ntl.com annual report 2000 nulrpr 2000 report annual

broadband

ntl Incorporated ntl United Kingdom ntl Europe 110 East 59th Street and Ireland 22, Quai Gallieni New York Bartley Wood 92150 Suresnes Cedex NY 10022 Business Park France USA Hook, Hampshire RG27 9UP T +33 (0) 141 44 6000 T +1 212 906 8440 F +33 (0) 141 44 6098 F +1 212 752 1157 T +44 (0) 1256 752000 F +44 (0) 1256 752100 What is broadband? And who is NTL? Imagine your internet at home is always on. Imagine it working hundreds of times faster than it does now. And imagine being able to use the phone and watch a film at the same time as you’re surfing the internet. That’s broadband. Like water or electricity or gas, centre, with notes stuck to the broadband networking will be in every fridge door replaced by video Now imagine an office where you can phone, send e-mails, transfer home, every office, every building and messages, e-mail and online at the corner of every street, as well calendars. A teenager’s bedroom vast amounts of data, run e-commerce and have videoconferencing as in the airwaves to support vast may still have its games console, all through one simple connection. numbers of mobile devices. but instead of playing in isolation young people will play over the The network that links together our network, against others who share many computers, and the services their obsession. Add a video camera That’s broadband. that are available over that network, and you can discuss tactics with your are already central to many friends, or send video e-mails to businesses. In fact, the network your Gran on her birthday between If you like, think of it as a big fat pipe coming into your home or is so important that nobody thinks games. And in the living room the that the world economy can screen in the corner can provide office, capable of carrying huge amounts of different information continue to grow, or even remain pure entertainment, whether you stable, without full participation want to relax in front of a soap, take at once, backwards and forwards, at a speed unknown until now. by all nations, all companies and – part in the latest quizzes or even eventually – all people. have a part in your own interactive onscreen drama: it will be your That’s broadband and that’s why it’s revolutionising the way That participation will go far beyond choice. what we see today. People will use we live and work. the network in ways which will Looking at a screen will never be as stretch our imagination and challenge good as looking into someone’s face, our ideas of how the world works. and a bedtime story always sounds It will happen in the office, of course, better if you’re in the same room where videoconferencing will cut instead of talking on the phone. travel costs and business systems Whether you’re playing with your will be spread across offices and children or attending a high level even continents. But the impact on meeting, there are times you just our lives will go far beyond changes have to be present. But there are in the workplace. many other times when you can Contents work as effectively via e-mail, a • ifc What is broadband? • 42 Financial review Universal, permanent and affordable mobile internet connection, or • 01 Delivering broadband • 46 Selected financial data access to the network can give us even online chat. Once you have the • 02 NTL group at a glance • 47 Management’s discussion back our freedom to choose how network, always on and always fast • 04 Letter to shareholders – • 55 Consolidated balance sheets we organise our lives and our living enough, then being there becomes our move to centre stage • 56 Consolidated statements of operations spaces. Instead of having to put up a choice, not an obligation. • 06 Frequently asked questions – • 57 Consolidated statement of cash flows with large, out of town supermarkets, your questions answered • 58 Consolidated statements of built because economies of scale NTL’s network and the services • 08 ntl: our markets, an overview shareholders’ equity demand them, we can use the available over it will let us rediscover • 14 ntl: United Kingdom and Ireland – delivering • 60 Notes to consolidated financial economies of the network to order the good things that we seem to • 16 ntl: home statements most of our groceries online. Then have lost in the drive to higher • 22 ntl: business • 76 Report of Independent Auditors smaller shops, providing personal productivity and greater efficiency – • 28 ntl: broadcast • 77 Corporate information service, specialist items and the fresh things like local shops, evenings • 34 ntl: networks • 78 Directors and officers food that cannot be bought from a playing games with the family and • 36 ntl: content • 79 How to find us screen, can move back into our High jobs that allow us flexibility over • 38 ntl: Europe – developing • 80 Coming soon Streets, revitalising town centres. where and when we work. Because the network is not about technology: Design Addison Corporate Marketing Photography Michael Heffernan, Ben Jennings In the home, the kitchen may it is about people, and helping us Printed Westerham Press become a real communications all live the lives we want. 01 NTL annual report 2000 •Delivering broadband www.ntl.com

And broadband is at the heart of our operations. It’s why we can genuinely claim to be The Complete Communications Company. Because whatever method of communication exists now and whatever is hovering on the horizon, we can deliver it anywhere through our broadband cable network. It brings you the emergency services. It brings you business systems. It brings you home services. It comes through wired or wireless networks, to your choice of device. It brings you freedom. That’s broadband. delivering broadband

So who are we? We are people who can see the potential of broadband and are setting out to make it the reality it is today and will be tomorrow. Like any company, our focus is on understanding and delivering what our customers want and need. Unlike many companies, we believe it’s possible to combine a sense of fun and excitement about what we’re doing, with a high standard of service and ethics. We recognise that a company such as ours has a wider responsibility to the communities we serve. With that in mind, we’re determined to make a real and positive difference, not just from what we do, but more importantly, from the way we do it. Over the next few pages, you’ll find a full description of all our activities and meet some of the people responsible. Any company is only as good as the people who run it and the people who run NTL represent, in our view, the best from the new wave of media convergence. That, too, is broadband. 02 NTL annual report 2000 •Group at a glance www.ntl.com

group at a glance

We operate in all of Europe’s major financial centres – Paris, Frankfurt and Zurich – as well as in Ireland, Europe’s fastest-growing economy, and Sweden, Europe’s most advanced broadband market. We have customers throughout the United Kingdom – in major cities such as London, Manchester, Glasgow, Belfast, Cardiff, Leeds, Nottingham, Southampton, Oxford and Cambridge. 20millionhomes

We want to make it easy for people to communicate companies. Our Broadcast division, ntl: broadcast, wherever they are, whenever they want – through provides transmission services for ITV channels a PC, TV, mobile phone or any of the range of new and most of the independent radio stations in the devices now becoming available for users in United Kingdom, and has transmission networks business, at home and on the move. in Australia. ntl: Europe manages our interests in other European countries. What we do In the United Kingdom and Ireland our Consumer Customers first division – ntl: home, as we call it – offers television, Understanding and serving customers is telephone, and internet services to people at what we’re about. We’re successful at winning home. Our Business Telecoms division – and keeping customers because they’re our ntl: business – provides communications first priority in all we do. Having signed up solutions, including telecoms and corporate over 250,000 new customers during the year networks, to organisations from national names in the United Kingdom and Ireland alone, we to home offices, and delivers wholesale (carrier) ended the year with more than 8.5 million services to other telecoms operators and internet customers in homes and businesses

Our products and services at a glance

Telephone High-speed internet Digital and Carrier Managed services analogue radio and services TV transmission

Digital TV Dial-up internet Satellite services Data transport Internet and end-to-end services applications media solutions

Towers, sites and Secure data Private mobile Analogue TV Interactive services wireless solutions networking radio 03 NTL annual report 2000 •Group at a glance www.ntl.com

Franchise homes gross total On-net residential customers gross total 96 1,000,000 96 168,200 97 2,090,000 97 321,300 98 5,182,000 98 1,172,300 99 6,301,000 99 1,845,500 00 20,300,000 00 6,900,000 8.5millioncustomers

across all of our affiliated companies in the of our on-net customers connecting to NTL directly United Kingdom, Ireland and mainland Europe. through our ntlworld service with unmetered access. We’re now the third largest internet Our associates service provider (ISP) in the United Kingdom. Each of the 23,900-plus individuals who work for NTL is called an NTL associate – a term that Growing fast underlines both our shared responsibility in By acquiring CWC ConsumerCo, the former serving customers and our internal values. residential communications business of All associates participate in the stock option Cable & Wireless, NTL became the largest programme which adds to our sense of building cable company in the United Kingdom, and the the company together and is the power behind second largest consumer telephone company. our entrepreneurial spirit. We also expanded our footprint through investments in mainland Europe. Revenue An internet leader in 2000 rose to £1.9 billion ($2.8 billion), We have more than two million registered up from £979 million ($1.6 billion) in 1999. internet customers with more than 70 per cent

Business telecoms lines United Kingdom Internet customers gross total 96 8,930 96 5,000 97 25,500 97 100,000 98 128,400 98 200,000 99 186,500 99 625,000 00 339,500 00 2,000,000

Transmission sites 96 645 97 985 98 1,311 99 2,019 00 3,421 04 NTL annual report 2000 •Letter to shareholders www.ntl.com

Letter to shareholders our move to centre stage In 2000 we re-created NTL yet again. We are now the largest broadband company in the United Kingdom and Switzerland, with leading positions in Germany and France, revolutionary new services – digital TV, unmetered internet, and cable modems – and another year of record growth in all divisions.

Last year brought a sudden change in capital Broadband became a reality for NTL in 2000. markets for our industry. From breathless Our launch of cable modems and new high- acceleration to full stop to full reverse – all in bandwidth services set the stage for explosive less than six months. Fortunately, we had begun growth. In addition to stand-alone cable modems, to adjust our course at roughly the same time, our choice of cable system architecture means recognising that after two years of breakneck that over time we expect every digital TV customer acquisition and growth it was time to focus, to have a PC- and TV-capable cable modem digest, and rationalise. embedded in their set-top-box. More than 500,000 of our 700,000 digital TV customers While capital markets retreated, the market were so equipped as of March, 2001. place for our services continued to expand. Barclay Knapp By year end we had exceeded our targets with We also launched broadband for business in 2000. President and Chief Executive record quarterly customer growth; 530,000 Our high bandwidth dedicated internet access Officer new digital TV customers; 500,000 new internet service is now one of our most popular products. subscribers; 12,000 cable modems; a record It will shortly be joined by a multi-user cable order backlog in our Business and Broadcast modem offering for the exploding small business divisions; more than $3.4 billion in annualised marketplace for broadband services. In addition revenue; and almost $400 million in annualised to large carriers and national business, our EBITDA. highest Business division priority this year is providing simple and scalable broadband On the focus side, our first priority was to integrate services to small and medium enterprises. CWC ConsumerCo and bring it to ‘NTL Standards’ for customer service. In six months we significantly As competitors struggle, we have taken the lead reduced churn and began to grow the customer in broadband in the United Kingdom. DSL services base again after almost two years of decline. have been problematic, and neither local loop We still have a way to go, especially in London unbundling nor any other competitive initiative and so integration remains a priority. has yet taken hold.

