NTL Incorporated (NASDAQ: NTLI) announces results for the quarter
ended June 30, 2006 - the first full quarter since NTL merged with
Telewest Global, Inc. on March 3, 2006. This earnings release
contains historical financial information on both an actual
reported basis and a pro forma basis. The pro forma results for the
quarter ended March 31, 2006 assume that the merger took place on
January 1, 2006 and the pro forma results for 2005 quarterly
periods assume that the merger took place on January 1, 2005.
Quarterly highlights(1) -- Strong OCF and consumer revenue growth
-- Strong operating income growth -- ARPU of GBP 42.21, up GBP 0.71
vs Q1-06 -- RGU per customer of 2.12, up from 2.09 at Q1-06 --
Triple play penetration of 37.1%, up from 34.9% at Q1-06 --
Estimated GBP 15m of synergy savings achieved in quarter -- Virgin
Mobile acquisition - first true quad-play to be offered -- Virgin
brand licence agreed, enabling rebranding of entire consumer
business 1 - operational statistics for prior periods prepared on a
pro forma basis -0- *T (GBP millions) (unaudited) Reported Pro
forma Reported -------- -------- -------- Q2 2006 Q1 2006 Q1 2006
-------- -------- -------- Revenue Consumer 644.7 636.7 461.4
Business 160.1 165.6 122.8 -------- -------- -------- Total Cable
804.8 802.3 584.2 Content 79.5 86.5 27.2 -------- -------- --------
Total Revenue 884.3 888.8 611.4 OCF 293.3 277.0 198.4 Operating
income/(loss) 6.3 (0.9) 3.9 *T OCF in the second quarter of 2006
has been negatively impacted by costs relating to the merger with
Telewest, including GBP 13.7m of merger integration costs (pro
forma Q1-06: GBP 5.8m) such as third party costs for planning and
implementing the merger integration and costs of our internal
"merger office". Costs like these will recur as we continue our
drive to realize merger synergies. We also incurred an estimated
GBP 5.5m of additional stock based compensation expense arising
from the revaluation of Telewest stock options on the merger (pro
forma Q1-06: GBP 2.8m). For further discussion, please see
Operational Review. OCF is operating income before depreciation,
amortization and other charges and is a non-GAAP measure. The pro
forma presentation set forth above and elsewhere in this earnings
release is non-GAAP financial information. Please see Appendix F
for reconciliation of non-GAAP terms to their nearest GAAP
equivalents. Steve Burch, Chief Executive Officer of NTL, said: "We
are delighted with today's strong operational and financial
results. They show continued evidence of improvements in our
consumer business. Consumer revenue, OCF, ARPU, RGU per customer
and triple play penetration have all improved sharply as we focused
our strategy on acquiring profitable quality customers. As
expected, this did impact overall customer levels slightly. We also
achieved GBP 15 million of estimated synergy cost savings in this
quarter, which puts us firmly on track to achieve the GBP 250
million run rate as promised by the end of 2007. Now that we have
closed the Virgin Mobile transaction, we can really start to reap
the benefits of being able to exploit our bundling, branding and
network strengths along with new channels to market. The launch of
quad-play and Free TV bundles will provide more opportunities to
offer our consumers unbeatable value and service, whatever their
communication and entertainment needs. By continuing to exploit our
competitive strengths, delivering on the growth opportunities in
our markets, and capturing substantial merger synergies, we believe
we can drive significant free cash flow generation going forward.
This will provide us with excellent financial flexibility and
improved capital deployment options." OPERATIONAL REVIEW The
commentary below refers to financial results prepared on both an
actual reported and pro forma basis. The historical actual reported
results consolidate Telewest from March 3, 2006, the date of the
closing of the merger between NTL and Telewest. The pro forma
financial information for the first quarter of 2006 assumes that
the merger with Telewest occurred on January 1, 2006. The pro forma
results for 2005 quarterly periods assume that the merger occurred
on January 1, 2005. All historical references to operational
statistics including customer and subscriber figures, ARPU and
churn are on a pro forma basis. The pro forma financial information
is non-GAAP financial information that management believes
facilitates a comparative analysis of developments in the Company's
business. Total revenue in the quarter was GBP 884.3 million, up
GBP 272.9 million sequentially compared with the first quarter of
2006 and up GBP 401.8 million compared to the second quarter of
2005, due mainly to the acquisition of Telewest. Total revenue in
the quarter was down GBP 4.5 million compared to the pro forma
previous quarter, principally due to reduced Business and sit-up
revenue, partially offset by growth in Consumer and Flextech. Total
revenue was up GBP 24.4 million compared to the pro forma second
quarter of 2005 due mainly to Telewest's acquisition of sit-up in
May 2005. Cable Segment Consumer Consumer revenue in the second
quarter was GBP 644.7 million, up GBP 183.3 million sequentially
compared with the first quarter and GBP 265.8 million compared to
the second quarter of 2005, due mainly to the acquisition of
Telewest. Consumer revenue was up GBP 8.0 million sequentially
compared to the pro forma first quarter primarily due to a sharp
increase in ARPU to GBP 42.21 from GBP 41.50 in the previous
quarter. As expected, customer growth has been affected by our
strategy to integrate the two cable businesses and to share best
practices across the group's operations. This has improved ARPU,
RGU per customer and triple play penetration but has had an impact
on overall customer levels. We expect this impact will continue
into the second half as we continue to focus on improving our
operational performance, targeting more profitable consumers, and
delivering a better experience to our customers. We anticipated
that customer net additions would be lower than the first quarter,
and this was borne out in the results. Net customer disconnects
were 18,900 in the second quarter, compared to 25,800 net customer
additions in the previous quarter and to 62,500 net customer
additions in the same quarter last year. Specific reasons for this
impact include an increased focus on quality growth at old NTL,
some increase in competitive pressure and a higher level of house
moves than has been typical historically. To focus on better
quality growth, we have more closely aligned old NTL up-front
credit policies with those of old Telewest, with the effect of
reducing gross customer acquisition levels in old NTL. When
Telewest implemented a similar policy change in 2003, it
experienced two quarters of customer losses before churn benefits
were realized. This effort is intended to promote quality growth
rather than overall customer growth, and is being demonstrated in
improved ARPU, as described above. ARPU growth reflects our
successful focus on selling profitable product bundles, on
cross-sell and up-sell to existing customers as well as selected
price increases. This is reflected in growth in RGU per customer
from 2.09 to 2.12 and in triple play penetration which grew from
34.9% to 37.1% during the quarter. The success of this focus was
most apparent in old NTL where ARPU grew by GBP 0.93 to GBP 40.21 n
the quarter. Competitive activity has had some impact on overall
acquisition levels. In response to our aggressive and ambitious
move into the quad-play arena with the prospect of the Virgin
brand, competition in our sector has intensified. However, we are
confident in our ability to compete on value, quality, technology,
service and brand. As a result, this pressure from increased
competition may be expected to have some impact, but we believe it
should lessen over time. Any estimate of the impact on customer
acquisition is inherently subjective, however we estimate that
roughly 10,000 to 15,000 of the reduction in gross customer
additions relates to increased competitive pressure. We are
addressing this with the launch of our new offers including Free TV
bundles and quad-play and remain confident that our expertise in
marketing triple play will result in consumer demand for simple,
accessible and good value products. Customer growth was also
impacted by higher churn at 1.5%, which was up from 1.3% in the
previous quarter and up from 1.4% for the second quarter of 2005.
As anticipated, churn rose due to seasonal factors such as
increased house moves and student churn as well as being impacted
by the credit policy changes. We believe that the percentage of
house moves was higher than the same quarter last year. We do not
believe that churn was materially impacted by increased competition
due to the costs of moving from cable broadband to DSL. Positive
customer net additions in old Telewest areas were outweighed by net
disconnections in old NTL areas. We expect this to occur again in
the third quarter due to the credit policy changes we have made at
old NTL. (As mentioned above, when Telewest underwent similar
policy changes in 2003, it had two quarters of customer losses
before churn benefits were realized.) In addition, as part of our
focus on quality profitable growth, we are managing a shift to more
profitable sales channels, which will lead to reduced acquisitions
from our direct sales channels. As a result of the above, positive
customer growth will continue to be challenging in the third
quarter. Net RGU additions were 91,700 in the second quarter,
compared to 205,100 in the first quarter and to 196,100 in the
second quarter of 2005. RGU growth was lower in the second quarter
compared to the previous quarter for the reasons outlined above
relating to overall customer growth. During the quarter, we
instituted a post-merger review of our customer and RGU reporting
across all four of our existing billing systems. As a result of
data cleanse and alignment of customer and RGU definitions across
the two companies, our customer count has been reduced by
approximately 0.7% (or 36,200) and RGU count by approximately 0.7%
(or 69,000.) We are planning to integrate old NTL's three existing
billing systems onto the existing system used by Telewest over the
next fifteen months. As a result, it is probable that further
adjustments to customer numbers will take place at the time of
those conversions. These adjustments in raw customer numbers and
RGU numbers do not have any impact on revenue or OCF. Broadband We
continue to experience good growth in the number of broadband
subscribers, with net additions of 104,900 in the quarter, compared
to 191,400 in the previous quarter and 149,800 in the same quarter
last year. In the second quarter of last year, broadband growth had
been boosted by the introduction in old NTL of a GBP 9.99
standalone broadband offer, which has not been repeated. Broadband
penetration stands at 24.7% of our homes marketable, leaving
significant room for further growth. As an end-to-end network
owner, we have competitive strengths in the quality of broadband
service that we offer. Customers can receive consistent speeds no
matter where they live on our network and our top speeds of 10Mb
are available throughout our addressable areas. We are also
increasing our entry level speed in old NTL areas to 2Mb in
September which will then be the consistent entry tier across the
entire group. Television Digital television net additions were
73,800, compared to 70,600 in the previous quarter and to 57,100 in
the second quarter of 2005. Total TV net additions, which includes
analog television, were 8,300 in the quarter compared to 5,600 in
the previous quarter and to 13,200 in the same quarter last year.
