EXHIBIT 99.2
NTL ANNOUNCES FINANCIAL RESULTS FOR FIRST QUARTER 2000
17th CONSECUTIVE QUARTER OF INCREASED PENETRATION
RESIDENTIAL REVENUE GENERATING UNITS EXCEED 5.2 MILLION
REVENUES INCREASE BY 57%, EBITDA INCREASES BY 111%
HIGHLIGHTS INCLUDE FINANCIAL BREAKOUT OF OPERATING SEGMENTS
New York, New York (May 15, 2000) - NTL Incorporated (Nasdaq and Easdaq: NTLI)
announced its financial results for the three months ended March 31, 2000.
Operating and financial results showed strong increases year over year from both
organic growth as well as acquisitions.
Annualized revenues increased from $1.25 billion to $1.96 billion. Annualized
EBITDA increased from $130 million to $275 million. Residential cable TV and
telephony customers increased from 1,226,800 to 3,236,100. Business customers
increased from 36,100 to 46,200. Internet customers increased from 215,000 to
999,700, and the Company reported that it also had more than 350,000
pre-registrations for its new free Internet service, "ntlworld," offered
throughout the UK and Ireland.
As of the latest publicly available data, the consumer operations of Cable &
Wireless Communications plc ("CWC ConsumerCo") reported approximately 1.2
million cable and telephony customers, 150,000 internet customers and more than
2.0 million revenue generating units ("RGUs").
Commenting on the Company's performance, Barclay Knapp, Chief Executive Officer
said:
"NTL is moving faster and accomplishing more in shorter amounts of time than
virtually any other company in our industry.
"Every day we must manage internal growth from our core activities, develop new
strategic initiatives to improve our core activities longer term, rapidly
integrate the many acquisitions we have made over the last 18 months, and
prepare for new acquisitions such as CWC ConsumerCo and Cablecom (Switzerland).
"The results we are announcing today are displayed to reflect these core
activities, as well as being broken out to reflect our multiple lines of
business.
"NTL derives great strength from its multiple activities and multiple segments,
but it has made the Company complex to understand by the outsider. With today's
announcement we hope to add more clarity, and therefore convey the true
excitement we all have about our accomplishments to date as well as the
tremendous opportunities that await us."
CONSUMER SERVICES
Growing our residential and business services in our current UK operations is
our number one priority. In residential services we are focusing on time. In the
following tables, amounts are in thousands of US$'s and the EBITDA that is shown
is before allocation of the shared costs, which are described below.
RESIDENTIAL TELECOMS AND TELEVISION SERVICES
The following tables illustrate our UK on and off-net residential telecoms and
television service activities over the previous year, as well as the combined
results for our Cablelink (Ireland), BT (England) and 1G (France) properties
acquired in mid 1999.
1999 2000
---------------------------------------------------------------------------------
Core UK - On-Net Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ 162,697 $ 195,373 $ 199,935 $ 220,052 $ 225,513
EBITDA 54,782 69,968 73,372 78,977 81,357
1999 2000
---------------------------------------------------------------------------------
Core UK - Off-Net Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ - $ - $ - $ - $ 654
EBITDA - - - - (1,062)
1999 2000
---------------------------------------------------------------------------------
Cablelink/BT/1G Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ - $ - $ 20,469 $ 23,804 $ 24,406
EBITDA - - 1,925 904 4,840
We have now begun the network upgrading process in the acquired Cablelink
(Ireland), BT (England) and 1G (France) properties, and so while these are
currently EBITDA positive, we anticipate that they will move to negative EBITDA
as we add the new services. Adding these services, which include digital cable,
telephony, and high-speed Internet access, together with the operating
infrastructure to support them, will produce negative EBITDA in these systems
through 2001.
We completed the acquisition of Cablecom in Switzerland at the very end of the
first quarter. Network upgrading for digital television and cable modems is
already underway at Cablecom, and we expect to begin the addition of telephony
shortly. Cablecom's financial results will be reflected in our second quarter.