After successfully launching digital television – Our Broadcast division also continued to shine. and overcoming the usual glitches with any Major digital terrestrial television contracts for new technology – we ended 2000 by beating Australia came faster and on better terms than our own growth targets with a robust product we expected, and through astute management, and a superior service. Evidently customers the division added significantly to its backlog agree, and digital TV growth continues to and tower portfolio. We expect to have a stock accelerate in 2001. tracking this division’s trading by mid-2001. 05 NTL annual report 2000 •Letter to shareholders www.ntl.com

Our strategy is as easy as a,b,c

Access Bundling Connectivity

Broadband for everyone Full range of products Available any time, anywhere, anyhow High-speed digital services for businesses Integrated seamless delivery Popular content and applications via and homes Best value for money NTL gateway Available on demand Simple pricing structure

Entertainment

Communications NTL as the gateway

Customer Telephone Information Television Internet Mobile Education

e-commerce

Homes and Businesses

We established a new division for our Continental We bundle services to provide greater value for European activities. The priority in our European money. Each individual product is second-to-none operations is to roll out digital technology quickly in relation to competition, and the set of products and use it to launch cable modems and additional is unavailable from any other single source. TV channels. We are well down this road in This increases penetration and average revenue Switzerland and France, and are beginning the per customer, decreases churn and unit costs, process in Germany. With a strong digital system and increases our use of assets. and cable modems in place, we believe Internet Protocol (IP) technology will become a very cost- Finally, we act as a gateway, not a gatekeeper. effective reality for telephony in early 2002, If we want everyone to use our access networks, completing the ‘triple play’. we have to provide connectivity to the content George Blumenthal and applications they desire. In developing our Chairman In 2001 our priorities are repackaging and own capabilities in TV, internet and other content, repricing services to reflect their competitive we are only a catalyst to stimulate new and better uniqueness; exploiting our new scale to improve stuff from those who do it for a living. We want margins, reduce costs, and increase the use of every customer to believe they can get anything assets; and managing the balance sheet to increase they want, at any time, over our network – and we our flexibility and liquidity for the longer term. are reaching that reality. In other words, more revenue, better margins, lower costs, lower capex, and a fully-funded The last and most important priority for 2001 is to business plan. This is well under way and has reaffirm NTL’s dedication to the customer, and to already allowed us to exceed external expectations. those who support the customer – our associates. The two of us are personally engaged at ground Our overall strategy remains the same, and is as level, talking to customers and associates every easy as ‘a, b, c’. We have a unique Access network day about how we make the company better, capable of delivering a unique Bundle of services. and having a great time doing it. As a result, This allows customers to Connect to virtually we continue to be truly amazed and energised any kind of communications, entertainment, by the opportunities that lie before us. or information they choose.

All communications services start with access. George Blumenthal At NTL, we have the only access network that can deliver TV and telephone and high-speed internet – and we are looking to partner with the best access network for mobile. Barclay Knapp 06 NTL annual report 2000 •Frequently asked questions www.ntl.com

Frequently asked questions your questions answered Here are some of the questions we’ve been asked most often about NTL over the past 12 months by investors, analysts, institutional shareholders and journalists.

What is your acquisition strategy? Reducing our interest by several percentage points Over the last seven years we have acquired would have a tremendous impact on our financial a number of companies to help us increase statements and overall liquidity. our customer and geographic base and to complement or enhance the products we offer. Today nearly 50 per cent of our debt is in currencies We believe that through the 11 acquisitions which track the underlying businesses, however, we have made over the past 18 months on the as we continue to refinance our debt over time, we Continent and in the United Kingdom we have intend to move this percentage significantly higher. now achieved the necessary scale to create a cost-effective and efficient broadband Tell me about NTL’s leverage communications company. We have worked hard over the past few years to reduce our leverage, i.e. the percentage of debt Our acquisitions outside of the United Kingdom to capitalisation. Over the past two years, we have have been based on a capital city approach, giving substantially reduced the leverage level of the us a presence in the most affluent markets. company from 92 per cent at 31 December 1998 to 63 per cent at 31 December 2000. Although We do not believe that further large-scale our gross debt has increased from £5.5 billion transactions in the United Kingdom, Ireland ($8.9 billion) at 31 December 1999, to £10.1 billion or Continental Europe are necessary for us ($15.1 billion) at 31 December 2000, shareholders to achieve our business objectives. equity also increased from £1.3 billion ($2.1 billion) to £5.6 billion ($8.4 billion) during the same period. How do you intend to finance your business plan going forward? Although the capital markets are tight, they continue to In 2000 alone we raised over £9.8 billion be open to us. We raised £4.0 billion ($6.0 billion) in ($14.8 billion) of debt and equity financing. equity financing alone last year and have never We began 2001 with over £2.1 billion ($3.2 billion) experienced difficulty in the past in attracting investors. of cash and undrawn bank facilities, and have since raised an additional £225 million ($335 All broadband networks require significant million) from a bond offering and Australian bank up-front capital investment. Now that the United facility. This liquidity coupled with expectations Kingdom network is nearly fully built-out, the of declining capital expenditures and increasing era of high capex costs in the United Kingdom EBITDA, allow us to believe that the majority is behind us. of our financings are behind us. Where does your future revenue With expectations for EBITDA acceleration over and EBITDA growth come from? the coming years, our leverage ratios should Historically, we have grown our revenues and improve and permit us to refinance existing debt. EBITDA primarily through selling a bundled Considering none of our debt matures prior to package of analogue pay TV and telephony. 2004 and that a significant portion is or becomes Going forward we expect to extract greater value callable over the next several years, we expect to from our customer base through continued return to the markets as opportunities present migration to digital TV, upsell of premium themselves. packages and high speed internet services. 07 NTL annual report 2000 •Frequently asked questions www.ntl.com

Our Business and Broadcast divisions have now although we also work with both companies on reached significant scale and profitability and industry-wide initiatives and they are both major are well positioned to grow in their respective suppliers to NTL. markets. OnDigital also provides pay TV services and AOL and In addition, we expect EBITDA margin expansion Freeserve are leading ISPs. However, we believe as we continue our programme of greater we offer customers the best value for money for integration and reduced operating costs. a package of TV, telephone and internet services.

How much of the United Kingdom Our Business division competes with Colt, Energis network is built-out? and Cable & Wireless and, in our franchises, In the United Kingdom we have built passed a number of smaller regional operators. about 75 per cent of our franchised homes. Our network has 650,000 fibre miles, 50,000 Our Broadcast division competes mainly with route miles and 42 headends. Its resiliency Crown Castle. stands at 99.999 per cent and and our ducts provide us with virtually unlimited fibre and How will you improve the service in London? transmission capabilities. By the end of 2001, We are focusing on this in 2001 and our goal is our network will be 95 per cent digital ready. to make London the broadband capital of Europe. We have a dedicated management team in place What are your plans for a London listing? and are working hard to overcome the results of We could list on London, but we would not substantial under investment in the networks in be in the FTSE 100. To do that, we would have to London, multiple cable owners, low penetration be incorporated in the United Kingdom. We‘re rates and a poor product mix. This will take time, currently incorporated in Delaware and if we were but we’re making good progress. This year we are to change where we are incorporated, we would investing 50 per cent of the ntl:home infrastructure have to pay substantial sums to the United States budget in London. That is around £40 million Government in taxes. That is simply not feasible. ($60 million). We are building out the old Videotron network and looking to roll-out two-way Are you making progress on listing interactive and broadband services during 2001. elsewhere in Europe? We are currently listed on Easdaq. However, What is your internet strategy? we are considering a number of other options, NTL aims to be the leading broadband service including Amsterdam. company in the United Kingdom. For our ‘connected customers’ this means that we will What is your strategy in Europe? be the market-leading supplier of broadband Our European strategy has four key components: internet services to United Kingdom homes, to acquire well-positioned cable companies in the leading pioneer of broadband services over major markets with attractive demographic the television, the leading provider of bundled characteristics; to upgrade the network telephone and broadband internet services to infrastructure for the delivery of advanced small businesses, and a leading partner for broadband solutions to consumers and businesses; companies that wish to offer internet services to replicate our success with bundled services in (virtual ISPs) to others. Looking inside NTL, the United Kingdom in order to drive penetration we are embracing the internet at the heart of and maximise profitability per customer, and all our processes and systems, and in this way realise economies of scale through continued we will best be able to serve our connected integration while maintaining a regional focus customers with higher quality services, faster on customer operations. and with better economics for NTL.

Is NTL exposed to the global economic When will all your United Kingdom television downturn? customers be digital? All businesses are impacted by the global economy. Our target is to have 1.25 million ntl digitalplus NTL is in the ‘sweet spot’ in a potential recessionary customers and over 100,000 ntl broadband situation as statistics prove that consumers spend internet customers by the end of 2001. more time watching television and purchasing pay TV products when the economy slows down. We are continuing to sell analogue TV, telephone Furthermore, many of our Broadcasting and and internet packages, but increasingly, our Business services customers are long-term customers are realising the benefits and value contractual revenue generators. We feel that we of our digital product. We anticipate that by the are well protected in times of sluggish GDP growth. end of 2002 the majority of our customers will be receiving digital TV. Who are your competitors? Broadly speaking, our main competitors in the United Kingdom are British Telecom and BSkyB, 08 NTL annual report 2000 •Our markets, an overview www.ntl.com

our markets, an overview

200 TV channels UNTHIN200 billion dollar market

Fuelled by the booming demand for all kinds of internet, interactive and multimedia services, Western Europe’s £133 billion ($200 billion) communications market remained extremely buoyant throughout 2000, with growth outstripping GDP per capita growth as consumers and businesses increased their spending on communications and information technology. 09 NTL annual report 2000 •Our markets, an overview www.ntl.com

UK and US penetration levels 2000 % Digital TV Mobile Internet 68

49

39 36 30

2

Households Population Households ■ UK ■ US

25 per cent pay TV growth KABLE! 8 million digital households

Rapid advances in optical fibre and microprocessing technology are boosting bandwidth availability to previously unthinkable levels, opening the way for new digital media applications such as 200-plus television channels, high-speed internet, video-streaming and interactive services.

The United Kingdom NTL’s core market was dominated by three major trends in 2000: the mass-market take-up of digital television; the explosive rise in numbers of mobile phones; and the dramatic growth in internet penetration and usage. The United Kingdom, among the world’s major information-age economies, is a leader in all three areas, and is well positioned for the significant growth expected in television and PC interactivity.

More than eight million households in the United Kingdom have digital television – a penetration figure of 30 per cent making the United Kingdom a world leader. Digital television offers a vast choice of services that were simply unavailable with analogue technology.

Beyond more television channels, digital television has created a new market – interactive content and services. Most digital television customers have access to a range of services via the television, including e-mail, online banking, gaming and shopping. Interactive gaming has surprised the industry with its popularity. As a result of all these new services available in digital, take-up for pay television grew by 25 per cent during 2000. 10 NTL annual report 2000 •Our markets, an overview www.ntl.com

our markets, an overview

Communications Internet connections continued to rise steeply during the year, ending with 36 per cent of United spend by consumers Kingdom households connected, a rise of more than 56 per cent from 1999. Metered internet usage in the UK £ has been a factor keeping United Kingdom usage levels behind those of the United States. Following

105 the introduction of unmetered access during 2000, United Kingdom usage and penetration is expected to catch up to United States levels. As a pioneer in the field with a genuinely free, unmetered access offer, NTL has become the leading internet provider in areas covered by its local networks.

In the mobile marketplace, pre-pay options helped to drive penetration to astonishing heights – to 40 per cent by year end. This represents 40 million handsets, or more than 1.5 handsets per household in the United Kingdom. Mobile data entered the arena with the much-heralded WAP services, but poor availability of handsets contributed to the low initial customer take-up. 23 UK households have enjoyed rising real disposable income levels during the last decade due to economic growth and as a result of government and competitive pressure to reduce the cost of consumer durables 1980s 2000 (e.g. automobiles, personal computers, etc.) which are high compared with Continental Europe and North ■ Fixed telephony America. The rise in real disposable income has created an increased budget for leisure, communication ■ Mobile telephony ■ Pay TV and entertainment expenditures. At the end of the 1980s, households were typically paying around ■ TV licence £23 ($35) a month for fixed line voice telephony and the TV licence. Today, the typical household subscribing ■ Unmetered ISP to all services spends, on average, £105 ($158) per month, similar to United States levels. Most continue to pay for the TV licence and fixed phone line while adding some, or all of a wider mix of extra lines, mobile telephony, multi-channel television, internet access and other services.

