ntl Incorporated
Announces Results for Three Months and Six Months Ended June 30, 2004
NEW
YORK--(BUSINESS WIRE)--Aug. 4, 2004--ntl Incorporated (NASDAQ: NTLI)
-- Combined segment profit margin expansion continues on strong path
-- ntl's Q2 2004 performance demonstrates solid progress over Q2 2003:
continued growth in customers, revenues, segment profit and cash flow from
operations
-- ntl: Home now serving over 3m customers in the UK
-- Exceeded target customer penetration with 60,500 net customer adds and
115,700 additional RGUs achieved in ntl: Home during Q2 2004
-- Consolidated revenues up 6.0 per cent to GBP 584.4m and ntl: Home
revenues up 7.7 per cent to GBP 397.8m compared to Q2 2003
-- Combined segment profit up 17.3 per cent to GBP 202.4m and margins
expanded 330 basis points to 34.6 per cent compared to Q2 2003
-- Q2 2004 net loss of GBP 249.8m includes the GBP 162.3m loss on
extinguishment of debt of which GBP 155.8m represents the non-cash write-off of
previously capitalised and unamortized financing costs and discounts relating
to repaid debt
Financial Highlights GBP
(In millions) Q2-2004 Q2-2003
------- -------
Revenues
Home 397.8 369.5
Business 66.8 71.2
Broadcast 72.6 64.8
Carriers 29.3 27.4
Ireland 17.9 18.4
------- -------
Total revenues 584.4 551.3
======= =======
Segment profit (loss)
Home 176.2 163.7
Business 26.5 24.0
Broadcast 33.6 26.9
Carriers 23.4 23.3
Ireland 6.1 5.6
Shared Services - services(1) (58.5) (68.5)
------- -------
207.3 175.0
Shared Services - stock based
compensation expense (SBCE)(1) (4.9) (2.5)
------- -------
Combined segment profit 202.4 172.5
======= =======
Combined segment profit margin % 34.6% 31.3%
Operating income (loss) (7.0) (51.0)
Net (loss) (249.8) (160.3)
(1)Shared Services consists of two components: services and stock
based compensation expense and totalled GBP 63.4 million in Q2 04
and GBP 71.0 million in Q2 03. For a description of the services
component please see p10, and for the SBCE component, please see
p11.
ntl Incorporated (NASDAQ: NTLI) announced today its second quarter 2004
results. Commenting on the results, Simon Duffy, Chief Executive Officer of
ntl, said:
"ntl continues to achieve substantial progress on its stated objectives
of increased market penetration, revenue growth, margin expansion, and enhanced
cash flow. The progress in the second quarter is particularly satisfying given
the continued execution on major initiatives such as our call centre
consolidation and Harmony implementation.
"For the fourth consecutive quarter, ntl: Home delivered net customer
additions (of 60,500) in excess of the 50,000 per quarter needed to achieve its
goal of around 50 per cent customer penetration of marketable homes by the end
of 2008.
"ntl: Home continued on its growth path, although offsetting the growth
this quarter were one-time adjustments to analogue television and off-net
revenues, the seasonally lower telephony usage and the impact of a BT change in
interconnect pricing. Together, these factors reduced ntl: Home revenue by
approximately GBP 7.0 million ($12.8 million).
"ntl: Business revenues were also affected by seasonality quarter over
quarter, where traditionally high first quarter public sector spend was not
repeated in the second quarter. ntl: Business revenues were also unfavourably
impacted by the delayed timing of project work.
"The growth in customers and RGUs, combined with gains in efficiency,
resulted in a 130 basis point expansion in margins over Q1 2004, and a 330
basis point expansion in margins over Q2 2003, to 34.6 per cent.
"The financial results achieved are particularly noteworthy given the
continued progress towards delivery of our restructuring initiatives. During
the second quarter we closed a second operations centre and announced two
further call centre closures as well as the outsourcing of our technical
service bureau.
"As I look to the second half of 2004, I expect continued progress on
all four of our stated objectives. This reflects an improving sales pipeline,
the expected delivery of product enhancements, the already announced price
increases in ntl: Home and the continued execution of our key restructuring
initiatives."
Group Highlights
Quarter ended June 30, 2004
Revenue
Second quarter consolidated revenues increased by 6.0 per cent to GBP 584.4
million ($1,055.5 million) from GBP 551.3 million ($892.5 million) for the same
period of 2003.
The revenue increase was mainly associated with the net addition of 324,500
broadband customers and 139,800 telephony customers (after the data cleanse) in
ntl: Home, where revenues increased by GBP 28.3 million or 7.7 per cent to GBP
397.8 million ($718.4 million). ntl: Broadcast increased revenues by GBP 7.8
million or 12.0 per cent over the prior period, primarily due to an increase in
project revenues. These increases were partly offset by lower revenues in ntl:
Business where low margin or negative margin revenues were discontinued as part
of the division's 2003 restructuring.
Combined segment profit
Second quarter combined segment profit increased by 17.3 per cent to GBP
202.4 million ($365.7 million) from GBP 172.5 million ($279.4 million) for the
same period of 2003.
This improvement was led by ntl: Home where segment profit increased by GBP
12.5 million over Q2 2003 as a result of increased revenues which were partly
offset by higher programming costs and sales and marketing expense. ntl:
Broadcast increased segment profit by GBP 6.7 million primarily due to
increased revenues. In addition, savings totalling GBP 10.0 million were
realised in ntl: Shared Services compared with the prior period, primarily as a
result of property rationalisation and facilities contract renegotiations
together with the IBM contract renegotiation in Q3 2003. The increases to
combined segment profit were partly offset by a higher stock based compensation
expense in Q2 2004.
Operating and net loss
Second quarter operating loss was GBP 7.0 million ($12.7 million), compared
to a GBP 51.0 million ($82.6 million) operating loss for the second quarter of
2003. The improvement mainly results from the GBP 29.9 million expansion in
combined segment profitability and lower depreciation expense.
Second quarter net loss of GBP 249.8 million ($448.5 million) includes the
GBP 162.3 million ($290.1 million) loss on the extinguishment of debt of which
GBP 155.8 million ($278.7 million) represents the non-cash write down of
previously capitalised and unamortized financing costs and discounts resulting
from the successful debt refinancing in the quarter. Second quarter net loss
also reflects a reduction in interest payments and the margin improvement
described above.
