)
Gains(losses) on
derivative
instruments 1.6 5.7 (9.2) - -
--------------------------------------------------
Loss from continuing
operations before
income taxes,
minority interest
and cumulative
effect of change in
accounting
principle (104.4) (206.0) (121.5) (46.1) (64.9)
Income tax
benefit(expense) 0.9 9.9 - (10.1) 12.4
Minority interest (0.7) 0.3 0.4 - (1.0)
Cumulative effect of
change in
accounting
principle - - 1.2 - -
--------------------------------------------------
Loss from continuing
operations (104.2) (195.8) (119.9) (56.2) (53.5)
--------------------------------------------------
Discontinued
operations
Income from
discontinued
operations before
income taxes - - - 0.2 -
Gain on disposal of
assets 8.1 - - (0.2) 1.4
Income tax expense - - - - -
--------------------------------------------------
Income from
discontinued
operations 8.1 0.0 0.0 0.0 1.4
--------------------------------------------------
Net (loss)income (96.1) (195.8) (119.9) (56.2) (52.1)
==================================================
Basic and diluted
loss from
continuing
operations per
share (GBP 0.32)(GBP 0.68)(GBP 0.49)(GBP 0.26)(GBP 0.25)
==================================================
Basic and diluted
income from
discontinued
operations per
share GBP 0.02 GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.01
==================================================
Basic and diluted
net loss per share (GBP 0.30)(GBP 0.68)(GBP 0.49)(GBP 0.26)(GBP 0.24)
==================================================
Average number of
shares outstanding 322.0 287.9 245.5 212.8 212.8
==================================================
*T
-0-
*T
B) GROUP RESIDENTIAL OPERATIONS STATISTICS
(data in 000's)
Group (1)
Q3-06 Q2-06 Q1-06 Q4-05 Q3-05
---------------------------------------------
Group RGUs
Opening RGUs 15,100.0 15,015.3 14,805.6 14,432.3 14,166.2
Data Cleanse (2) - (69.0) - (43.1) -
Adjusted Opening RGUs 15,100.0 14,946.3 14,805.6 14,389.2 14,166.2
Net RGU adds 171.4 153.7 209.7 428.7 266.1
Reduction to customer
count (3) - - - (12.3) -
---------------------------------------------
Closing Group RGUs 15,271.4 15,100.0 15,015.3 14,805.6 14,432.3
Group RGUs
On-net Telephone 4,178.3 4,233.0 4,268.1 4,260.0 4,285.0
On-net TV 3,315.4 3,293.1 3,315.9 3,310.3 3,288.7
On-net Broadband 2,980.4 2,902.3 2,821.7 2,630.3 2,466.5
---------------------------------------------
Total On-net 10,474.1 10,428.4 10,405.7 10,200.6 10,040.2
Off-net Telephone 42.8 47.6 53.2 60.3 64.4
Off-net Broadband 242.8 235.0 224.8 198.7 174.3
---------------------------------------------
Total Off-net 285.6 282.6 278.0 259.0 238.7
Mobile 4,511.7 4,389.0 4,331.6 4,346.0 4,153.4
---------------------------------------------
Total RGUs 15,271.4 15,100.0 15,015.3 14,805.6 14,432.3
Net RGU adds
On-net Telephone (54.6) (21.6) 8.1 0.8 2.6
On-net TV 22.2 8.3 5.6 23.3 (5.0)
On-net Broadband 78.1 104.9 191.4 191.7 205.1
---------------------------------------------
Total On-net 45.7 91.7 205.1 215.8 202.7
Off-net Telephone (4.8) (5.6) (7.1) (4.1) (8.7)
Off-net Broadband 7.8 10.2 26.1 24.4 27.9
---------------------------------------------
Total Off-net 3.0 4.6 19.0 20.3 19.2
Mobile 122.7 57.4 (14.4) 192.6 44.2
---------------------------------------------
Total Net RGU adds 171.4 153.7 209.7 428.7 266.1
Notes
(1) Subscriber information is on a pro forma combined basis assuming
that the merger with Telewest and the acquisition of Virgin
Mobile had occurred on January 1, 2005.