Our roll-out of exciting new television products continues.
Video-on-demand (VOD) is now available to around 80% of our digital
subscribers and digital video recorders (DVR) and high definition
TV (HDTV) are available in old Telewest areas where we currently
have 34,000 subscribers with the HD compatible DVR box. We continue
to add to our line-up of VOD and HDTV content. Cable was the first
platform in the UK to launch HDTV and was the only TV platform in
the UK to offer all broadcasted World Cup football matches in HDTV.
Television remains a focus for ARPU enhancements. In old Telewest,
we increased the price of our top two basic packages and Sky
premium channels in March, 2006 and in old NTL we increased some
basic package prices in July, 2006, and plan to increase certain
premium channel prices in September, 2006. Our HDTV/DVR service is
charged at GBP 10 per month for customers on the top basic service.
Our wide and comprehensive range of television services allows us
to retain a competitive advantage over competing platforms.
Telephony Telephony net disconnections were 21,600 in the quarter,
compared to 8,100 net additions in the previous quarter and to
33,100 net additions in the same quarter last year. We have
continued our strategy of migrating subscribers to flat rate
packages to reduce the impact of declining fixed line telephony
usage. We have recently launched a unique new bundled minutes phone
package, Talk Anywhere, offering all domestic, international,
internet and even mobile phone calls for a single fixed price. In
addition, we acquired Virgin Mobile Holdings (UK) plc, or Virgin
Mobile, on July 4, 2006. This exciting transaction, amongst other
things, will allow us to cross-sell Virgin Mobile products and
services to our fixed-line telephone subscribers. We increased the
price of telephony line rental from GBP 10.50 to GBP 11.00 in June.
Off-net Consumer off-net revenue was GBP 16.3 million in the second
quarter, compared to GBP 18.0 million in the previous quarter and
GBP 17.6 million in the same quarter last year. These revenues are
largely from Virgin.net, our wholly owned broadband ISP. As at the
quarter end, Virgin.net had 205,300 broadband subscribers. Business
Business revenue in the second quarter was GBP 160.1 million, up
GBP 37.3 million sequentially and up GBP 56.5 million compared to
the second quarter of 2005 due mainly to the acquisition of
Telewest. Business revenue was down GBP 5.5 million compared to the
pro forma previous quarter mainly due to reductions in wholesale
and other contract renewals. In line with our continued focus on
corporate and mid-market customers, we have experienced a shift in
revenue mix, with data revenues growing compared to the pro forma
second quarter last year and constituting a higher percentage of
total Business revenues. In the short term, we believe business
voice and data services remain a challenging market in the UK.
However, we believe we are well positioned for long-term growth,
with a lower unit network cost than our competitors, a strong
capable network and a substantial increase in scale from the
Telewest merger, which should enable us to take on our competition
with greater success. Cable Segment OCF Cable segment OCF in the
quarter was GBP 284.5 million, up GBP 120.3 million as compared to
the same quarter last year, and up GBP 89.1 million compared to the
previous quarter due mainly to the merger with Telewest. The cable
segment's OCF in the quarter was up GBP 16.9 million as compared to
the pro forma second quarter due mainly to the non-recurrence of
certain costs relating to the merger with Telewest, detailed
further below. Content Segment The Content segment consists of two
businesses, Flextech and sit-up. Content revenue, after inter
segment elimination, in the second quarter was GBP 79.5 million,
comprising GBP 34.4 million from Flextech and GBP 45.1 million from
sit-up, compared to GBP 27.2 million Content revenue in the prior
quarter and GBP nil Content revenue in the second quarter of 2005,
due entirely to the acquisition of Telewest on March 3, 2006.
Flextech has historically sold programming to NTL, as well as to
Telewest. For pro forma consolidation purposes therefore, these
amounts have been eliminated. Total Content revenue, after inter
segment elimination, was up GBP 26.2 million on the pro forma
second quarter of 2005 due to the acquisition of sit-up by Telewest
in May 2005. Content revenue was down GBP 7.0 million on the pro
forma previous quarter mainly due to a reduction in sit-up
revenues. Flextech revenue, after inter segment elimination, was
GBP 34.4 million in the quarter, relatively flat as compared to the
pro forma previous quarter and up 17.8% on the pro forma second
quarter of 2005. Flextech advertising revenue was GBP 21.0 million
in the second quarter, down GBP 1.0 million on the pro forma
previous quarter but up GBP 5.3 million on the pro forma same
quarter last year, resulting primarily from increased share of the
advertising revenue market due to the prior year growth in
commercial impacts. Flextech subscription revenue before inter
segment elimination was relatively flat compared to the pro forma
previous quarter at GBP 14.6 million, but up 6.6% on the same
quarter last year, due to increased multi-channel penetration.
Sit-up revenue was GBP 45.1 million in the quarter, relatively flat
as compared to the same quarter last year (as reported by sit-up
under UK GAAP before its acquisition by Telewest.) Revenue was down
GBP 6.8 million from the previous quarter on a pro forma basis, due
principally to the seasonal downturn associated with Easter and
weak viewing and demand during the World Cup. Content segment OCF
in the quarter was GBP 8.8 million after inter segment
eliminations, up GBP 8.8 million as compared to the same quarter
last year and up GBP 5.8 million compared to the prior quarter due
to the merger with Telewest. The content segment's OCF in the
quarter, before inter segment eliminations of GBP 14.5 million, was
up GBP 3.2 million as compared to the pro forma same quarter last
year and down by GBP 0.2 million from the pro forma prior quarter.
Operating income before depreciation, amortization and other
charges (OCF) OCF in the second quarter was GBP 293.3 million, up
GBP 94.9 million sequentially compared to the first quarter and up
GBP 129.1 million compared to the second quarter of 2005, mainly
due to the merger with Telewest. OCF in the second quarter was up
GBP 16.3 million from the pro forma previous quarter, mainly due to
the non-recurrence of certain transaction costs relating to the
Telewest merger transaction, such as investment banking fees and
insurance costs. Second quarter OCF was also impacted negatively by
other costs associated with the merger integration. Some of these
costs can be expected to recur as we continue our drive to realize
synergies from the Telewest merger. These costs include: -- Third
party costs of GBP 10.8 million principally for planning and
implementing the merger integration, compared to GBP 3.6 million in
the first quarter of 2006. -- Estimated additional selling, general
and administrative expense (SG&A) of approximately GBP 2.9
million due to the costs of our internal "merger office", a
department staffed by employees working predominantly on the
integration of the two businesses. This compares to GBP 2.2 million
in the first quarter of 2006. -- An estimated GBP 5.5 million of
additional stock-based compensation expense (SBCE) from the
revaluation at the time of the merger of stock options issued to
Telewest personnel. For the first quarter of 2006, the amount was
GBP 2.8 million on a pro forma basis. OCF in the second quarter
benefited from approximately GBP 11 million of estimated synergy
cost savings resulting from the merger. This was offset, however,
by the total merger implementation costs incurred in the quarter of
GBP 14 million. We expect implementation costs to roughly equal the
synergy savings in the third quarter. We continue to expect to
achieve a run rate of GBP 250 million of synergy savings by the end
of 2007, consisting of GBP 200m of operational expenditure savings
and GBP 50 million of capital expenditure savings. The
implementation costs to achieve this are expected to be GBP 250
million in total, with just over half being incurred in 2006, split
roughly as to two-thirds of operating expenditure and one-third of
capital expenditure. We expect OCF in the third quarter to be
impacted by some extra costs including increased marketing
expenditure, increased investment in customer care, increased SBCE
costs relating to senior management, and the cost of the Virgin
brand trade license. OCF and pro forma OCF are non-GAAP measures.
See Appendix F for reconciliation of non-GAAP measures to their
nearest GAAP equivalents. Operating income, loss from continuing
operations and net loss Operating income in the second quarter was
GBP 6.3 million, compared to GBP 6.4 million in the second quarter
of 2005. The increase in OCF arising from the acquisition of
Telewest was offset by additional depreciation and amortization,
also arising from the acquisition of Telewest, together with an
increase in other charges. Other charges of GBP 12.1 million in the
second quarter represent old NTL employee termination and property
exit costs in connection with the merger integration restructuring
program. Loss from continuing operations in the second quarter was
GBP 195.8 million, compared to GBP 66.1 million in the second
quarter of 2005. The increased loss was driven primarily by an
increase in interest expense from the indebtedness incurred to
acquire Telewest and an increase of GBP 81.3 million in foreign
currency transaction losses. Net loss was GBP 195.8 million in the
second quarter compared to net income of GBP 73.5 million in the
same quarter last year, which included a GBP 141.4 million gain on
the disposal of our Ireland business. Capital Expenditure Fixed
asset additions (accrual basis) in the quarter were GBP 133.9
million, an increase of GBP 16.1 million as compared to the
previous quarter, and an increase of GBP 63.7 million as compared
to the second quarter of 2005, due mainly to the acquisition of
Telewest. Fixed asset additions (accrual basis) in the quarter were
down GBP 24.4 million as compared to the pro forma previous
quarter, and up GBP 4.7 million as compared to the second quarter
of 2005. Fixed asset additions (accrual basis) and pro forma fixed
asset additions (accrual basis) are non-GAAP financial measures.