Fixed asset additions (accrual basis)
To provide comparable data to the US Cable industry, and in accordance with
NCTA (National Cable & Telecommunications Association) reporting
guidelines*, ntl has allocated fixed asset additions (accrual basis) to the
standard NCTA reporting categories.
Second quarter fixed asset additions were GBP 69.3 million ($125.4 million)
of which approximately 56 per cent related to ntl: Home projects and 24 per
cent related to ntl: Shared Services.
Overall, about 80 per cent of ntl's NCTA fixed asset additions continue to
be growth oriented, with the largest component related to customer premise
equipment (CPE), in support of ntl: Home's continued customer growth. The lower
cost of set top boxes and cable modems combined with the better utilisation of
second-hand, refurbished set top boxes have enabled ntl: Home to reduce the CPE
per gross addition in Q2 2004 over the prior period.
Support capital includes GBP 9.6 million ($17.3 million) associated with
ntl's Harmony billing system integration programme together with other IT
costs.
We expect to spend between GBP 300.0 million ($545.0 million) and GBP 350.0
million ($635.0 million) on fixed asset additions for the full year of 2004.
(figures in millions) unaudited Q2 2004 Q2 2003
-------------- -------------
GBP $ GBP $
------ ------- ------ ------
UK Fixed Asset Additions (Accrual Basis)
NCTA Fixed Asset Additions (Accrual Basis)
CPE 27.5 49.6 34.1 55.2
Scaleable Infrastructure 15.4 27.7 10.9 17.7
Commercial 5.7 10.3 10.5 16.9
Line Extensions (0.2)(1)(0.3)(1) 0.5 0.8
Upgrade/Rebuild 2.0 3.7 2.1 3.5
Support Capital 12.0 21.7 9.9 16.0
------ ------- ------ ------
Total NCTA Fixed Asset Additions
(Accrual Basis) 62.4 112.7 68.0 110.1
Non NCTA Fixed Asset Additions (Accrual
Basis)
Broadcast/Other 4.0 7.4 1.5 2.5
------ ------- ------ ------
Total UK Fixed Asset Additions (Accrual
Basis) 66.4 120.1 69.5 112.6
Ireland 2.9 5.3 2.7 4.4
------ ------- ------ ------
Total Fixed Asset Additions
(Accrual Basis) 69.3 125.4 72.2 117.0
====== ======= ====== ======
(1) includes the release of prior period accruals no longer required
* ntl is not a member of the NCTA and is providing this information solely for
comparative purposes.
Cash and cash equivalents
At June 30, 2004, cash and cash equivalents were GBP 101.5 million ($183.9
million).
For the use of non-GAAP financial measures please reference pages 19-22.
Segment Review
ntl: Home
ntl: Home provides bundled products and services including local and long
distance telephone services, digital and analogue cable television, and a range
of broadband and dial-up internet services, to an addressable market of 7.8
million households in the UK.
Overall, revenue increased by 7.7 per cent to GBP 397.8 million ($718.4
million) in Q2 2004 from GBP 369.5 million ($598.2 million) in Q2 2003. Year
over year revenue growth can be directly attributed to an additional 511,100
RGUs (after the data cleanse) compared with the prior period, with a higher
proportion of Talk Plan telephony subscribers and a higher number of broadband
subscribers in the customer mix.
In the second quarter ntl: Home added approximately 60,500 net customers,
ending the quarter with 2,981,500 customers, an 8.3 per cent increase from Q2
2003. ntl: Home recently passed the 3 million customer milestone demonstrating
that it is well on track to achieve its target of around 50 per cent customer
penetration of marketable homes by the end of 2008. In addition, ntl: Home
added 115,700 RGUs (after the data cleanse) in Q2 2004 ending the quarter with
5,752,600 RGUs, a 9.8 per cent increase from Q2 2003.
ntl: Home continued to increase on-net revenues, adding GBP 3.1 million
($5.7 million) over Q1 2004. Incremental customer additions and RGUs drove this
sequential revenue growth by approximately GBP 7.0 million ($12.8 million).
This growth was partly offset by a one-time adjustment to analogue television
revenue and lower interconnect rates associated with a BT pricing change. In
addition, revenue growth was also impacted by the seasonally lower telephony
usage that resulted from the four bank holidays in the quarter, compared to
only one in Q1 2004.
Q2 off-net revenues decreased by GBP 2.9 million ($5.3 million) from Q1
2004, mainly due to the disconnection of non-paying customers which drove the
reduction in the number of customers by 42,700 to 100,600. The drop in off-net
revenue had a limited impact on segment profit due to the reversal of the
corresponding bad debt provision.
Improved customer mix, in particular the increased penetration of broadband
from 27.8 per cent of the customer base for Q2 2003 to 36.5 per cent for Q2
2004 contributed to average revenue per user (ARPU) of GBP 41.38 in the second
quarter, an increase of GBP 0.34 over Q2 2003. ARPU declined GBP 0.53 over Q1
2004 primarily due to the mainly non-recurring adjustments discussed above and
second quarter seasonality. Consistent with 2003, we expect ARPU to increase in
the second half of 2004, reflecting two scheduled price rises and further
improvements in the customer mix. We believe that this will result in a 1-2 per
cent growth in ARPU for Q4 2004 compared to Q4 2003.
In support of our ARPU expectations in the second half of 2004, ntl: Home is
communicating to its customers that, in addition to the June 1 price changes,
it will be raising digital television prices from September 1, 2004, in
response to BSkyB's recently announced increase in programming costs.
ntl: Home segment profit increased by 7.6 per cent to GBP 176.2 million
($318.2 million) in Q2 2004 from GBP 163.7 million ($265.1 million) in Q2 2003.
This increase is mainly due to the higher broadband and Talk Plan telephony
revenues that were partly offset by increased programming costs, higher repair
costs associated with the recycling of set top boxes and a reduction in
capitalised overheads.
Second quarter 2004 monthly churn rose slightly to 1.2 per cent, which was
mainly due to a higher number of customers moving outside our network area. In
addition, we expect that students leaving for university vacations and the
continued trend of customers moving house during the summer months will affect
churn in Q3 2004.
During the second quarter, the ongoing data cleanse exercise associated with
the Harmony billing system integration programme identified and adjusted
approximately 2,200 incorrectly classified customers and approximately 800
incorrectly classified RGUs. We may need to make further adjustments to customer
and RGU numbers as the Harmony programme continues in 2004.