(2) Data cleanse activity in Q2-06 resulted in a decrease of 69,000
RGUs, a decrease of approximately 13,500 Telephone, 24,400
Broadband and 31,100 TV RGUs. Data cleanse activity in Q2-06 is a
result of more closely aligning customer definitions between old
NTL and old Telewest together with the removal of approximately
20,000 inactive backlog customers in old NTL. Data cleanse
activity in Q4-05 resulted in a decrease in old NTL of 43,100
RGUs, a decrease of approximately 17,700 Telephone, 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 an additional 10,000 customers, representing
approximatley 12,300 RGUs.
*T
-0-
*T
RESIDENTIAL CABLE OPERATIONS STATISTICS (excluding Off-net and Mobile)
(data in 000's except percentages, RGU/Customer and ARPU)
Pro forma new NTL (1)
Q3-06 Q2-06 Q1-06 Q4-05 Q3-05
------------------------------------------------------------
Customers
Opening
Customers 4,928.7 4,983.8 4,958.0 4,945.4 4,893.1
Data
Cleanse
(2) - (36.2) - (18.1) -
Adjusted
Opening
Customers 4,928.7 4,947.6 4,958.0 4,927.3 4,893.1
Gross
customer
adds 229.2 192.3 218.1 248.9 271.9
Total
Customer
disconn-
ections (266.5) (211.2) (192.3) (208.2) (219.6)
Net
customer
adds (37.3) (18.9) 25.8 40.7 52.3
Reduction
to
customer
count (3) - - - (10.0) -
------------------------------------------------------------
Closing
Customers 4,891.5 4,928.7 4,983.8 4,958.0 4,945.4
Monthly
customer
churn % 1.8% 1.5% 1.3% 1.4% 1.5%
Cable RGUs
Opening
RGUs 10,428.4 10,405.7 10,200.6 10,040.2 9,837.5
Data
Cleanse
(2) - (69.0) - (43.1) -
Adjusted
Opening
RGUs 10,428.4 10,336.7 10,200.6 9,997.1 9,837.5
Net RGU
adds 45.7 91.7 205.1 215.8 202.7
Reduction
to RGU
count (3) - - - (12.3) -
------------------------------------------------------------
Closing
RGUs 10,474.1 10,428.4 10,405.7 10,200.6 10,040.2
Net RGU
Adds
Telephone (54.6) (21.6) 8.1 0.8 2.6
Television 22.2 8.3 5.6 23.3 (5.0)
DTV 85.8 73.8 70.6 85.5 42.9
Broadband 78.1 104.9 191.4 191.7 205.1
------------------------------------------------------------
Total Net
RGU Adds 45.7 91.7 205.1 215.8 202.7
Revenue
Generating
Units
(RGUs)
Telephone 4,178.3 4,233.0 4,268.1 4,260.0 4,285.0
Television 3,315.4 3,293.1 3,315.9 3,310.3 3,288.7
DTV 2,922.0 2,836.2 2,786.5 2,715.9 2,637.5
Broadband 2,980.4 2,902.3 2,821.7 2,630.3 2,466.5
------------------------------------------------------------
Total RGUs 10,474.1 10,428.4 10,405.7 10,200.6 10,040.2
RGU /
Customer 2.14 2.12 2.09 2.06 2.03
Internet
Customers
Dial-up
and DTV
access 97.0 113.3 140.4 181.6 219.0
Broadband 2,980.4 2,902.3 2,821.7 2,630.3 2,466.5
------------------------------------------------------------
Total
Internet 3,077.4 3,015.6 2,962.1 2,811.9 2,685.6
Bundled
Customers
Dual RGU 1,798.3 1,838.9 1,939.1 2,033.2 2,114.5
Triple RGU 1,892.1 1,830.4 1,741.4 1,604.6 1,490.2
Percentage
of dual
or triple
RGUs 75.4% 74.4% 73.8% 73.4% 72.9%
Percentage
of triple
