[TELEWEST LOGO]
EARNINGS RELEASE
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TELEWEST Q1 RESULTS SHOW CONTINUED STRONG
OPERATIONAL AND FINANCIAL PERFORMANCE
May 12, 2005 - London, United Kingdom - Telewest Global, Inc. ("Telewest"
or the "Reorganized Company") (NASDAQ TLWT) today announces first quarter
financial results for 2005.
HIGHLIGHTS
o Adjusted EBITDA growth of 10% over Q1 04
o Operating income increased 26% over Q1 04
o Consumer sales division revenue growth of 5% over Q1 04
o Triple play penetration increased by 11.4 percentage points over Q1 04
to 30.3%
o Revenue Generating Units grew by 113,000 in the quarter; RGUs per
customer grew from 1.93 at Q1 04 to 2.08 at Q1 05
FINANCIAL HIGHLIGHTS
TELEWEST GLOBAL,
INC. TELEWEST GLOBAL, INC. PREDECESSOR
- --------------------------- -------------------- ----------------------- ----------------------
(UNAUDITED IN (POUND)M) Q1 2005 Q4 2004 Q1 2004
Revenue 338 336 328
Operating income 24 18 19
Adjusted EBITDA 134 128 122
Net income/(loss) 1 (17) (4)
Free cash flow 63 (3)* 25
- --------------------------- -------------------- ----------------------- ----------------------
*Q4 2004 free cash flow was impacted by an extra 87 days or (pound)34m of
bank cash interest, as a result of the timing of interest payments in
connection with the refinancing of bank facilities during Q4.
OPERATIONAL HIGHLIGHTS
- --------------------------- -------------------- ----------------------- ----------------------
Q1 2005 Q4 2004 Q1 2004
Customer net adds 23,000 30,000 12,000
Broadband net adds 88,000 91,000 51,000
RGU net adds 113,000 132,000 77,000
Triple play percentage 30.3% 27.4% 18.9%
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BARRY ELSON, ACTING CHIEF EXECUTIVE OFFICER OF TELEWEST GLOBAL, INC.,
COMMENTED:
"Telewest continues to build on its strong performance and we are
encouraged by the operational and financial trends in our consumer and
content businesses. In particular, we have seen increased triple play
penetration and ARPU and reduced churn and our customer growth and RGU
growth is higher than the corresponding quarter last year. Our roll-out
plans for DVR and VOD are progressing and we are optimistic that these
products will add to our competitiveness and increase loyalty as we strive
to provide the best service and product suite for our customers."
ENQUIRIES
Richard Williams Head of investor +44 (0) 20 7299 5479
relations
Vani Gupta Investor relations +44 (0) 20 7299 5353
manager
Kirstine Cox Head of media +44 (0) 20 7299 5115
BRUNSWICK
Nick Claydon UK +44 (0) 20 7404 5959
Frank De Maria US +1 212 333 3810
OPERATIONAL REVIEW
CABLE SEGMENT
CONSUMER SALES DIVISION
The Consumer division has had another strong quarter with a net increase of
23,000 customer relationships, further increases in ARPU to (pound)45.34
and a reduction in monthly churn from 1.1% to 1.0% as compared to quarter
4, 2004. Customer and RGU growth was lower than in the seasonally strong
fourth quarter, but higher than in the corresponding quarter last year.
We have achieved the quarter's strong results through effective marketing
and continued use of promotional campaigns, such as our triple play "3 for
(pound)30" offer and our "Easy Switch" broadband offer, which offers a
discount on entry level broadband when taken with a phone line.
The continued increase in ARPU is particularly encouraging and reflects our
successful focus on selling bundled products. The percentage of "triple
play" customers has increased by 3 percentage points to 30% in the quarter.
34% of customer acquisitions in the quarter took the full "triple play".
Consequently, RGU per customer also grew to 2.08 in the first quarter.
Triple play growth over the last two quarters has been stronger than
expected. Consequently, we now expect to reach 40% triple play penetration
during 2007, over two years earlier than our previously stated guidance.
We will implement selected price increases in television from July 1, 2005,
which we expect to have a positive impact on household ARPU in the third
quarter of 2005.
CONSUMER INTERNET
We have experienced continued strong growth in the number of broadband
subscribers, with 88,000 net additions in the quarter. Most of the growth
has been in our lowest tier, where we have increased connection speeds from
256Kb to 512Kb. This has impacted the mix of broadband subscribers and
broadband ARPU, which fell (pound)0.34 (less than 2%) in the quarter to
(pound)19.89. Over 60% of our broadband subscriber base take a 1Mb or
higher speed service.
Broadband continues to be successful in attracting new customers to
Telewest - 41% of broadband installations were for customers who were not
existing customers. Multi-service penetration remains high in broadband,
with 70% of all broadband internet subscribers subscribing to the full
"triple play" and 93% subscribing to at least one other product.
CONSUMER TELEVISION
Digital TV subscribers rose by 27,000 in the quarter and total TV
subscribers rose by 8,000 net additions. TV ARPU increased by (pound)0.24
in the quarter to (pound)21.12 due to a full quarter's effect of last
November's (pound)1 price increase on our "Starter" package and selected
price increases on our premium channels. We have introduced promotions to
improve the take-up of higher tier packages and consequently the number of
subscribers to our "Supreme" package, increased during the quarter.
From July 1, 2005, we will be increasing the price of our two lowest
digital TV tiers by (pound)1 each. The price of the "Starter" tier will
increase to (pound)5.50 per month and the "Essential" tier will increase to
(pound)10.50 per month.