We expect consumer spending to continue to rise as television and telecoms converge into an increasingly entertainment-driven internet, and broadband becomes the essential platform for accessing bandwidth-intensive applications and content like video streaming, on-demand movies, remote learning and interactive games. Almost one in seven internet users in the United Kingdom now regularly use streaming media. The need for high capacity and speed to deliver movies, music, games and on-demand programming is driving mass-market take-up of broadband access.

Broadband users are online for longer – 57 per cent of broadband users spend more than 10 hours per week online compared with 15 per cent of dial-up users – which presents tremendous opportunities for broadband service providers such as NTL to grow revenues. Customers switching to broadband not only spend longer online, but also devote the increased time to entertainment-based services, which are served so well by broadband.

UK household internet penetration ntlworld marketshare of on-net 2000 % dial-up customers 2000 % 40 76 8487 68 7099 7000

6250 35 44

30 28 28 20 10 10 7 6 4 2 25 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ■ Households ■ AOL ■ Freeserve ■ NTL connected In NTL franchises excluding ConsumerCo Penetration 11 NTL annual report 2000 •Our markets, an overview www.ntl.com

NTL reaches 76 per cent 1.5 mobiles per household internet market share

GROWTH

8.5 million internet households

net usage up 35 per cent with broadband

Broadband users – Drivers of increased time online number of hours 21.40 36 18 21.4 32 1828 35 17 7.49 15.90 1561 15.9

6.84 21 6.85 2.23 1.91 1.93

1.27 1.07

0.64 0.86 Online session per month Days online per month Time active online per month (hours) Time active per session (minutes) Page views per month ➔ 3.02 3.21 ➔ While using narrowband After switching to broadband 12➔ 12➔ 12 12 12 ■ Community 1 March 2000 (while on narrowband) ■ Entertainment 2 September 2000 (after switch to broadband) ■ Transactions ■ Portals, ISPs ■ News ■ Other Source: J P Morgan H&Q and McKinsey & Co. 12 NTL annual report 2000 •Our markets, an overview www.ntl.com

our markets, an overview

The complexity and breadth of services for the business marketplace makes it difficult to summarise trends. There is intense competition among many types of providers to supply communications services ranging from the relatively basic needs of small business to the multi-site corporate voice and data networks of large organisations. One clear fact is that the internet is pervasive throughout business – over 90 per cent of businesses in the United Kingdom have access to the internet. Over time we expect businesses to shift more of their communication, commerce and computing activities to internet- enabled platforms whereby employees and customers are able to access and interact with these platforms respectively. IDC forecasts over 40 million broadband business connections in Western Europe by 2004, and analysts estimate a 892 billion B2B e-commerce market in Europe by 2005.

In the broadcasting and tower market, operators are currently working to create the infrastructure on which to launch ‘next generation’ mobile services this year. To provide high-quality coverage, particularly in the densely populated areas where services will be most in demand, we estimate that over 30,000 new mobile sites will be required. The combination of tight timescales and planning issues is likely to force greater collaboration between competing mobile operators to share existing and new sites.

Western Europe businesses with Businesses with internet broadband Total B2B market access 2000 % connectivity 000’s in Europe bn 93 93 91 892 90 87 85 40,983 80 74 22,916 414 11,186 172.6 4,437 71.4 30.3 13.2 1,338 344 Sweden Canada UK Germany Japan France US Italy 99 00 01 02 03 04 00 01 02 03 04 05

90 per cent business internet penetration EXPANS 13 NTL annual report 2000 •Our markets, an overview www.ntl.com

3rd generation infrastructure roll-out

Continental Europe While the United Kingdom currently leads the major Western European economies in internet and digital television penetration, we believe that Continental Europe is poised to follow quickly with significant take-up of new communications services in homes and businesses. The market enjoys the benefits of a strong regulatory force in Brussels, and this ensures adequate room for new entrants to compete against recently privatised PTTs in this large and affluent market. With disposable incomes in Western European households comparing favourably with those of the United Kingdom, there are significant opportunities in this marketplace. 76 per cent internet growth Internet penetration rose by 76 per cent in Europe during 2000 to 116 million people, with almost one in three Europeans using the internet regularly. Internet penetration across Europe varies from six per cent at the lower end of the scale (Greece) to 48 per cent at the higher end (Sweden). By 2003, most European online markets are expected to increase rapidly, doubling or tripling in size. In this period, France and Germany are forecast to reach penetration rates of 40 per cent, while Scandinavia will continue to demonstrate Europe’s highest penetration rates; but population size means that the expanding markets of Germany, France and Spain will have the greatest overall numbers of online users in Continental Europe.

The Continental European markets are also shifting to broadband. Forrester predicts that 38 per cent of European online households will be broadband by 2005. Cable companies have an early advantage as they currently provide 85 per cent of Continental European broadband connections.

The roll-out of digital television has begun to gather momentum in Continental Europe, with early leadership in France and Spain. The German digital television market has been slow to take off, but the completion of the sale of Deutsche Telekom’s cable assets will provide a welcome catalyst for Europe’s largest television market to benefit from digital services.

Although PC-based internet access enjoys a higher penetration than interactive TV (iTV) among European households today, a potential shift is on the horizon. According to Jupiter Research, iTV will be the interactive medium of choice in Western Europe in the coming years. By 2005, 74.4 million European households will subscribe to digital TV-based iTV services, compared with 71.6 million PC-based internet subscribers. The variety of interactive media available through iTV can be easily integrated with shopping, travel, gaming, advertising and other commercial content, which will help boost television-commerce in Western Europe.

85 per cent of European broadband via cable

DTV households Consumer broadband and penetration in access 000’s Western Europe m 80 74.4 6,302 63.3 60 50.8 4,306

40 37.3 2,547 25.9 20 17.8 1,174 11.3 338 49 0 99 00 01 02 03 04 99 00 01 02 03 04 05 ■ Households connected IO N Penetration 14 NTL annual report 2000 •United Kingdom and Ireland www.ntl.com

United Kingdom and Ireland

delivering

Stephen A. Carter Jerry Roest Peter Black Stuart Ross Managing Director and Group Managing Director Chief Technology Officer Group Finance Director Chief Operating Officer Strategy and Internet

Today we are a major service provider and on generating revenue from customers network owner. We are uniquely positioned through local connections – whether through to exploit both the continuing demand for the communications or IT services. By contrast, in benefits of digital television, and the emerging the Broadcast marketplace, we build on NTL’s enthusiasm for access to the range of lengthy ‘can do’ track record and the technical communication, entertainment and education capability to deliver complete solutions. In all content that will drive the much-discussed our markets, we are replicating our successes Priorities-2001 convergence across devices and markets. by transferring our know-how across market – Customer service sectors and international borders. – Integration No other company today has such an extensive – Financial performance network ready to deliver the benefits of broadband Marketing will only be successful if backed by services to so many homes and businesses. good customer service. This has long been an NTL strength but, with the pace of change last The three businesses within ntl: United Kingdom year, we were unable to maintain high standards and Ireland – ntl: home, ntl: business and across all the new areas of our business. ntl: broadcast – have very different products, ntl: home customers were particularly affected markets and customers. For the home market, as we coped with the stream of acquisitions. we need to communicate clearly how options like The fact that we are now working towards digital television or broadband services open a regaining and exceeding former levels of whole new range of information, entertainment customer satisfaction is strong testimony to and communications, and make it easy for them the commitment and abilities of our 22,000 to take advantage of new services. The issue for NTL associates. businesses is broadband services. The sheer power of our networks can transform the To raise service quality, it is critical to complete economics of their operations and help small the integration of our acquisitions, and we are companies compete on equal footing with much harmonising and simplifying business systems larger enterprises. and processes across the whole company. NTL has been highly successful in building a single There are, however, considerable operational company in name, culture and ambition, and in synergies between our Home and Business creating strong awareness in the marketplace. operations. All are network-based and focused Now it is equally essential for us to become one 15 NTL annual report 2000 •United Kingdom and Ireland www.ntl.com

Networks (page 34) Technology (page 80) Content (page 36)

the leading broadband home (page 16) service company

an alternative business (page 22) communications provider

the leading provider of broadcast TV, broadcast (page 28) radio and transmission services

In the history of the cable industry, last year will be judged as a critical inflexion point. For NTL, it was a momentous year in which we gained the scale and reach to achieve our operational ambitions and deliver on the commitment to customers that is the essence of our culture.

company in operation, and present a single a major United Kingdom utility with a £5 billion face to customers with consistent services. turnover, he is experienced in leading Full integration is our top priority, and by the end management change initiatives, cost and of 2001 we will have a national product offer and capital reduction and business re-engineering. tariff structure, and the foundations of a single These skills are critical to improving operating customer management system. Already we have efficiency, one of our most important goals. made decisions on unified technology platforms, products, national pricing and targets for The company is now entering an exciting customer service. new phase. As part of this we are developing a social vision that recognises our position and By any measure, NTL is a remarkable company, responsibilities in the community. NTL’s reputation powered by teamwork and vision. We have a great is built not only on services and the quality of deal to do, and I am fortunate in the strength of the customers’ experiences, but also on a passion NTL management team – not only the individuals to make a positive difference to the lives of our running the business areas but also those paving stakeholders and the community in which we the way to achieving our strategy. Here, Jerry operate. We intend to carry forward NTL’s ‘do Roest’s group is leading our work on broadband some good’ philosophy in a way that is and internet services and Peter Black’s team is responsible, ethical and fun. It is a marvellous focused on ensuring our networks will meet the opportunity to have joined at this ‘delivery’ demands of new broadband services. The arrival stage of NTL’s evolution. of Stuart Ross in the UK-based role of Group Finance Director also adds considerable strength. Formerly Finance Director of British Gas Trading, Stephen A. Carter 16 NTL annual report 2000 •Home www.ntl.com

home The leading broadband service company

530,000 digital television customers

1.8 million internet customers 17 NTL annual report 2000 •Home www.ntl.com

12,800 broadband customers 18 NTL annual report 2000 •Home www.ntl.com

home choice,value and entertainment

The integration of CWC ConsumerCo into our operations is a major undertaking, but all the basics are now in place. The one overriding priority is customer service. Delivering to CWC ConsumerCo customers the service they expect from NTL is the most effective way of retaining customers and attracting new ones, and we have Scott Falconer Mike Hounsell Charlotte Bradshaw made great progress in this most fundamental Group Managing Director Chief Marketing Officer Business Development area. The CWC ConsumerCo customer base is Consumer Services Director now rising and churn has been reduced by nearly a third to 1.7 per cent per month by the end of the year. We can also measure operational improvements, with fault rates coming down. There are still issues for us to resolve, and we are focusing on these in 2001.

ntl digitalplus is driving growth by offering the Doug Giesen Dinni Jain value and choice of digital television channels plus Customer Services Director Deputy Managing Director telephony and internet services. The service was (Integration and Convergence) launched later than planned, yet gained 531,000 digital customers by the end of the year – ahead of target – with many using the interactive services of e-mail, games and shopping through their televisions for the first time.