The number of broadband customers increased by approximately 59,900 to
1,088,900 (after the data cleanse) in the second quarter. In addition, 6,800
customers have signed up to ntl: Home's 60 day free trial, most of whom we
expect to become paying customers once the promotional period has expired. We
remain on track to achieve our full-year growth target of between a 25 to 30
per cent increase in broadband subscribers.
ntl: Home increased second quarter on-net telephone customers by 35,100 to
2,593,100 (after the data cleanse), compared to an increase of 27,000 in Q2
2003. In addition, ntl: Home increased the number of television customers by
20,700 during the second quarter to 2,070,600 (after the data cleanse),
compared to a loss of 14,900 television customers in Q2 2003. Approximately
37,900 (after the data cleanse) digital television customers were added during
the second quarter resulting in approximately 68 per cent of cable television subscribers
now taking digital services.
ntl: Home - summary customer statistics:
000s Q2-2004 Q1-2004 Q4-2003 Q3-2003 Q2-2003
On-net
Opening Customers (1) 2,923.2 2,867.9 2,809.5 2,753.3 2,713.5
Data cleanse (2) (2.2) (6.2) 0 0 0
Opening customers post
data cleanse 2,921.0 2,861.7 2,809.5 2,753.3 2,713.5
Customer additions 166.5 160.3 153.9 158.5 129.3
Customer disconnects 106.0 98.8 95.5 102.3 89.5
Net customer movement 60.5 61.5 58.4 56.2 39.8
Closing Customers (1) 2,981.5 2,923.2 2,867.9 2,809.5 2,753.3
Churn (3) 1.2% 1.1% 1.1% 1.2% 1.1%
Revenue Generating Units
(2,4) 5,752.6 5,636.1 5,497.8 5,364.1 5,240.7
Television 2,070.6 2,048.9 2,023.6 2,009.7 2,022.8
DTV 1,408.7 1,371.0 1,330.0 1,294.8 1,269.7
Telephone 2,593.1 2,558.4 2,525.0 2,489.8 2,453.7
Broadband 1,088.9 1,028.8 949.2 864.6 764.2
RGU/Customer 1.93x 1.93x 1.92x 1.91x 1.90x
Internet dial-up and DTV
access (5) 293.3 321.1 324.3 332.1 349.1
Broadband 60 day free trial 6.8 0.0 0.0 0.0 0.0
GBP GBP GBP GBP GBP
Average Revenue Per User (6) 41.38 41.91 41.96 41.43 41.04
(1) Opening and closing customers include master antenna television,
or MATV customers.
(2) Data cleanse activity, as part of the harmonisation of billing
systems, resulted in a reduction of recorded customers by
approximately 2,200 and an increase of RGUs by approximately 800.
The data cleanse increased total broadband customers by 200,
reduced total telephony customers by 400 and increased total
television customers by 1,000. We anticipate that there may be
similar adjustments to customer and RGU numbers as the data
cleanse progresses during the course of this year.
(3) Monthly customer churn is calculated by taking the total
disconnects during the month and dividing them by the average
number of customers during the month. Average monthly churn during
a quarter is the average of the three monthly churn calculations
within the quarter.
(4) Telephone, television and broadband internet subscribers directly
connected to our network count as one RGU. Accordingly, a
subscriber who receives both telephone and television service
counts as two RGUs. RGUs may include subscribers receiving some
services at a reduced rate in connection with incentive offers.
The 6,800 60 day free trial broadband customers are excluded from
the RGU numbers. NCTA reporting guidelines for the US Cable
industry do not recognise dial-up internet customers as RGUs,
although they are revenue generating for ntl.
(5) Dial-up internet subscribers have been adjusted to exclude metered
customers who have not used the service for 30 days or more. The
data cleanse activity reduced dial-up internet customers by
approximately 20,000.
(6) Average Revenue Per User is calculated on a monthly basis by
dividing total revenues generated from the provision of telephone,
cable television and internet services to customers who are
directly connected to our network in that month, exclusive of VAT,
by the average number of customers in that month. Quarterly ARPU
is an average of the three months in that quarter.
ntl: Business
ntl: Business provides a range of voice, data and internet products and
services to private and public sector organisations.
ntl: Business revenues decreased by 6.2 per cent to GBP 66.8 million ($120.5
million) in Q2 2004 from GBP 71.2 million ($115.3 million) in Q2 2003. The
decrease in revenue was primarily due to the reduction of lower-margin revenues
resulting from the restructuring of the division to focus on profitability
during 2003.
After completing its restructuring in 2003, ntl: Business has focussed on
growing revenues. Several initiatives have been implemented during the first
half of 2004 in support of this objective. These include:
-- the expansion of the sales force with a particular focus on higher-margin
data product contract wins; and
-- the creation of a Small Business Unit to focus on the SME market for
medium-term growth opportunities.
Early results of these initiatives show ntl: Business winning a number of local
government contracts in Q2 2004 including a deal to implement the Northern
Ireland Regional Area Network to deliver high speed broadband links between 23
educational institutions. Also in the second quarter, ntl: Business won the
contract to provide a WAN solution to the Royal National Lifeboat Institute
(RNLI) utilizing ntl's Broadband Power, IP Net and Ether Point to Point
products to enhance the RNLI's call-out system for mobilising lifeboats in an
emergency. In addition, we are experiencing attractive growth in the sales
pipeline which we believe will produce additional growth later this year and in
2005.
ntl: Business segment profit increased by 10.4 per cent to GBP 26.5 million
($47.8 million) in Q2 2004 from GBP 24.0 million ($38.8 million) in Q2 2003.
This increase was primarily a result of reduced associate costs, lower bad debt
charges and the lower repairs and maintenance required following the closure of
the Viatel network. The increase in segment profit has been partly offset by
lower capitalised overheads and an increase in sales and marketing expense as
ntl: Business focuses on new customer acquisitions.
ntl: Broadcast
Through its three divisions: Media Solutions, Wireless Solutions and Public
Safety, ntl: Broadcast provides digital and analogue television and radio
broadcast transmission services, network management, tower site rental and
satellite and media services as well as communications support to public safety
organisations in the UK.
ntl: Broadcast revenues increased by 12.0 per cent to GBP 72.6 million
($131.3 million) in Q2 2004 from GBP 64.8 million ($104.9 million) in Q2 2003.
