NTL Reports Fourth Quarter and Year End 2004 Results; Strong finish to

NTL Reports Fourth Quarter and Year End 2004 Results; Strong finish to year underpinned by solid gross adds, higher ARPU and continued margin expansion

    Business Editors

    LONDON--(BUSINESS WIRE)--March 15, 2005--NTL Incorporated (NASDAQ: NTLI) today reported its fourth quarter and year end results for 2004.

    Highlights of Continuing Operations

    Financial Highlights

--	2004 revenue up 5.7 per cent to GBP 2,074 million
--	Up 5.3 per cent to GBP 532 million vs. Q4 2003
--	2004 Operating income before depreciation, amortization and other charges (OCF) increased 12.0 per cent to GBP 695 million
--	Up 4.7 per cent to GBP 182 million vs. Q4 2003
--	2004 Operating loss improved by 79.7 per cent to GBP (39) million
--	Improved 88.6 per cent to GBP (6.4) million vs. Q4 2003
--	OCF margin and adjusted OCF margin (or underlying margin)* in Q4 at 34 per cent and 36 per cent respectively

    Operational Highlights

    -- Strong gross adds in Q4 of 185,200 (162,100 on-net) in line
    with previous four quarters

    -- 2004 consumer revenue up 8.7 per cent to GBP 1,508 million

    -- Up 7.5 per cent to GBP 391 million vs. Q4 2003

    -- Q4 on-net ARPU of GBP 42.40

    -- On-net broadband growth of 71,800 in Q404, full year growth of
    31 per cent

    -- Triple play on-net penetration of 24.0 per cent, up 3.4 points
    vs. Q4 2003

    Corporate Highlights

    -- Free Cash Flow improved to GBP 61 million for full year 2004
    vs. GBP (26) million for 2003

    -- Net cash provided by operating activities improved to GBP
    385.3 million for the full year 2004 compared with GBP 318.8
    million for 2003.

    -- Broadcast business sold for GBP 1.27 billion

    -- Used proceeds to prepay GBP 500 million of debt and announced
    intention to effect the purchase of our common stock in any
    amount up to GBP 475 million

    * OCF margin is OCF as a percentage of revenue. Adjusted OCF Margin (or underlying margin) is Adjusted OCF, which excludes certain costs associated with redundancies in December 2004 and, with respect to our discontinued operations and total operations, Broadcast disposal costs and other provisions of discontinued operations, as a percentage of revenue. For a discussion of the non-U.S. GAAP financial measures underlying these ratios, see Appendix G.

    Commenting on the results, Simon Duffy, Chief Executive Officer of ntl, said: "ntl underwent major organisational changes in 2004, with almost every part of the business being restructured. It therefore gives me particular pleasure to report that, despite this upheaval, the company performed very well with underlying margins for the group as a whole, including Broadcast, rising to 37 per cent in Q4. For continuing operations alone, they rose to 36 per cent. We considerably strengthened and improved the operational base of the company, reinforcing our ability to continue to grow profitably.
    After implementing major systems improvements in 2004 and aggressively removing delinquent or non-paying customers from our customer count, we expect to add over 200,000 customers on-net this year, including a further 20-25 per cent increase in our broadband customer base.
    The sale of Broadcast and the acquisition of virgin.net mark significant changes in the company's strategic profile and, along with the operational improvements, position it well for the next stage of development. The whole company will remain focused on driving increases in shareholder value in 2005."

Financial Highlights of Continuing Operations

Quarterly Annual Results % Results % ----------------- -------------- (GBP millions) change Q4- Q4- change 2004 2003 2004 2003 ----------------- -------------- Revenue Consumer 1,508.0 1,387.7 8.7 %390.8 363.7 7.5% Business 493.0 500.9 (1.6%) 121.6 122.4 (0.6%) Ireland 72.6 72.5 0.1% 19.3 18.7 3.2% -------- -------- ------ ------- Total Revenue 2,073.6 1,961.1 5.7% 531.7 504.8 5.3%

Operating Income before depreciation, amortization and other charges 694.7 620.1(1) 12.0% 181.5 173.3(2) 4.7%

Operating Loss (39.0) (192.4) 79.7% (6.4) (56.0) 88.6%

Net Loss (484.2) (583.7) 17.1% (73.6)(130.2) 39.8% ======== ======== ====== =======

(1) 2003 included approximately GBP 33m of previously disclosed non-recurring benefits

(2) Q403 included approximately GBP 16m of previously disclosed non-recurring benefits

    In the following discussion, the company's intention is to provide investors with a better understanding of the operating results and underlying trends to measure past and future performance and liquidity. We evaluate operating performance based on several measures, including the non-GAAP measures of operating income before depreciation, amortization and other charges (OCF), Adjusted OCF, free cash flow, defined as net cash provided by (used in) operating activities less purchase of fixed assets, and fixed asset additions (accrual basis), as we believe these are important measures of the operational strength of our business. Since these measures are not calculated in accordance with U.S. GAAP, they should not be considered as substitutes for operating (loss) income, net cash provided by (used in) operating activities, and purchase of fixed assets respectively, as indicators of our operating and cash flow performance and expenditure for fixed assets. Please see Appendix G for use of non-GAAP financial measures.