The launch of unmetered access through our ntlworld service fuelled rapid expansion in the internet area. This revolutionary product created tremendous demand and queues formed after our ‘free access’ announcement as we phased internet connections to maintain service quality.

Customer penetration % original NTL franchises Consumer revenue growth $m 96 36.0 97 167 97 39.7 98 356 98 44.2 99 830 99 48.3 00 1,530 00 50.7 19 NTL annual report 2000 •Home www.ntl.com

Our main locations With the launch of three key products during 2000, Accrington Aldershot ntl: home put us at the forefront of broadband service Andover Ashford (Kent) development in the United Kingdom and Ireland. Aylesbury We launched digital television with the ntl digitalplus Barking Barnet bundle of TV, telephony and internet services; ntl Basingstoke Bebington broadband internet, our high-speed cable modem Bedford product; and the internet service ntlworld, with Belfast Birkenhead revolutionary unmetered access. Bolton Bournemouth Bracknell Brent New services and value-for-money pricing continue Brighton to be highly attractive to customers. Our penetration Bromley Burnley of households in the original NTL franchise areas is Burton-upon-Trent Bury now over 50 per cent, with churn rates falling to record Cambridge lows of one per cent per month. With existing and new Cardiff Cheshunt ntl: home customers, we ended the year with a total Chester City of London 3.7 million (1999: 1.8 million). City of Westminster Clacton-on-sea Clydebank Colchester Coventry Darlington In 2001 we are focusing on generating higher returns Derby from the investments in networks, our customer Dublin base and exsisting products. Dumbarton Dunstable NTL Ireland is the country’s leading cable Durham television company, with over 370,000 customers. Ealing & Greenford During 2000 we offered customers a combined Eastbourne Our easy to use keyboard The electronic programme TV, telephone and internet service, and launched East Kilbride and remote control guide ‘ntlworld.ie’ with a localised portal. This year we Eastleigh will offer a digital television service in Dublin, Epping & Loughton Waterford and Galway – using a technology that Epsom will be a base for interactive and broadband Farnborough Building at our fastest rate ever to deliver this services in the future. Folkestone service, we tripled the capacity at local points of Fulham presence in major towns and cities. At year end Putting customers first Galway our total of registered internet customers had Our early success was built on outstanding Glasgow risen to 1.8 million, with over 850,000 directly customer service, and this continues to be the Gosport using NTL, the others using services we provide heart of our offer. The rapid development of the Great Yarmouth for Virgin.Net and Which?Online. business over the past few years and growth in Grimsby customer numbers, has strained our established Guildford More than 70 per cent of NTL customers who customer service systems, and these are now Hamilton use the internet at home select ntlworld. These being upgraded and redesigned. By listening Hammersmith customers are more loyal to NTL and spend more carefully to our customers, we are examining Harlow on other communication services. In particular, every aspect of the life cycle of the relationship. Harrogate they are an ideal target for high-speed internet Better training, plus new step-by-step processes Harrow access services through the cable modems that for installation and fault resolution are all under Hartlepool are central to our broadband strategy. With more way and starting to make a difference. We will Hastings than 12,800 ntl broadband internet modems improve every aspect of the customer experience Havant installed by the end of the year and demand rising from first contact onwards. Havering steeply, we expect this to provide a significant Hemel Hempstead income stream in the future. 20 NTL annual report 2000 •Home www.ntl.com

home

Net customer additions ntl digitalplus customers Q1 48,000 Q1 0 Q2 61,000 Q2 230,000 Q3 63,000 Q3 325,000 Q4 84,000 Q4 530,000

Commited to London set for the whole company. By using our own As a broadband company, we deliver all our technology with internet-connected customers, services through high-specification networks, we will develop ‘e-care’ systems to deal more but some we have recently acquired, particularly efficiently with faults and difficulties – avoiding in London, need to be upgraded to meet our the cost and delay for customers waiting for a standards. The highest concentration of potential Call Centre response or a technician to call. customers for our high-margin broadband Focusing on helping products is in London, and our goal is to make The NTL gateway our customers London the broadband capital of the world. Bringing broadband services to customers is what NTL is all about. We are improving the Raising revenue ‘NTL gateway’ to make affordable broadband There is wide scope for generating greater services available to more customers, whether revenue from customers – particularly in acquired through a TV or PC. With a cable modem franchise areas – with attractive offers for those connection through a digital set-top-box, every using just one product to take up two or three. digital television customer becomes a potential In original NTL franchises, we have achieved high-speed access customer. The bonus in former a 92 per cent cross-sell of products. Among CWC ConsumerCo regions is that set-top-boxes Movies every day former CWC ConsumerCo customers we have already contain a usable modem, allowing us to raised customers taking multiple products from potentially deliver high-speed internet in these 68 per cent to 72 per cent but the potential for areas faster than expected. growth is obvious. Other improvements to the NTL gateway, aimed Our internet access and broadband offers, at increasing take-up of services, include coupled with the general excitement around partnering with other internet players for ntlworld digital television and interactive services, are and exploiting our football-related content rights. driving us towards these targets. The Max Later this year, the ntl digitalplus package will Pack bundle of broadband and digital services gain extra customer appeal with additional introduced this year at £43 per month will move attractive television channels, open internet us closer to our target revenue per customer. access and more interactive services. The NTL gateway is wide open, and we are taking up the Focusing on costs challenge to encourage customers to use the We are looking to streamline our operations to full range of services we offer. bring immediate cost-efficiencies. This includes focusing on what NTL does best and eliminating or outsourcing non-core products and services – which involves a reduction in staffing. By improving product quality we are also reducing the need for rework and problem resolution. There will be further substantial benefits from economies of scale in this much larger business, and from integrating our business processes into a single 21 NTL annual report 2000 •Home www.ntl.com

Hertford High Wycombe Huddersfield Kensington & Chelsea Kettering Lambeth NTL ISP customers Broadband internet customers Leatherhead Q1 130,000 Q1 0 Leeds Q2 375,000 Q2 1,400 Leicester Q3 662,000 Q3 3,500 Lewisham Q4 859,000 Q4 12,800 Lichfield Lincoln Lisburn Londonderry Loughborough Lowestoft Luton Manchester Mansfield Merthyr Tydfil Middlesbrough Newcastle-under- Newcastle United in action ntlworld helped drive Enjoying ntl digitalplus Lyme internet take-up Newport Newtownabbey Northampton Nottingham Key facts Priorities – 2001 Oldham – 8.8 million homes passed –Focus on achieving targets Paisley – £35 ARPU 1.25 million digital subscribers by end 2001 Peterborough – 3.7 million customers, 1.8 million dual, Over 100,000 cable modem subscribers by Reading over 200k triple end 2001 Redbridge – 1.8 million internet subscribers, –Focus on revenue growth Rochdale 0.85 million direct. Pricing, packaging and product development Royal Leamington Spa 0.95 million wholesale Upsell digital, premium channels and Rugby – 530k digital TV subscribers high-speed access Salford – Continue integration Salisbury Achievements – 2000 – Reduce cost base Scunthorpe – 20th consecutive quarter of increased –Improve customer experience in installations, Southampton penetration billing and fault rectifications St. Albans – Record customer quarterly additions –Focus on London Stafford – Accelerating take-up of digital TV and Stevenage broadband services Stockport – Reducing churn in acquisitions Stockton-on-Tees – Reducing fault rates Stoke-on-Trent – 76 per cent of dial-up internet market on-net Swansea Swindon Tamworth Teesside Thamesmead Tower Hamlets Waltham Forest Wandsworth Warrington Waterford 22 NTL annual report 2000 •Business www.ntl.com

business An alternative communications provider

large

medium

00.23 02.45 03.38 05.21 07.58 08.23 08.5609.06 10.16 10.58

small 23 NTL annual report 2000 •Business www.ntl.com

12.34 14.09 15.22 16.36 19.54 20.34 21.14 22.40 23.10 24 NTL annual report 2000 •Business www.ntl.com

business a competitive edge

NTL’s Business division delivers voice, data and internet services on NTL’s high-capacity local and national networks – enabling organisations to work more efficiently and productively. We have focused on specific market sectors where we have a clear competitive advantage. These markets range from small business customers, such as local doctors, to the wholesale customers such as mobile phone operators and internet service providers whose traffic we carry on our networks. We believe our addressable market will grow from today’s £16 billion ($24 billion) to more than £24 billion ($36 billion) over the next five years.

In 2000, this division was transformed by bringing 16 businesses together – including some previous Chris Hutchings Peter Ryde NTL acquisitions and parts of CWC ConsumerCo. Group Managing Director Director We can now draw on an enormous breadth of Wholesale Markets specialist expertise for customers to provide complete business solutions based on broadband access, internet, voice and data communications. As a result, the division has come into its own – generating £464 million ($702 million) in revenue from over 76,000 business customers last year, and now emerging as one of the largest business communications companies in the United Kingdom. Stephen Rowles Tim Wainwright Deputy Managing Director Customer Support Director Our networks The capability and reach of our networks gives us an overwhelming advantage in the business-to- business communications marketplace we serve. Our broadband strategy is to capitalise on our high- capacity fibre network that can deliver unrivalled high-speed services. Our network already passes more than 400,000 United Kingdom business premises, which gives us enormous scope to focus on delivering broadband for businesses. We plan to capture a significant percentage of the United Kingdom’s business telecoms market over the next five years. 25 NTL annual report 2000 •Business www.ntl.com

We have a world-class network plus wide expertise from companies we have integrated into ntl: business. From a single source, we offer customers everything they need to work with high-speed applications that can transform the economics of their businesses.

A key priority in 2001 is to win business customers We are also developing more internet-based within reach of our existing network. With local services geared to specific market sectors and loops now in most of the United Kingdom’s major accessed through an NTL internet gateway centres of population, we have access to a vast (portal). We have already announced an intranet pool of customers. The combination of high- for the education community that links schools, quality broadband networks, with expertise from pupils and parents, and launched a portal for acquisitions like the corporate networking the travel industry. These targeted services Looking after the specialist Workplace Technologies, means demonstrate our ability to deliver value to a communication needs of the emergency services we can provide solutions that cover the whole specific market sector, and we are now adapting range of communications needs – fixed them for other sectors. telecommunications, corporate networks, e-business and wireless solutions. Our markets With the introduction of Business Essentials in Another move to extract value from this wider October, we applied some of our successful capability is our focus on sales of data products experience from our consumer operations to aimed at market sectors where we are particularly the small business market. Like ntl: home’s strong: small-to-medium businesses, the public consumer product concept, Business Essentials Working with our customers sector and wholesale operators. We can now is an affordable package that lets customers add to find solutions design and build local or wide area networks and more services in the future. It wraps together internet solutions tailored to companies’ needs, internet access through an NTL portal designed as well as the voice-over-IP services in which for small businesses with voice, data and other NTL is a pioneer. Demand is rising for Internet internet-based services. This is a large and Protocol (IP) services because they can package profitable market opportunity for us because it is almost any kind of information and send it over simple to install these services, whether through virtually any network. Our network across the direct or indirect connections to our networks, campus of the Millennium Dome in London was and the United Kingdom’s 1.2 million small one of the United Kingdom’s first fully functional enterprises are largely ignored by competitors. voice-over-IP installations. More than 1,000 businesses had signed up for the package by the end of the year.