This was primarily a result of the continued rollout of digital radio services,
new satellite distribution contracts and an increase in project revenues, in
particular for public safety contracts.
ntl: Broadcast segment profit increased by 24.9 per cent to GBP 33.6 million
($60.8 million) in Q2 2004 from GBP 26.9 million ($43.6 million) in Q2 2003.
This was mainly due to the increased revenues described above together with a
GBP 1.8 million ($3.3 million) Local Authority rates rebate.
ntl: Broadcast achieved a higher than usual segment profit margin of 46.3
per cent in the second quarter mainly due to the rates rebate described above.
We expect a more typical low to mid 40s per cent segment profit margin in the
second half of 2004.
ntl: Broadcast has consistently grown revenues and segment profit year over
year and is focussed on a number of opportunities to support continued growth.
With 75% market share in public safety radio communications support services,
ntl: Broadcast is in a strong position to take advantage of increased
government investment in public safety contracts. In addition, the Media
Solutions group's recent lease of a transponder on the Eurobird satellite will
enable ntl: Broadcast to offer end-to-end services for TV channels, as
satellite capacity becomes scarcer. Meanwhile, the Wireless Solutions group's
development of inbuilding and CityCell mobile networks positions ntl: Broadcast
well for anticipated 3G rollout.
Media Solutions added GBP 44.9 million ($81.4 million) to the order book in
Q2 2004 as the media market shows signs of recovery. New orders include the
installation of a new multiplex system for digital terrestrial television
operator SDN at ntl's playout and studio centre in West London and the
provision of additional compression and uplinking services for ITV. The Media
Solutions Radio group maintained its more than 90% share in digital commercial
radio multiplexing and transmission services. In the second quarter, Digital
One signed a contract with ntl for 10 transmitters and power increases at 18
existing sites. Analogue radio continues to offer long term business with both
The Wireless Group and the GWR Group renewing their analogue transmission
contracts for approximately eight additional years.
Following the Wireless Solutions group's successful deployment of mobile
operator O2 on ntl: Broadcast's CityCell shared cellular system, three other
mobile operators have commenced 2G/3G trials during the quarter on the Glasgow
system.
The Public Safety group secured orders worth GBP 10.8 million ($19.6
million) to the order book in the second quarter. These included a contract
from Warwickshire Police for a new Command & Control installation and an
order from the Metropolitan Police for mobile data support.
ntl: Carriers
ntl: Carriers provides a range of wholesale telecommunications services
supporting voice, data and mobile operators. Products include network design
and build, voice transit and termination, managed infrastructure services such
as fibre and co-location along with retail products such as leased lines.
ntl: Carriers revenues increased by 6.9 per cent to GBP 29.3 million ($52.8
million) in Q2 2004 from GBP 27.4 million ($44.4 million) in Q2 2003. This was
mainly due to low-margin voice minutes growth.
ntl: Carriers segment profit remained flat at GBP 23.4 million ($42.2
million) in Q2 2004 compared to GBP 23.3 million ($37.7 million) in Q2 2003 due
to low margin voice revenue growth in a highly price competitive market.
ntl: Ireland
ntl: Ireland offers digital and analogue television to homes in its network
areas of Dublin, Waterford and Galway. It also offers broadband and telephone
services in parts of Dublin. In addition, ntl: Ireland also offers a full range
of business telecommunication services including voice, data and internet
products.
ntl: Ireland continued to improve its financial performance during the
second quarter.
ntl: Ireland revenues decreased by 2.7 per cent to GBP 17.9 million ($32.5
million) in Q2 2004 from GBP 18.4 million ($29.7 million) in Q2 2003. The
reduction in revenues was entirely due to Euro to sterling exchange rate
movements. Underlying Euro revenues increased by 2.7 per cent due to several
factors including price increases and improved business revenues.
ntl: Ireland segment profit increased by 8.9 per cent to GBP 6.1 million
($11.0 million) in Q2 2004 from GBP 5.6 million ($9.0 million) in Q2 2003.
Local currency segment profit increased by 13.8 per cent reflecting
improvements in gross margins, continued reduction in bad debt charges and
other operating cost efficiencies. This increase was partly offset by the
inclusion in Q2 2003 of a cost benefit resulting from the successful
renegotiation of a major supplier contract that was not repeated in Q2 2004.
In Q2 2004, residential customer numbers remained unchanged at approximately
341,200 (including MMDS). Digital television customers grew by approximately
3,800 to 82,200. The programme to migrate all MMDS customers to digital was
successfully concluded during the second quarter. Monthly customer churn was
reduced significantly from 1.2 per cent in Q2 2003 to 0.7 per cent in Q2 2004.
During Q2 2004, ntl: Ireland also announced a major investment programme to
enable its network for broadband. It is estimated that approximately 100,000
homes will be broadband enabled by the end of 2004.
Shared Services
Shared Services predominantly support our UK operations, with ntl: Ireland
being largely self-sufficient. Shared Services consists of two components:
services and stock based compensation expense (SBCE). The services component is
further divided into networks and central support and IT.
In Q2 2004, Shared Services totalled GBP 63.4 million ($114.3 million), (GBP
58.5 million or $105.5 million of services and GBP 4.9 million or $8.8 million
of SBCE). In Q2 2003, Shared Services totalled GBP 71.0 million ($114.8
million), (GBP 68.5 million or $110.9 million of services and GBP 2.5 million
or $3.9 million of SBCE).
The majority of the networks portion of Shared Services cost relates to the
day-to-day running of the network, with the remainder comprising data and voice
capacity management and, to a lesser degree, architecture and standards.
The central support and IT portion of Shared Services comprises a range of
functions including group site services, finance, human resources, supply
chain, legal affairs, risk assurance, communications, IT and US corporate
costs.
The services component costs decreased by 14.6 per cent to GBP 58.5 million
($105.5 million) in Q2 2004, from GBP 68.5 million ($110.9 million) in Q2 2003.
This improvement is primarily due to the lower property and facility costs, as
a result of property rationalisation and reduced facility costs in central
support, reduced IBM and other costs in IT and a one-time employment tax
adjustment of GBP 1.6 million ($2.9 million).
ntl continues to recognise the provisions of FASB Statement No.123,
Accounting for Stock-Based Compensation, which has been and will be applied to
all employee stock awards granted, modified, or settled after January 1, 2003.
Stock based compensation expense increased in Q2 2004 following the approval of
the stock awards plan at our annual meeting of shareholders in May 2004.