    Q404 and Full Year 2004 Review

    Reporting changes

    We entered into an agreement to sell our Broadcast business on December 1, 2004 and closed the sale on January 31, 2005. As a result, we are accounting for the Broadcast business as a discontinued operation in all financial statements for the 2004 and 2003 fiscal year. Accordingly, Broadcast financials have been removed from the results of continuing operations and the operating results for Broadcast have been reported as a gain from discontinued operations.
    Following the Broadcast sale, we now manage a single cable business. From now on, we will operate our business and report our operations in a single segment under the relevant accounting guidelines and will provide relevant data with respect to our three principal sales channels, Consumer, Business and Ireland. Financial information for prior periods has been restated accordingly. Please refer to Appendix C for a revenue comparison of current reporting to historical reporting.

    Revenue

    Fourth quarter revenue was GBP 531.7 million ($991.4 million), up 5.3 per cent from the fourth quarter of 2003. Full year revenue was GBP 2,073.6 million ($3,800.1 million), up 5.7 per cent over full year 2003. The increase for both periods is primarily due to strong growth in Consumer revenue which is discussed in detail below.

    Consumer

    We provide bundled services, including a range of broadband and dial-up internet services, local, long distance and international telephone services, and digital and analogue cable television, to our residential customers through our Consumer sales channel, previously reported within ntl: Home. Included within Consumer are ntl's residential off-net customers and virgin.net. In November 2004 we acquired from the Virgin Group 51 per cent of Virgin Net Limited, which operates virgin.net, thereby making it our wholly-owned subsidiary. Wholesale internet revenue, previously reported in ntl: Home, is now included in Business revenue.
    Fourth quarter Consumer revenue was GBP 390.8 million ($728.5 million), up 7.5 per cent over the same period last year. Included in Q4 Consumer revenue is GBP 4.8 million ($8.8 million) related to virgin.net. The increase in revenue is primarily related to strong growth in broadband RGUs which increased by 155,900 in the quarter, including approximately 62,000 acquired by virtue of our acquisition of virgin.net. Also contributing to Consumer revenue growth is the increase in Talk Plan telephony customers, which grew from approximately 26 per cent to 32 per cent of our on-net telephony customer base compared with the same period last year.
    The overall value of our customer base continues to improve as evidenced by the rise in the number of customers taking three services. On-net triple play penetration reached 24.0 per cent in the fourth quarter, up 3.4 points from the same period last year. On-net average revenue per user (ARPU) increased by GBP 0.44 over Q4 2003 to GBP 42.40. The increase in ARPU was primarily related to a greater number of broadband and DTV RGUs as well as two DTV price rises, which were partly offset by lower telephony usage and lower ATV RGUs.
    We enjoyed good growth in gross customer additions, reflecting the strength of our bundled offers. Gross customer additions, which include on-net and off-net customers, were 185,200 (162,100 on-net), which is in line with the average of the previous four quarters. At 36 per cent for broadband, 34 per cent for telephony and 30 per cent for television, on-net gross RGU additions were evenly distributed between all three product categories.
    We added 34,200 residential customers (20,700 on-net) in the fourth quarter to end the year with 3.14 million customers (2.98 million on-net), a 3.8 per cent increase over Q4 2003. We also added 80,500 RGUs (65,200 on-net) in the quarter, ending the year with 5.95 million RGUs (5.78 million on-net), a 5.5 per cent increase over Q4 2003.
    The strong performance of gross customer additions was partly offset by an increase in involuntary churn as our collections activities struggled to meet the challenges of aggressively clearing out non-paying customers and the implementation of our new credit policy. The increase in churn mostly impacted telephony and analogue TV customers. In addition, we disconnected 42,000 of the 49,300 backlog disclosed in our Q3 results and, as a result of the continuing harmonisation of our billing systems, removed 20,000 customers (29,300 RGUs, mostly television) from the customer count. Please see appendix D for a reconciliation of customer movements and appendix E for a reconciliation of RGU movements.
    Looking forward, we foresee another strong gross adds performance in Q1 of 2005 and expect that a significant improvement in churn will result in a substantial improvement in on-net net additions in the first quarter. We also expect to be back on track for our long-term on-net target of over 50,000 net customer additions per quarter from Q2 onwards, resulting in over 200,000 on-net net additions for full year 2005.
    Full year Consumer revenue was GBP 1,508.0 million ($2,763.6 million), up 8.7 per cent over 2003, largely reflecting the 40 per cent growth in broadband subscribers to 1.33 million including approximately 62,000 acquired with virgin.net. Excluding virgin.net and off-net broadband customers, on-net broadband subscribers increased by 31 per cent over 2003, ahead of the company's guidance of 25 to 30 per cent. On-net broadband customer penetration is up 8.9 points to 41.9 per cent vs. the same period last year. Increased telephony call volumes, growth in Talk Plan penetration, and 52,500 additional digital television subscribers also contributed to the full year growth in revenue.
    We expect continued robust on-net broadband growth in 2005 of approximately 20 to 25 per cent, despite starting from a significantly higher base of customers.