Customer growth in our core UK operations continues to be strong. We added
48,300 customers in the first quarter, the most ever for a first quarter, which
is historically our slowest. Our average revenue per customer increased, again
against our normal first quarter trend, as we continued to attract both higher
spending customers with our bundled internet offering as well as from additional
services such as pay-per-view.
We re-launched our off-net services early in the second quarter with our
"ntlworld" free Internet service bundled with our "3-2-1" indirect access
telephony product. Our off-net strategy is to provide a nationwide one-stop-shop
for all NTL services, thereby gaining substantial national efficiencies in
marketing, provisioning, and customer support. We plan to include television in
the off-net bundle early in 2001 with our own high-function Digital Terrestrial
Television set top box being developed with Microsoft (Registered). Our off-net
Internet and interactive services have the same content, look and feel as our
on-net services, thereby completing our "ubiquitous portal" strategy as
described more fully below.
The following table shows the cable television and telephony customer statistics
for NTL:
CABLE TELEVISION AND TELEPHONY CUSTOMERS AS OF MARCH 31, 2000
- ------------------------------ -------------------------------------------------------------------------------------------
"Original" Cablelink/ Total UK/ Switzerland/
NTL (1) UK Acq. (2) BT Cable (3) Ireland (4) France (5) NTL Combined
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Homes passed 1,366,400 2,376,500 605,500 4,348,400 1,697,100 6,045,500
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Homes marketed (Tel.) 1,171,300 2,033,800 0 3,205,100 0 3,205,100
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Homes marketed (CATV) 1,171,300 2,147,300 553,600 3,872,200 1,644,000 5,516,200
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Total customers 572,200 826,200 422,100 1,820,500 1,415,600 3,236,100
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Dual 529,300 443,900 0 973,200 0 973,200
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Telephone-only 18,000 283,200 0 301,200 0 301,200
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Cable-only 24,900 99,100 422,100 546,100 1,415,600 1,961,700
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Total RGUs (6) 1,101,500 1,270,100 422,100 2,793,700 1,415,600 4,209,300
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Customer penetration 48.9% 38.5% 76.2% 47.0% 86.1% 58.7%
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
RGU penetration 94.0% 59.1% 76.2% 72.1% 86.1% 76.3%
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Telephone penetration 46.7% 35.8% N/A 39.8% N/A 39.8%
- ------------------------------ --------------- -------------- -------------- --------------- -------------- --------------
Cable penetration 47.3% 25.3% 76.2% 39.2% 86.1% 53.2%
============================== =============== ============== ============== =============== ============== ==============
(1) Data for franchises which NTL has been developing since 1993.
(2) Data for franchises acquired by NTL in 1998/1999: Comcast UK, Diamond Cable
and ComTel.
(3) Data for Cablelink (Ireland) and the BT cable franchises acquired in 1999.
(4) Includes total subscribers for UK and Ireland.
(5) Data for Cablecom (Switzerland) and the "1G Networks" (France). Cablecom
homes passed is a bestst estimate and Cablecom homes marketed are assumed to
be equal to homes passed.
(6) An RGU is one cable television account or one telephone account; a dual
customer generates two RGUs.
Monthly RGU churn was approximately 1.1% in the first quarter.
The following table shows the Internet operating statistics for NTL:
INTERNET CUSTOMERS AS OF MARCH 31, 2000
- ------------------------------ -------------------------------------------------------------
NTL Direct UK Wholesale NTL Combined Switzerland
- ------------------------------ --------------- -------------- -------------- ---------------
Total customers 128,700 712,000 159,000 999,700
============================== =============== ============== ============== ===============
Key additional developments in Residential Services included:
- - On May 4, 2000, NTL launched digital cable television throughout Scotland,
Northern Ireland and Wales. Priced at (UK Pound) 13.00 per month, the
digital television service also includes telephony and "ntlworld," our free
Internet access and interactive service. The service will roll out to the
remaining NTL franchises by the end of the third quarter. Westminster and
Milton Keynes will commence service in 2001; and
- - In January 2000, NTL announced that Microsoft would provide the software
platform for the delivery of interactive TV services as part of NTL's
digital terrestrial TV (DTT) and telephony package to UK consumers. DTT
services will bring interactivity and enhanced TV services, including
digital video recording (DVR) to those consumers beyond the reach of NTL's
broadband cable networks.