Other Matters
Refinancing
In April 2004, ntl issued GBP 811 million equivalent of new senior notes and
entered into a new GBP 2.425 billion senior credit facility, including a GBP
250 million revolving facility which is currently undrawn. Proceeds from the
senior note offering, in conjunction with cash on hand and the funding under
the new credit facility were used to repay in full the previous senior credit
facility and to redeem the outstanding ntl Triangle debentures due 2007 and the
Diamond Holdings notes due 2008. As a result of the repayment of ntl's previous
debt prior to its scheduled maturity, mainly non-cash costs of GBP 162.3
million ($290.1 million) were written off during the second quarter of 2004.
General syndication of the senior credit facility was completed during the
second quarter.
During Q2 2004, hedging for exchange risk on the dollar denominated bonds
was increased to 75 per cent of the principal value of the senior notes, for
five years from issue date. The coupon payments were previously hedged. During
the quarter GBP 1.2 billion of floating rate debt was fixed for a period of
three years ending April 14, 2007, following which, approximately two thirds of
the total outstanding debt is now at a fixed rate.
Call centre consolidation
Other charges of GBP 14.8 million ($26.9 million), representing
restructuring costs, were made during Q2 2004. These charges include GBP 12.4
million ($22.6 million) relating to the approximately 2,300 redundancies that
are expected to be made as a result of the call centre consolidation. To ensure
that a smooth transition in the consolidation process is effected, we
anticipate that approximately 1,600 staff will be recruited for the remaining
call centres. After this transitional period further efficiencies will be made
in 2005 and onwards, ultimately enabling ntl to deliver a higher level of
customer service with 1,500 fewer staff. Total costs of the consolidation
programme are expected to be approximately GBP 25.0 million ($45.3 million).
Senior Management Appointment
ntl has appointed Bryan Hall as General Counsel and Company Secretary. As
general counsel of the Company, Bryan is responsible for managing ntl's
in-house lawyers and outside counsel on all legal issues and affairs involving
the Company, as well as providing legal advice to ntl and its board of
directors.
Bryan has over 15 years experience as a corporate lawyer in New York. Most
recently Bryan was a partner in the corporate department at Fried, Frank,
Harris, Shriver & Jacobson LLP in New York, specializing in public and
private acquisitions and acquisition financings. He joined Fried Frank in 1997
as an associate attorney before his promotion to partner in 2000.
REVENUE SUMMARY (in GBP millions) (unaudited)
Q2-2004 Q1-2004 Q4-2003 Q3-2003 Q2-2003
------- ------- ------- ------- -------
HOME GBP GBP GBP GBP GBP
On-Net 366.3 363.2 358.1 345.5 336.1
Wholesale & Off-Net 31.5 35.2 32.6 26.3 33.4
------- ------- ------- ------- -------
Total 397.8 398.4 390.7 371.8 369.5
BUSINESS 66.8 69.2 66.5 69.4 71.2
BROADCAST
Media 40.7 39.9 42.2 40.4 39.7
Wireless 12.4 11.0 12.2 11.1 10.8
Public Safety 19.5 20.5 17.5 16.1 14.3
------- ------- ------- ------- -------
Total 72.6 71.4 71.9 67.6 64.8
CARRIERS 29.3 28.5 28.9 28.5 27.4
IRELAND 17.9 17.5 18.7 17.9 18.4
TOTAL REVENUES GBP GBP GBP GBP GBP
584.4 585.0 576.7 555.2 551.3
======= ======= ======= ======= =======
SEGMENT PROFIT (LOSS) SUMMARY (in GBP millions) (unaudited)
Q2-2004 Q1-2004 Q4-2003 Q3-2003 Q2-2003
------- ------- ------- ------- -------
HOME GBP GBP GBP GBP GBP
On-Net 169.2 168.2 171.5 164.1 152.5
Wholesale & Off-Net 7.0 8.5 10.6 12.4 11.2
------- ------- ------- ------- -------
Total 176.2 176.7 182.1 176.5 163.7
BUSINESS 26.5 26.2 32.6 26.9 24.0
BROADCAST
Media 23.3 20.3 22.1 20.1 19.6
Wireless 7.0 6.1 6.6 5.6 5.2
Public Safety 3.3 3.5 3.5 2.5 2.1
------- ------- ------- ------- -------
Total 33.6 29.9 32.2 28.2 26.9
CARRIERS 23.4 22.9 23.1 23.9 23.3
IRELAND 6.1 6.1 7.4 7.5 5.6
SHARED SERVICES(1)
Services component:
Networks (14.1) (16.2) (13.6) (14.0) (14.6)
Central Support/IT (44.4) (48.8) (55.8) (46.9) (53.9)
------- ------- ------- ------- -------
Total (58.5) (65.0) (69.4) (60.9) (68.5)
Stock based compensation
expense component(2) (4.9) (1.9) (3.4) (2.0) (2.5)
COMBINED SEGMENT PROFIT GBP GBP GBP GBP GBP
202.4 194.9 204.6 200.1 172.5
======= ======= ======= ======= =======
(1)Shared Services consists of two components: services and stock
based compensation expense.
(2)Stock based compensation expense component includes stock options
and restricted stock. Prior periods have been adjusted to remove
this expense and show it separately.
The reporting currency for the company is the U.S. dollar, however, the
functional currencies of our subsidiaries are the British Pound Sterling and
the Euro. Unless otherwise disclosed, all amounts in U.S. dollars as of June
30, 2004 are based on an exchange rate of $1.8126 to GBP 1, all amounts
disclosed for the six months ended June 30, 2004 are based on an average
exchange rate of $1.8227 to GBP 1 and all amounts disclosed for the six months
ended June 30, 2003 are based on an average exchange rate of $1.6108 to GBP 1.