See Appendix F for reconciliation of non-GAAP measures to their
nearest GAAP equivalents. Net Debt As of June 30, 2006, net debt
was GBP 5,396 million. This consisted of GBP 4,400 million
outstanding on the company's Senior Credit Facilities, GBP 567
million of Senior Bridge financing, GBP 760 million of Senior
notes, and GBP 110 million of capital leases and other, offset by
GBP 441 million of cash and cash equivalents. The acquisition of
Virgin Mobile Holdings (UK) plc took place following the quarter
end on July 4, 2006. NTL paid for the acquisition through the
issuance of 34.4 million shares of NTL common stock and GBP 418
million of cash. Since the end of the quarter, NTL has completed
the refinancing of its debt following the acquisitions of both
Telewest and Virgin Mobile. As a result, gross debt was GBP 6,326
million. This consisted of three tranches of Senior Credit
Facilities, a GBP 3,525 million "A" tranche, a GBP 1,340 million
"B" tranche and a GBP 300 million "C" tranche of Senior Credit
Facilities, GBP 757 million of existing Senior Notes, $550 million
of new Senior Notes and GBP 110 million of capital leases and
other. Net debt is a non-GAAP financial measure. See Appendix F for
reconciliation of non-GAAP measures to their nearest GAAP
equivalents. "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: Various statements contained in this
document constitute "forward-looking statements" as that term is
defined under the Private Securities Litigation Reform Act of 1995.
Words like "believe," "anticipate," "should," "intend," "plan,"
"will," "expects," "estimates," "projects," "positioned,"
"strategy," and similar expressions identify these forward-looking
statements, which involve known and unknown risks, uncertainties
and other factors that may cause our actual results, performance or
achievements or industry results to be materially different from
those contemplated, projected, forecasted, estimated or budgeted,
whether expressed or implied, by these forward-looking statements.
These factors include: (1) the failure to obtain and retain
expected synergies from the merger with Telewest and the
acquisition of Virgin Mobile; (2) rates of success in executing,
managing and integrating key acquisitions, including the merger
with Telewest and the acquisition of Virgin Mobile; (3) the ability
to achieve business plans for the combined company; (4) the ability
to manage and maintain key customer relationships; (5) the ability
to fund debt service obligations through operating cash flow; (6)
the ability to obtain additional financing in the future and react
to competitive and technological changes; (7) the ability to comply
with restrictive covenants in NTL's indebtedness agreements; (8)
the ability to control customer churn; (9) the ability to compete
with a range of other communications and content providers; (10)
the effect of technological changes on NTL's businesses; (11) the
functionality or market acceptance of new products that NTL may
introduce; (12) possible losses in revenues due to systems
failures; (13) the ability to maintain and upgrade NTL's networks
in a cost-effective and timely manner; (14) the reliance on
single-source suppliers for some equipment and software; (15) the
ability to provide attractive programming at a reasonable cost; and
(16) the extent to which NTL's future earnings will be sufficient
to cover its fixed charges. These and other factors are discussed
in more detail under "Risk Factors" and elsewhere in NTL's Form
10-K and NTL Holdings Inc.'s Form 10-K that were filed with the SEC
on February 28, 2006 and March 1, 2006, respectively. We assume no
obligation to update our forward-looking statements to reflect
actual results, changes in assumptions or changes in factors
affecting these statements. NTL-Telewest Merger On March 3, 2006,
NTL Holdings Inc, (formerly known as NTL Incorporated) merged with
a subsidiary of NTL Incorporated (formerly known as Telewest
Global, Inc.). Because this transaction is accounted for as a
reverse acquisition, the actual reported financial information
included in this release is of the corporation now known as NTL
Holdings Inc. for the period through March 3, 2006 and thereafter
it reflects the reverse acquisition of Telewest Global, Inc. The
pro forma financial information treats the merger as if it occurred
at the beginning of the relevant year. Virgin Mobile Acquisition On
July 4, 2006. NTL Incorporated completed the acquisition of Virgin
Mobile Holdings (UK) plc, or Virgin Mobile. Virgin Mobile is the
UK's leading virtual mobile network operator with approximately 4.3
million customers and the UK's fifth largest provider of mobile
communications services. We have entered into a long-term exclusive
license agreement with Virgin Enterprises Limited pursuant to which
we intend to re-brand our combined consumer business with the
Virgin brand. Virgin Mobile's summary financial information IFRS
financial results for the year ended March 31, 2006 has been made
available in Appendix G for background information only. We did not
own Virgin Mobile during this period. We do not take responsibility
for the information in these financial statements which are not
prepared in accordance with or reconciled to US GAAP. Non-GAAP
Financial Measures We use non-GAAP measures with a view to
providing investors with a better understanding of the operating
results and underlying trends to measure past and future
performance and liquidity. We evaluate operating performance based
on several non-GAAP financial measures, including (i) operating
income before depreciation, amortization and other charges (OCF),
(ii) fixed asset additions (accrual basis) and (iii) net debt, as
we believe these are important measures of the operational strength
of our business. Since these measures are not calculated in
accordance with GAAP, they should not be considered as substitutes
for operating income (loss), purchase of fixed assets and total
liabilities, respectively, as indicators of our operating
performance, expenditure for fixed assets and total liabilities.
Please see Appendix F for a discussion of our use of non-GAAP
financial measures. Pro Forma Financial Information The pro forma
presentation of our financial results contained herein is non-GAAP
financial information. We have included the pro forma information
to provide a useful basis for evaluating developments in our
business over time, but it should not be viewed as a substitute for
our GAAP financial information. Please see Appendix E. Appendices:
A) Financial Statements -- Condensed Consolidated Statement of
Operations -- Condensed Consolidated Balance Sheet -- Condensed
Consolidated Statement of Cashflows -- Quarterly Condensed
Consolidated Statement of Operations B) Residential Operations
statistics C) Segmental Analysis D) Fixed Asset Additions (accrual
basis) E) Pro Forma Combined Condensed Financial Information F) Use
of non-GAAP Financial Measures and Reconciliations to GAAP G)
Virgin Mobile Financial and Operational Results Appendices A)
Financial Statements -0- *T CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS (in GBP millions, except per share data) (unaudited)
Three months Six months ended ended June 30, June 30,
--------------- ----------------- 2006 2005 2006 2005 -------
------- --------- ------- Revenue 884.3 482.5 1,495.7 980.3 Costs
and expenses Operating costs (exclusive of depreciation shown
separately below) (367.5) (196.0) (622.4) (402.9) Selling, general
and administrative expenses (223.5) (122.3) (381.6) (242.1) Other
charges (12.1) (0.7) (20.5) (1.1) Depreciation (219.3) (129.6)
(368.6) (259.9) Amortization (55.6) (27.5) (92.4) (54.9) -------
------- --------- ------- Total costs and expenses (878.0) (476.1)
(1,485.5) (960.9) ------- ------- --------- ------- Operating
income 6.3 6.4 10.2 19.4 Other income (expense) Interest income and
other, net 8.6 8.3 17.2 14.8 Interest expense (135.6) (58.4)
(219.4) (128.5) Share of income from equity investments 3.1 0.2 4.5
0.2 Foreign currency transaction losses (94.1) (12.8) (104.1)
(16.8) Loss on extinguishment of debt - - (32.4) - Gains (losses)
on derivative instruments 5.7 - (3.5) - ------- ------- ---------
------- Loss from continuing operations before income taxes,
minority interest and cumulative effect of change in accounting
principle (206.0) (56.3) (327.5) (110.9) Income tax benefit
(expense) 9.9 (9.8) 9.9 (21.1) Minority interest income 0.3 - 0.7 -
Cumulative effect of change in accounting principle - - 1.2 -
------- ------- --------- ------- Loss from continuing operations
(195.8) (66.1) (315.7) (132.0) ------- ------- --------- -------
Discontinued operations (Loss) income from discontinued operations
before income taxes - (1.8) - 5.5 Gain on disposal of assets -
141.4 - 656.0 Income tax expense - - - (0.2) ------- -------
--------- ------- Income from discontinued operations 0.0 139.6 0.0
661.3 ------- ------- --------- ------- ------- ------- ---------
------- Net (loss) income (195.8) 73.5 (315.7) 529.3 =======
======= ========= ======= Basic and diluted (loss) from (GBP (GBP
(GBP (GBP continuing operations per share 0.68) 0.31) 1.20) 0.62)
======= ======= ========= ======= Basic and diluted income from GBP
GBP discontinued operations per share - 0.66 - 3.08 ======= =======
========= ======= Basic and diluted net (loss) income (GBP GBP (GBP
GBP per share 0.68) 0.35 1.20) 2.47 ======= ======= =========
======= Average number of shares outstanding 287.9 212.8 262.4
214.5 ======= ======= ========= ======= CONDENSED CONSOLIDATED
BALANCE SHEET (in GBP millions) December June 30, 31, 2006 2005
---------- -------- (Unaudited) (See Note) Assets Current assets