INTERNET, DIGITAL AND INTERACTIVE SERVICES
The first quarter of 2000 saw a rapid build-up of activities in three strategic
areas closely allied with our residential unit: Internet, digital television,
and interactive services. Our customer research suggests that dial-up Internet
subscribers are higher spending, more apt to buy digital and high-speed
services, and "stickier" from a retention point of view. Therefore, starting
late last year and continuing through the first quarter, we have invested
heavily in launching several integrated services: a) our free dial-up Internet
service "ntlworld," b) our cable modem Internet service which is rolling out
throughout our UK franchises, c) our digital cable TV service, and d) our common
Internet portal, which operates across all of these platforms. The following
table illustrates our expenditures in these areas over the last year:
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Internet, Digital & Interactive Q1 Q2 Q3(1) Q4 Q1
Services
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Expense $ 310 $ 104 $ (341) $ 1,563 $ 4,745
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
(1) Net expenses were positive in the third quarter as content partners'
payments to us for "repurposing" sites exceeded expenditure in that quarter.
As a result of our investment in this area, NTL may be the only company in the
world capable of delivering a common web portal and interactive service via both
PC and TV platforms, in both narrowband and broadband versions, and both on and
off-net nationwide.
With our recent addition of Lastminute.com, we now have over 140 content
partners on our interactive services, over 40 of which have "repurposed" their
sites to perform well on the TV set. These partners give our services greater
breadth and depth than those obtainable from any other cable or satellite
provider.
TELEVISION CONTENT AND PROGRAMMING.
Another area of strategic investment for our residential services is television
programming and content, especially as we rapidly approach true video-on-demand.
Our customer research shows that consumers in the UK want greater choice in
movies, sports, local programming, and personalized information. Our investment
in programming to date has mirrored this demand. In 1998, NTL and Telewest
created our Front Row pay-per-view service. During the last 12 months we have
focused especially on basic sports programming through our British Eurosport
channel (a joint venture with Eurosport via our Premium TV division), as well as
personalized, interactive, and information programs through our recently
announced joint venture with ITN and our interactive services initiatives.
Investment in these areas to date is shown below.
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
TV Programming Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ 653 $ 686 $ 959 $ 3,481 $ 2,440
EBITDA (6,032) (5,180) (5,516) (4,568) (7,868)
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Premium TV has also made investments in the Newcastle United, Aston Villa, and
Middlesbrough football clubs whereby we secured all media rights except those
negotiated by the Premier League. In these transactions we have also secured the
sports Internet rights and additional sponsorship opportunities for the teams.
NTL aims to stimulate the creation and development of a wide range of digital
programming via the creation of the "NTL digital content fund". The fund will
provide up to (UK Pound) 5 million per year for the next five years to nurture
an entirely new programming category - we call "enteractivity". Enteractivity
will blur the lines between video, data, graphics, interactivity and Internet
access, allowing the consumer greater control over the entertainment experience.
These investments, along with our ownership of the British Eurosport sports
platform, have measurably enhanced our strategic position in the
penetration-building sports category. Our activities to date in non-sports
programming will begin paying off in 2000 as we roll out near-video-on-demand
movies and additional news and entertainment channels for our digital services.
Designed to increase digital penetration, these initiatives will increase
negative EBITDA through 2000 as we build this important strategic position.
BUSINESS SERVICES
NATIONAL TELECOMS SERVICES
Our primary activity in national telecoms is to grow our customer base,
revenues, and EBITDA for our targeted carrier and business customers. To date,
we have implemented a "barbell" strategy where we sell "connectivity" to very
large, sophisticated customers such as carriers and large corporations, and
"solutions" to smaller businesses. Our results in these areas are as follows:
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Business/Carrier Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ 77,539 $ 82,124 $ 94,753 $ 100,116 $ 103,956
EBITDA 15,651 28,231 39,520 42,506 42,646
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Serving carriers and smaller businesses means steady growth from adding
customers every day, and adding services and revenues to existing customers -
much like our consumer business. Last year we recognized the need to enhance our
"solutions" product offerings to medium to large business by adding data,
LAN/WAN, and desktop integration services, so we acquired Workplace
Technologies. Workplace is one of the leading, turnkey data integration
companies in the UK. Workplace's business is somewhat "lumpy" since its revenues
include equipment resale and other one-time items, and therefore its EBITDA
pattern is governed by the timing of significant contracts. This is illustrated
as follows:
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Workplace Technologies Q1 Q2 Q3 (1) Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ - $ - $ 10,914 $ 48,301 $ 34,257
EBITDA - - 1,107 (808) (3,141)
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
(1) Results for the quarter are from the date of acquisition.