Business revenue growth $m 97 89 98 158 99 453 00 702 26 NTL annual report 2000 •Business www.ntl.com

business

Key facts – Q4 2000 annualised revenues of £524 million ($761 million) and EBITDA of £189 million ($284 million) – Over 76,000 business customers – ntl: business carries over 25 per cent of the UK’s mobile traffic – Over 70 per cent of the UK’s emergency services radio communications are provided by ntl: business – Addressable market estimated to be about £16 billion ($24 billion) – NTL network passes more than 400,000 businesses

While continuing the roll-out of Business exploit the demand for the new third-generation Essentials, we are now selling customers (3G) mobile services. This work has positioned our higher value-added services, and will be us to win business with the 3G licensees who expanding the offer with broadband and mobile are beginning to construct networks this year. solutions. We are also working with partners such Orders for wholesale (carrier) business reached as Cisco and Nortel to build managed-premises record levels in 2000 and we ended the year network services, and with applications service with a £580 million ($870 million) contracted Linking schools and providers to give small businesses access via the forward order book. This includes extensions universities across the UK internet to applications and expertise normally to contracts with Vodafone and One-2-One and only affordable to larger companies. This way, a £150 million ($225 million) next generation they don’t have to buy the software or install it network for Orange. on their own systems. In our radio communications business, our target For medium and larger businesses, the priority is to maximise the value of our 70 per cent-plus is to extract greater value from our networks by market share of the United Kingdom’s public providing these customers with an ever-widening safety and emergency services business. Many range of communications solutions. We have been individual organisations are moving to digital Providing advice and support especially successful in manufacturing and retail technology and looking to focus on their core sectors, winning a network integration project for business. As a result, they are outsourcing their Boots of Nottingham, along with private voice and communications needs – all of which plays to data communications networks for the hospitality NTL’s core competencies. For example, we chain JD Wetherspoon, and companies within the opened a new radio customer support centre ICI family including Huntsman Chemicals and in London as a purpose-built hub dedicated to ENIOS. Another highlight of the year was the supporting one of our major customers in this award of a £1.3 million ($2 million) contract field, the Metropolitan Police. for cabling the prestigious headquarters of PriceWaterhouseCoopers in London. We have a strong business with public sector customers because of our success in helping In the wholesale sector of this division we are large organisations with widespread locations preparing our transmission infrastructure to to give better service and get more value from

Data and internet trends 2000–2005 £bn Voice trends 2000-2005 £bn 00 8 00 11 0110 0112 02 11 02 12 03 12 03 13 04 15 04 14 05 19 05 15 Data transport IP Applications ASP Switched voice Value-added voice Mobile In-premises 27 NTL annual report 2000 •Business www.ntl.com

Achievements – 2000 Priorities – 2001 – Consolidation of business services under – Focus on enhancing customer experience one brand ‘ntl: business’ – Exploit NTL’s leading position in broadband – Record contracted forward order book worth – Drive down costs through process and system in excess of £718 million ($1.1 billion) enhancements – Major contracts extended including Vodafone, – Develop a powerful ntl: business brand and Orange and One-2-One market position – Launch of platform to take broadband to small businesses during 2001 – Launch of Business Essentials, a bundled communications package for small businesses – Installed and managed Europe’s largest VoIP project

Total addressable markets 2000–2005 £bn their communications budgets. We now have 00 15 over 21 per cent of the United Kingdom’s local 0116 government organisations as customers, and 02 17 are a leader in connectivity for education, with 03 19 some 5,200 schools and universities as customers 04 21 across the United Kingdom. We are now marketing 05 24 our education community intranet that links all the schools in an area and delivers easy-to-use services to many different kinds of user. During the time that we have worked in partnership with the Technology Colleges Trust, we have built the United Kingdom’s first – and still the only – national broadband network for schools: the Supergrid for Learning. Hundreds of schools use it to share information, 125 of them via broadband connections.

Small business market trends 2000–2005 % Working efficiently and effectively 00 100 Through our many acquisitions over the past 01100 two years we have brought many different sets 02 100 of activities and processes together. In 2000 we 03 100 undertook a radical business transformation 04 100 programme aimed at restructuring the division 05 100 into market-focused sales groups with a single Fixed voice Mobile Data & bandwidth customer support function. Other initiatives Internet services ASP include creating a single set of business processes, speeding our time to market, raising sales force productivity and building the deeper knowledge of customers that will enable us to increase market penetration. As a result, there is wide scope for improving operating efficiencies and achieving cost reductions from rationalising and reducing duplicated and overlapping activities. We also benefited from economies of scale, and reduced the number of people employed by 20 per cent in the last 12 months.

Other areas where we are improving efficiency are harder to quantify, but we are confident of gaining business benefits across the board. 28 NTL annual report 2000•Broadcast www.ntl.com

broadcast The leading provider of broadcast television, radio and transmission services 29 NTL annual report 2000•Broadcast www.ntl.com 30 NTL annual report 2000•Broadcast www.ntl.com

broadcast tuned-in to quality

ntl: broadcast is the leading provider of end-to- end broadcast television and radio services in the United Kingdom and Australia. It is also an important player in the wireless communications marketplace where we provide transmission services for mobile phone operators, the emergency services and other users of private Peter Douglas Alan Watson Patrick Duffy radio networks. Managing Director Director Strategy Director Broadcast Media Solutions Our philosophy is to design, build and own the infrastructure on which we provide long-term services. Our media customers are terrestrial broadcasters like ITV, Channels 4 and 5, Digital 3 and 4, SDN, Australian Broadcasting Corporation (ABC) and Special Broadcasting Service (SBS) in Australia, and satellite direct- to-home services such as BBC Discovery, Tom O'Connor Dave Ellis CNN and QVC. We also broadcast the United Director Business Development Kingdom’s national digital radio and 85 per Towers & Sites Director cent of the country’s independent radio stations. With fibre cables across the country, satellite uplinks through four teleports, and transmission networks in the United Kingdom and in Australia, 90 per cent of the services we provide are on our own infrastructure.

The division’s revenue was £210 million ($318 million) in 2000, producing EBITDA of £100 million ($150 million), 16 per cent up on last year, while its order book – 93 per cent for contracts of 10 years or longer – stands at a record £2.3 billion ($3.5 billion). We have grown this business significantly since 1996 when we acquired its base – the former engineering and transmission infrastructure of the Independent Broadcasting Authority. We are currently in the process of setting up a tracking stock for ntl: broadcast.

Our strategy for growing ntl: broadcast’s market share is to focus on providing end-to-end broadcast solutions. 31 NTL annual report 2000•Broadcast www.ntl.com

Our record of success in this division is a unique asset. We provide complete, turn-key solutions including transmission and full support services for clients in radio, television and wireless communications. Our Australian operations are working well, and are on the same path to success as our United Kingdom Broadcast activities. We are using know-how built up over decades in NTL to acquire not only the Australian television transmission network but also to develop trunk networks and radio.

Broadcast revenue $m Australia 97 227 Our great success in Australia fully validates our 98 231 acquisition of the NTA broadcast transmission 99 297 assets in May 1999. We have won three significant 00 319 contracts to provide digital services. The first two – for digital services in major Australian cities for the national broadcasters ABC and SBS – were completed and operating in January this year. The third, a further contract from ABC, at A$1.1 billion ($600 million), is the biggest single contract ever won by NTL. We will roll out digital transmission services for ABC across Australia over the next five years, as well as continuing the existing contract for country-wide analogue services. The new contract runs for 15 years with the option of a further five. We are also widening SBS’ analogue This sets us apart in the marketplace, both in the coverage by building 69 more stations, with 30 United Kingdom and overseas. We can take our completed in 2000 and the remainder by June 2001. Helping people communicate customers’ content from the camera in the studio or outside broadcast vehicle to the TV set in the We are building a telecommunications network home – carrying it on fibre-optic cable, transmitting down the length of the east coast of Australia from our antennas, or uplinking to a satellite. This in partnership with WIN Television and Southern ‘glass-to-glass’ capability is increasingly making Cross Broadcasting (SCB). NTL Telecommunications us the complete delivery company for customers. Holdings has a 51 per cent share of the new For example, we have installed NTL fibres directly venture, NTL Telecommunications Pty Ltd., which into the Channel 5 playout centre, and provide will deliver 100 points of presence in cities and channel origination and production services for a regional towns from Cairns to Hobart. Initially number of clients, including sports and pay-per- providing distribution services for SCB and WIN, Monitoring quality – 24 hours view movie operators. We will meet the rising the new company will later offer wholesale a day demand in this field by opening a new playout bandwidth to fixed and mobile operators and ISPs. centre in London this year. The first section of the network will be built this year and like many of this division’s build projects The continued roll-out of digital television is forecast for delivery below budget. Our priority services in the United Kingdom and Australia in the current year in Australia is to continue the is a key priority for 2001. ITN chose NTL to deliver roll-out of digital TV while winning the remaining its first fully digital 24-hour news channel, digital contracts due to be awarded in 2001. underlining the confidence of key broadcasters in our end-to-end media solutions. Using our Digital Broadcast radio Media Centre in Langley as a playout hub, we In broadcast radio, we became number one deliver the ITN News Channel over digital cable, during the year as a provider of digital radio digital satellite and digital terrestrial television. services with a 90 per cent market share. 32 NTL annual report 2000•Broadcast www.ntl.com

broadcast

Key facts Achievements – 2000 – £210 million ($318 million) revenue and – Towers & Sites – Launch and growth of £100 million ($150 million) EBITDA successful In Building product with services in – £2.3 billion ($3.5 billion) forward order book Bluewater and Canary Wharf (93 per cent for10 year plus contracts) – Broadcast Radio – Provision of digital radio – 3,421 sites in United Kingdom including land transmission, distribution and multiplexing options & Australia (561 sites in Australia) services with 90 per cent market share in – Global satellite connectivity commercial radio – Camera to TV transmission – Australia – A$1.1 billion contract for ABC roll- out of digital TV across the whole of Australia – Media Solutions – Expanded our product portfolio to include full outside broadcast facilities and enhancing our glass-to- glass strategy – Pacific Rim – Designed the world’s first DTT transmission system to provide mobile reception in Singapore

As new local digital radio licences are advertised UK wireless site leasing revenue growth £m this year, we are confident that we can win more 97 9.6 than 70 per cent of the multiplex contracts. This 98 14.2 build-up of success began 18 months ago when we 99 19.2 won a multiplexing, distribution and transmission 00 23.1 contract with Digital One, at that time the only commercial digital broadcaster. Since then, 14 Marketed sites Our Digital Media Centre licences have been advertised and we have won 97 758 at Langley contracts with 13, including Emap and Capital. 98 985 99 1,726 Satellite 00 2,607 With demand for our satellite uplinking services UK Towers In Building Australia Towers rising during 2000, we built a further teleport Land Options near our Winchester location. It opened for service in March 2001 to coincide with the launch of three new satellites that have more than trebled the capacity available for broadcasters in the Providing more capacity United Kingdom market over the next three years. for broadcasters With the combination of a further 21 large satellite Priorities – 2001 dishes and new playout centre, we are confident – Focus on 3G opportunities including of winning a significant share of the increased portfolio expansion business from this explosion in broadcast – Continue digital TV roll-out capacity, including handling complete channel in the United Kingdom and Australia launches on behalf of clients. – Continue to win disproportionate share of digital radio contracts In parallel, we are building up our occasional – Exploit satellite uplinking assets as services business, based on our ability to provide TV channel capacity explodes to end-to-end global broadcast and media services over 600 more channels from electronic satellite news gathering (ESNG) – Pursue international acquisition opportunities through to playout, with distribution via a range – Win remaining digital contracts in Australia of digital media. – Improve operating efficiencies 33 NTL annual report 2000•Broadcast www.ntl.com

This service runs all day, every day, to cover United Kingdom and European news and sports events – including the Six Nations Rugby and World Cup football series – both as one-off requests and regular contracts. We set out to win a bigger share of this booming market with the acquisition of the outside broadcast company Scanners TV in October. We can now deliver world-class services Serving our customers Maintaining our network using the latest digital widescreen technology, around the clock of towers and combine it with our ESNG services for comprehensive coverage of sports, entertainment and music events.