Cash and cash equivalents 441.7 735.2 Restricted cash 7.5 3.4
Marketable securities - 96.9 Accounts receivable - trade, less
allowance for doubtful accounts of GBP 44.1 (2006) and GBP 41.7
(2005) 340.8 191.8 Inventory for re-sale 11.9 - Programming
inventory 42.6 - Prepaid expenses and other current assets 101.3
112.4 ---------- -------- Total current assets 945.8 1,139.7 Fixed
assets, net 6,133.0 3,294.9 Goodwill 1,420.0 - Reorganization value
in excess of amounts allocable to identifiable assets 193.0 193.0
Customer lists, net 919.9 247.6 Other intangible assets, net 64.0
2.4 Investments in and loans to affiliates, net 363.4 - Other
assets, net of accumulated amortization of GBP 25.1 (2006) and GBP
32.2 (2005) 138.9 110.9 ---------- -------- Total assets 10,178.0
4,988.5 ========== ======== Liabilities and shareholders' equity
Current liabilities Accounts payable 287.4 176.9 Accrued expenses
and other current liabilities 586.2 291.1 Interest payable 27.8
37.8 Deferred revenue 227.6 103.2 Current portion of long-term debt
49.8 0.8 ---------- -------- Total current liabilities 1,178.8
609.8 Long-term debt, net of current portion 5,788.1 2,279.2
Deferred revenue and other long-term liabilities 168.5 134.3
Defered income taxes 127.9 9.2 ---------- -------- Total
liabilities 7,263.3 3,032.5 ---------- -------- Commitments and
contingent liabilities Minority Interest 0.3 1.0 Shareholders'
equity Common stock 1.6 1.2 Additional paid-in capital 3,758.2
2,671.0 Treasury stock - (114.0) Accumulated other comprehensive
income 120.7 45.5 Accumulated deficit (966.1) (648.7) ----------
-------- Total shareholders' equity 2,914.4 1,955.0 ----------
-------- Total liabilities and shareholders' equity 10,178.0
4,988.5 ========== ======== Note: The balance sheet at December 31,
2005 has been derived from the audited financial statements at that
date. CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS (in GBP
millions) (unaudited) Six months ended June 30, ------------------
2006 2005 --------- -------- Net cash provided by operating
activities 243.8 122.6 --------- -------- Investing activities
Purchase of fixed assets (263.4) (144.4) Investments in and loans
to affiliates 13.6 - Acquisition of subsidiaries, net of cash
acquired (2,013.7) - Proceeds from the sale of fixed assets 0.9 2.2
Decrease (increase) in restricted cash 4.2 (22.6) Proceeds from
sale of broadcast operations, net - 1,229.0 Proceeds from sale of
Ireland operations, net - 216.2 --------- -------- Net cash (used
in) provided by investing activites (2,258.4) 1,280.4 ---------
-------- Financing activities Proceeds from employee stock option
exercises 30.3 4.3 Purchase of stock - (114.0) New borrowings
6,769.9 - Principal payments on long-term debt (4,950.6) (700.0)
Financing fees (104.1) - Capital lease payments (12.9) (0.4)
Dividends paid (1.6) - --------- -------- Net cash provided by
(used in) financing activities 1,731.0 (810.1) --------- --------
Cash flow from discontinued operations Net cash used by operating
activities - (14.3) Net cash used by investing activities - (4.1)
--------- -------- Net cash used in discontinued operations -
(18.4) --------- -------- Effect of exchange rate changes on cash
and cash equivalents (9.9) 10.4 (Decrease) increase in cash and
cash equivalents (293.5) 584.9 Cash and cash equivalents, beginning
of period 735.2 125.2 --------- -------- Cash and cash equivalents,
end of period GBP GBP 441.7 710.1 ========= ======== QUARTERLY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ( GBP millions,
except share and per share data) (unaudited) Three months ended
--------------------------------------- Jun 30, Mar 31, Dec 31, Sep
30, Jun 30, 2006 2006 2005 2005 2005
--------------------------------------- Revenue 884.3 611.4 484.6
482.7 482.5 Costs and expenses Operating costs (exclusive of
depreciation shown separately below) (367.5) (254.9) (205.2)
(200.2) (196.0) Selling, general and administrative expenses
(223.5) (158.1) (124.7) (116.2) (122.3) Other charges (12.1) (8.4)
(22.4) (1.3) (0.7) Depreciation (219.3) (149.3) (139.5) (142.3)
(129.6) Amortization (55.6) (36.8) (27.2) (27.4) (27.5) -------
------- ------- ------- ------- Total costs and expenses (878.0)
(607.5) (519.0) (487.4) (476.1) ------- ------- ------- -------
------- Operating income (loss) 6.3 3.9 (34.4) (4.7) 6.4 Other
income (expense) Interest income and other, net 8.6 8.6 7.8 6.8 8.3
Interest expense (135.6) (83.8) (55.6) (51.7) (58.4) Share of
income from equity investments 3.1 1.4 0.9 (0.2) 0.2 Foreign
currency transaction losses (94.1) (10.0) 35.2 (13.1) (12.8) Loss
on extinguishment of debt - (32.4) - (2.0) - Gain (loss) on
derivative instruments 5.7 (9.2) - - - ------- ------- -------
------- ------- Loss from continuing operations before income
taxes, minority interest and cumulative effect of change in
accounting principle (206.0) (121.5) (46.1) (64.9) (56.3) Income
tax benefit (expense) 9.9 - (10.1) 12.4 (9.8) Minority interest
income (charge) 0.3 0.4 - (1.0) - Cumulative effect of change in
accounting principle - 1.2 - - - ------- ------- ------- -------
------- Loss from continuing operations (195.8) (119.9) (56.2)
(53.5) (66.1) ------- ------- ------- ------- ------- Discontinued
operations Income from discontinued operations before income taxes
- - 0.2 - (1.8) Gain on disposal of assets - - (0.2) 1.4 141.4
Income tax expenses - - - - - ------- ------- ------- -------
------- Income from discontinued operations 0.0 0.0 0.0 1.4 139.6
------- ------- ------- ------- ------- Net (loss) income (195.8)
(119.9) (56.2) (52.1) 73.5 ======= ======= ======= ======= =======
Basic and diluted (loss) from (GBP (GBP (GBP (GBP (GBP continuing
operations per 0.68) 0.49) 0.26) 0.25) 0.31) share ======= =======
======= ======= ======= Basic and diluted income from GBP GBP GBP
GBP GBP discontinued operations per 0.00 0.00 0.00 0.01 0.66 share
======= ======= ======= ======= ======= Basic and diluted net
(loss) (GBP (GBP (GBP (GBP GBP income per share 0.68) 0.49) 0.26)
0.24) 0.35 ======= ======= ======= ======= ======= Average number
of shares outstanding 287.9 245.5 212.8 212.8 212.8 ======= =======
======= ======= ======= B) RESIDENTIAL OPERATIONS STATISTICS (data
in 000's except percentages, RGU/Customer and ARPU) Pro forma new
NTL (1) Q2-06 Q1-06 Q4-05 Q3-05 Q2-05 --------- --------- ---------
--------- --------- Customers Opening Customers 4,983.8 4,958.0
4,945.4 4,893.1 4,830.6 Data Cleanse (2) (36.2) - (18.1) - -
Adjusted Opening Customers 4,947.6 4,958.0 4,927.3 4,893.1 4,830.6
Gross customer adds 192.3 218.1 248.9 271.9 250.8 Total Customer
disconnections (211.2) (192.3) (208.2) (219.6) (188.3) Net customer
adds (18.9) 25.8 40.7 52.3 62.5 Reduction to customer count (3) - -
(10.0) - - --------- --------- --------- --------- ---------
Closing Customers 4,928.7 4,983.8 4,958.0 4,945.4 4,893.1 Monthly
customer churn % 1.5% 1.3% 1.4% 1.5% 1.4% RGUS Opening RGUs
10,405.7 10,200.6 10,040.2 9,837.5 9,641.4 Data Cleanse (2) (69.0)
- (43.1) - - Adjusted Opening RGUs 10,336.7 10,200.6 9,997.1
9,837.5 9,641.4 Net RGU adds 91.7 205.1 215.8 202.7 196.1 Reduction
to RGU count (3) - - (12.3) - - --------- --------- ---------
--------- --------- Closing RGUs 10,428.4 10,405.7 10,200.6
10,040.2 9,837.5 Net RGU Adds Telephone (21.6) 8.1 0.8 2.6 33.1
Television 8.3 5.6 23.3 (5.0) 13.2 DTV 73.8 70.6 85.5 42.9 57.1
Broadband 104.9 191.4 191.7 205.1 149.8 --------- ---------
--------- --------- --------- Total Net RGU Adds 91.7 205.1 215.8
202.7 196.1 Revenue Generating Units (RGUs) Telephone 4,233.0
4,268.1 4,260.0 4,285.0 4,282.4 Television 3,293.1 3,315.9 3,310.3
3,288.7 3,293.6 DTV 2,836.2 2,786.5 2,715.9 2,637.5 2,594.6
Broadband 2,902.3 2,821.7 2,630.3 2,466.5 2,261.4 ---------
--------- --------- --------- --------- Total RGUs 10,428.4
10,405.7 10,200.6 10,040.2 9,837.5 RGU / Customer 2.12 2.09 2.06
2.03 2.01 Internet Customers Dial-up (metered) 35.5 46.6 56.8 64.5
72.4 Dial-up (unmetered) 71.8 87.4 117.2 146.6 192.2 DTV Access 6.0
6.4 7.6 8.0 8.4 --------- --------- --------- --------- ---------
Total Dial-up and DTV access customers 113.3 140.4 181.6 219.0
273.0 Broadband 2,902.3 2,821.7 2,630.3 2,466.5 2,261.4 ---------
--------- --------- --------- --------- Total Internet 3,015.6
2,962.1 2,811.9 2,685.6 2,534.5 --------- --------- ---------
--------- --------- Bundled Customers Dual RGU 1,838.9 1,939.1
2,033.2 2,114.5 2,184.6 Triple RGU 1,830.4 1,741.4 1,604.6 1,490.2
1,379.9 Percentage of dual or triple RGUs 74.4% 73.8% 73.4% 72.9%
72.8% Percentage of triple RGUs 37.1% 34.9% 32.4% 30.1% 28.2% ARPU
Combined GBP GBP GBP GBP GBP 42.21 41.50 41.27 41.28 41.63 NTL GBP
GBP GBP GBP GBP 40.21 39.28 38.96 38.99 39.69 Telewest GBP GBP GBP
GBP GBP 45.46 45.15 45.13 45.11 44.84 . Homes Marketable On-net
Telephone 12,312.7 12,311.2 12,299.7 12,288.5 12,273.1 ATV 12,661.1
12,656.7 12,652.8 12,633.9 12,621.2 DTV 12,009.7 11,989.2 11,972.3
11,941.7 11,926.1 Broadband 11,766.2 11,745.7 11,613.6 11,583.2
11,567.9 Total homes 12,661.1 12,656.7 12,652.8 12,633.9 12,621.2
Penetration of Homes Marketable On-net Telephone 34.4% 34.7% 34.6%
34.9% 34.9% Television - Total 26.0% 26.2% 26.2% 26.0% 26.1%
Television - DTV 23.6% 23.2% 22.7% 22.1% 21.8% Broadband 24.7%
24.0% 22.6% 21.3% 19.5% Total Customer 38.9% 39.4% 39.2% 39.1%
38.8% Notes (1) Subscriber information is on a pro forma combined
basis assuming that the old Telewest and old NTL merger had
occurred on January 1, 2005 and reflects old Telewest and old NTL
reported on- net with prior periods restated for policy alignments
where applicable. (2) Data cleanse activity in Q2-06 resulted in a
decrease of 36,200 customers and 69,000 RGUs, a decrease of
approximately 13,500 Telco, 24,400 Broadband and 31,100 TV RGUs.