RGUs 38.7% 37.1% 34.9% 32.4% 30.1%
Cable ARPU GBP 42.48 GBP 42.21 GBP 41.50 GBP 41.27 GBP 41.28
ARPU
calculation:
On-net
revenues GBP 625,400 GBP 628,400 GBP 618,600 GBP 613,400 GBP 608,800
Average
customers 4,907.4 4,962.3 4,969.2 4,954.1 4,916.0
Homes
Marketable
On-net
Telephone 12,427.1 12,312.7 12,311.2 12,299.7 12,288.5
ATV 12,505.5 12,661.1 12,656.7 12,652.8 12,633.9
DTV 11,982.2 12,009.7 11,989.2 11,972.3 11,941.7
Broadband 11,815.4 11,766.2 11,745.7 11,613.6 11,583.2
Total
homes 12,505.5 12,661.1 12,656.7 12,652.8 12,633.9
Penetration
of Homes
Marketable
On-net
Telephone 33.6% 34.4% 34.7% 34.6% 34.9%
Television
- Total 26.5% 26.0% 26.2% 26.2% 26.0%
Television
- DTV 24.4% 23.6% 23.2% 22.7% 22.1%
Broadband 25.2% 24.7% 24.0% 22.6% 21.3%
Total
Customer 39.1% 38.9% 39.4% 39.2% 39.1%
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
Telephone, 24,400 Broadband and 31,100 TV RGUs. Data cleanse
activity in Q2-06 is a result of more closely aligning customer
definitions between old NTL and old Telewest together with the
removal of approximately 20,000 inactive backlog customers in old
NTL. 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 Telephone, 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 an additional 10,000 customers, representing
approximatley 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 Q1-06, filed with the SEC
on May 9, 2006.
*T
-0-
*T
RESIDENTIAL CABLE OPERATIONS STATISTICS (excluding Off-net and Mobile)
(data in 000's except percentages, RGU/Customer and ARPU)
Old Telewest (1&4)
Q3-06 Q2-06 Q1-06 Q4-05 Q3-05
--------------------------------------------------------
Customers
Opening
Customers 1,886.8 1,886.8 1,868.2 1,848.1 1,837.2
Data Cleanse
(2) - (3.7) - - -
Adjusted
Opening
Customers 1,886.8 1,883.1 1,868.2 1,848.1 1,837.2
Gross customer
adds 87.9 73.2 79.2 86.1 89.5
Total Customer
disconn-
ections (80.3) (69.5) (60.6) (66.0) (78.6)
Net customer
adds 7.6 3.7 18.6 20.1 10.9
Reduction to
customer
count (3) - - - - -
--------------------------------------------------------
Closing
Customers 1,894.4 1,886.8 1,886.8 1,868.2 1,848.1
Monthly
customer
churn % 1.4% 1.2% 1.1% 1.2% 1.4%
Cable RGUs
Opening RGUs 4,212.9 4,164.9 4,059.6 3,955.2 3,873.8
Data Cleanse
(2) - (4.6) - - -
Adjusted
Opening RGUs 4,212.9 4,160.3 4,059.6 3,955.2 3,873.8
Net RGU adds 60.4 52.6 105.3 104.4 81.4
Reduction to
RGU count (3) - - - - -
--------------------------------------------------------
Closing RGUs 4,273.3 4,212.9 4,164.9 4,059.6 3,955.2
Net RGU Adds
Telephone (5.1) 1.2 11.5 0.5 (2.8)
Television 17.1 1.2 3.3 19.0 16.8
DTV 26.3 15.2 21.4 42.6 38.6
Broadband 48.5 50.1 90.5 84.9 67.3
--------------------------------------------------------
Total Net RGU
Adds 60.4 52.5 105.3 104.4 81.4
Revenue
Generating
Units
(RGUs)
Telephone 1,693.8 1,698.9 1,698.4 1,686.9 1,686.4
Television 1,387.2 1,370.2 1,370.9 1,367.6 1,348.6