With the capability to offer global access directly This is a massive opportunity for NTL – since from our teleports, we continued to win new winning even a fairly small share of the market contracts with TV companies while building on demand for sites could double our revenue from existing successful relationships. For example, this business area – and we are well placed to we increased our capacity on the Astra 2A satellite succeed. to service the expanding Discovery network, and won long-term contracts for services on Astra 2B Demand is rising for ‘In Building’ systems that – including interactive capability for QVC, a new provide multi-operator coverage in confined auction-style channel called Situp.com and the spaces like retail centres, and we have the Asian channel Prime TV. specialist knowledge to meet it. Last year we built systems to provide mobile coverage in some Wireless/mobile 15 large public buildings throughout the United We are entering a period of exceptional activity Kingdom, including the prestigious Canary in wireless communications services. Already Wharf development and ExCel, London’s new in 2000 we have seen enormous growth, with International Conference and Exhibition Centre. 500 more customers or tenants taking up our The advantage of expanding our portfolio of sites, site-sharing facilities in the race to provide more skills and facilities is that – as for broadcast services and better coverage for their end-users. customers – we can now offer mobile operators a complete bundle of services, including site The driving force for this business is the continued management and maintenance. Covering UK and European growth of mobile communications in the United news and sports events Kingdom both for existing services and the Pacific Rim imminent launch of third-generation (3G) mobile We continue to develop relationships in the Asia/ phone services using the new UMTS standard. Pacific region, helped by an NTL presence in local We have made it a top priority to ready our existing offices. With economies in the region recovering, sites for the new era, and to prepare for operators’ countries are restarting their plans to move to needs by acquiring or holding options on new digital technology. We pioneered mobile digital ones in the urban and suburban locations where terrestrial television in trials on Singapore buses, demand will be greatest. In addition to more than and built the country’s mobile DTT system – the 2000 owned and shared sites, we have nearly 800 first in the world designed for mobile use – The NTL tower at Emley Moor further land options in the United Kingdom. completing the network in the first quarter of 2001.

Growth Opportunities – Capitalise on demand for 3G wireless sites in the United Kingdom – 4,000 new site requirements per operator by 2003 – 10,000 new site requirements per operator by 2010 – Continue the roll-out of digital broadcasting in the United Kingdom and Australia – Take advantage of outsourcing/ privatisation trends 34 NTL annual report 2000 •Networks www.ntl.com

networks Our competitive advantage

Our networks are ready to support the emerging through NTL’s satellite earth stations (teleports), technologies and services that will transform and to European and transatlantic cables – everyday communications, entertainment and expanded during 2000 to provide us with three information. In the United Kingdom our networks times the capacity to the United States. Network are second only to BT in reach, and second to usage climbed steeply during the year. Around none in terms of broadband capacity. With the 1.7 billion minutes a month at the end of 1999 £7.5 billion ($11.2 billion) construction phase had risen to 3.1 billion minutes a month by the now largely behind us, we have shifted the balance end of 2000, driven both by the acquisition of towards operation – delivering the benefits CWC ConsumerCo and more customers taking of integrating CWC ConsumerCo and NTL up more services. infrastructures, and exploiting our networks to bring broadband services to homes and ntl broadband internet is the cable modem businesses. product spearheading our broadband strategy. With a cable modem, customers can have an We are on track to offer ntl digitalplus – our new ‘always on’, broadband internet connection digital TV and telephony service – across nearly running at around ten times the speed of a 95 per cent of our United Kingdom networks by dial-up service. The target is to install more the end of 2001, having met last year’s target than 100,000 by the end of 2001, up from 12,800 of 92 per cent in original NTL areas, around at the end of last year. 90 per cent overall. We still have some work to do in former CWC ConsumerCo regions to We continue to invest in strategic projects upgrade networks to deliver digital services. such as Broadnet, which will expand both the reach and capacity of our network by switching Our networks now consist of a national backbone to Internet Protocol (IP). There is a worldwide of 7,800 route fibre kilometres, and 122,000 shift to IP-based networks, largely because route fibre kilometres of regional networks that IP serves as a ‘common language’ to enable link the fibre backbone to nodes serving groups all kinds of information to be transmitted by of typically around 500 homes. With the former virtually any network to virtually any device. IP CWC ConsumerCo areas added last year, our networks can support broadband and deliver networks cover over 50 per cent of the United voice, data, video and internet services, and we Kingdom and run past nearly nine million homes are positioning NTL to handle the expected rapid and over 400,000 businesses in major population acceleration in IP traffic. Another key project is centres. They also link to our 2000-plus radio the upgrading of our newly acquired London communications and broadcast transmission networks to equip them to deliver the high-quality sites across the country, to world destinations broadband services essential for a capital city. 35 NTL annual report 2000 •Networks www.ntl.com

The power behind our broadband strategy is the virtually unlimited capacity of our optical-fibre-based networks in local regions. We have more fibre running closer to more homes and businesses than any other company, and by the end of 2001 these networks will be ready to deliver all the services for which we see market demand.

NTL’s network growth 2000 1999 1998 Voice switches 100 56 43 Voice traffic 3,125m/m 1,700m/m 800m/m Data PoPs 23 18 9 IP Backbone 1.2Gb/s 622 Mb/s – Core fibre route kms 7,800 6,900 5,500

This is a long-term project that involves Work continues on tightening the operational considerable work. In preparation for leading efficiency of the IT systems on which we run the the next generation of high-speed broadband business. A range of new systems projects set in services, we are running a trial in a central motion in 2000 are geared to capturing further London apartment block with fibre directly economies of scale. We are developing an into each home. automated system for our field force to help them deal more efficiently with faults and difficulties. Operational efficiency This will have the added benefit of reducing costs. We are already benefiting from economies of scale through integrating the former CWC Internally we made good progress on aligning the ConsumerCo networks. Last year we saved different IT systems that have come with our many over 5 per cent of our interconnect costs by acquisitions. The major work to unify business routing traffic more efficiently over our own lines processes is due for completion by the end of this instead of those of other operators. This year, year, and will allow us to launch new products we will make even greater savings from linking faster and improve service to customers. our networks together physically, which will allow us to keep even more traffic on our own networks. NTL’s access reach homes passed Further savings have come from installing United Kingdom and Ireland cache storage in points of presence around the 97 1,007,000 network sites. This enables us to hold popular 98 2,775,000 content available locally, and reduce the need 99 4,291,700 00 8,809,500 for transatlantic capacity.

As part of NTL’s drive to focus on the customer- facing aspects of the business that we do best, we have taken the first steps towards outsourcing Our National Network non-core IT activities. NTL and IBM reached an – Fully resilient core SDH fibre network outline agreement in January, and expect to sign – Passes 8.8 million homes and more a contract later this year. This will extend CWC than 400,000 businesses ConsumerCo’s existing strategic alliance with – 90 per cent digital ready IBM, and is forecast to bring substantial IT – 42 headends budget savings of some £300 million over – 100 switches the life of the contract. – 50,000 fibre route miles 36 NTL annual report 2000 •Content www.ntl.com

content A force for innovation

Our pay-per-view movie The United Kingdom’s first NTL and Universal Studios Enhanced ratings with British Leading the way in interactive service internet-centric news channel working together Eurosport in 2000 games

Our investments in the content arena follow a for the next three years, during which the three-point strategy. First, we have launched competition will be officially known as the services where we see a gap in the market and NTL National Basketball Cup. can be a force for innovation – for example offering interactive news through our partnership New internet content also targets the UK’s with ITN. Second, we are investing to gain a level millions of sports fans. For the start of the coming of ownership in the three most popular areas of season we are launching tailored internet content multi-channel TV – sport (with British Eurosport); and services for 71 football clubs. This is a joint news (through the ITN News Channel); and venture with the Football League, again managed movies, with Front Row and The Studio. through Premium TV, and is set to become one of the United Kingdom’s largest internet content These two moves to strengthen our own content aggregators. It will serve over six million dedicated assets help us achieve the third element of the fans of the Football League, adding to our existing strategy, which is to increase our understanding internet users in Premier League and Scottish of the market dynamics and our negotiating Premier League clubs, and building into a position with other major content providers. profitable online business. For 2001, all our content interests have been brought under a single management vehicle, Another important move we made was buying Premium TV. the rights to exploit the BBC’s archive of sports material. This lets us tap into a rich store of high- Sports programming has been key to the take-up quality material and we are looking at using it to of our television services generally and we have create the backbone for a channel and exploiting it a range of agreements and partnerships with through future broadband services such as video sports organisations. Our stakes (typically just streaming. We have similar opportunities through under 10 per cent) and sponsorship agreements our sponsorship of the 2001 British Lions Rugby with five leading football clubs – Newcastle tour of Australia. United, Aston Villa, Leicester City, Middlesbrough United and Glasgow Rangers – carry various One of our first initiatives continues to be successful. media and internet rights. These give us wide Through a joint venture we funded the creation of opportunities to be a catalyst for new UK-specific programming from the pan-European programming, including club TV channels. Eurosport channel, resulting in British Eurosport. Middlesbrough launched its own recently, This is now the most widely available sports with others likely to follow. In a deal with the channel in the United Kingdom, and is carried British Basketball League, we became the on all three television platforms – satellite, main sponsor of the Basketball National Cup terrestrial and cable. 37 NTL annual report 2000 •Content www.ntl.com

Our content investments are geared to driving the next generation of multi-channel business. We led the way with the launch of the United Kingdom’s first interactive television service in 1999, offering news, sport, entertainment, travel, shopping, home learning and information services via our innovative TV-internet platform. Today, the service features more than 100 brands and is available to customers across most of our digital network.

The fast-evolving field of interactive and broadband content is led by Two Way TV, a software design and development company in which we have a stake. The company has created a range of interactive services, including pay-per-play games that will be available on a number of platforms, including our own. Games based on TV shows such as Mastermind and A Question of Sport have already proved popular, and during 2001, Two How to find out what’s on TV Way TV’s products will allow viewers to play along with programmes in the broadcasting stream. Families will be able to compete in their favourite game shows, or win prizes by forecasting scores in live sports events. We also continue to add to our existing partnerships with retailers for interactive services.