All amounts in U.S. dollars as of December 31, 2003 are based on an exchange
rate of $1.7842 to GBP 1. All rates are based on the noon buying rate in the
City of New York for cable transfers as certified for customs purposes by the
Federal Reserve Bank of New York. U.S. dollar amounts for the three months
ended June 30, 2003 and 2004 are determined by subtracting the U.S. dollar
converted financial result for the three months ended March 31, 2003 and 2004
from the U.S. dollar converted financial result for the six months ended June
30, 2003 and 2004 respectively. The variation between the 2003 and 2004
exchange rates has impacted the dollar comparisons significantly.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) (in millions, except per share data)
Three months ended
June 30,
2004 2003
--------- ---------
Revenue $1,055.5 $ 892.5
Costs and expenses
Operating costs (exclusive of depreciation
shown separately below) (452.9) (389.2)
Selling, general and administrative expenses (236.9) (223.9)
Other charges (26.9) (20.9)
Depreciation (295.3) (290.7)
Amortisation (56.2) (50.4)
--------- ---------
Total costs and expenses (1,068.2) (975.1)
--------- ---------
Operating income (loss) (12.7) (82.6)
Other income (expense)
Interest income and other, net 6.5 3.2
Interest expense (127.3) (186.9)
Loss on extinguishment of debt (290.1) -
Share of income (loss) from equity investments 1.0 (1.6)
Foreign currency transaction (losses) gains (25.3) 21.0
--------- ---------
(Loss) before income taxes (447.9) (246.9)
Income tax (expense) (0.6) (12.6)
--------- ---------
Net (loss) ($448.5) ($259.5)
========= =========
Basic and diluted net (loss) per common share $ (5.16) $ (4.36)
========== ========
Average number of shares outstanding 87.0 59.5
========== ========
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) (in millions, except per share data)
Six months ended
June 30,
2004 2003
--------- ---------
Revenue $2,131.6 $1,768.4
Costs and expenses
Operating costs (exclusive of depreciation
shown separately below) (924.2) (797.8)
Selling, general and administrative expenses (483.2) (440.8)
Other charges (27.8) (23.8)
Depreciation (591.8) (575.1)
Amortisation (113.3) (100.2)
--------- ---------
Total costs and expenses (2,140.3) (1,937.7)
--------- ---------
Operating income (loss) (8.7) (169.3)
Other income (expense)
Interest income and other, net 9.5 5.9
Interest expense (265.2) (363.4)
Loss on extinguishment of debt (290.1) -
Share of income (loss) from equity investments 2.2 (1.5)
Foreign currency transaction (losses) gains (12.4) 17.6
--------- ---------
(Loss) before income taxes (564.7) (510.7)
Income tax (expense) (4.1) (28.8)
--------- ---------
Net (loss) ($568.8) ($539.5)
========= =========
Basic and diluted net (loss) per common share $ (6.55) $ (9.07)
========= =========
Average number of shares outstanding 86.9 59.5
========= =========
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except per share data)
June 30, December 31,
2004 2003
----------- ------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 183.9 $ 795.9
Accounts receivable - trade, less allowance
for doubtful accounts of $41.1 (2004) and
$28.8 (2003) 451.7 405.3
Prepaid expenses 119.6 85.2
Other current assets 39.4 55.8
----------- ------------
Total current assets 794.6 1,342.2
Fixed assets, net 7,659.4 7,880.5
Reorganisation value in excess of amounts
allocable to identifiable assets 545.6 539.1
Customer lists, net of accumulated amortisation
of $338.2 (2004) and $221.9 (2003) 1,084.8 1,178.9
Investments in and loans to affiliates, net 2.0 2.3
Other assets, net of accumulated amortisation
of $4.1 (2004) and $70.1 (2003) 236.3 229.8
----------- ------------
Total assets $ 10,322.7 $ 11,172.8
=========== ============
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 284.7 $ 260.0
Accrued expenses 584.9 633.1
Accrued construction costs 34.3 33.6
Interest payable 65.4 194.6
Deferred revenue 287.3 269.9
Other current liabilities 30.3 27.1
Current portion of long-term debt 71.1 2.3
----------- ------------
Total current liabilities 1,358.0 1,420.6
Long-term debt, net of current portion 5,431.2 5,728.4
Deferred revenue and other long term liabilities 333.4 325.7
Deferred income taxes 0.2 0.1
Commitments and contingent liabilities
Shareholders' equity
Preferred stock - $.01 par value; authorised
5.0 (2004 and 2003) shares; issued and
outstanding none 0.0 0.0
Common stock - $.01 par value; authorised
400.0 (2004 and 2003) shares; issued and
outstanding 87.5 (2004) and 86.9 (2003) shares 0.9 0.9
Additional paid-in capital 4,358.5 4,325.0
Unearned stock-based compensation (31.7) (15.0)
Accumulated other comprehensive income 395.2 341.3
Accumulated (deficit) (1,523.0) (954.2)
----------- ------------
Total shareholders' equity 3,199.9 3,698.0
----------- ------------
Total liabilities and shareholders' equity $ 10,322.7 $ 11,172.8
=========== ============
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
(Unaudited) (in millions)
Six months ended
June 30,
2004 2003
-------- --------
Net cash provided by operating activities $ 280.8 $ 236.4
Investing activities
Purchase of fixed assets (234.2) (299.7)
Investments in and loans to affiliates 2.5 2.3
Decrease in other assets 0.0 2.1
Purchase of marketable securities 0.0 (17.1)
Proceeds from sale of assets 4.2 0.0
Proceeds from sale of marketable securities 0.0 22.3
-------- --------
Net cash (used in) investing activities (227.5) (290.1)
Financing activities
Proceeds from employee stock options 5.0 0.0
Proceeds from net borrowings, net 5,275.7 0.0
Principal payments on long-term debt (5,942.2) (4.8)
-------- --------
Net cash (used in) financing activities (661.5) (4.8)
Effect of exchange rate changes on cash and cash
equivalents (3.8) 11.8
-------- --------
(Decrease) in cash and cash equivalents (612.0) (46.7)
Cash and cash equivalents, beginning of period 795.9 640.7
-------- --------
Cash and cash equivalents, end of period $ 183.9 $ 594.0
======== ========
Supplemental disclosure of cash flow information
Cash paid during the period for interest, exclusive
of amounts capitalised $ 354.2 $ 245.2
Use of non-US GAAP (Generally Accepted Accounting Principles) Financial
Measures
Segment Profit (Loss)
ntl's primary measure of profit or loss for each of our reportable segments
is segment profit (loss). Our management, including our chief executive officer
who is our chief operating decision maker, considers segment profit (loss) an
important indicator of the operational strength and performance of our
reportable segments. Segment profit (loss) for each segment 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, amortisation, interest expense, loss on
extinguishment of debt, foreign currency transaction gains (losses), share of
income (losses) from equity investments, and taxation.
Other charges, including restructuring charges and other losses are also
excluded from segment profit (loss) as management believes they 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.
Combined Segment Profit
Combined segment profit is not a financial measure recognised under US GAAP.