    Business

    We provide a range of retail and wholesale voice, data and internet products and services to the business market comprising private and public organizations as well as resellers and mobile operators. We now report revenue from Wholesale Internet customers and Carriers customers within our Business revenue. Wholesale Internet revenue was previously included in ntl: Home and Carriers revenue was disclosed separately.
    Fourth quarter Business revenue of GBP 121.6 million ($227.0 million), which includes GBP 56.5 million ($103.5 million) relating to Wholesale Internet and Carriers, was down 0.6 per cent over the same period last year. Full year Business revenue of GBP 493.0 million ($903.5 million), which includes GBP 227.7million ($417.3 million) from Wholesale Internet and Carrier customers, was down 1.6 per cent over 2003. Broadband growth in Wholesale Internet was more than offset by lower mobile and international call usage.

    Ireland

    We offer digital and analogue cable television to homes in our network in the Republic of Ireland, in Dublin, Waterford and Galway, and broadband in parts of Dublin. Additionally, we offer a full range of business telecommunications services in Ireland, including voice, data and internet products.
    Fourth quarter Ireland revenue was GBP 19.3 million ($35.9 million), up 3.2 per cent over the same period last year, due largely to greater take up of digital television services and better television pricing.
    In the fourth quarter, residential customers increased by approximately 4,100 to reach 347,800. Monthly churn improved substantially to 0.6 per cent, representing an improvement of more than 50 per cent compared with the same period last year.
    As a result of the ongoing investment in the network, broadband homes marketable increased by nearly 22,000 to 88,100. Broadband customers increased to 7,500, more than double the number at the end of last year.

    Operating income before depreciation, amortization and other charges (OCF)

    Since the company now has only one segment, it is no longer appropriate to report Segment Profit. We now refer to OCF, which is calculated in the same way as we previously calculated Combined Segment Profit. Please refer to Appendix G for a discussion of the use of OCF as a non-U.S. GAAP measure and the reconciliation of operating income before depreciation, amortization and other charges to U.S. GAAP.
    Fourth quarter operating income before depreciation, amortization and other charges increased by 4.7 per cent to GBP 181.5 million ($338.3 million) versus the same period last year. Full year operating income before depreciation, amortization and other charges was GBP 694.7 million ($1,273.2 million), up 12.0 per cent over full year 2003. The improvement in both the quarterly and full year results reflects increased Consumer revenues, reduced costs for PPV and PremierPlus content (which were partly offset by higher Sky programming costs), lower maintenance contracts and reduced employee costs, though the latter were more than offset by a one-off charge in Q4 of GBP 10.6 million in respect of the December 2004 redundancies. The net benefit was also impacted by higher bad debt charges in Consumer and costs related to Sarbanes-Oxley compliance. Stock based compensation expense (SBCE) was GBP 2.9 million ($5.0 million) in Q4 and GBP 12.9 million ($23.6 million) in for the full year.

    Operating and net loss

    Fourth quarter operating loss was GBP 6.4 million ($12.0 million), an 88.6 per cent improvement versus the same period last year primarily due to our improved operating performance, reduced restructuring charges and lower depreciation charges.
    Full year operating loss was GBP 39.0 million ($71.6 million), a 79.7 per cent improvement versus the same period last year largely due to improved operating performance relating to consumer subscriber growth.
    Fourth quarter net loss was GBP 73.6 million ($137.8 million), a 43.5 per cent improvement versus the same period last year. The improvement reflects decreased interest expense following the refinancing in 2004 which was partly offset by exchange rate losses.
    Full year net loss was GBP 484.2 million ($880.1 million), a 17.1 per cent improvement over 2003. The decreased loss is attributable to our improved operating performance and savings in interest expense which were largely offset by a previously disclosed charge in Q204 of GBP 162.3m resulting from extinguishment of debt.