More innovations are under way. For example, Our interactive service viewers can already click the TV remote control features over 100 brands to move from the ITN News Channel to related content on the web and we will extend this during the year with fast links from other television We continue to be alive to new possibilities in channels to background information, sports or the sports market, and expect to invest in further shopping. We are also pioneering an interactive ventures during the year. version of our Electronic Programme Guide (EPG) for launch later this year. This web-based version In the news sector, our launch of ITN’s 24-hour uses software in the customer’s set-top-box digital news channel last August was a true to offer a range of current and up-coming innovation in the marketplace – an online news programme-related content as well as practical Sports sponsorship has product backed by the strong ITN brand. features such as allowing customers to restrict helped brand awareness access to individual channels. The ITN News Channel is a partnership between NTL and ITN. We take ITN’s programme feed of With programming for linear TV well established, global and national news, insert commercials and the big step ahead is broadband. With the deliver it across all three digital television platforms. combination of digital and broadband technologies, The News Channel is also available on the internet, customers can benefit from the full potential of mobile phone and handheld organisers. enhanced TV, interactive TV and internet over TV, and the speed at which they are taking up these Competing for the NTL We have built on the success of Front Row – the services is accelerating. National Basketball Cup pay-per-view movies service we own jointly with Telewest – by widening our customers’ choice of Later this year we plan to launch a new portal movies. In a partnership with Universal Studios for the growing number of broadband internet Networks we are also presenting a new, dedicated customers – introducing exciting new applications movie channel at the basic tier of ntl: home such as video streaming, music downloads and services. As with Front Row, where we also software-on-demand that will transform our negotiate direct with studios for content, this customers’ experience of the internet by expanding gives us a measure of independence from entertainment, education and communication Scoring a try for the British Lions the large content providers. into new dimensions. 38 NTL annual report 2000 •Europe www.ntl.com

Europe

developing

Bruno Claude Steven Wagner Ueli Dietiker Bernard Touraine Hamid Heidary Managing Director and Managing Director Chief Executive Officer Chief Executive Officer Chief Technology Officer Chief Operating Officer Consumer Services NTL Cablecom NTL France

NTL Europe and its affiliates’ networks pass more than 6.6 million homes and serve some 3.7 million cable television, internet and telephone customers. Through these networks, NTL has access to some of the most prominent cities in Continental Europe, including Paris, Frankfurt, Zurich and Stockholm.

In the newly liberalised telecoms environments presence in strategically important areas such as across Europe, tremendous opportunities are the major financial centres of London, Paris and unfolding for us to replicate our success in Frankfurt. We are in Switzerland – where we reach the United Kingdom and create Europe’s leading Europe’s wealthiest population – and in Sweden, broadband communications company. Europe’s most advanced broadband market.

Since our first step into mainland Europe in 1999, In 2001, the key components of our European we have made further strategic investments strategy are to: in leading European markets. In 2000 we – consolidate our position in capital cities and completed the purchase of the assets of the major markets with attractive demographics Cablecom Group, Switzerland’s largest cable –replicate our United Kingdom success with company, and acquired a 25 per cent interest in bundled services to drive penetration of new Svenska Bredbandsbolaget AB (B2), which is products and raise revenue per customer running fibre directly to the home throughout –upgrade the network infrastructure to deliver Sweden and Norway. We announced our intention advanced broadband solutions to consumers to take a 27 per cent stake in Noos SA, France’s and businesses market-leading broadband company, and –capture economies of scale through continued acquired a 50 per cent interest in eKabel InvestCo, integration, while maintaining a regional focus which owns 65 per cent of eKabel LP, the cable on customer operations. network in Hessen, Germany. We have made good progress towards these We now have the most extensive broadband goals. Cablecom in Switzerland and IG Networks footprint in Western Europe, with a strong in France are well-positioned cable companies 39 NTL annual report 2000 •Europe www.ntl.com

1

4 2 3

1 Sweden 2 France 3 Switzerland 4 Germany Scandinavia has Europe’s Our first broadband venture Over 90 per cent of television We have a 50 per cent highest penetration of internet in Continental Europe was in broadcasting in Switzerland is investment in eKabel Invest users and we have a 25 per cent France. The acquisition of 1G delivered over cable networks. Co which owns 65 per cent stake in Bredbandsbolaget Networks offers an excellent Cablecom, acquired in March of eKabel L.P, the Hessen (B2), one of Sweden’s leading opportunity for growth and 2000, has an industry-leading cable network in Germany. broadband communications our intention to take a stake penetration rate of 91 per cent. Hessen includes Frankfurt, companies. B2 is developing in Noos will strengthen our Our strategy is for Cablecom the second largest financial a fibre-optic network linking position in France. to become the premier centre in Europe. key metropolitan areas in provider of communications Sweden and Norway. services for Swiss residential and business markets.

Product migration strategy – in major markets. We continue to prepare the Average revenue per subscriber £ networks of these companies to deliver bundled Current ARPU 7.86 digital cable television, high-speed internet and IP 2005 target 34.50 telephony services to consumer customers, and UK target 60.00 advanced broadband services to the business ■ Telephony ■ Premium TV ■ High-speed access community. There is significant demand for ■ Basic CATV high-speed services in Europe.

To take up the substantial opportunities for growth in our other European investments, we are building on our market expertise and NTL Europe product roll-out success in marketing communications services. UK roll-out: HFC + Copper Euro roll-out: HFC We will grow revenues by moving customers Two pairs of Telephone Wire One Coaxial cable + Coaxial cable from single products to multiple services, using Television Television our experience in driving take-up through product ➔➔➔ ➔➔➔ bundling, offering value and choice, and raising Telephony Digital levels of customer service.

Digital High speed We are reaping benefits from our wider European operations by increasing our buying power – not Product Roll-out Product High speed VOIP only for equipment but also for programming and content. Longer term, we will generate revenue streams from business customers by creating 40 NTL annual report 2000 •Europe www.ntl.com

Europe

a pan-European network of integrated services. Highlights – 2000 Moving towards this, we have agreements to swap –NTL expanded into Continental Europe with excess capacity on our United Kingdom networks the aim of replicating its success in the United for capacity from other major international Kingdom to create Europe’s leading broadband telecoms carriers. With this, we can roll out a communications company fibre backbone connecting up to 24 cities in –We made several strategic investments in 2000: Europe as needed over the next two years. March – We completed the purchase of the assets of the Cablecom Group, Switzerland’s Our emphasis is firmly on local management, largest cable company which has been a hallmark of our success. March – We acquired a 25 per cent interest The local market expertise of management teams in Svenska Bredbandsbolaget A.B. or ‘B2’, in each of our subsidiaries and investments in a company based in Scandinavia, which is Europe will be important in tailoring the delivery deploying fibre directly to the home throughout of services to existing customers. We also put Sweden, Norway and Denmark in place a European management team during August – We announced that we intend 2000, solely dedicated to managing our operations to make a 27 per cent minority investment and interests in mainland Europe and ensuring in Noos S.A., the market-leading French overall consistency. broadband company August – We acquired a 50 per cent interest Switzerland in eKabel InvestCo, which owns 65 per cent NTL acquired Cablecom in March 2000. of eKabel L.P., the Hessen cable network As Switzerland’s leading cable operator, with in Germany some 53 per cent of the market, Cablecom serves –We continued to expand 1G Networks, which over 1.5 million customers in 12 large Swiss cities provides services to homes in Greater Paris and maintains a penetration rate of more than and Toulon, by upgrading the network and 90 per cent. Cablecom also owns one of the preparing for the launch of digital television country’s largest ISPs – SwissOnline – which and high-speed internet Switzerland’s leading has around 150,000 internet customers. cable company With this strong base of customers, we have taken up the obvious opportunity to build a multi-service business by launching both digital television and high-speed internet services. This has been Germany key in differentiating Cablecom’s service from Through an NTL subsidiary we took a 32.5 per competitors, and brought a rapid take-up of cent interest in eKabel – which owns and operates 27,000 cable modems by the end of the year. the largest cable television network in the province Keeping customers loyal of Hessen, which includes Frankfurt, Germany’s by introducing new products Our strategic network upgrade programme major financial centre. Currently the eKabel & services will see the completion of a national fibre-optic network passes 1.8 million homes, of which backbone by the end of 2001, covering some 1.3 million are customers. With a low annual 75 per cent of the country. With only one other churn rate of less than 6 per cent, our loyal backbone of this quality and scale in the country, customer base is a platform on which to grow Cablecom is attracting business-to-business broadband products and services. customers with high-grade carrier services and broadband internet access. Other key elements eKabel plans to spend 930 million, ($880 million) of our strategy for Cablecom include increasing over the next five years to upgrade to a state-of-the- capacity in major cities and introducing value- art broadband network that will pass an additional added services such as digital interactive 300,000 homes and over two million homes in total. television, pay television, pay-per-view, high- eKabel intends to be a leader in providing a wide speed internet and telephony. We are also range of broadband products and services, building installing the superior customer care operations on its large customer base, extended network and essential to support much larger numbers of the attractive economic and demographic factors customers plus new products and services. of the region. 41 NTL annual report 2000 •Europe www.ntl.com

France Priorities – 2001 The French broadband market offers one of –Closely integrate European business operating the best opportunities for growth among major units to exploit synergies while maintaining European countries, and NTL’s operations are regional focus centred on the strategically important Paris –Maintain capital-efficient digital upgrades region. From a relatively low penetration of cable -Accelerate selling in to previously television, PC and internet users, take-up rate converted areas of internet and broadband technologies is now -Focus on cable modems, then telephony increasing rapidly. –In Switzerland, Cablecom will continue to upgrade its network, and will begin the roll-out We acquired France Telecom’s IG Networks in two of its value added services, including digital TV, steps during 1999. This was our first broadband pay-TV and high-speed internet. Cablecom will venture in Continental Europe, bringing us 48,000 also prepare its network for the roll-out of customers. We strengthened our position in this interactive services and telephony high-potential area in August 2000 by announcing –eKabel is currently launching a pilot for 500 our intention to purchase, with an investment homes offering TV, internet and telephone partner, a stake in the market-leading French services. The focus in 2001 is to begin broadband company Noos, which has 803,000 upgrading its network to a state-of-the-art customers and networks that pass over 2.5 million two-way broadband network with an average homes and businesses. Noos has an estimated of 500 homes per node 26 per cent of the French cable television market, –In France, 1G Networks is launching a pilot and a state-of-the-art, fully digital network that version of its digital platform, increasing the is a unique platform for its broadband strategy – number of channels available to customers as already providing high-speed internet access well as providing high-speed internet access to more than 63,000 homes and businesses. –In Scandinavia, B2 will continue to expand its services into Sweden, Norway and Denmark by The cable franchise areas served by IG and offering two-way high-speed internet access to Delivering bundled services Noos represent approximately 40 per cent of over 100,000 homes already passed the French communications market. In both operations, with the local management, we are positioning the companies to grow by bundling digital cable television, high-speed internet and telephony services.