As we integrate Workplace into our business telecoms group, we expect to smooth
their results somewhat by winning the recurring carrier revenue portion of their
contracts that have historically gone to our competitors when Workplace was
independent.
Other major areas of our national telecoms group include our radiocomms and
satellite divisions. In these areas revenues and EBITDA are steady because they
are generally driven by large, long term service contracts with major entities.
Growth in these areas is thus dependent on securing additional contracts and/or
acquisitions. We are active in both areas, having recently secured a (UK Pound)
70 million contract with the London Metropolitan Police for radiocomms, for
example. The following table illustrates revenues and cash flow from these
areas:
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Radiocomms/Satellite Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ 33,184 $ 30,749 $ 34,009 $ 40,043 $ 43,204
EBITDA 10,367 11,888 10,850 14,415 14,088
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Key additional developments in the National Telecoms Services division included:
- - In May 2000, NTL announced its e-business strategy. NTL will roll-out a
unique range of e-business services, the first of which, "Shopbuilder",
will provide businesses with an efficient and cost-effective entry level
e-commerce solution that will act as a web shop-front for products or
services;
- - In April 2000, NTL won a (UK Pound) 1 million contract to design and
implement an advanced communications infrastructure for the London
Exhibition Center adjacent to the London Millennium Dome;
- - In March 2000, Office Angels, one of the UK's leading recruitment
specialists, selected NTL to design, install and manage the company's LAN
and WAN networks across 56 regional and head-offices for a three-year term;
and
- - In January 2000, NTL won a (UK Pound) 10+ million contract from the Royal
National Lifeboat Institution for a voice and paging network. NTL will
design, build, maintain and monitor the system on a 24-hour basis for 10
years.
BROADCAST SERVICES
Another source of revenue and EBITDA stability is our broadcast business. Here,
too, growth comes mainly through winning major new contracts and acquisitions.
Examples include our acquisition of the Australian National Transmission Network
last year, and our recent signing of the contracts shown below.
The broadcast business in the UK is subject in part to a price cap formula which
reduces the revenue for analog TV broadcasting for ITV and Channel 4 by
inflation less a fixed percentage. The price cap leads to slight declines in
revenue in the first quarter of each new year until additional services,
contracts, and acquisitions build them up again. The price cap does not apply to
digital TV services, radio services, or other competitive offerings.
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Broadcast Services Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Revenue $ 38,824 $ 50,910 $ 55,198 $ 56,969 $ 55,893
EBITDA 25,081 27,709 28,809 30,240 29,499
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Additional developments in Broadcast Services included:
- - In March 2000, NTL was appointed the "preferred transmission supplier" by
UKRD Radio Group Ltd, which has interests in 18 UK radio stations. In
addition, the broadcast radio group has been successful in signinseveral
important contract renewals with long-established UK customers: The Pulse,
Jazz FM, Channel 103 and Island FM;
- - NTL has been awarded a multi-million pound contract for its part in
transmitter improvements for UK digital terrestrial television; and
- - NTL Australia has been awarded its first commercial radio contract from
DMG Radio, the largest radio operator in Australia.
SHARED COSTS
BRANDING
In the last year we have significantly enhanced the NTL brand by extending it
nationwide and converting all of the businesses acquired through 1999. This has
entailed significant expenditures as shown below, but has lifted our awareness,
recall, and customer esteem dramatically as shown in the following data:
March 1999 November 1999 May 2000
- ---------------------------------- ----------------------- ------------------------ ------------------------
Name Recognition 20% 58% 69%
Web-site Visits 52,000/month 500,000/month 1,000,000/month
Job Seekers 200/month 17,500/month 33,600/month
- ---------------------------------- ----------------------- ------------------------ ------------------------
We will continue to aggressively promote the NTL brand nationwide, especially
during the second and fourth quarters, which are historically very strong for
customer growth.