87% of our TV subscribers now take our digital service. We are accelerating
migration of the remaining 171,000 analog customers to digital. We estimate
that we will be fully digital by the end of 2006. Once complete, this will
free up significant amounts of bandwidth in our network, which will allow
extra capacity for Video-On-Demand, (VOD), High Definition TV, broadband
speed increases and other services.
We launched VOD services in Bristol in the first quarter and the next stage
of the roll-out is scheduled for early July to 26,000 subscribers in
Cheltenham. We plan to complete the national roll-out of VOD by early 2006.
We continue to work on our plans for the launch of DVR (Digital Video
Recorder) services later in the year.
CONSUMER TELEPHONY
The number of telephony subscribers increased by 17,000 in the quarter,
primarily as a result of the continued success of our bundled offerings.
Telephony penetration is now 35.8%.
We have continued our strategy of migrating subscribers to flat rate
packages to minimize the impact of declining telephony usage. As a result,
37% of all telephony subscribers are now on a "Talk" flat rate package. At
the start of the quarter, we withdrew our 3-2-1 metered telephony package
from sale to new customers. From July 1, 2005, we will be migrating all our
existing 3-2-1 subscribers to "Talk Weekends" which gives subscribers free
local and national calls at weekends. This package is charged at
(pound)10.50 per month compared to (pound)10 for the existing 3-2-1
service.
BUSINESS SALES DIVISION
Revenues fell by (pound)2 million to (pound)61 million compared to the
previous quarter primarily due to continued weakness in the business voice
market. We are addressing these market conditions through new and more
advanced products. For example, within the Public Sector, we have signed a
new deal worth (pound)2.2 million over 5 years with Maidstone and Tunbridge
Wells NHS Trust for our managed voice product Centrex and our new SRS
Advanced platform to integrate telephony services across three hospital
sites.
We have signed a large number of data contracts in the quarter including
large IPVPN contracts with Oxford Swindon and Gloucester Co-op and Royal
London. Our new Ethernet portfolio has enabled the division to sign some
new Ethernet deals, including a three-year deal with Bristol City Council
for (pound)1.3 million.
CONTENT SEGMENT
Overall revenue growth in our content segment, Flextech, was up 19% from
(pound)26 million in the first quarter of 2004 to (pound)31 million in the
first quarter of 2005, although it was down (pound)1 million as compared to
the fourth quarter of 2004. Advertising revenue was up (pound)1 million on
the fourth quarter of 2004 and up (pound)4 million on the first quarter of
2004. This growth was driven by increases in UK Pay-television penetration,
the strong performance of Flextech's channels and strong growth in the UK
advertising market in the first quarter.
Subscription revenue remained flat at (pound)11 million compared to the
previous quarter, but up (pound)1 million compared to the same quarter last
year. Other non-core revenues fell by (pound)2 million compared to the
fourth quarter of 2004, but were flat at (pound)3 million compared to the
first quarter of 2004.
The portfolio of content assets is soon to be enhanced by the acquisition
of sit-up Limited, which we expect to complete during June 2005.
COSTS
Total gross margin increased to 74% from 72% in the fourth quarter and from
71% in the first quarter of last year, due primarily to the growing number
of high margin broadband subscribers, television price increases and
reduced cable segment expenses.
SG&A of (pound)115 million was up (pound)1 million from the fourth quarter
of 2004.
DEBT AND CAPITAL RESOURCES
Capital expenditure was (pound)54 million for the quarter. Capital
expenditure is expected to be in the range of (pound)230 million to
(pound)250 million in 2005.
Telewest's soon to be completed acquisition of the remaining equity in
sit-up Limited will in part be financed by a new (pound)130 million senior
secured bank facility entered into by Telewest's Flextech subsidiaries. The
bank facility consists of (pound)110 million of term loans, which were
fully drawn in connection with the acquisition and a (pound)20 million
revolving credit facility, which remains undrawn.
As at March 31, 2005, net debt was (pound)1,728 million. This consisted of
(pound)1,701 million drawn down on our credit facilities, (pound)114
million of leases and other loans, offset by cash balances of (pound)87
million. The (pound)1,701 million drawn amount includes US$150 million and
Euro 100 million, with the remainder in pounds sterling.
FINANCIAL RESULTS
GAAP FINANCIAL MEASURES 3 MONTHS ENDED MARCH 31,
----------------------------------------
(UNAUDITED IN (POUND) MILLIONS) 2005 2004
REORGANIZED PREDECESSOR
COMPANY COMPANY
- -------------------------------------------------- ------------------- --------------------
Operating income 24 19
Net income/(loss) 1 (4)
Net cash provided by operating activities 116 82
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Operating income for the first quarter of 2005 was (pound)24 million, up
from (pound)19 million for the first quarter of 2004, due principally to
revenue growth, lower cable segment expenses and SG&A partially offset by
increased content segment expenses, depreciation and amortization. SG&A in
the first quarter of 2004 was impacted by (pound)9 million of financial
restructuring charges compared to (pound)0 in the first quarter of 2005 and
the first quarter of 2005 was impacted by (pound)3 million of stock-based
compensation expense compared to (pound)0 in the first quarter of 2004.
The improvement from net loss of (pound)4 million for the first quarter of
2004 to net income of (pound)1 million for the first quarter of 2005, was
due principally to enhanced operating income and lower interest costs
following our financial restructuring, partially offset by lower foreign
exchange gains. There were (pound)77 million of foreign exchange gains in
the first quarter of 2004 relating to dollar-denominated debt, which was
extinguished as part of our predecessor's financial restructuring. This is
the first time that Telewest has generated net income.
Net cash provided by operating activities increased from (pound)82 million
for the first quarter of 2004 to (pound)116 million for the first quarter
of 2005. This increase arose principally as a result of improvements in
operating income and reduced interest payments being partially offset by
increased net working capital.