Combined segment profit represents our combined earnings before interest,
taxes, depreciation and amortisation, other charges, share of income from
equity investments, loss on extinguishment of debt and foreign currency
transaction gains (losses), for each of our reportable business segments. This
measure is most directly comparable to the US GAAP financial measure net income
(loss). Some of the significant limitations associated with the use of combined
segment profit as compared to net income (loss) are that combined segment
profit does not consider the amount of required reinvestment in depreciable
fixed assets, interest expense, gains or losses on foreign currency
transactions, income tax expense or benefit and similar items on our results of
operations. Combined segment profit also ignores the impact on our results of
operations of items that management believes are not characteristic of our
underlying business operations. We compensate for these limitations by using
combined segment profit to measure profit or loss on a combined divisional
basis and not to determine our consolidated results of operations.
We believe combined segment profit 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-US GAAP
financial measure reflects an additional way of viewing aspects of our
operations that, when viewed with our US 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-US GAAP financial
measures are not standardised, it may not be possible to compare combined
segment profit (loss) with other companies' non-US 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 income (loss) or other measures of financial performance reported in
accordance with US GAAP.
Fixed Asset Additions (Accrual Basis)
ntl's primary measure of expenditures for fixed assets is Fixed Asset
Additions (Accrual Basis). Fixed Asset Additions (Accrual Basis) is defined as
the purchase of fixed assets as measured on an accrual basis. ntl's business is
underpinned by its significant investment in network infrastructure and
information technology. Management therefore considers Fixed Asset Additions
(Accrual Basis) an important component in evaluating ntl's liquidity and
financial condition since purchases of fixed assets are a necessary component
of ongoing operations. Fixed Asset Additions (Accrual Basis) (formerly Capital
Expenditure) is most directly comparable to the US GAAP financial measure
purchases of fixed assets as reported in the Statement of Cash Flows. The
significant limitations associated with the use of Fixed Asset Additions
(Accrual Basis) as compared to purchases of fixed assets are (1) Fixed Asset
Additions (Accrual Basis) excludes timing differences from payments of
liabilities related to purchases of fixed assets and (2) Fixed Asset Additions
(Accrual Basis) excludes capitalised interest. Management excludes these
amounts from Fixed Asset Additions (Accrual Basis) because both are more
related to the cash management treasury function than to ntl's management of
fixed asset purchases for long-term operational performance and liquidity.
Management compensates for these limitations by separately measuring and
forecasting working capital and interest payments.
The presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for other measures of financial
performance reported in accordance with US GAAP accepted in the United States.
These non-US GAAP financial measures reflect an additional way of viewing
aspects of ntl's operations that, when viewed with ntl's US GAAP results and
the accompanying reconciliations to corresponding US GAAP financial measures,
provide a more complete understanding of factors and trends affecting ntl's
business. Management encourages investors to review ntl's financial statements
and publicly-filed reports in their entirety and to not rely on any single
financial measure.
RECONCILIATION OF REVENUE TO US GAAP REVENUE AND
RECONCILIATION OF COMBINED SEGMENT PROFIT TO US GAAP NET LOSS
(Unaudited) (in millions)
3 months 3 months 3 months 3 months 3 months
ended ended ended ended ended
June March December September June
30, 2004 31, 2004 31, 2003 30, 2003 30, 2003
--------- --------- --------- --------- ---------
Revenue(in GBP's)GBP584.4 GBP585.0 GBP576.7 GBP555.2 GBP551.3
Effective exchange
rate 1.81 1.84 1.70 1.61 1.61
--------- --------- --------- --------- ---------
US GAAP Revenue
(in US $'s) $1,055.5 $1,076.1 $ 982.7 $ 894.1 $ 892.5
Combined Segment
Profit(in GBP's)GBP202.4 GBP194.9 GBP204.6 GBP200.1 GBP172.5
Effective exchange
rate 1.81 1.84 1.70 1.61 1.61
--------- --------- --------- --------- ---------
Combined Segment
Profit(in US $s)$ 365.7 $ 358.5 $ 346.9 $ 322.4 $ 279.4
Reconciling items:
Other Charges (26.9) (0.9) (12.7) (4.2) (20.9)
Depreciation &
Amortisation (351.5) (353.6) (414.6) (346.7) (341.1)
--------- --------- --------- --------- ---------
Operating income
(loss) (12.7) 4.0 (80.4) (28.5) (82.6)
Interest income
(expense) and
other, net (120.8) (134.9) (188.2) (183.7) (183.7)
Loss on
extinguishment
of debt (290.1) - - - -
Share of income
(losses) from
equity
investments 1.0 1.2 1.0 - (1.6)
Foreign
currency
transaction
(losses) gains (25.3) 12.9 33.0 3.4 21.0
Income tax
benefit
(expense) (0.6) (3.5) 10.7 18.0 (12.6)
--------- --------- --------- --------- ---------
US GAAP net (loss)
in (US $) ($448.5) ($120.3) ($223.9) ($190.8) ($259.5)
========= ========= ========= ========= =========
GBP Equivalent (GBP249.8) (GBP65.4) (GBP130.2) (GBP118.4) (GBP160.3)
net loss
GBP Equivalent
operating income
(loss) (GBP7.0) GBP2.2 (GBP47.4) (GBP17.7) (GBP51.0)
RECONCILIATION OF FIXED ASSET ADDITIONS (ACCRUAL BASIS)
TO US GAAP PURCHASE OF FIXED ASSETS
(in millions)
unaudited
3 months 3 months 3 months 3 months 3 months
ended ended ended ended ended
June 30, March 31, December September June 30,
2004 2004 31, 2003 30, 2003 2003
-------- -------- -------- --------- --------
Fixed Asset Additions
(accrual basis)
(in GBP's) GBP69.3 GBP68.5 GBP63.6 GBP58.9 GBP72.2
Effective exchange
rate 1.81 1.84 1.71 1.61 1.61
-------- -------- -------- --------- --------
Fixed Asset Additions
(accrual basis)
(in US $'s) $ 125.4 $ 125.9 $ 109.0 $ 95.0 $ 117.0
Other items:
Changes in liabilities
related to Fixed Asset
Additions
(accrual basis) 4.1 (21.2) 7.7 62.8 (4.4)
Capitalised interest - - - - 1.9
-------- -------- -------- --------- --------
Subtotal 4.1 (21.2) 7.7 62.8 (2.5)
-------- -------- -------- --------- --------
Purchase of Fixed
Assets (in US $'s) $ 129.5 $ 104.7 $ 116.7 $ 157.8 $ 114.5
======== ======== ======== ========= ========
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995
Various 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 these forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements or industry
results to be materially different from those contemplated, projected,
forecasted, estimated or budgeted, whether expressed or implied, by these
forward-looking statements. These factors include those set forth under the
caption "Risk Factors" in our form 10-K that was filed with the SEC
on March 11, 2004, as well as:
-- potential adverse developments with respect to our liquidity or results
of operations;
-- our significant debt payments and other contractual commitments;
-- our ability to fund and execute our business plan;
-- our ability to generate sufficient cash to service our debt;
-- the impact of new business opportunities requiring significant up-front
investments;
-- our ability to attract and retain customers, increase our overall market
penetration and react to competition from providers of alternative services;
-- our ability to integrate our billing systems;
-- our significant management changes since our emergence from Chapter 11
reorganisation;
-- our ability to develop and maintain back-up for our critical systems;
-- our ability to respond adequately to technological developments;
-- our ability to maintain contracts that are critical to our operations;
-- our ability to continue to design networks, install facilities, obtain
and maintain any required governmental licenses or approvals, and finance
construction and development, in a timely manner at reasonable costs and on
satisfactory terms and conditions;
-- interest rate and currency exchange rate fluctuations; and
-- the impact of our recent reorganisation and subsequent organisational
restructuring.