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Branding Q1 Q2 Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Expense $ - $ 23,993 $ 7,947 $ 15,336 7,284
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
INTEGRATION
In the last 24 months we have completed more than 15 acquisitions in all areas
of our business. Recently, we have been actively preparing for our biggest
acquisition yet, CWC ConsumerCo, which we expect to close shortly. Our
integration costs have come from a number of sources, and are shown in the
following table. One of our major costs has been the integration of acquired
companies' IT systems, while simultaneously upgrading them for digital
television, interactive services, and VOD. It is anticipated that we will incur
up to $20 million in the second quarter of 2000 for costs from data conversion,
training and consultants as these integrated and upgraded systems come on line.
1999 2000
- ---------------------------------- --------------- --------------- ----------------
Integration Q3 Q4 Q1
- ---------------------------------- --------------- --------------- ----------------
Expense $ 490 $ 1,440 $ 1,453
- ---------------------------------- --------------- --------------- ----------------
OTHER SHARED COSTS
Human resources, finance, facilities, IT and administrative costs are shared
among all our UK operations and are therefore difficult to allocate. In
addition, we run our network operations as a centralized function to gain
maximum efficiency. Although these costs have remained largely stable over the
last year, we experienced an increase in our network costs in the first quarter.
The increase came from increases in our network maintenance costs as older
equipment came off warranty, sharp growth in our Internet interconnection
capacity, and from increasing employment in our centralized network group to
handle our tremendous growth in our Internet, Satellite, and European
activities.
1999 2000
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Network Operations & Shared Q1 Q2 Q3 Q4 Q1
Services
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
Expense $ 66,973 $ 71,195 $ 76,565 $ 67,705 $ 78,133
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
as % of Revenues 21.4% 19.8% 18.4% 13.7% 15.9%
- ---------------------------------- --------------- --------------- ---------------- --------------- ----------------
STRATEGIC INITIATIVES
EUROPEAN EXPANSION
Our objective in expanding into continental Europe is not only to replicate our
UK success, but also to develop new business models for Europe, which could in
turn enhance our UK operations as well. Our European initiative is five-fold:
- - Acquire well-positioned cable companies having high customer penetrations
and upgradable networks in key major markets;
- - Link these with each other and the UK via a pan-European fiber backbone
network;
- - Expand the range of services in each country initially via indirect
telephony, dial-up Internet and mobile virtual networks, and then later via
unbundled telephony access and DSL;
- - Build metropolitan and local loop fiber networks to directly connect
customers in strategic areas; and
- - Employ all of these assets to offer total broadband solutions to both the
consumer and B2B market within each country.
We are well on our way to achieving these goals. Cablecom and 1G are excellent
cable companies in major markets and are in the process of being upgraded. We
seek additional acquisitions in France, Belgium, Netherlands, Scandinavia,
Germany, Italy and Spain.
We have secured agreements with major international telecoms carriers giving us
a very high capacity dark-fiber backbone network connecting any 24 cities of our
choosing throughout Europe. This network was realized by swapping capacity on
our UK networks, and will be rolled out as needed over the next 24 months.
We have commenced activities building out our fiber optic networks directly to
the home and to multiple family dwelling units in Switzerland and the UK, with
an eye toward making this a feature of our standard network build going forward.
In addition, this fiber-to-the-homes (FTTH) architecture could serve as a pure
broadband connection strategy in areas where we do not operate cable systems.
For this reason, we have taken a strategic stake in Sweden's B2 (described
below) which is pursuing a similar strategy.
We plan to increase and expand these activities throughout 2000 and beyond in
order to achieve our objectives.