Data cleanse activity in Q2-06 is a result of more closely aligning
old NTL up-front credit policies with those of old Telewest, in
order to focus on better quality customer growth. Data cleanse
activity in Q4-05 resulted in a decrease in old NTL of 18,100
customers and 43,100 RGUs, a decrease of approximately 17,700
Telco, 26,600 Broadband and an increase of 1,300 net TV RGUs. (3)
Review of inactive backlog customers in Q4-05 resulted in an
adjustment to remove 10,000 inactive backlog disconnects,
representing 12,300 RGUs. (4) A table showing old NTL operational
statistics for Q1-06 on an actual basis reflecting the merger with
old Telewest on March 3, 2006 can be found in our Form 10Q for Q
1-06, filed with the SEC on May 9, 2006. RESIDENTIAL OPERATIONS
STATISTICS (data in 000's except percentages, RGU/Customer and
ARPU) Old Telewest (1&4) Q2-06 Q1-06 Q4-05 Q3-05 Q2-05 --------
-------- -------- -------- -------- Customers Opening Customers
1,886.8 1,868.2 1,848.1 1,837.2 1,822.5 Data Cleanse (2) (3.7) - -
- - Adjusted Opening Customers 1,883.1 1,868.2 1,848.1 1,837.2
1,822.5 Gross customer adds 73.2 79.2 86.1 89.5 79.4 Total Customer
disconnections (69.5) (60.6) (66.0) (78.6) (64.7) Net customer adds
3.7 18.6 20.1 10.9 14.7 Reduction to customer count (3) - - - - -
-------- -------- -------- -------- -------- Closing Customers
1,886.8 1,886.8 1,868.2 1,848.1 1,837.2 Monthly customer churn %
1.2% 1.1% 1.2% 1.4% 1.2% RGUS Opening RGUs 4,164.9 4,059.6 3,955.2
3,873.8 3,784.8 Data Cleanse (2) (4.6) - - - - Adjusted Opening
RGUs 4,160.3 4,059.6 3,955.2 3,873.8 3,784.8 Net RGU adds 52.6
105.3 104.4 81.4 89.0 Reduction to RGU count (3) - - - - - --------
-------- -------- -------- -------- Closing RGUs 4,212.9 4,164.9
4,059.6 3,955.2 3,873.8 Net RGU Adds Telephone 1.2 11.5 0.5 (2.8)
11.6 Television 1.2 3.3 19.0 16.8 11.3 DTV 15.2 21.4 42.6 38.6 39.9
Broadband 50.1 90.5 84.9 67.3 66.1 -------- -------- --------
-------- -------- Total Net RGU Adds 52.5 105.3 104.4 81.4 89.0
Revenue Generating Units (RGUs) Telephone 1,698.9 1,698.4 1,686.9
1,686.4 1,689.2 Television 1,370.2 1,370.9 1,367.6 1,348.6 1,331.7
DTV 1,305.8 1,292.2 1,270.8 1,228.2 1,189.5 Broadband 1,143.8
1,095.6 1,005.1 920.2 852.8 -------- -------- -------- --------
-------- Total RGUs 4,212.9 4,164.9 4,059.6 3,955.2 3,873.8 RGU /
Customer 2.23 2.21 2.17 2.14 2.11 Internet Customers Dial-up
(metered) 9.6 15.4 19.6 23.6 25.0 Dial-up (unmetered) 22.7 28.9
38.3 49.5 65.5 DTV Access - - - - - -------- -------- --------
-------- -------- Total Dial-up and DTV access customers 32.3 44.3
57.9 73.2 90.6 Broadband 1,143.8 1,095.6 1,005.1 920.2 852.8
-------- -------- -------- -------- -------- Total Internet 1,176.1
1,139.9 1,063.0 993.4 943.4 -------- -------- -------- --------
-------- Bundled Customers Dual RGU 721.8 756.9 794.0 812.6 831.7
Triple RGU 802.2 760.6 698.6 647.3 602.4 Percentage of dual or
triple RGUs 80.8% 80.4% 79.9% 79.0% 78.1% Percentage of triple RGUs
42.5% 40.3% 37.4% 35.0% 32.8% ARPU GBP GBP GBP GBP GBP 45.46 45.15
45.13 45.11 44.84 Homes Marketable On-net Telephone 4,700.2 4,701.2
4,698.4 4,696.4 4,694.0 ATV 4,704.8 4,702.9 4,700.8 4,698.1 4,698.5
DTV 4,586.5 4,568.5 4,525.2 4,503.9 4,501.2 Broadband 4,586.5
4,568.5 4,525.2 4,503.9 4,501.2 Penetration of Homes Marketable
On-net Telephone 36.1% 36.1% 35.9% 35.9% 36.0% Television - Total
29.1% 29.1% 29.1% 28.7% 28.3% Television - DTV 28.5% 28.3% 28.1%
27.3% 26.4% Broadband 24.9% 24.0% 22.2% 20.4% 18.9% Total Customer
40.1% 40.1% 39.7% 39.3% 39.1% Old NTL on-net (1) Q2-06 Q1-06 Q4 05
Q3-05 Q2-05 -------- -------- -------- -------- -------- Customers
Opening Customers 3,097.0 3,089.8 3,097.3 3,055.9 3,008.1 Data
Cleanse (2) (32.5) - (18.1) - - Adjusted Opening Customers 3,064.5
3,089.8 3,079.2 3,055.9 3,008.1 Gross customer adds 119.2 138.9
162.8 182.4 171.4 Total Customer disconnections (141.7) (131.7)
(142.2) (141.0) (123.6) Net customer adds (22.5) 7.2 20.6 41.4 47.8
Reduction to customer count (3) - - (10.0) - - -------- --------
-------- -------- -------- Closing Customers 3,042.0 3,097.0
3,089.8 3,097.3 3,055.9 Monthly customer churn % 1.6% 1.5% 1.6%
1.6% 1.5% RGUS Opening RGUs 6,240.8 6,141.0 6,085.0 5,963.7 5,856.6
Data Cleanse (2) (64.4) - (43.1) - - Adjusted Opening RGUs 6,176.4
6,141.0 6,041.9 5,963.7 5,856.6 Net RGU adds 39.1 99.8 111.4 121.3
107.1 Reduction to RGU count (3) - - (12.3) - - -------- --------
-------- -------- -------- Closing RGUs 6,215.5 6,240.8 6,141.0
6,085.0 5,963.7 Net RGU Adds Telephone (22.8) (3.4) 0.3 5.4 21.5
Television 7.1 2.3 4.3 (21.8) 1.9 DTV 58.6 49.2 42.9 4.2 17.2
Broadband 54.8 100.9 106.8 137.7 83.7 -------- -------- --------
-------- -------- Total Net RGU Adds 39.1 99.8 111.4 121.3 107.1
Revenue Generating Units (RGUs) Telephone 2,534.0 2,569.7 2,573.1
2,598.6 2,593.2 Television 1,922.9 1,945.0 1,942.7 1,940.1 1,961.9
DTV 1,530.4 1,494.3 1,445.1 1,409.3 1,405.1 Broadband 1,758.5
1,726.1 1,625.2 1,546.3 1,408.6 -------- -------- -------- --------
-------- Total RGUs 6,215.5 6,240.8 6,141.0 6,085.0 5,963.7 RGU /
Customer 2.04 2.02 1.99 1.96 1.95 Internet Customers Dial-up
(metered) 25.9 31.2 37.2 40.9 47.4 Dial-up (unmetered) 49.1 58.5
78.9 97.0 126.7 DTV Access 6.0 6.4 7.6 8.0 8.4 -------- --------
-------- -------- -------- Total Dial-up and DTV access customers
81.0 96.1 123.7 145.9 182.5 Broadband 1,758.5 1,726.1 1,625.2
1,546.3 1,408.6 -------- -------- -------- -------- -------- Total
Internet 1,839.5 1,822.2 1,748.9 1,692.2 1,591.1 -------- --------
-------- -------- -------- Bundled Customers Dual RGU 1,117.2
1,182.2 1,239.2 1,301.9 1,352.9 Triple RGU 1,028.2 980.8 906.0
842.9 777.5 Percentage of dual or triple RGUs 70.5% 69.8% 69.4%
69.2% 69.7% Percentage of triple RGUs 33.8% 31.7% 29.3% 27.2% 25.4%
ARPU GBP GBP GBP GBP GBP 40.21 39.28 38.96 38.99 39.69 Homes
Marketable On-net Telephone 7,612.5 7,610.0 7,601.3 7,592.0 7,579.1
ATV 7,956.3 7,953.8 7,952.0 7,935.8 7,922.7 DTV 7,423.2 7,420.7
7,447.1 7,437.8 7,424.9 Broadband 7,179.7 7,177.2 7,088.4 7,079.3
7,066.7 Penetration of Homes Marketable On-net Telephone 33.3%
33.8% 33.9% 34.2% 34.2% Television - Total 24.2% 24.5% 24.4% 24.4%
24.8% Television - DTV 20.6% 20.1% 19.4% 18.9% 18.9% Broadband
24.5% 24.0% 22.9% 21.8% 19.9% Total Customer 38.2% 38.9% 38.9%
39.0% 38.6% Notes (1) Subscriber information reflects old Telewest
and old NTL reported on-net with prior periods restated for policy
alignments, where applicable. (2) Data cleanse activity in Q2-06
resulted in a decrease in old Telewest of 3,700 customers and 4,600
RGUs, a decrease of approximately 700 Telco, 2,000 Broadband and
1,900 TV RGUs, and in old NTL of 32,500 customers and 64,400 RGUs,
a decrease of approximately 12,800 Telco, 22,400 Broadband and
29,200 TV RGUs. Data cleanse activity in Q2-06 is a result of more
closely aligning old NTL up-front credit policies with those of old
Telewest, in order to focus on better quality customer growth. Data
cleanse activity in Q4-05 resulted in a decrease in old NTL of
18,100 customers and 43,100 RGUs, a decrease of approximately