NON-GAAP FINANCIAL MEASURES 3 MONTHS ENDED MARCH 31,
-------------------------------------------------
(UNAUDITED IN (POUND) MILLIONS) 2005 2004
REORGANIZED PREDECESSOR
COMPANY COMPANY
- ----------------------------------------- ------------------------ ------------------------
Adjusted EBITDA 134 122
Free cash flow 63 25
- ----------------------------------------- ------------------------ ------------------------
Adjusted EBITDA (earnings before interest, taxation, depreciation,
amortization and financial restructuring expenses) for the first quarter of
2005 was (pound)134 million, up 10% as compared to the first quarter of
2004. This increase reflects increased revenues, particularly in the
consumer sales division and content segment, lower operating costs and
expenses in the cable segment, and improved gross margin, partially offset
by higher operating costs and expenses in the content segment. Adjusted
EBITDA margin (Adjusted EBITDA as a percentage of revenue) has increased
from 37.2% to 39.6%.
Stock-based compensation expense ("SBCE") of (pound)3 million was incurred
in the first quarter of 2005. SBCE arises as a result of options and
restricted stock granted upon completion of the financial restructuring of
our predecessor. SBCE will similarly affect future periods. This is a
non-cash item and no such expense was incurred in the first quarter of
2004. Adjusted EBITDA before the deduction of SBCE was (pound)137 million
in the first quarter of 2005, an increase of (pound)15 million, or 12%,
over the first quarter of 2004 on the same basis.
Free cash flow (cash flow from operating activities excluding financial
restructuring expenses less capital expenditure) for the three months ended
March 31, 2005 was (pound)63 million, compared with (pound)25 million for
the three months ended March 31, 2004. The increase was primarily due to
reduced cash interest payments relating to our bank facilities, reduced
capital expenditure and increased Adjusted EBITDA. Cash interest paid in
the first quarter of 2005 was lower than the first quarter of 2004 by
approximately (pound)20 million. This decrease resulted primarily from the
lower levels of our bank facilities and capital lease obligations for the
first quarter of 2005 compared to the first quarter of 2004. In addition,
capital expenditure was (pound)12 million less in the first quarter of 2005
compared with the same period in 2004, due to reduced CPE costs, increased
efficiency in the install process and improvements in the supply chain.
Reconciliations of these non-GAAP financial measures, Adjusted EBITDA and
free cash flow, to the most directly comparable GAAP financial measures are
explained and shown on pages 14 and 15.
PRINCIPAL AFFILIATES
UKTV
(UNAUDITED IN (POUND) MILLIONS) 3 MONTHS ENDED MARCH 31,
------------------------
2005 2004
- -------------------------------------------------------------------- ------------ ---------
Share of net income of UKTV 5 4
Cash inflow from UKTV, being interest received, repayment of loans
made, net, and dividends received 6 3
- -------------------------------------------------------------------- ------------ ---------
Telewest owns 50% of the companies that comprise UKTV, a group of joint
ventures formed with BBC Worldwide. UKTV offers a portfolio of
multi-channel television channels based on the BBC's program library.
Telewest accounts for its interest in UKTV under the equity method and
recognized a share of net income of (pound)5 million for the three months
ended March 31, 2005. This compares with (pound)4 million share of net
income for the three months ended March 31, 2004.
UKTV is funded by a loan from Telewest, the balance of which was (pound)184
million at March 31, 2005. Total cash interest and repayments received in
respect of this loan by Telewest were (pound)4 million in the first quarter
of 2005. Telewest's cash interest receipts from UKTV are recorded in free
cash flow but not in Telewest's Adjusted EBITDA. During the three months
ended March 31, 2005, we received (pound)2 million of dividends from UKTV.
We expect to continue to receive dividends from UKTV as it continues to
generate cash.
SIT-UP
On March 23, 2005, Telewest acquired 21.2% (on a fully diluted basis) of
sit-up Limited (sit-up), a UK-based interactive television retailer, for a
cash consideration of approximately (pound)41 million, bringing its total
holding of sit-up's share capital to approximately 49.7% (on a fully
diluted basis). In addition, pursuant to agreements entered into with
sit-up's founders and an offer to sit-up shareholders, Telewest has since
acquired or offered to acquire the remaining 50.3% (on a fully diluted
basis) of sit-up not already owned by it for an aggregate consideration of
approximately (pound)97.5 million. In addition, sit-up's existing
management will remain with the company following completion of the
acquisition. Telewest expects to complete this acquisition in June 2005 and
to finance it in part from borrowings under a new (pound)130 million bank
facility entered into by its FleXtech subsidiaries on May 10, 2005.
sit-up owns the second, third and fourth most distributed television home
shopping channels in the UK, with over five million viewers per month.
Supplementary financial information in respect of sit-up's operations and
cash flows for 2003 and 2004 is included on page 16 of this earnings
release.