DTV 1,332.1 1,305.8 1,292.2 1,270.8 1,228.2
Broadband 1,192.3 1,143.8 1,095.6 1,005.1 920.2
--------------------------------------------------------
Total RGUs 4,273.3 4,212.9 4,164.9 4,059.6 3,955.2
RGU / Customer 2.26 2.23 2.21 2.17 2.14
Internet
Customers
Dial-up and
DTV access 29.1 32.3 44.3 57.9 73.2
Broadband 1,192.3 1,143.8 1,095.6 1,005.1 920.2
--------------------------------------------------------
Total Internet 1,221.4 1,176.1 1,139.9 1,063.0 993.4
Bundled
Customers
Dual RGU 695.2 721.8 756.9 794.0 812.6
Triple RGU 841.9 802.2 760.6 698.6 647.3
Percentage of
dual or
triple RGUs 81.1% 80.8% 80.4% 79.9% 79.0%
Percentage of
triple RGUs 44.4% 42.5% 40.3% 37.4% 35.0%
Cable ARPU GBP 45.61 GBP 45.46 GBP 45.15 GBP 45.13 GBP 45.11
ARPU
calculation:
On-net
revenues GBP 258,300GBP 257,600GBP 254,300GBP 251,900GBP 248,900
Average
customers 1,887.9 1,888.6 1,877.4 1,860.6 1,839.4
Homes
Marketable
On-net
Telephone 4,702.5 4,700.2 4,701.2 4,698.4 4,696.4
ATV 4,706.9 4,704.8 4,702.9 4,700.8 4,698.1
DTV 4,588.9 4,586.5 4,568.5 4,525.2 4,503.9
Broadband 4,588.9 4,586.5 4,568.5 4,525.2 4,503.9
Penetration
of Homes
Marketable
On-net
Telephone 36.0% 36.1% 36.1% 35.9% 35.9%
Television -
Total 29.5% 29.1% 29.1% 29.1% 28.7%
Television -
DTV 29.0% 28.5% 28.3% 28.1% 27.3%
Broadband 26.0% 24.9% 24.0% 22.2% 20.4%
Total Customer 40.2% 40.1% 40.1% 39.7% 39.3%
Old NTL on-net (1)
Q3-06 Q2-06 Q1-06 Q4 05 Q3-05
-------------------------------------------------------
Customers
Opening
Customers 3,042.0 3,097.0 3,089.8 3,097.3 3,055.9
Data Cleanse
(2) - (32.5) - (18.1) -
Adjusted
Opening
Customers 3,042.0 3,064.5 3,089.8 3,079.2 3,055.9
Gross
customer
adds 141.3 119.2 138.9 162.8 182.4
Total
Customer
disconn-
ections (186.2) (141.7) (131.7) (142.2) (141.0)
Net customer
adds (44.9) (22.5) 7.2 20.6 41.4
Reduction to
customer
count (3) - - - (10.0) -
-------------------------------------------------------
Closing
Customers 2,997.1 3,042.0 3,097.0 3,089.8 3,097.3
Monthly
customer
churn % 2.1% 1.6% 1.5% 1.6% 1.6%
Cable RGUs
Opening RGUs 6,215.5 6,240.8 6,141.0 6,085.0 5,963.7
Data Cleanse
(2) - (64.4) - (43.1) -
Adjusted
Opening
RGUs 6,215.5 6,176.4 6,141.0 6,041.9 5,963.7
Net RGU adds (14.7) 39.1 99.8 111.4 121.3
Reduction to
RGU count
(3) - - - (12.3) -
-------------------------------------------------------
Closing RGUs 6,200.8 6,215.5 6,240.8 6,141.0 6,085.0
Net RGU Adds
Telephone (49.5) (22.8) (3.4) 0.3 5.4
Television 5.2 7.1 2.3 4.3 (21.8)
DTV 59.5 58.6 49.2 42.9 4.2
Broadband 29.6 54.8 100.9 106.8 137.7
-------------------------------------------------------
Total Net
RGU Adds (14.7) 39.1 99.8 111.4 121.3
Revenue
Generating
Units
(RGUs)
Telephone 2,484.5 2,534.0 2,569.7 2,573.1 2,598.6
Television 1,928.1 1,922.9 1,945.0 1,942.7 1,940.1
DTV 1,589.9 1,530.4 1,494.3 1,445.1 1,409.3
Broadband 1,788.1 1,758.5 1,726.1 1,625.2 1,546.3
-------------------------------------------------------