17,700 Telco, 26,600 Broadband and an increase of 1,300 net TV
RGUs. (3) Review of inactive backlog customers in Q4-05 resulted in
an adjustment to remove 10,000 inactive backlog disconnects,
representing approximately 12,300 RGUs. (4) Old Telewest
operational statistics given above for Q1-06 are for the full 3
months ended March 31, 2006 on a pro forma basis including the
period prior to the merger with old NTL. C) SEGMENTAL ANALYSIS (GBP
millions) (unaudited) Actual Reported Three months ended
------------------------------ Jun Mar Dec Sep Jun 30, 31, 31, 30,
30, 2006 2006 2005 2005 2005 ------------------------------ Revenue
Cable segment Consumer 645.1 461.7 379.4 377.5 378.9 Business 160.1
122.8 105.2 105.2 103.6 ------------------------------ Total 805.2
584.5 484.6 482.7 482.5 Inter segment revenue (0.4) (0.3) - - -
------------------------------ 804.8 584.2 484.6 482.7 482.5
------------------------------ Content segment Flextech 40.1 12.8 -
- - Sit-up 45.1 16.2 - - - ------------------------------ Total
85.2 29.0 - - - Inter segment revenue (5.7) (1.8) - - -
------------------------------ 79.5 27.2 - - -
------------------------------ ------------------------------ Total
revenue 884.3 611.4 484.6 482.7 482.5
------------------------------ Segment OCF Cable segment OCF 284.5
195.4 154.7 166.3 164.2 Content segment OCF 8.8 3.0 - - -
------------------------------ OCF (Total) 293.3 198.4 154.7 166.3
164.2 ------------------------------ Pro forma Three months ended
------------------------------ Jun Mar Dec Sep Jun 30, 31, 31, 30,
30, 2006 2006 2005 2005 2005 ------------------------------ Revenue
Cable segment Consumer 645.1 637.2 631.6 626.7 641.2 Business 160.1
165.6 168.2 169.1 166.2 ------------------------------ Total 805.2
802.8 799.8 795.8 807.4 Inter segment revenue (0.4) (0.5) (0.4)
(0.7) (0.8) ------------------------------ 804.8 802.3 799.4 795.1
806.6 ------------------------------ Content segment Flextech 40.1
39.9 37.7 36.0 34.4 Sit-up 45.1 51.9 84.1 57.5 24.1
------------------------------ Total 85.2 91.8 121.8 93.5 58.5
Inter segment revenue (5.7) (5.3) (5.1) (5.4) (5.2)
------------------------------ 79.5 86.5 116.7 88.1 53.3
------------------------------ ------------------------------ Total
revenue 884.3 888.8 916.1 883.2 859.9
------------------------------ Segment OCF Cable segment OCF 284.5
267.6 283.2 299.5 312.3 Content segment OCF 8.8 9.4 8.8 7.8 6.1
------------------------------ OCF (Total) 293.3 277.0 292.0 307.3
318.4 ------------------------------ Note: Segment OCF includes
inter segment revenue and costs as applicable. OCF (Total) is a
non-GAAP financial measure - see Appendix F. D) Fixed Asset
Additions (accrual basis) (in GBP millions) (unaudited) Three
months ended -------------------------------- Jun Mar Dec Sep Jun
30, 31, 31, 30, 30, 2006 2006 2005 2005 2005
-------------------------------- NCTA Fixed Asset Additions CPE
48.6 40.1 31.6 32.0 29.3 Scaleable Infrastructure 36.9 52.1 48.7
27.8 22.2 Commercial 19.6 11.4 6.2 8.2 4.9 Line extensions 1.0 0.5
- - - Upgrade/Rebuild 4.1 3.8 2.5 2.3 2.8 Support Capital 22.6 9.5
7.5 6.3 10.6 ------ ------ ------ ----- ----- Total NCTA Fixed
Asset Additions 132.8 117.4 96.5 76.6 69.8 Non NCTA Fixed Asset
Additions 1.1 0.4 (1.9) (0.3) 0.4 ------ ------ ------ ----- -----
Total Fixed Asset Additions (accrual basis) 133.9 117.8 94.6 76.3
70.2 Change in capital accruals (5.8) 17.5 (22.8) (4.4) 0.4 ------
------ ------ ----- ----- Total Purchase of Fixed Assets 128.1
135.3 71.8 71.9 70.6 ====== ====== ====== ===== ===== Note: Ntl is
not a member of NCTA and is providing this information solely for
comparative purposes. Fixed Asset Additions (accrual basis) are
from continuing operations. See Appendix F for a discussion of the
use of Fixed Asset Additions (accrual basis) as a non-GAAP measure
and the reconciliation of Fixed Asset Additions (accrual basis) to
GAAP Purchase of Fixed Assets. E) Proforma Combined Condensed
Financial Information (in GBP millions) (unaudited) Three months
ended ---------------------------------------- Jun 30, Mar 31, Dec
31, Sep 30, Jun 30, 2006 2006 2005 2005 2005 -------
------------------------------- Revenue 884.3 888.8 916.1 883.2
859.9 Costs and expenses Operating costs (exclusive of depreciation
shown separately below) (367.5) (369.0) (399.1) (362.0) (331.4)
Selling, general and administrative expenses (223.5) (242.8)
(225.0) (213.9) (210.1) Other charges (12.1) (8.9) (22.4) (1.3)
(0.7) Depreciation (219.3) (210.4) (229.2) (232.0) (219.3)
Amortization (55.6) (58.6) (59.8) (60.0) (60.1) ------- -------
------- ------- ------- (878.0) (889.7) (935.5) (869.2) (821.6)
------- ------- ------- ------- ------- Operating income (loss) 6.3
(0.9) (19.4) 14.0 38.3 Other income (expense) Interest income and
other, net 8.6 8.3 7.4 6.0 8.0 Interest expense (135.6) (112.0)
(126.9) (119.2) (121.4) (Loss) on extinguishment of debt - (32.4) -
(2.0) - Other, net 5.7 (9.2) 4.0 - 1.0 Share of income from equity
investments 3.1 5.0 2.5 3.9 7.5 Foreign currency transaction
(losses) gains (94.1) (8.6) 33.0 (13.9) (15.4) ------- -------
------- ------- ------- (Loss) from continuing operations before
income taxes (206.0) (149.8) (99.4) (111.2) (82.0) Income tax
benefit (expense) 9.9 - (12.6) 12.9 (9.5) Minority interest 0.3 0.4
- (1.0) - Cumulative effect of a change in accounting principle -
2.0 - - - ------- ------- ------- ------- ------- (Loss) from
continuing operations (195.8) (147.4) (112.0) (99.3) (91.5) -------
------- ------- ------- ------- Reconciliation of Pro Forma OCF to
Pro Forma Operating income (loss) Pro Forma OCF 293.3 277.0 292.0
307.3 318.4 Less: Other charges (12.1) (8.9) (22.4) (1.3) (0.7)
Depreciation (219.3) (210.4) (229.2) (232.0) (219.3) Amortization
(55.6) (58.6) (59.8) (60.0) (60.1) ------- ------- ------- -------
------- Pro Forma Operating income (loss) 6.3 (0.9) (19.4) 14.0
38.3 ------- ------- ------- ------- ------- The pro forma
information presented in these schedules in respect of the three
months ended June 30 and March 31, 2006 has been prepared on a
basis as if the merger with Telewest had occurred on January 1,
2006 and the pro forma information in respect of the three months
ended on each of June 30, September 30 and December 31, 2005 has
been prepared on a basis as if the merger with Telewest had
occurred on January 1, 2005 and includes adjustments to reflect the
purchase accounting impact on our historical results. Readers
should refer to the notes herein for further explanation of the
adjustments made. The presentation does not include all the
information and footnotes required by generally accepted accounting
principles in the United States to be included in pro forma
financial statements. These pro forma operating results are not
necessarily indicative of the results that would have been achieved
if the merger had occurred on January 1, 2006 or January 1, 2005,
and undue reliance should not be placed on this information.
Proforma Combined Condensed Financial Information Three months
ended March 31, 2006 (in GBP millions) (unaudited) NTL Inc.