TELEWEST GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
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THREE MONTHS ENDED MARCH 31,
- ---------------------------------------------------------------------------------------------
2005 2004
----------------- ---------------
REORGANIZED PREDECESSOR
COMPANY COMPANY
- ---------------------------------------------------------------------------------------------
REVENUE
Consumer Sales Division 246 235
Business Sales Division 61 67
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TOTAL CABLE SEGMENT 307 302
Content Segment 31 26
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TOTAL REVENUE 338 328
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OPERATING COSTS AND EXPENSES
Cable segment expenses 69 79
Content segment expenses 20 16
Depreciation 101 94
Amortization 9 -
Selling, general and administrative expenses 115 120
- ---------------------------------------------------------------------------------------------
314 309
- ---------------------------------------------------------------------------------------------
OPERATING INCOME 24 19
OTHER INCOME/(EXPENSE)
Interest income 4 7
Interest expense (including amortization of debt (29) (109)
discount)
Foreign exchange (losses)/gains, net (4) 77
Share of net income of affiliates 6 3
Other, net - (1)
- ---------------------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES 1 (4)
Income taxes charge - -
- ---------------------------------------------------------------------------------------------
NET INCOME/(LOSS) 1 (4)
- ---------------------------------------------------------------------------------------------
Basic and diluted loss per share of common stock -
Weighted average number of shares of common stock - (in 245
millions)
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TELEWEST GLOBAL, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
- ---------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
2005 2004
----------- -----------
REORGANIZED REORGANIZED
COMPANY COMPANY
- ---------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents 87 68
Restricted cash 25 26
Trade receivables 119 108
Other receivables 33 33
Prepaid expenses 34 17
- ---------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 298 252
Investments accounted for under the equity method 349 304
Property and equipment, net 2,925 2,974
Intangible assets, net 305 314
Reorganization value in excess of amounts allocable to
identifiable assets 425 425
Programming inventory 32 24
Deferred financing costs (net of amortization of (pound)1 million;
2004: (pound)0 million) 51 51
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS 4,385 4,344
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 127 93
Other liabilities 427 424
Debt repayable within one year 21 21
Capital lease obligations repayable within one year 43 38
- ---------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 618 576
Deferred taxes 105 105
Debt repayable after more than one year 1,686 1,686
Capital lease obligations repayable after more than one year 65 69
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TOTAL LIABILITIES 2,474 2,436
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- ---------------------------------------------------------------------------------------------
MINORITY INTEREST (1) (1)
- ---------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock - US$0.01 par value; authorized 5,000,000
shares, issued none (2005 and 2004) - -
Common stock - US$0.01 par value; authorized 1,000,000,000
shares, issued 245,080,629 (2005 and 2004) 1 1
Additional paid-in capital 1,957 1,954
Accumulated other comprehensive loss (1) -
Accumulated deficit (45) (46)
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TOTAL SHAREHOLDERS' EQUITY 1,912 1,909
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- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,385 4,344
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TELEWEST GLOBAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN (POUND)MILLIONS)
(UNAUDITED)
- ---------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
----------------------------
2005 2004
------------ -------------
REORGANIZED PREDECESSOR
COMPANY COMPANY
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) 1 (4)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation 101 94
Amortization 9 -
Amortization of deferred financing costs and debt discount 1 20
Fair value adjustment of interest rate swaps (10) -
Unrealized losses/(gains) on foreign currency translation 4 (77)
Stock-based compensation expense 3 -
Share of net income of affiliates (4) (3)
Profit on disposal of assets - (1)
Amounts written off investments - 1
Changes in operating assets and liabilities, net of effect of
acquisition of subsidiaries:
Change in receivables (12) (2)
Change in prepaid expenses (18) (5)
Change in other assets (8) (2)
Change in accounts payable 31 15
Change in other liabilities 18 46
- ---------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 116 82
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (54) (66)
Additional investments in and loans to affiliates (41) -
Repayment of loans made to affiliates, net 2 3
Proceeds from sale and leaseback 4 -
- ---------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (89) (63)
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Release of restricted cash 1 -
Repayment of other debt (1) -
Cash paid for loan issue costs (1) -
Principal element of capital lease repayments (7) (12)
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NET CASH USED IN FINANCING ACTIVITIES (8) (12)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 19 7
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 68 427
- ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 87 434
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Supplementary cash flow information:
Cash paid for interest, net (12) (32)
Cash received for income taxes - -
TELEWEST GLOBAL, INC.
SELECTED QUARTERLY OPERATING DATA - UNAUDITED
The following table sets out certain operating data for the three-month
periods shown. The information represents combined operating statistics for
all of our franchises.
- ------------------------------------------------------------------------------------------------------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31,
2005 2004 2004 2004 2004
Reorganized Company Predecessor Company
----------------------------------------------- --------------------------
CUSTOMER DATA
Homes passed and marketed (1) 4,694,480 4,686,794 4,686,799 4,682,777 4,678,182
Total customer relationships (2) 1,822,530 1,799,556 1,769,263 1,752,553 1,742,144
Customer penetration 38.8% 38.4% 37.7% 37.4% 37.2%