    Fixed asset additions (accruals basis)

    Fourth quarter fixed asset additions were GBP 81.4 million ($151.6 million), an increase of GBP 22.3 million over the same period last year. The increase is due to higher scaleable infrastructure costs primarily associated with the London network upgrade, higher commercial costs related to upgrades to the voice network and higher CPE costs reflecting an increase in deliveries of set top boxes and cable modems. These increases were partly offset by improved CPE controls and cost savings.
    Full year fixed asset additions were GBP 292.5 million ($536.0 million), an increase of GBP 27.9 million over the same period last year. Scaleable infrastructure costs increased primarily due to the network upgrade in London and commercial spend increased due to higher investment on voice services. While we increased the deliveries of set top boxes and cable modems, CPE spend decreased due to improved cost controls and an increased number of pre-wired homes where the cost to install is expensed rather than capitalized.
    Full year 2005 fixed asset additions are projected to be between GBP 300 million and GBP 340 million. The projected increase over 2004 is driven primarily by higher CPE costs due to anticipated customer growth and project spend related to broadband speed increases, continued voice network upgrades and the rollout of Video on Demand. Please refer to Appendix B for the NCTA breakdown of our fixed asset additions.

    Cash and Cash equivalents

    At December 31, 2004, cash and cash equivalents were GBP 125.3 million ($240.0 million).

    Other Matters

    Broadcast sale and use of proceeds

    As previously announced, we sold our Broadcast business in January 2005 for proceeds of GBP 1.27 billion ($2.30 billion), subject to post-closing adjustment. ntl has previously announced that it may use up to GBP 475 million ($900 million) of the proceeds to repurchase its common stock. The company has also repaid GBP 500 million of debt outstanding under its GBP 2.17 billion credit facility, resulting in a forecast decrease in cash interest expense of GBP 35 million in 2005. The balance of the net proceeds will be retained for general corporate purposes.
    In February 2005, ntl used $130 million to repurchase 1.89 million shares of its common stock in the open market. Future repurchases may be effected either in the open market, using one or more tender offers, one or more private transactions or a combination thereof. Stock repurchases are subject to a variety of factors, including market conditions, the competitive environment and exchange rates.

    virgin.net

    In November 2004, we completed the acquisition of Virgin Media Group's remaining 51 per cent ownership interests in Virgin Net Limited and remaining interests held by existing and former management. Virgin Net Limited, which operates under the brand virgin.net, is a substantial UK Internet Service Provider (ISP) with roughly 590,000 customers, approximately 10 per cent of which were broadband customers as of year end 2004.

    Ireland

    We are evaluating strategic alternatives for our business in the Republic of Ireland, which may include a divestiture. Considerable interest has been expressed by prospective purchasers.

    About ntl

--	ntl Incorporated (NASDAQ: NTLI) offers a wide range of communications and content distribution services to residential and business customers throughout the UK and Ireland.
--	ntl is the UK's largest cable company with 3 million residential customers, and the UK's leading supplier of broadband services to consumers, with over 1.3 million broadband customers.
--	ntl's network can service 7.9 million homes in the UK.
--	Information on ntl and its products can be obtained at www.ntl.com

    There will be a conference call for analysts and investors today at 08.30 EDT/ 13.30 UK time. Analysts and investors can dial in to the presentation by calling + 1 334 420 4950 or +1 334 420 4951 in the United States or + 44 (0) 20 7162 0125 for international access or via a live webcast of the conference call and presentation on the Company's website, www.ntl.com/investors. The replay will be available for one week beginning approximately two hours after the end of the call until March 22, 2005. The dial-in replay number for the US is: +1 954 334 0342 and the international dial-in replay number are: +44 (0)20 7031 4064, conference ID: 646478.

    Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

    Various statements contained in this document constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. Words like "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify these forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated, projected, forecasted, estimated or budgeted whether expressed or implied, by these forward-looking statements. These factors include: potential adverse developments with respect to our liquidity or results of operations; our significant debt payments and other contractual commitments; our ability to fund and execute our business plan; our ability to generate cash sufficient to service our debt; the impact of new business opportunities requiring significant up-front investments; our ability to attract and retain customers and increase our overall market penetration; our ability to compete against other communications and content distribution businesses; our ability to complete the integration of our billing systems; 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; our ability to have an impact upon, or to respond effectively to, new or modified laws or regulations; and interest rate and currency exchange rate fluctuations. We assume no obligation to update these forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.

    Appendices to be added later.

--30--AC/ny*

CONTACT: ntl Investor Relations: Patti Leahy, +1 610 667 5554 patricia.leahy@ntl.com or Investor Relations office: +44 (0) 207 967 3347 karen.bullot2@ntl.com or ntl Media: Alison Kirkwood, +44 (0) 1256 752662 / (0) 7788 186154 alison.kirkwood@ntl.com or Buchanan Communications Richard Oldworth or Jeremy Garcia +44 (0) 207 466 5000

KEYWORD: UNITED KINGDOM INTERNATIONAL EUROPE INDUSTRY KEYWORD: ADVERTISING/MARKETING TELEVISION/RADIO CABLE EARNINGS CONFERENCE CALLS SOURCE: NTL Incorporated

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