Telewest Pro As Jan 1 - Total Forma reported Mar 3 Adjustments
Combined ------------------------------- --------- Revenue 611.4
279.9 (2.5) 888.8 Costs and expenses Operating costs (exclusive of
depreciation shown separately below) (254.9) (88.5) (25.6) (369.0)
Selling, general and administrative expenses (158.1) (110.0) 25.3
(242.8) Other charges (8.4) (0.5) - (8.9) Depreciation (149.3)
(66.1) 5.0 (210.4) Amortization (36.8) (8.4) (13.4) (58.6)
------------------------------- --------- (607.5) (273.5) (8.7)
(889.7) ------------------------------- --------- Operating income
(loss) 3.9 6.4 (11.2) (0.9) Other income (expense) Interest income
and other, net 8.6 4.0 (4.3) 8.3 Interest expense (83.8) (22.2)
(6.0) (112.0) (Loss) on extinguishment of debt (32.4) - - (32.4)
Other, net (9.2) - - (9.2) Share of income from equity investments
1.4 3.6 - 5.0 Foreign currency transaction (losses) gains (10.0)
1.4 - (8.6) ------------------------------- --------- (Loss) from
continuing operations before income taxes (121.5) (6.8) (21.5)
(149.8) Income tax (expense) benefit - - - - Minority interest 0.4
- - 0.4 Cumulative effect of a change in accounting principle 1.2
0.8 - 2.0 ------------------------------- --------- (Loss) from
continuing operations (119.9) (6.0) (21.5) (147.4)
------------------------------- --------- For the three months
ended March 31, 2006, the unaudited pro forma combined condensed
financial information contains the actual combined operating
results of NTL Inc. with the results of Telewest for the period
from January 1, 2006 to March 3, 2006 adjusted to include the pro
forma impact of: the elimination of transactions between the former
NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based
on the preliminary purchase price allocation; the adjustment of
interest income based on the reduced cash balance after the merger
transaction; the adjustment of interest expense based on the
refinancing in March 2006 using the new senior credit facility and
bridge facility borrowing rates; to reflect the impact of income
taxes on the pro forma adjustments utilizing NTL's statutory tax
rate of 35% and certain accounting policy alignment adjustments.
Readers can refer to the Unaudited Pro Forma Combined Condensed
Financial Data filed on Form 8 -K/A on May 10, 2006, for detailed
descriptions of the adjustments made to this information. Proforma
Combined Condensed Financial Information Three months ended
December 31, 2005 (in GBP millions) (unaudited) Pro Historical
Historical Total Forma NTL Telewest adjustments Combined
---------------------------------- --------- Revenue 484.6 434.5
(3.0) 916.1 Costs and expenses Operating costs (exclusive of
depreciation shown separately below) (205.2) (163.9) (30.0) (399.1)
Selling, general and administrative expenses (124.7) (133.8) 33.5
(225.0) Other charges (22.4) - - (22.4) Depreciation (139.5) (97.9)
8.2 (229.2) Amortization (27.2) (16.0) (16.6) (59.8)
---------------------------------- --------- (519.0) (411.6) (4.9)
(935.5) ---------------------------------- --------- Operating
income (loss) (34.4) 22.9 (7.9) (19.4) Other income (expense)
Interest income and other, net 7.8 6.1 (6.5) 7.4 Interest expense
(55.6) (43.1) (28.2) (126.9) (Loss) on extinguishment of debt - - -
- Other, net 0.9 3.1 - 4.0 Share of income from equity investments
- 2.5 - 2.5 Foreign currency transaction (losses) gains 35.2 (2.2)
- 33.0 ---------------------------------- --------- (Loss) from
continuing operations before income taxes (46.1) (10.7) (42.6)
(99.4) Income tax (expense) benefit (10.1) (2.5) - (12.6) Minority
interest - - - - ---------------------------------- ---------
(Loss) from continuing operations (56.2) (13.2) (42.6) (112.0)
---------------------------------- --------- For the three months
ended December 31, 2005, the unaudited pro forma combined condensed
financial information contains the actual combined operating
results of NTL and the former Telewest adjusted to include the pro
forma impact of: the elimination of transactions between the former
NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based
on the preliminary purchase price allocation; the adjustment of
interest income based on the reduced cash balance after the
transaction; the adjustment of interest expense based on the
refinancing in March 2006 using the new senior credit facility and
bridge facility borrowing rates; to reflect the impact of income
taxes on the pro forma adjustments utilizing NTL's statutory tax
rate of 35% and certain accounting policy alignment adjustments.
Readers can refer to the Unaudited Pro Forma Combined Condensed
Financial Data filed on Form 8-K/A on May 10, 2006, for detailed
descriptions of the adjustments made to this information. Proforma
Combined Condensed Financial Information Three months ended
September 30, 2005 (in GBP millions) (unaudited) Pro Historical
Historical Total Forma NTL Telewest adjustments Combined
---------------------------------- --------- Revenue 482.7 403.7
(3.2) 883.2 Costs and expenses Operating costs (exclusive of
depreciation shown separately below) (200.2) (133.0) (28.8) (362.0)
Selling, general and administrative expenses (116.2) (128.5) 30.8
(213.9) Other charges (1.3) - - (1.3) Depreciation (142.3) (99.4)
9.7 (232.0) Amortization (27.4) (9.4) (23.2) (60.0)
---------------------------------- --------- (487.4) (370.3) (11.5)
(869.2) ---------------------------------- --------- Operating
income (loss) (4.7) 33.4 (14.7) 14.0 Other income (expense)
Interest income and other, net 6.8 5.7 (6.5) 6.0 Interest expense
(51.7) (38.9) (28.6) (119.2) (Loss) on extinguishment of debt (2.0)
- - (2.0) Other, net - - - - Share of income from equity
investments (0.2) 4.1 - 3.9 Foreign currency transaction (losses)
gains (13.1) (0.8) - (13.9) ----------------------------------
--------- (Loss) from continuing operations before income taxes
(64.9) 3.5 (49.8) (111.2) Income tax (expense) benefit 12.4 0.5 -
12.9 Minority interest (1.0) - - (1.0)
---------------------------------- --------- (Loss) from continuing
operations (53.5) 4.0 (49.8) (99.3)
---------------------------------- --------- For the three months
ended September 30, 2005, the unaudited pro forma combined
condensed financial information contains the actual combined
operating results of NTL and the former Telewest adjusted to
include the pro forma impact of: the elimination of transactions
between the former NTL and the former Telewest; the adjustment of
amortization of acquired intangible assets and depreciation of
fixed assets based on the preliminary purchase price allocation;
the adjustment of interest income based on the reduced cash balance
after the transaction; the adjustment of interest expense based on
the refinancing in March 2006 using the new senior credit facility
and bridge facility borrowing rates; to reflect the impact of
income taxes on the pro forma adjustments utilizing NTL's statutory
tax rate of 35% and certain accounting policy alignment
adjustments. Readers can refer to the Unaudited Pro Forma Combined
Condensed Financial Data filed on Form 8-K/A on May 10, 2006, for
detailed descriptions of the adjustments made to this information.
Proforma Combined Condensed Financial Information Three months
ended June 30, 2005 (in GBP millions) (unaudited) Pro Historical
Historical Total Forma NTL Telewest adjustments Combined
---------------------------------- --------- Revenue 482.5 380.7
(3.3) 859.9 Costs and expenses Operating costs (exclusive of
depreciation shown separately below) (196.0) (104.0) (31.4) (331.4)
Selling, general and administrative expenses (122.3) (118.6) 30.8
(210.1) Other charges (0.7) - - (0.7) Depreciation (129.6) (101.0)
11.3 (219.3) Amortization (27.5) (9.3) (23.3) (60.1)
---------------------------------- --------- (476.1) (332.9) (12.6)
(821.6) ---------------------------------- --------- Operating
income (loss) 6.4 47.8 (15.9) 38.3 Other income (expense) Interest
income and other, net 8.3 6.2 (6.5) 8.0 Interest expense (58.4)
(40.5) (22.5) (121.4) (Loss) on extinguishment of debt - - - -
Other, net - 1.0 - 1.0 Share of income from equity investments 0.2
7.3 - 7.5 Foreign currency transaction (losses) gains (12.8) (2.6)
- (15.4) ---------------------------------- --------- (Loss) from
continuing operations before income taxes (56.3) 19.2 (44.9) (82.0)
Income tax (expense) benefit (9.8) 0.3 - (9.5) Minority interest -
- - - ---------------------------------- --------- (Loss) from
continuing operations (66.1) 19.5 (44.9) (91.5)
---------------------------------- --------- For the three months
ended June 30, 2005, the unaudited pro forma combined condensed
financial information contains the actual combined operating
results of NTL and the former Telewest adjusted to include the pro
forma impact of: the elimination of transactions between the former
NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based
on the preliminary purchase price allocation; the adjustment of
interest income based on the reduced cash balance after the
transaction; the adjustment of interest expense based on the
refinancing in March 2006 using the new senior credit facility and
bridge facility borrowing rates; to reflect the impact of income
taxes on the pro forma adjustments utilizing NTL's statutory tax
rate of 35% and certain accounting policy alignment adjustments.