We assume no obligation to update the forward-looking statements contained
herein to reflect actual results, changes in assumptions or changes in factors
affecting these statements.
There will be a conference call to analysts and investors today at 08.30
EDT/ 13.30 UK time. Analysts and investors can dial in to the presentation by
calling + 1 334 323 6201 in the United States or + 44 (0)20 7162 0025 or
international access or via a live webcast of the conference call and
presentation on the Company's website, www.ntl.com/investors.
The replay will be available for one week beginning approximately two hours
after the end of the call until August 11, 2004. The dial-in number is as
follows: US Replay Dial-in Number: +1 334 323 6222 and the International Replay
Dial-in Number is +44 (0)20 8288 4459. Conference ID: 968232.
RESIDENTIAL OPERATING STATISTICS AS OF JUNE 30, 2004
(subscriber totals in 000s) UK Ireland(1) Total
---------- --------- ---------
Homes Marketable (2)
Telco-On Net 7,579.1 23.0 7,602.1
ATV 7,798.0 468.9 8,266.9
DTV 7,308.0 403.0 7,711.0
Broadband 6,752.4 28.1 6,780.5
========== ========= =========
Customers
Single RGU 867.0 317.9 1,184.9
Dual RGU 1,451.0 6.3 1,457.3
Triple RGU 663.5 0.0 663.5
---------- --------- ---------
Total 2,981.5 324.2 3,305.7
========== ========= =========
Telephone Customers 2,593.1 2.2 2,595.3
Television Customers
DTV-Cable 1,408.7 65.2 1,473.9
ATV-Cable & Master Antenna Television 661.9 259.0 920.9
---------- --------- ---------
Total 2,070.6 324.2 2,394.8
========== ========= =========
Internet
Dial-Up (metered - active last 30
days)(5) 63.0 0.0 63.0
Dial-Up (unmetered - active last
30 days)(5) 219.8 1.6 221.4
DTV Access 10.5 0.0 10.5
Broadband 1,088.9 4.1 1,093.0
Broadband 60 day free trial offer 6.8 0.0 6.8
---------- --------- ---------
Total 1,389.0 5.7 1,394.7
========== ========= =========
RGUs (3)
Telephone 2,593.1 2.2 2,595.3
Television 2,070.6 324.2 2,394.8
Broadband Internet 1,088.9 4.1 1093.0
---------- --------- ---------
Total 5,752.6 330.5 6083.1
========== ========= =========
RGUs/Customer 1.93 1.02 1.84
Penetration (4)
Telephone 34.2% 9.6% 34.1%
Television 26.6% 69.1% 29.0%
Broadband Internet 16.2% 14.6% 16.2%
Customer 38.2% 69.1% 40.0%
Customer/RGU Movement
Opening Customers (at March 31, 2004) 2,923.2 324.0 3,247.2
Data cleanse (5) (2.2) 0.0 (2.2)
---------- --------- ---------
Opening customers post data cleanse 2,921.0 324.0 3,245.0
Gross Adds 166.5 6.2 172.7
Disconnects (106.0) (6.0) (112.0)
---------- --------- ---------
Closing Customers (at June 30, 2004) 2,981.5 324.2 3,305.7
========== ========= =========
Quarterly Customer Adds 60.5 0.2 60.7
Quarterly RGU Adds 115.7 0.3 116.0
% Customer Churn (6) 1.2% 0.7% 1.1%
Off-Net Telephony
Telephone 8.1 1.1 9.2
Telephone and Internet 92.5 0.7 93.2
---------- --------- ---------
Total 100.6 1.8 102.4
========== ========= =========
(1) mtl: Ireland also offers MMDS services to 70,000 marketable homes
and had approximately 17,000 digital MMDS customers at June 30,
2004.
(2) Homes marketable refer to the number of homes within our service
area that can potentially be served by our network with minimal
connection costs. Q2 04 homes marketable for telephone and
television include a 70,000 data cleanse adjustment while
broadband marketable homes include a 20,000 data cleanse
reduction.
(3) Telephone, television and broadband internet subscribers directly
connected to our network count as one RGU. As such, a subscriber
who receives both telephone and television service counts as two
RGUs. RGUs may include subscribers receiving some services at a
reduced rate in connection with incentive offers. The 6,800 60 day
free trial broadband customers are excluded from the RGU numbers.
(4) Penetration rate measures the number of subscribers for our
services divided by the number of marketable homes that our
services pass.
(5) Data cleanse activity, as part of the harmonisation of billing
systems, resulted in a reduction of recorded customers by
approximately 2,200 and an increase in RGUs of approximately 800.
The data cleanse increased total broadband customers by 200,
reduced total telephony customers by 400 and increased total
television customers by 1,000. In addition, the data cleanse
activity reduced dial-up internet customers by approximately
20,000. We anticipate that there may be similar adjustments to
customer and RGU numbers as the data cleanse progresses during the
course of this year.
(6) Monthly customer churn is calculated by taking the total
disconnects during the month and dividing them by the average
number of customers during the month. Average monthly churn during
a quarter is the average of the three monthly churn calculations
within the quarter.