MOBILE
We strongly believe that having a mobile service to bundle with our consumer and
business propositions would be extremely attractive. We have begun negotiations
to secure a "virtual network operator" (VNO) agreement for both current and UMTS
services with one or more carriers in the UK. We withdrew from the recent UMTS
operator auction in the UK because we believe the rate of return of our VNO
strategy will be higher than that for purchasing a UMTS license and becoming an
actual carrier.
A VNO agreement will allow us to provide an NTL branded mobile service as part
of our bundle, including providing the NTL web portal as the primary interactive
service on the mobile phone itself. From the customer's view it should be no
different than if NTL were the carrier. Since NTL will be providing a
significant amount of both network and operations infrastructure, we believe
mobile operating margins should be attractive. In addition, we believe that the
current operators will desire to conclude arrangements with us as the major
alternative fixed operator in the UK and to quickly recoup a portion of their
expenditures for UMTS.
STRATEGIC FUND
We have recently formed Brigadoon Ventures, Inc., to focus on early stage
strategic investments in emerging networks, Internet content, communications
technology and programming. We have always had numerous opportunities to take
small stakes in emerging areas of great strategic interest to NTL. Creating the
fund will allow us to attract additional outside capital to make these
investments along side with us, thereby further leveraging our strategic vision.
It is expected that the fund will concentrate on those areas where NTL might
eventually take a majority stake and integrate the operation into the company.
In March 2000, Brigadoon took a 25% stake in Bredbandsbolaget (B2), a Swedish
telecommunications company specializing in the provision of 10-100 Megabit
broadband ethernet access and services via a direct fiber connection to the
home.
In May 2000, Brigadoon made a $6 million investment in Diva Systems Corporation,
a video-on-demand operator currently developing VOD capability for the Company's
UK network.
OTHER DEVELOPMENTS
ACQUISITION OF THE ASSETS OF CABLECOM
On March 28, 2000, NTL acquired the businesses and assets of Cablecom,
Switzerland's largest cable operator, from Swisscom AG, Siemens Schweiz AG and
VEBA Telecom GmbH for CHF 5.8 billion (approximately $3.5 billion). At March 31,
2000, Cablecom had approximately 1.37 million subscribers with a 53% share of
the Swiss cable market and is the major operator in 12 of Switzerland's 16
biggest cities. Cablecom also owns Swiss Online, one of the largest Internet
service providers in Switzerland and one of the country's most popular portals
with 152,100 customers at March 31, 2000. NTL financed the transaction from cash
on hand, loan facilities and the issuance of $1.85 billion of 5% cumulative
preferred stock, series A, to France Telecom and a group of commercial banks.
The preferred stock issued to the banks is subject to a put and call option
agreement in favor of France Telecom.
On March 28, 2000 the Company entered into a CHF 4.1 billion (approximately $2.5
billion) senior secured credit facility, consisting of a CHF 2.7 billion term
loan facility used to finance approximately 50% of the Cablecom acquisition
consideration and a CHF 1.4 billion revolving credit facility to fund capital
expenditures, working capital, operating expenses and general corporate
financing requirements.
AGREEMENT TO ACQUIRE CWC CONSUMERCO.
On July 26, 1999, NTL, with the support of France Telecom, agreed to acquire the
consumer cable telephony, Internet and television operations of CWC ConsumerCo.
NTL expects to acquire CWC ConsumerCo for approximately 85 million new shares of
NTL common stock and (UK Pound) 2.85 billion in cash. NTL will also assume
approximately (UK Pound) 1.9 billion of CWC's net debt, plus operational
adjustments prior to closing. On March 22, 2000, the Secretary of State for
Trade and Industry and the Competition Commission cleared, without condition,
NTL's acquisition of CWC ConsumerCo from a competition perspective. On May 10,
2000, the Secretary of State for Trade and Industry approved France Telecom's
investment in NTL, subject to certain undertakings by FT regarding its UK
investments.
The Company has entered into a note purchase agreement for up to approximately
(UK Pound) 2.4 billion (approximately $3.8 billion) to refinance CWC
ConsumerCo's existing indebtdedness.