Readers can refer to the Unaudited Pro Forma Combined Condensed
Financial Data filed on Form 8-K/A on May 10, 2006, for detailed
descriptions of the adjustments made to this information. F) Use of
non-GAAP Financial Measures and Reconciliations to GAAP Operating
income before depreciation, amortization and other charges (OCF)
Operating income before depreciation, amortization and other
charges, which we refer to as OCF (or OCF (Total)), is not a
financial measure recognised under GAAP. OCF represents our
earnings before interest, taxes, depreciation and amortization,
other charges, share of income from equity investments, loss on
extinguishment of debt, loss on derivative instruments and foreign
currency transaction gains (losses). Our management, including our
chief executive officer, who is our chief operating decision maker,
considers OCF as an important indicator of our operational strength
and performance. OCF excludes the impact of costs and expenses that
do not directly affect our cash flows. Other charges, including
restructuring charges, are also excluded from OCF as management
believes they are not characteristic of our underlying business
operations. OCF is most directly comparable to the GAAP financial
measure operating income (loss). Some of the significant
limitations associated with the use of OCF as compared to operating
income (loss) are that OCF does not consider the amount of required
reinvestment in depreciable fixed assets and ignores the impact on
our results of operations of items that management believes are not
characteristic of our underlying business operations. We believe
OCF is helpful for understanding our performance and assessing our
prospects for the future, and that it provides useful supplemental
information to investors. In particular, this non- GAAP financial
measure reflects an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the
reconciliation to operating income (loss) shown below, provides a
more complete understanding of factors and trends affecting our
business. Because GAAP financial measures are not standardized, it
may not be possible to compare OCF with other companies' GAAP
financial measures that have the same or similar names. For a
reconciliation of pro forma OCF to pro forma operating income
(loss), See Appendix E. Reconciliation of operating income before
depreciation, amortization and other charges (OCF) to GAAP
operating income (loss) (in GBP millions)(unaudited) Three months
ended --------------------------------------- Jun 30, Mar 31, Dec
31, Sep 30, Jun 30, 2006 2006 2005 2005 2005
--------------------------------------- Operating income before
depreciation, amortization and other charges (OCF) 293.3 198.4
154.7 166.3 164.2 Reconciling items Other charges (12.1) (8.4)
(22.4) (1.3) (0.7) Depreciation and amortization (274.9) (186.1)
(166.7) (169.7) (157.1) ------- ------- ------- ------- -------
Operating income (loss) 6.3 3.9 (34.4) (4.7) 6.4 ======= =======
======= ======= ======= Net debt Net debt is defined as long-term
debt, including current portion, less cash and cash equivalents and
marketable securities. Our management, including our chief
operating decision-maker, consider net debt an important measure of
our financing obligations. Net debt is not a financial measure
recognized under GAAP. This measure is most directly comparable to
the GAAP financial measure, total liabilities. The significant
limitation associated with the use of net debt as compared to total
liabilities is that net debt does not consider current liabilities
due in respect of accounts payable and other liabilities. It also
assumes that all of the cash and cash equivalents and marketable
securities are available to service debt. We believe net debt is
helpful for understanding our entire net debt funding obligations
and provides useful supplemental information to investors. Because
non-GAAP financial measures are not standardized, it may not be
possible to compare net debt with other companies' non-GAAP
financial measures that have the same or similar names. The
presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for total liabilities,
or other measures of financial performance reported in accordance
with GAAP. Reconciliation of net debt to GAAP Total liabilities (in
GBP millions) (unaudited) Jun 30, Dec 31, 2006 2005 ---------
--------- Net Debt 5,396.2 1,447.9 Cash and cash equivalents 441.7
735.2 Marketable Securities - 96.9 --------- --------- Long-term
debt, including current portion 5,837.9 2,280.0 Accounts payable
287.4 176.9 Accrued expenses and other current liabilities 586.2
291.1 Interest Payable 27.8 37.8 Deferred Revenue and other
long-term liabilities 396.1 237.5 Deferred Income Taxes 127.9 9.2
--------- --------- Total liabilities 7,263.3 3,032.5 =========
========= Fixed Asset Additions (accrual basis) Our primary measure
of expenditures for fixed assets is Fixed Asset Additions (accrual
basis). Fixed Assets Additions (accrual basis) is defined as the
purchase of fixed assets as measured on an accrual basis. Our
business is underpinned by significant investment in net work
infrastructure and information technology. Our management therefore
considers Fixed Asset Additions (accrual basis) an important
component in evaluating our liquidity and financial condition since
purchases of fixed assets are a necessary component of ongoing
operations. Fixed Asset Additions (accrual basis) is most directly
comparable to the GAAP financial measure Purchase of Fixed Assets,
as reported in the Statement of Cashflows. The significant
limitations associated with the use of Fixed Asset Additions
(accrual basis) as compared to Purchase of Fixed Assets is that
Fixed Asset Additions (accrual basis) excludes timing differences
from payments of liabilities related to purchases of fixed assets.
We exclude this amount from Fixed Asset Additions (accrual basis)
because timing differences from payments of liabilities are more
related to the cash management treasury function than to our
management of fixed asset purchases for long-term operational
pereformance and liquidity. We compensate for the limitation by
separately measuring and forecasting working capital.
Reconciliation of pro forma and reported Fixed Asset Additions
(accrual basis) to GAAP Purchase of Fixed Assets (in GBP millions)
(unaudited) Three months ended ------------------------------------
Jun Mar Dec Sep Jun 30, 31, 31, 30, 30, 2006 2006 2005 2005 2005
-------- ------ ------ ------ ------ Reported Pro Pro Pro Pro Forma
Forma Forma Forma Pro forma Fixed Asset Additions (accrual basis)
GBP GBP GBP GBP GBP 133.9 158.3 158.6 144.3 129.2 Pre-acquisition
Telewest Fixed Asset Additions (accrual basis) - (40.5) (64.0)
(68.0) (59.0) -------- ------ ------ ------ ------ Fixed Asset
Additions (accrual GBP GBP GBP GBP GBP basis) 133.9 117.8 94.6 76.3
70.2 Changes in liabilities related to Fixed Asset Additions
(accrual basis) (5.8) 17.5 (22.8) (4.4) 0.4 -------- ------ ------
------ ------ Purchase of Fixed Assets GBP GBP GBP GBP GBP 128.1
135.3 71.8 71.9 70.6 ======== ====== ====== ====== ====== The
presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for other measures of
financial performance reported in accordance with GAAP. These
non-GAAP financial measures reflect an additional way of viewing
aspects of our operations that, when viewed with our GAAP results
and the accompanying reconciliations to corresponding GAAP
financial measures, provide a more complete understanding of
factors and trends affecting our business. We encourage invetsors
to review our financial statements and publicly-filed reports in
their entirety and to not rely on any single financial measure.
G)VIRGIN MOBILE HOLDINGS (UK) LIMITED (formerly Virgin Mobile
Holdings (UK) plc)
--------------------------------------------------------------------
The summary financial information set out below has been extracted
from the audited financial statements of Virgin Mobile Holdings
(UK) Limited ("Virgin Mobile") for the year ended 31 March 2006 and
has been made available by NTL for background information only. The
financial statements of Virgin Mobile for the year ended 31 March
2006 were prepared in accordance with International Financial
Reporting Standards as applied in the United Kingdom ("IFRS") and
have not been reconciled to US GAAP. NTL was not involved in the
preparation of these financial statements, which relate to a period
prior to NTL's acquisition of Virgin Mobile and NTL has not
completed its review of them. However, NTL is aware that, as
previously disclosed, there are significant differences between
Virgin Mobile's accounting policies and NTL's accounting policies,
including, but not limited to, the accounting policy in respect of
Subscriber Acquisition Costs ("SACs"). Under Virgin Mobile's
current accounting policies, SACs for contract customers are
recognised over the length of the contract. If contract SAC had
been expensed in full upon connection, NTL estimates that Virgin
Mobile's operating profit for the year ended 31 March 2006 would
have been reduced by approximately GBP 25 million. This estimate
should not be taken to provide any indication of the impact of this
accounting policy difference on future periods. CONSOLIDATED INCOME
STATEMENT FOR THE YEAR ENDED 31 MARCH 2006 Year Year ended ended 31
March 31 March 2006 2005 GBP '000 GBP '000
----------------------------------------------------------
--------- Revenue Service 514,609 457,636 Equipment 48,472 63,660
--------- --------- 563,081 521,296 Cost of sales (352,683)
(301,624)
----------------------------------------------------------
--------- Gross profit 210,398 219,672 Administrative expenses
(131,119) (151,906)
----------------------------------------------------------
--------- Operating profit 79,279 67,766 Investment income 732
1,511 Finance costs (14,318) (16,594)
----------------------------------------------------------
--------- Profit before tax 65,693 52,683 Tax (20,819) (18,242)
----------------------------------------------------------
--------- Profit for the year 44,874 34,441
----------------------------------------------------------
---------
----------------------------------------------------------
--------- Operating profit includes: Depreciation of property,
plant and equipment 3,810 4,011 Amortisation of other intangible
assets 11,158 13,425 Operating profit also includes the following
one-off expenses: NTL bid approach costs 3,757 - Capital
restructuring and IPO related expenses - 6,320 Pre-IPO employee
share option costs - 8,869
----------------------------------------------------------
---------
----------------------------------------------------------
--------- Purchase of property, plant and equipment 2,401 3,477
Purchase of other intangible assets 10,981 8,025
----------------------------------------------------------
---------
----------------------------------------------------------
--------- 90 day active customers (000's) 4,331.6 4,031.9 Active
customer churn 27.5% 22.6% Rolling 12 month ARPU GBP 124 GBP 127
----------------------------------------------------------
--------- Conference Call There will be a conference call for
analysts and investors today at 0830 EDT/ 1330 UK time. Analysts
and investors can dial in to the presentation by calling +1 617 614
4925 in the United States or + 44 (0) 207 365 8426 for
international access, passcode "NTL" for all participants. The
presentation can also be accessed live via webcast on the Company's
website, www.ntl.com/investors. The teleconference replay will be
available for one week beginning approximately two hours after the
end of the call and will be available until Tuesday, August 15,
2006. The dial-in replay number for the US is: +1 617 801 6888 and
the international dial-in replay number is: +44 (0) 207 365 8427,
passcode: 72501180. *T
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