Customer additions 78,695 89,452 78,707 67,118 61,997
Customer disconnections (55,721) (59,159) (61,997) (56,709) (50,291)
Net customer additions 22,974 30,293 16,710 10,409 11,706
Revenue Generating Units ("RGUs") (3) 3,784,835 3,671,402 3,539,185 3,447,254 3,363,240
RGUs per customer 2.08 2.04 2.00 1.97 1.93
Net RGU additions 113,433 132,217 91,931 84,014 76,534
Average monthly revenue per customer (4) (pound)45.34 (pound)45.13 (pound)45.05 (pound)44.98 (pound)45.05
Average monthly churn (5) 1.0% 1.1% 1.2% 1.1% 1.0%
- ------ ------------------------------------------------ --------------- -------------- ------------------------------ --------------
BUNDLED CUSTOMERS
Customers subscribing to two or more services 1,409,998 1,379,057 1,338,632 1,312,842 1,291,141
Customers subscribing to three services
("triple play") 552,307 492,789 431,290 381,859 329,955
Percentage of dual or triple play customers 77.4% 76.6% 75.7% 74.9% 74.1%
Percentage of triple play customers 30.3% 27.4% 24.4% 21.8% 18.9%
- ------ ------------------------------------------------ --------------- -------------- ------------------------------ --------------
CONSUMER TELEVISION
Television ready homes passed and marketed 4,694,480 4,686,794 4,686,799 4,682,777 4,678,182
Total subscribers 1,320,487 1,312,825 1,297,304 1,288,272 1,285,797
Quarterly net additions 7,662 15,521 9,032 2,475 13,733
Television penetration 28.1% 28.0% 27.7% 27.5% 27.5%
Digital ready homes passed and marketed 4,451,420 4,420,388 4,405,162 4,401,860 4,386,050
Digital subscribers 1,149,641 1,122,301 1,078,623 1,052,855 1,029,759
Quarterly net digital additions 27,340 43,678 25,768 23,096 41,886
Penetration of digital subscribers to total
subscribers 87.1% 85.5% 83.1% 81.7% 80.1%
Average monthly churn (5) 1.4% 1.5% 1.4% 1.3% 1.2%
Average monthly revenue per subscriber (4) (pound)21.12 (pound)20.88 (pound)20.72 (pound)20.53 (pound)21.18
- ------ ------------------------------------------------ --------------- -------------- ------------------------------ --------------
CONSUMER TELEPHONY
Telephony ready homes passed and marketed 4,691,704 4,683,153 4,682,002 4,677,861 4,674,932
"3-2-1" and "Talk Weekends" telephony
subscribers 1,053,226 1,080,893 1,082,125 1,105,056 1,130,171
"Talk Unlimited" and "Talk Evenings and
Weekends" subscribers 624,417 579,448 552,534 516,313 481,976
Total subscribers 1,677,643 1,660,341 1,634,659 1,621,369 1,612,147
Quarterly net additions 17,302 25,682 13,290 9,222 12,114
Telephony penetration 35.8% 35.5% 34.9% 34.7% 34.5%
Average monthly churn (5) 1.0% 1.1% 1.2% 1.1% 1.0%
Average monthly revenue per subscriber (4) (pound)23.00 (pound)23.18 (pound)23.53 (pound)23.70 (pound)24.20
- ------ ------------------------------------------------ --------------- -------------- ------------------------------ --------------
TELEWEST GLOBAL, INC.
SELECTED QUARTERLY OPERATING DATA - UNAUDITED (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
MAR. 31, DEC. 31, SEP. 30 JUN. 30, MAR. 31,
2005 2004 2004 2004 2004
REORGANIZED COMPANY PREDECESSOR COMPANY
------------------------------------ ------------------------
CONSUMER INTERNET
Broadband ready homes passed and marketed 4,451,420 4,420,388 4,405,162 4,401,860 4,386,050
Total metered dial-up internet subscribers 29,376 33,417 39,196 47,884 50,953
Total unmetered dial-up internet 85,909 107,220 127,745 151,457 177,250
subscribers
Total broadband internet subscribers 786,705 698,236 607,222 537,613 465,296
Quarterly net broadband internet additions 88,469 91,014 69,609 72,317 50,687
Broadband internet penetration 17.7% 15.8% 13.8% 12.2% 10.6%
Average monthly broadband internet churn 1.0% 1.0% 1.3% 1.2% 1.0%
(5)
Average monthly revenue per broadband
internet subscriber (4) (pound)19.89 (pound)20.23 (pound)21.50* (pound)22.45* (pound)22.29*
- ------------------------------------------------------------------------------------------------------------------
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
NCTA CAPITAL EXPENDITURE (6)
---------- ---------- ---------- ---------- ---------
Customer premise equipment ("CPE") 16 25 19 23 23
Scaleable infrastructure 7 14 8 7 7
Commercial 8 8 12 9 11
Line extensions 2 1 1 1 1
Upgrade/rebuild 6 10 1 4 2
Support capital 13 7 10 9 8
---------- ---------- ---------- ---------- ----------
Total NCTA Capital expenditure 52 65 51 53 52
Non NCTA Capital expenditure:
Content Segment - 1 - 1 -
Change in capital accruals 2 (2) (1) 7 14
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Total Capital expenditure 54 64 50 61 66
- -------------------------------------------------------------------------------------------------------------------
* The product ARPUs for broadband internet in these quarters have been
adjusted to reflect the full value of promotional discounts offered.
<FN>
(1) The number of homes within our service area that can potentially be
served by our network with minimal connection costs. Information concerning
the number of homes "passed and marketed" is based on physical counts made
by us during network construction or marketing phases.
(2) The number of customers who receive at least one of our television,
telephony or broadband internet services.
(3) Revenue Generating Units ("RGUs"), refer to subscriptions to each of
our analog television, digital television, telephony and broadband internet
services on an individual basis. For example, when we provide one customer
with digital television and broadband internet services, we record two
RGUs. Dial-up internet services, second telephone lines and additional TV
outlets are not recorded as RGUs although they generate revenue for us.
(4) Average monthly revenue per customer (often referred to as "ARPU" or
"Average Revenue per User") represents the consumer sales division's total
quarterly revenue of residential customers, including installation
revenues, divided by the average number of residential customers in the
quarter, divided by three. The same methodology is used for television,
telephony and broadband internet ARPU.
(5) Average monthly churn represents the total number of customers who
disconnected during the quarter divided by the average number of customers
in the quarter, divided by three. Subscribers who move premises within our
addressable areas (known as "Moves and Transfers") and retain our services
are excluded from this churn calculation.
(6) In order to provide comparable data to the US and UK cable industry,
and in accordance with NCTA (National Cable & Telecommunications
Association) reporting guidelines, Telewest has allocated capital
expenditure to the standard reporting categories as per below. Telewest is
not a member of the NCTA and is providing this information solely for
comparative purposes.