STRATEGIC INVESTMENT FROM FRANCE TELECOM
In July 1999, France Telecom agreed to invest an initial $1 billion in NTL and
provided a commitment for an additional (UK Pound) 2.8 billion. This commitment
is a key factor in the proposed CWC ConsumerCo acquisition. In August 1999,
France Telecom purchased approximately 4.2 million shares of NTL common stock
and 750,000 shares of 5% Convertible Preferred Stock for a total of $1 billion.
France Telecom, subject to certain conditions, will purchase approximately 42.2
million shares of NTL common stock and 2 million shares of 5% Convertible
Preferred Stock for a total of (UK Pound) 2.8 billion.
INVESTMENT IN MIDDLESBROUGH FOOTBALL CLUB
In March 2000, NTL announced that Premium TV Limited, a wholly owned subsidiary,
entered into a media partnership with Middlesbrough Football Club, whereby NTL
would make an undisclosed investment for a 5.585% stake and obtain certain
marketing and sponsorship rights for a five year period from May 2000.
OFFER TO CONVERT 7% CONVERTIBLE NOTES DUE 2008
NTL is considering an offer to convert its 7% Convertible Subordinated Notes due
2008. The terms of the offer will be disclosed when and if made.
REDEMPTION OF VARIABLE RATE REDEEMABLE GUARANTEED LOAN NOTES
In March 2000, NTL redeemed in full its Variable Rate Redeemable Guaranteed Loan
Notes, principal amount of IR(UK Pound) 60 million ($73.2 million), plus accrued
and unpaid interest using cash held in escrow.
FINANCIAL HIGHLIGHTS
Three Months Ended
March 31,
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2000 1999
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(in thousands, except per share data)
Revenues
Residential telecommunications and television $ 253,572 $168,827
National and international telecommunications 181,481 105,730
Broadcast transmission and other 55,893 38,824
---------------------------------------------------
490,946 313,381
Costs and expenses
Operating expenses 240,868 161,544
Selling, general and administrative expenses 181,334 119,270
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422,202 280,814
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EBITDA 68,744 32,567
Franchise fees - 6,848
Corporate expenses 10,190 5,252
Depreciation and amortization 249,684 141,734
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Operating (loss) (191,130) (121,267)
Other income (expense)
Interest and other income 22,431 11,013
Interest expense (205,997) (130,823)
Foreign currency transaction (losses) gains (28,270) 10,658
---------------------------------------------------
(Loss) before income tax benefit (402,966) (230,419)
Income tax benefit 5,218 -
---------------------------------------------------
Net (loss) (397,748) (230,419)
Preferred stock dividend (18,868) (13,092)
---------------------------------------------------
Net (loss) available to common shareholders $(416,616) $(243,511)
===================================================
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Basic and diluted net (loss) per common share $ (3.02) $ (2.44)
===================================================
Weighted average shares 137,901 99,663
DISCUSSION OF OPERATING RESULTS
As a result of the completion of the acquisitions of Diamond Cable
Communications plc in March 1999, the Australian National Transmission Network
("NTL Australia") in April 1999, Cablelink Limited in July 1999, the "1G
Networks" of France Telecom in August and December 1999, and Workplace
Technologies in September 1999, the Company consolidated the results of
operations of these businesses from the dates of acquisition. The results of
these businesses are not included in the 1999 results except for the results of
operations of Diamond from the date of acquisition.
The Company acquired the cable assets of the Cablecom Group on March 28, 2000.
The results of operations of Cablecom from the date of acquisition to March 31,
2000 were not significant.
Residential telecommunications and television revenues increased to $253,572,000
from $168,827,000 as a result of acquisitions and from customer growth that
increased the Company's current revenue stream. The 2000 and 1999 revenue
includes $64,096,000 and $12,283,000, respectively, from acquired companies. The
Company expects its customer base to continue to increase as the Company
completes the construction of its broadband network past the remaining homes in
its franchise areas.
National and international telecommunications revenues increased to $181,481,000
from $105,730,000 as a result of acquisitions and from increases in business
telecommunications revenues, Internet services revenues and carrier services
revenues. The 2000 and 1999 revenue includes $46,543,000 and $3,503,000,
respectively, from acquired companies. Business telecommunications and Internet
services revenues increased primarily as a result of customer growth. The
Company expects its business telecommunications and Internet services customer
base to continue to increase. The Company is expanding its sales and marketing
effort to business customers and for Internet services in its completed network.