Total RGUs 6,200.8 6,215.5 6,240.8 6,141.0 6,085.0
RGU /
Customer 2.07 2.04 2.02 1.99 1.96
Internet
Customers
Dial-up and
DTV access 67.9 81.0 96.1 123.7 145.9
Broadband 1,788.1 1,758.5 1,726.1 1,625.2 1,546.3
-------------------------------------------------------
Total
Internet 1,856.0 1,839.5 1,822.2 1,748.9 1,692.2
Bundled
Customers
Dual RGU 1,103.1 1,117.2 1,182.2 1,239.2 1,301.9
Triple RGU 1,050.2 1,028.2 980.8 906.0 842.9
Percentage
of dual or
triple RGUs 71.8% 70.5% 69.8% 69.4% 69.2%
Percentage
of triple
RGUs 35.0% 33.8% 31.7% 29.3% 27.2%
Cable ARPU GBP 40.52 GBP 40.21 GBP 39.28 GBP 38.96 GBP 38.99
ARPU
calculation:
On-net
revenues GBP 367,100GBP 370,800GBP 364,300GBP 361,500GBP 359,900
Average
customers 3,019.5 3,073.7 3,091.8 3,093.5 3,076.6
Homes
Marketable
On-net
Telephone 7,724.6 7,612.5 7,610.0 7,601.3 7,592.0
ATV 7,798.6 7,956.3 7,953.8 7,952.0 7,935.8
DTV 7,393.3 7,423.2 7,420.7 7,447.1 7,437.8
Broadband 7,226.6 7,179.7 7,177.2 7,088.4 7,079.3
Penetration
of Homes
Marketable
On-net
Telephone 32.2% 33.3% 33.8% 33.9% 34.2%
Television -
Total 24.7% 24.2% 24.5% 24.4% 24.4%
Television -
DTV 21.5% 20.6% 20.1% 19.4% 18.9%
Broadband 24.7% 24.5% 24.0% 22.9% 21.8%
Total
Customer 38.4% 38.2% 38.9% 38.9% 39.0%
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 Telephone, 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 Telephone, 22,400 Broadband and 29,200 TV
RGUs. Data cleanse activity in Q2-06 is a result of more closely
aligning customer definitions betwwen old NTL and old Telewest
together with the removal of approximately 20,000 inactive
backlog customers in old NTL. 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 Telephone, 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.
*T
-0-
*T
MOBILE OPERATIONS STATISTICS
(data in 000's except ARPU)
Mobile
Q3-06 Q2-06 Q1-06 Q4-05 Q3-05
----------------------------------------------------
Mobile Customers
(90 day active)
(1 & 2)
Opening
Customers 4,389.0 4,331.6 4,346.0 4,153.4 4,109.2
Net customer adds 122.7 57.4 (14.4) 192.6 44.2
----------------------------------------------------
Closing Mobile
Customers (90
day active) 4,511.7 4,389.0 4,331.6 4,346.0 4,153.4
Mobile monthly
ARPU (3) GBP 10.28
ARPU
calculation:
Service
revenue GBP 132,500
Average
customers 4,294.8
Notes
(1) Mobile customer information prior to acquisition has
been taken, without adjustment, from Virgin Mobile's
historical information.
(2) 90 day active customers - Prepay customers are defined as active
customers if they have made an outbound event in the preceding 90
days. Contract customers are defined as active customers if they
have been provisioned and have not been disconnected.
(3) Mobile monthly ARPU is calculated on total US GAAP service revenue
for the period since acquisition divided by the average 90 day
active customers for the period since acquisition, divided by
three.