</FN>
CPE - costs incurred at the customer's house to secure new customers,
revenue units and additional bandwidth revenues. Includes connections
to previously unserved houses in accordance with SFAS 51 and customer
premise equipment. Scaleable infrastructure - costs, not CPE or
network related, to secure growth of new customers, revenue units and
additional bandwidth revenues or provide service enhancements.
Commercial - costs to provide high speed data and telephony services
to businesses and institutions. Includes network and infrastructure
expenditures. Line extensions - network costs associated with entering
new service areas including costs of fiber, coaxial cable, amplifiers,
electronic equipment, make-ready and design/engineering.
Upgrade/rebuild - costs to modify or replace existing coax and fiber
networks. Includes materials, contract labor, in-house labor,
make-ready, design engineering and other miscellaneous costs
associated with all aspects of the construction of the plant miles
along an existing route. Benefits include added bandwidth and/or
reliability/extended life to the existing plant. Support capital -
costs associated with the replacement or enhancement of non-network
assets due to obsolescence and wear-out, replacement of network assets
unrelated to line extensions, rebuild/upgrade or customer growth.
TELEWEST GLOBAL, INC.
SUPPLEMENTAL ANALYSIS
- -------------------------------------------------------------------------------
o FORWARD-LOOKING STATEMENTS
o FRESH-START REPORTING
o QUARTERLY HISTORICAL INFORMATION
o SEGMENTAL INFORMATION
o USE OF NON-GAAP FINANCIAL MEASURES
o SIT-UP LIMITED
FORWARD-LOOKING STATEMENTS
Some of the statements in this earnings release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. These statements relate to future events or our future
financial performance, including, but not limited to, strategic plans,
potential growth (including penetration of developed markets and
opportunities in emerging markets), product introductions and innovation,
meeting customer expectations, planned operational changes (including
product improvements), expected capital expenditures, future cash sources
and requirements, liquidity, customer service improvements, cost savings
and other benefits of acquisitions or joint ventures - potential and/or
completed - that involve known and unknown risks, uncertainties and other
factors that may cause our or our businesses' actual results, levels of
activity, performance or achievements to be materially different from those
expressed or implied by any forward-looking statements. In some cases, you
can identify forward-looking statements by terminology such as "may,"
"will," "could," "would," "should," "expect," "plan," "anticipate,"
"intend," "believe," "estimate," "predict," "potential," or "continue," or
the negative of those terms or other comparable terminology.
There are a number of important factors that could cause our actual results
and future development to differ materially from those expressed or implied
by those forward-looking statements. These factors include those discussed
under the caption "Risk Factors" in the Annual Report on Form 10-K for the
year ended December 31, 2004 (No. 000-50886) filed by Telewest Global, Inc.
on March 22, 2005 with the United States Securities and Exchange
Commission, although those risk factors may not be exhaustive. Other
sections of this earnings release may describe additional factors that
could adversely impact our business and financial performance. We operate
in a continually changing business environment, and new risk factors may
emerge from time to time. Management cannot anticipate all of these new
risk factors, nor can they definitively assess the impact, if any, of new
risk factors on us or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those projected
in any forward-looking statements. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results.
Unless otherwise required by applicable securities laws, we assume no
obligation to publicly update or revise any of the forward-looking
statements after the date of this earnings release to reflect actual
results, whether as a result of new information, future events or
otherwise.
FRESH-START REPORTING
As a result of the completion of the financial restructuring of Telewest
Communications plc, our predecessor, on July 15, 2004, Telewest adopted
fresh-start reporting in accordance with Statement of Position 90-7,
"Reporting by Entities in Reorganization under the Bankruptcy Code", ("SOP
90-7"), with effect from July 1, 2004. Under SOP 90-7, Telewest established
a new accounting basis, recording our predecessor's assets at their fair
value and liabilities at the present value of amounts to be paid.
A reconciliation of our predecessor's balance sheet at June 30, 2004 to the
fresh-start balance sheet at July 1, 2004, is included in Telewest's Annual
Report on Form 10-K for the year ended December 31, 2004.
As a result of the adoption of fresh-start reporting, our balance sheets
and results of operations subsequent to July 1, 2004 will not be comparable
in many material respects to the balance sheets or results of operations
reflected in our predecessor's historical financial statements for periods
prior to July 1, 2004.
TELEWEST GLOBAL, INC.
QUARTERLY HISTORICAL INFORMATION
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
-------------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------------------------
MAR.31, DEC. 31, SEP. 30, JUN. 30, MAR. 31,
2005 2004 2004 2004 2004
REORGANIZED COMPANY PREDECESSOR COMPANY
- ----------------------------------------------------------------------------- --------------------
REVENUE
Consumer Sales Division 246 241 238 235 235
Business Sales Division 61 63 63 63 67
- ----------------------------------------------------------------------------------- --------------------
TOTAL CABLE SEGMENT 307 304 301 298 302
Content Segment 31 32 27 28 26
- ----------------------------------------------------------------------------------- --------------------
TOTAL REVENUE 338 336 328 326 328
- ----------------------------------------------------------------------------------- --------------------
OPERATING COSTS AND EXPENSES
Cable segment expenses 69 69 72 74 79
Content segment expenses 20 25 17 18 16
Depreciation 101 101 103 90 94
Amortization 9 9 9 - -
- ----------------------------------------------------------------------------------- --------------------
Cost of revenue 199 204 201 182 189
Selling, general and administrative expenses 115 114 117 124 120
- ----------------------------------------------------------------------------------- --------------------
314 318 318 306 309
- ----------------------------------------------------------------------------------- --------------------
OPERATING INCOME 24 18 10 20 19
OTHER INCOME/(EXPENSE)
Interest income 4 5 6 8 7
Interest expense (including amortization of
debt discount) (29) (47) (49) (121) (109)
Foreign exchange (losses)/gains, net (4) 3 - (37) 77
Share of net income of affiliates 6 4 4 5 3
Other, net - - - - (1)
- ----------------------------------------------------------------------------------- --------------------
INCOME/(LOSS) BEFORE INCOME TAXES 1 (17) (29) (125) (4)
Income taxes charge - - - (1) -
- ----------------------------------------------------------------------------------- --------------------
NET INCOME/(LOSS) 1 (17) (29) (126) (4)
- ----------------------------------------------------------------------------------- --------------------
Basic and diluted loss per share of common
stock - (pound)(0.07) (pound)(0.12)
Weighted average number of shares of common
stock - (in millions) 245 245 245
- ---------------------------------------------- ----------- ------------- ---------- -- --------- ----------
TELEWEST GLOBAL, INC.