Carrier services revenues increased due to growth in satellite services and
telephone services provided by the Company's wholesale operation to broadcasters
and telephone companies, respectively. Revenue growth in carrier services is
primarily dependent upon the Company's ability to continue to attract new
customers and expand services to existing customers.
Broadcast transmission and other revenues increased to $55,893,000 from
$38,824,000 due to revenues of $14,780,000 from NTL Australia in 2000 and from
increases in broadcast television and FM radio customers and accounts, which
exceeded price cap reductions in the Company's regulated services. The Company
expects its digital broadcasting services to increase in the future.
Operating expenses increased to $240,868,000 from $161,544,000 as a result of
increases in interconnection costs and programming costs due to customer growth.
The 2000 and 1999 expense includes $62,637,000 and $5,488,000, respectively,
from acquired companies.
Selling, general and administrative expenses increased to $181,334,000 from
$119,270,000 as a result of increases in telecommunications and CATV sales and
marketing costs and increases in additional personnel and overhead to service
the increasing customer base. The 2000 and 1999 expense includes $40,823,000 and
$5,558,000, respectively, from acquired companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred
license fees paid to the ITC to operate as the exclusive service provider in
certain of its franchise areas. Upon a request by the Company in 1999, the ITC
converted all of the Company's fee bearing exclusive licenses to non-exclusive
licenses at the end of 1999, and the Company's liability for license payments
ceased upon the conversion. Franchise fees were $6,848,000 in 1999.
Corporate expenses increased to $10,190,000 from $5,252,000 due to an increase
in various overhead costs.
Depreciation and amortization expense increased to $249,684,000 from
$141,734,000 due to an increase in depreciation of telecommunications and CATV
equipment. The 2000 and 1999 expense includes $82,398,000 and $18,463,000,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
Interest expense increased to $205,997,000 from $130,823,000 due to the issuance
of additional debt in 1999, and the increase in the accretion of original issue
discount on the deferred coupon notes. The 2000 and 1999 expense includes
$41,868,000 and $12,722,000, respectively, from Diamond. Interest of
$103,622,000 and $60,152,000 was paid in the three months ended March 31, 2000
and 1999, respectively.
Foreign currency transaction (losses) gains decreased to a loss of $28,270,000
from a gain of $10,658,000 primarily due to the effect of unfavorable changes in
the exchange rate. The Company's results of operations are impacted by changes
in foreign currency exchange rates as follows. NTL Incorporated and its
subsidiary NTL Communications Corp. each have cash, cash equivalents and debt
denominated in foreign currencies that are effected by changes in exchange
rates. In addition, foreign subsidiaries of the Company whose functional
currency is not the U.S. dollar hold cash, cash equivalents and debt denominated
in U.S. dollars which are effected by changes in exchange rates.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995.
When used herein, the words, "believe," "anticipate," "should," "intend,"
"plan," "will," "expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from those contemplated, projected,
forecasted, estimated or budgeted, whether expressed or implied, by such
forward-looking statements. Such factors include the following: general economic
and business conditions, the Company's ability to continue to design networks,
install facilities, obtain and maintain any required governmental licenses or
approvals and finance construction and development, all in a timely manner at
reasonable costs and on satisfactory terms and conditions, as well as
assumptions about customer acceptance, churn rates, overall market penetration
and competition from providers of alternative services, the impact of new
business opportunities requiring significant up-front investment, availability,
terms and deployment of capital.
* * * * * * * *
FOR MORE INFORMATION PLEASE CONTACT:
IN THE U.S.:
John F. Gregg, Chief Financial Officer
Richard J. Lubasch, Executive Vice President - General Counsel
Bret Richter, Vice President - Corporate Finance and Development
Erik Tamm, Investor Relations
Tel: (212) 906-8440
Or e-mail: investor-relations@ntli.com.
IN THE U.K.:
Alison Kirkwood
Will Robson
Tel: +44 1256 752 000