NTL OFF-NET OPERATIONS STATISTICS
(data in 000's)
Off-net
Q3-06 Q2-06 Q1-06 Q4-05 Q3-05
----------------------------------------------------
Off-net RGUs
Opening RGUs 282.6 278.0 259.0 238.7 219.5
Net RGU adds 3.0 4.6 19.0 20.3 19.2
----------------------------------------------------
Closing off-net
RGUs 285.6 282.6 278.0 259.0 238.7
RGUs
Telephone 42.8 47.6 53.2 60.3 64.4
Broadband 242.8 235.0 224.8 198.7 174.3
----------------------------------------------------
Total RGUs 285.6 282.6 278.0 259.0 238.7
Net RGU Adds
Telephone (4.8) (5.6) (7.1) (4.1) (8.7)
Broadband 7.8 10.2 26.1 24.4 27.9
----------------------------------------------------
Total Net RGU
Adds 3.0 4.6 19.0 20.3 19.2
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C) SEGMENTAL ANALYSIS
(in GBP millions) (unaudited)
Actual Reported Three months ended
--------------------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2006 2006 2006 2005 2005
--------------------------------------------------
Revenue
Cable segment
Consumer 643.7 645.1 461.7 379.4 377.5
Business 162.3 160.1 122.8 105.2 105.2
--------------------------------------------------
Total 806.0 805.2 584.5 484.6 482.7
Inter segment
revenue (0.9) (0.4) (0.3) - -
--------------------------------------------------
805.1 804.8 584.2 484.6 482.7
--------------------------------------------------
Mobile segment
Virgin Mobile 140.4 - - - -
Inter segment
revenue - - - - -
--------------------------------------------------
140.4 - - - -
--------------------------------------------------
Content segment
Flextech 37.8 40.1 12.8 - -
Sit-up 47.5 45.1 16.2 - -
--------------------------------------------------
Total 85.3 85.2 29.0 - -
Inter segment
revenue (5.9) (5.7) (1.8) - -
--------------------------------------------------
79.4 79.5 27.2 - -
--------------------------------------------------
--------------------------------------------------
Total revenue 1,024.9 884.3 611.4 484.6 482.7
--------------------------------------------------
Segment OCF
Cable segment OCF 296.3 284.5 195.4 154.7 166.3
Mobile segment OCF 16.0 - - - -
Content segment
OCF 5.5 8.8 3.0 - -
--------------------------------------------------
OCF (Total) 317.8 293.3 198.4 154.7 166.3
--------------------------------------------------
Pro forma (for
merger with
Telewest) Three months ended
--------------------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2006 2006 2006 2005 2005
--------------------------------------------------
Reported Reported Pro Forma Pro Forma Pro Forma
Revenue
Cable segment
Consumer 643.7 645.1 637.2 631.6 626.7
Business 162.3 160.1 165.6 168.2 169.1
--------------------------------------------------
Total 806.0 805.2 802.8 799.8 795.8
Inter segment
revenue (0.9) (0.4) (0.5) (0.4) (0.7)
--------------------------------------------------
805.1 804.8 802.3 799.4 795.1
--------------------------------------------------
Mobile segment
Virgin Mobile 140.4 - - - -
Inter segment
revenue - - - - -
--------------------------------------------------
140.4 - - - -
--------------------------------------------------
Content segment
Flextech 37.8 40.1 39.9 37.7 36.0
Sit-up 47.5 45.1 51.9 84.1 57.5
--------------------------------------------------
Total 85.3 85.2 91.8 121.8 93.5
Inter segment
revenue (5.9) (5.7) (5.3) (5.1) (5.4)
--------------------------------------------------
79.4 79.5 86.5 116.7 88.1
--------------------------------------------------
--------------------------------------------------
Total revenue 1,024.9 884.3 888.8 916.1 883.2
--------------------------------------------------
Segment OCF
Cable segment OCF 296.3 284.5 267.6 283.2 299.5
Mobile segment OCF 16.0 - - - -
Content segment
OCF 5.5 8.8 9.4 8.8 7.8
--------------------------------------------------
OCF (Total) 317.8 293.3 277.0 292.0 307.3
--------------------------------------------------
Notes: Segment OCF includes inter segment revenue and costs as
applicable. OCF (Total) is a non-GAAP financial measure - see
Appendix F.
The pro forma information presented in this schedule in respect of the
three months ended 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 December 31
and September 30, 2005 has been prepared on a basis as if the merger
with Telewest had occurred on January 1, 2005.