SEGMENT INFORMATION
(AMOUNTS IN (POUND)MILLIONS)
THREE MONTHS ENDED MARCH 31,
-------------------------------------
2005 2004
------------------- -----------------
REORGANIZED PREDECESSOR
COMPANY COMPANY
- ------------------------------------------------------- ------------------- -----------------
CABLE SEGMENT
Consumer Sales Division revenue 246 235
Business Sales Division revenue 61 67
- ------------------------------------------------------- ------------------- -----------------
THIRD PARTY REVENUE 307 302
Operating costs and expenses (before financial (179) (188)
restructuring charges)
- ------------------------------------------------------- ------------------- -----------------
ADJUSTED EBITDA including inter-segment costs 128 114
Inter-segment costs (1) 3 3
- ------------------------------------------------------- ------------------- -----------------
ADJUSTED EBITDA 131 117
- ------------------------------------------------------- ------------------- -----------------
CONTENT SEGMENT
Content segment revenue 34 29
Operating costs and expenses (before financial (28) (21)
restructuring charges)
- ------------------------------------------------------- ------------------- -----------------
ADJUSTED EBITDA including inter-segment revenues 6 8
Inter-segment revenues (1) (3) (3)
- ------------------------------------------------------- ------------------- -----------------
ADJUSTED EBITDA 3 5
- ------------------------------------------------------- ------------------- -----------------
RECONCILIATION TO OPERATING INCOME
Cable Segment Adjusted EBITDA 131 117
Content Segment Adjusted EBITDA 3 5
- ------------------------------------------------------- ------------------- -----------------
ADJUSTED EBITDA 134 122
Financial restructuring charges - (9)
Depreciation (101) (94)
Amortization (9) -
- ------------------------------------------------------- ------------------- -----------------
OPERATING INCOME 24 19
- ------------------------------------------------------- ------------------- -----------------
<FN>
(1) Inter-segment revenues are revenues of our Content Segment which are
costs in our Cable Segment and which are eliminated on consolidation.
</FN>
TELEWEST GLOBAL, INC.
USE OF NON-GAAP FINANCIAL MEASURES
- ---------------------------------------------------------------------------
ADJUSTED EBITDA
Telewest's primary measure of income or loss for each of our reportable
segments is Adjusted EBITDA. Our management, including our chief operating
decision maker, considers Adjusted EBITDA an important indicator of the
operational strength and performance of our reportable segments. Adjusted
EBITDA for each segment and in total excludes the impact of costs and
expenses that do not directly affect our cash flows or do not directly
relate to the operating performance of that segment. These costs and
expenses include depreciation, amortization, financial restructuring
charges, interest expense, foreign exchange gains/(losses), share of net
income/(loss) from affiliates and income taxes. It is the belief of
management that the legal and professional costs relating to our financial
restructuring are not characteristic of our underlying business operations.
Furthermore management believes that some of the components of these
charges are not directly related to the performance of a single reportable
segment.
Adjusted EBITDA is not a financial measure recognised under GAAP. This
measure is most directly comparable to the GAAP financial measure net
income/(loss). Some of the significant limitations associated with the use
of Adjusted EBITDA as compared to net income/(loss) are that Adjusted
EBITDA does not reflect the amount of required reinvestment in depreciable
fixed assets, financial restructuring charges, interest expense, foreign
exchange gains or losses, income taxes expense or benefit and similar items
on our results of operations. We believe Adjusted EBITDA is helpful for
understanding our performance and assessing our prospects for the future,
and that it provides useful supplemental information to investors. In
particular, this non-GAAP financial measure reflects an additional way of
viewing aspects of our operations that, when viewed with our GAAP results
and the reconciliations to net income/(loss), shown below, provide a more
complete understanding of factors and trends affecting our business.
Because non-GAAP financial measures are not standardized, it may not be
possible to compare Adjusted EBITDA with other companies' non-GAAP
financial measures that have the same or similar names. The presentation of
this supplemental information is not meant to be considered in isolation or
as a substitute for net cash provided by operating activities, operating
income/(loss), net income/(loss), or other measures of financial
performance reported in accordance with GAAP.
FREE CASH FLOW
Telewest's primary measure of cash flow is free cash flow. Free cash flow
is defined as net cash provided by/(used in) operating activities excluding
cash paid for financial restructuring charges, less capital expenditure.
Our management, including our chief operating decision maker, considers
free cash flow an important indicator of the operational performance of our
business.
