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