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D) Fixed Asset Additions (Accrual Basis)
(in GBP millions) (unaudited)
Three months ended
--------------------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2006 2006 2006 2005 2005
--------------------------------------------------
NCTA Fixed Asset
Additions
CPE 57.8 48.6 40.1 31.6 32.0
Scaleable
infrastructure 33.6 36.9 52.1 48.7 27.8
Commercial 16.4 19.6 11.4 6.2 8.2
Line extensions 1.3 1.0 0.5 - -
Upgrade/rebuild 3.5 4.1 3.8 2.5 2.3
Support capital 26.5 22.6 9.5 7.5 6.3
--------------------------------------------------
Total NCTA Fixed
Asset Additions 139.1 132.8 117.4 96.5 76.6
Non NCTA Fixed Asset
Additions 8.2 1.1 0.4 (1.9) (0.3)
--------------------------------------------------
Total Fixed Asset
Additions (accrual
basis) 147.3 133.9 117.8 94.6 76.3
Change in capital
accruals (13.7) (5.8) 17.5 (22.8) (4.4)
--------------------------------------------------
Total Purchase of
Fixed Assets 133.6 128.1 135.3 71.8 71.9
==================================================
Note: NTL is not a member of NCTA and is providing this information
solely for comparative purposes.
Fixed Asset Additions (accrual basis) are from continuing operations.
See Appendix F for a discussion of the use of Fixed Asset Additions
(accrual basis) as a non-GAAP financial measure and the
reconciliation of Fixed Asset Additions (accrual basis) to GAAP
Purchase of Fixed Assets.
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E) Proforma Combined Condensed Financial Information
(in GBP millions) (unaudited)
Three months ended
----------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2006 2006 2006 2005 2005
----------------------------------------
Reported Reported Pro Pro Pro
Forma Forma Forma
Revenue 1,024.9 884.3 888.8 916.1 883.2
Costs and expenses
Operating costs (exclusive
of depreciation shown
separately below) (440.0) (367.5) (369.0) (399.1)(362.0)
Selling, general and
administrative expenses (267.1) (223.5) (242.8) (225.0)(213.9)
Other charges (30.9) (12.1) (8.9) (22.4) (1.3)
Depreciation (222.6) (219.3) (210.4) (229.2)(232.0)
Amortization (73.9) (55.6) (58.6) (59.8) (60.0)
----------------------------------------
(1,034.5) (878.0) (889.7) (935.5)(869.2)
----------------------------------------
Operating (loss)income (9.6) 6.3 (0.9) (19.4) 14.0
Other income (expense)
Interest income and other,
net 7.1 8.6 8.3 7.4 6.0
Interest expense (113.2) (135.6) (112.0) (126.9)(119.2)
(Loss) on extinguishment of
debt (0.5) - (32.4) - (2.0)
Other, net 1.6 5.7 (9.2) 4.0 -
Share of income from equity
investments 3.9 3.1 5.0 2.5 3.9
Foreign currency transaction
(losses) gains 6.3 (94.1) (8.6) 33.0 (13.9)
----------------------------------------
(Loss) from continuing
operations before income
taxes (104.4) (206.0) (149.8) (99.4)(111.2)
Income tax benefit (expense) 0.9 9.9 - (12.6) 12.9
Minority interest (0.7) 0.3 0.4 - (1.0)
Cumulative effect of a change
in accounting principle - - 2.0 - -
----------------------------------------
(Loss) from continuing
operations (104.2) (195.8) (147.4) (112.0) (99.3)
----------------------------------------
Reconciliation of Pro Forma
OCF to Pro Forma Operating
income (loss)
Pro Forma OCF 317.8 293.3 277.0 292.0 307.3
Less:
Other charges (30.9) (12.1) (8.9) (22.4) (1.3)
Depreciation (222.6) (219.3) (210.4) (229.2)(232.0)
Amortization (73.9) (55.6) (58.6) (59.8) (60.0)
----------------------------------------
Pro Forma Operating income
(loss) (9.6) 6.3 (0.9) (19.4) 14.0
----------------------------------------
The pro forma information presented in these schedules in respect of
the three months ended 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
December 31 and September 30, 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 below for
further explanation of the adjustments made.