Free cash flow is not a financial measure recognized under GAAP. This
measure is most directly comparable to the GAAP financial measure net cash
provided by/(used in) operating activities. The significant limitation
associated with the use of free cash flow as compared to net cash provided
by/(used in) operating activities is that free cash flow does not consider
the amount of cash required to pay financial restructuring charges. We
believe free cash flow is helpful for understanding our performance and it
provides useful supplemental information to investors. Because non-GAAP
financial measures are not standardized, it may not be possible to compare
free cash flow with other companies' non-GAAP financial measures that have
the same or similar names. The presentation of this supplemental
information is not meant to be considered in isolation or as a substitute
for net cash provided by/(used in) operating activities, or other measures
of financial performance reported in accordance with GAAP.
NET DEBT
Net debt is defined as the sum of debt repayable, capital lease obligations
and accrued interest payable on notes and debentures less cash and cash
equivalents. The Company's management, including its chief operating
decision-maker, considers net debt an important measure of the financing
obligations undertaken by the Company.
Net debt is not a financial measure recognized under GAAP. This measure is
most directly comparable to the GAAP financial measure, total liabilities.
The significant limitation associated with the use of net debt as compared
total liabilities is that net debt does not consider current liabilities
due in respect of accounts payable and other liabilities. It also assumes
that all of cash and cash equivalents is available to service debt.
Telewest believes net debt is helpful for understanding its entire net debt
funding obligations and it provides useful supplemental information to
investors. Because non-GAAP financial measures are not standardized, it may
not be possible to compare net debt with other companies' non-GAAP
financial measures that have the same or similar names. The presentation of
this supplemental information is not meant to be considered in isolation or
as a substitute for total liabilities, or other measures of financial
performance reported in accordance with GAAP.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(AMOUNTS IN (POUND)MILLIONS)
- ------------------------------------------------ ------------------------------------------
THREE MONTHS ENDED
------------------------------------------
MAR. 31, MAR. 31, DEC. 31,
2005 2004 2004
--------------- -------------- -----------
REORGANIZED PREDECESSOR REORGANIZED
COMPANY COMPANY COMPANY
- ------------------------------------------------ --------------- -------------- -----------
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME/(LOSS)
- --------------------------------------------------------------------------------------------
Adjusted EBITDA 134 122 128
Financial restructuring charges - (9) -
Depreciation (101) (94) (101)
Amortization (9) - (9)
- --------------------------------------------------------------------------------------------
Operating income 24 19 18
Interest income 4 7 5
Interest expense (including amortization of (29) (109) (47)
debt discount)
Foreign exchange (losses)/gains, net (4) 77 3
Share of net income of affiliates 6 3 4
Other, net - (1) -
- --------------------------------------------------------------------------------------------
Net income/(loss) 1 (4) (17)
- --------------------------------------------------------------------------------------------
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
- --------------------------------------------------------------------------------------------
Free cash flow 63 25 (3)
Deduct cash paid for financial restructuring (1) (9) (9)
charges
Add capital expenditure 54 66 64
- --------------------------------------------------------------------------------------------
Net cash provided by operating activities 116 82 52
- --------------------------------------------------------------------------------------------
Free cash flow is reported after cash paid for interest, net, and cash
received for income taxes.
Supplementary cash flow information:
Cash paid for interest, net 12 32 72
Cash received for income taxes - - (2)
- --------------------------------------------------------------------------------------------
MAR. 31, DEC. 31,
2005 2004
-------------- -----------
REORGANIZED REORGANIZED
COMPANY COMPANY
- --------------------------------------------------------------------------------------------
RECONCILIATION OF NET DEBT TO TOTAL LIABILITIES
- --------------------------------------------------------------------------------------------
Net debt 1,728 1,746
Cash and cash equivalents 87 68
- --------------------------------------------------------------------------------------------
Total debt 1,815 1,814
Accounts payable 127 93
Other liabilities 427 424
Deferred taxes 105 105
- --------------------------------------------------------------------------------------------
Total liabilities 2,474 2,436
- --------------------------------------------------------------------------------------------
TELEWEST GLOBAL, INC.
SIT-UP LIMITED
- -------------------------------------------------------------------------------
The following supplementary financial information has been derived from the
audited financial statements of sit-up Limited for the years ended December
31, 2003 and 2004. The information has been prepared in accordance with
generally accepted accounting principles in the United Kingdom (UK GAAP).
This presentation of the financial information in respect of sit-up is not
intended to suggest that and should not be construed as suggesting that
Telewest's management controlled or directed the operations of sit-up
during the periods presented or that a consolidated presentation of the
results for these periods with those of Telewest is otherwise appropriate
under GAAP.
PROFIT AND LOSS ACCOUNT
(AMOUNTS IN (POUND)MILLIONS)
- --------------------------------------------------------------------------------
YEAR ENDED
--------------------------
DEC. 31, DEC. 31,
2004 2003
------------ -----------
Turnover 206 119
Other operating income 1 -
------------ -----------
207 119
Cost of sales (151) (91)
------------ -----------
GROSS PROFIT 56 28
Depreciation (2) (1)
Administrative expenses (excluding depreciation) (43) (28)
------------ -----------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 11 (1)
Taxation (3) 5
------------ -----------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 8 4
Preference share dividend/appropriation (1) (1)
------------ -----------
RETAINED PROFIT FOR THE FINANCIAL YEAR 7 3
- --------------------------------------------------------------------------------
SUMMARIZED CASH FLOW INFORMATION
(AMOUNTS IN (POUND)MILLIONS)
- -------------------------------------------------------------------------------
YEAR ENDED
--------------------------
DEC. 31, DEC. 31,
2004 2003
------------ -----------
Net cash inflow from operations 23 13
Net cash inflow from returns on investments and
servicing of finance 1 -
Net cash outflow from capital expenditure and
financial investment (2) (2)
Net cash outflow from financing (1) (2)
------------ -----------
INCREASE IN CASH IN THE YEAR 21 9
------------ -----------
- -------------------------------------------------------------------------------