These pro forma operating results are not necessarily indicative of
the results that would have been achieved if the merger with Telewest
had occurred on January 1, 2006 or January 1, 2005, and undue
reliance should not be placed on this information.
No pro forma financial information has been included in these
schedules in respect of the results of Virgin Mobile prior to its
acquisition.
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.
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.
For the three months ended December 31, and 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.
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F) Use of non-GAAP Financial Measures and Reconciliations to GAAP
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 investors to review our
financial statements and publicly-filed reports in their entirety and
to not rely on any single financial measure.
(i) 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.
(in GBP millions) (unaudited) Three months ended
---------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2006 2006 2006 2005 2005
---------------------------------------
Reconciliation of operating income before depreciation, amortization
and other charges (OCF) to GAAP operating (loss)income
Operating income before
depreciation, amortization and
other charges (OCF) 317.8 293.3 198.4 154.7 166.3
Reconciling items
Other charges (30.9) (12.1) (8.4) (22.4) (1.3)
Depreciation and
amortization (296.5) (274.9) (186.1) (166.7)(169.7)
---------------------------------------
Operating (loss)income (9.6) 6.3 3.9 (34.4) (4.7)
=======================================
Reconciliation of pro forma operating income before depreciation,
amortization and other charges (OCF) to GAAP operating (loss)income
Pro forma operating income
before depreciation,
amortization and other charges
(OCF) 317.8 293.3 277.0 292.0 307.3
Reconciling items
Depreciation and
amortization (296.5) (274.9) (186.1) (166.7)(169.7)
Other charges (30.9) (12.1) (8.4) (22.4) (1.3)
Telewest pro forma operating
loss(income) - - 4.8 (15.0) (18.7)
Telewest pro forma
depreciation and
amortization - - (82.9) (122.3)(122.3)
Telewest pro forma other
charges - - (0.5) - -
---------------------------------------
Operating (loss)income (9.6) 6.3 3.9 (34.4) (4.7)
=======================================
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(ii) 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 or liquidity reported in
accordance with GAAP.
Reconciliation of net debt to GAAP Total liabilities
(in GBP millions) (unaudited) Sep 30, Dec 31,
2006 2005
-------- --------
Net Debt 5,904.8 1,447.9
Cash and cash equivalents 302.2 735.2
Marketable securities - 96.9
-------- --------
Long-term debt, including current portion 6,207.0 2,280.0
Accounts payable 369.8 176.9
Accrued expenses and other current liabilities 637.8 291.1
Interest payable 94.4 37.8
Deferred revenue and other long-term liabilities 457.3 237.5
Deferred income taxes 77.0 9.2
-------- --------
Total liabilities 7,843.3 3,032.5
======== ========
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(iii) 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
network 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 performance 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
-----------------------------------------
Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
2006 2006 2006 2005 2005
-------- -------- ------- ------- -------
Reported Reported Pro Pro Pro
Forma Forma Forma
Pro forma Fixed Asset GBP GBP GBP GBP GBP
Additions (accrual basis) 147.3 133.9 158.3 158.6 144.3
Pre-acquisition Telewest
Fixed Asset Additions
(accrual basis) - - (40.5) (64.0) (68.0)
-------- -------- ------- ------- -------
Fixed Asset Additions GBP GBP GBP GBP GBP
(accrual basis) 147.3 133.9 117.8 94.6 76.3
Changes in liabilities
related to Fixed Asset
Additions (accrual basis) (13.7) (5.8) 17.5 (22.8) (4.4)
-------- -------- ------- ------- -------
Purchase of Fixed Assets GBP GBP GBP GBP GBP
133.6 128.1 135.3 71.8 71.9
======== ======== ======= ======= =======
*T
Conference Call
There will be a conference call for analysts and investors today
at 0900 EDT/ 1400 UK time. Analysts and investors can dial in to the
presentation by calling +1 617 213 8892 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 until Wednesday,
November 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: 32682745.