Sweden We have established an important strategic Focusing on exploiting alliance in Scandinavia, which has Europe’s synergies highest penetration of internet users, through our 25 per cent ownership interest in the Swedish broadband access and services company Bredbandsbolaget (B2). Working with service providers, B2 intends to offer customers a range of media content, B2 currently provides broadband services in Sweden, broadband data, telephony, television and video and is developing an extensive fibre-optic network through a specially designed interface that linking key metropolitan areas in Sweden and allows customers to create their own portal An exciting channel line-up Norway. B2 provides ‘always on’, low-cost access containing only the services of their choice. to a high-capacity broadband network that provides transmission to and from the customer This venture is also taking NTL forward by at the same speed. While most of NTL’s enabling us to run trials in this important test investments involve owned networks, B2 takes market for fibre-to-home – the next-generation advantage of the Swedish Government’s of high-speed access. Also, we are jointly looking substantial investment in broadband by buying for opportunities to extend B2’s network and capacity on its broadband wide area network. services into other areas of Europe. 42 NTL annual report 2000 •Financial review www.ntl.com

Financial review

2000 was a record financial year for NTL. With the acquisitions of Cable & Wireless ConsumerCo and Cablecom, we ended the year with a diverse revenue base of £1.9 billion ($2.8 billion), the largest in our history. More importantly, we reached critical mass in our core markets and are now nearing the end of our fixed capital investment programme in the United Kingdom. We are now entering a period of rapid EBITDA expansion, taking advantage of our scale to drive revenue growth and dramatically reduce costs.

EBITDA growth in $m Taking advantage of scale 95 -63 Since 1993, NTL and its acquired companies 96 -31 have cumulatively invested over £9.0 billion 97 21 ($13.4 billion) in network infrastructure, with 98 75 £7.5 billion ($11.2 billion) in the United Kingdom 99 211 alone. As our annualised revenues have grown 00 344 through the £2 billion ($3 billion) mark by the last John Gregg quarter of 2000 and our local networks reach Chief Financial Officer nearly one out of every three United Kingdom homes and businesses, we have obtained the Revenue in $m necessary scale to begin the harvesting of our 95 34 long-term capital investments. As a result, 96 228 we are now at an inflection point for accelerated 97 492 EBITDA growth. 98 747 99 1,584 In 2000 NTL generated record revenues of 00 2,841 £1.9 billion ($2.8 billion) and EBITDA of £229 Bret Richter million ($344 million). As anticipated, EBITDA Vice President margins declined slightly in 2000, as we began Corporate Finance and Development to integrate the CWC ConsumerCo acquisition in the United Kingdom and invested in the launch of Customer households under management* ’000s digital television and high-speed internet services. 95 58 96 168 EBITDA growth and margin expansion in 2001 97 321 and beyond will be generated from NTL’s proven 98 944 expertise in increasing penetration, increasing 99 1,820 ARPU and continuing to reduce costs. 00 5,299 *Accounts for equity interests in Noos (pending), NTL is highly focused on reducing its cost base. eKabel and B2, excluding dial-up internet subscribers A comprehensive review of the cost base in late 2000 led us to take a £43.5 million ($65.9 million) restructuring provision to account for the redundancy of 2,300 associates during 2001. We expect to uncover more synergistic areas in which to cut overlapping expenses as we continue to integrate the CWC ConsumerCo acquisition. 43 NTL annual report 2000 •Financial review www.ntl.com

Broadband homes passed* ’000s Original NTL penetration rates 95 463 Cable penetration % 96 779 95 29 97 1,007 96 33 98 2,775 97 38 99 4,557 98 43 00 12,087 99 47 *Accounts for equity interests in Noos (pending), 00 49 eKabel and B2

New products are expanding UK ARPU* £ Telephone penetration % Overall On-net** 35.7 95 29 Digital Customer*** 42.6 96 32 Triple Play**** 66.9 97 37 *All ARPUs as of Q4 2000 98 42 **Excludes BT Cable, a cable-only system 99 46 ***CWC ConsumerCo only 00 49 ****Includes telephone, digital TV and high-speed internet Household customer penetration % 95 33 96 36 97 40 98 44 99 48 00 51

Validation of the business model Capital expenditure NTL has proven its business model. In October 2000 was a peak year for capital spending as 1993 we predicted that in 10 years the company we upgraded our networks for digital television, would have 50 per cent cable penetration and 35 high-speed cable modem access and the per cent telephony penetration. After seven years bandwidth necessary for future product offerings. in our original franchises and a 10-fold increase The enormous network construction project is in the size of the company, we have exceeded that now behind us. Our networks are over 90 per cent Richard J. Lubasch target. In fact, in our best performing franchises, digital enabled throughout the United Kingdom Executive Vice President we have exceeded 65 per cent customer and with over 144 fibres in the backbone with duct General Counsel and Secretary telephony penetration surpassing our long-term capacity of approximately 2,300 fibres. As the business plan goals in these areas. In addition, majority of our United Kingdom infrastructure we have achieved these penetration levels with is complete, most of our future capital will be an industry-leading churn rate. We now see deployed on a success driven, contract build-out tremendous opportunity in selling broadband and customer-led basis. This will allow us to internet and digital television and thereby match our capital spending with the demand increasing average revenue per customer. for our services. We have already seen a 20 per cent uptick in ARPU Aizad Hussain for those customers who subscribe to digital and The upgrade of our Continental and Irish properties Managing Director broadband internet services. We compete in a has recently begun; we will initially focus on Corporate Finance and Development marketplace that has seen significant price upgrading the systems for digital television and increases from our competitors. We believe broadband internet access followed by the provision that our value-based bundled offer is a better to telephony via voice-over-IP infrastructure. proposition for the consumer and will continue We believe that by utilising this approach, we to give NTL significant competitive advantage can save a significant amount of capital expense leveraging off our unique network assets. while taking advantage of the worldwide surge in demand for broadband products. We have also made tremendous progress in the provision of communications solutions to the Acquisitions, associates and joint ventures Nigel Roberts business market. We now serve over 76,000 2000 marked another busy year for pursuing Group Treasurer business customers, from the home worker strategic investment opportunities in the United to global telecoms carriers such as AT&T and Kingdom and Western Europe. In total, NTL France Telecom. Finally, we have been able to announced or completed over £11.7 billion transition our broadcast customers successfully ($17.5 billion) of transactions. The year was to the digital world and are poised to serve our dominated by our two largest acquisitions to wireless customers as they roll-out their date, CWC ConsumerCo and Cablecom. 3G mobile networks. 44 NTL annual report 2000 •Financial review www.ntl.com

Financial review

Track record of improving performance Bundled services Penetration % New customer dual starter pack Comcast 39 TV & Telephone £ 56 Old Prices 10.00 ComTel 18 16.25 32 Diamond 39 New Prices 19.99 49 NTL BT+Sky

Monthly churn % New customer triple starter pack Comcast 1.9 TV, Telephone & unmetered internet £ 1.2 Old Prices 10.00 ComTel 2.5 26.25 1.4 Diamond 1.2 New Prices 32.98 1.0 NTL BT+Sky+Freeserve Mid 1998 Q4 2000

Following the announcement in July 1999, we These companies include Into Networks, one completed the acquistion of CWC ConsumerCo of the world’s leading broadband gaming content in May, 2000 for a total of approximately £8.7 providers; Global Radio, a pan-European digital billion ($13.1 billion). The acquisition was financed radio company and Diva Systems, one of the predominantly through the sale of primary equity world’s leading providers of video-on-demand to France Telecom and issuance of equity to solutions. Cable & Wireless Communications shareholders. In March, we acquired 100 per cent of the business Financing and assets of Cablecom, Switzerland’s largest We ended the year with over £2.1 billion cable operator, for approximately CHF5.8 billion ($3.2 billion) of liquidity consisting of cash and ($3.5 billion). This acquisition was financed available bank facilities. The company’s capital through a roughly equal measure of bank debt structure also improved significantly during the and issuance of preferred stock. year. We completed a number of large equity and debt transactions, mainly in relation to acquisitions, During the year, we also acquired a 25 per cent despite a generally volatile year for the sector with interest in Svenska Bredbandsbolaget (B2), regards to raising capital in the bank and bond the world’s leading provider of fibre-to-the-home markets. NTL’s leverage ratio has fallen dramatically connectivity to residential and business from 92 per cent at 31 December 1998 to 63 per customers. The company’s principal markets cent at 31 December 2000. Further, our net debt are in Sweden and Norway. In August 2000, per equity home passed has fallen 37 per cent we completed a £107 million ($160 million) from its peak to end last year at £795 ($1,193). investment for 50 per cent of eKabel Invest Co, which owns 65 per cent of eKabel L.P., the Hessen In March 2000, the company acquired 100 per cent cable network in Germany. eKabel Hessen GmbH of Cablecom AG. The acquisition was financed by owns and operates the largest cable television the issue of $1.85 billion of redeemable preferred network in the German province of Hessen, which stock, and through a new CHF 4.1 billion facility includes Frankfurt, the second largest financial which will also finance the upgrade of Cablecom’s centre in Europe. In August 2000, we announced networks. As of 31 December 2000, CHF 3.2 billion our intention to make a 27 per cent minority was outstanding and CHF 900 million was investment in Noos S.A., the market-leading available for drawing under this credit agreement. French broadband company. In May 2000, in connection with the acquisition In addition to these significant investments of CWC ConsumerCo, NTL issued £5.2 billion which increased our broadband presence ($7.8 billion) of equity and £1.3 billion ($1.9 billion) throughout Europe, the group also undertook of preferred stock. In addition, NTL Communications several smaller minority investments in a Ltd and NTL Business Ltd, both wholly-owned number of communication services providers subsidiaries, entered into a £2.5 billion credit focused on leveraging the enormous growth agreement to refinance CWC ConsumerCo’s in broadband communications. existing debt. 45 NTL annual report 2000 •Financial review www.ntl.com

Net debt per equity home passed* $ Gross PP&E $m 95 787 95 682 96 1,651 96 1,583 97 1,898 97 1,973 98 1,467 98 4,275 99 1,303 99 6,496 00 1,193 00 14,510 *Accounts for equity interests in Noos (pending), eKabel and B2 homes passed

Debt to book capitalisation (leverage) Debt as % 98 92.0 99 73.5 00 63.3

As of 31 December 2000, £2.2 billion of borrowings financing in US dollars and incurs construction were outstanding and £273 million was available and operation costs in various other currencies, for borrowing under this credit agreement. we will encounter currency exchange rate risks. Also in connection with the acquisition of CWC We have entered into cross-currency swaps to ConsumerCo, NTL Communications Ltd entered hedge the risk of exchange rate fluctuations related into a £1.3 billion credit agreement with a to the majority of interest payments on US dollar syndicate of banks subsequently reduced by denominated debt during 2001. £255 million due to debt issuances in October 2000 and January and February 2001. As of 31 Interest rate contracts December 2000, there were no amounts drawn Approximately 63 per cent of our indebtedness under this agreement. is fixed rate, with a further 5 per cent within an interest rate collar, the remainder is floating. In October 2000 NTL Communications Corp Our Swiss subsidiary has entered into a number issued $500.0 million principal amount of of interest rate collars to protect against the risk 11per cent senior notes due 2010. of rising interest rates. The principal amount of the collars is CHF1.2 billion ($720 million). In January and February 2001 NTL The group has not entered into any other interest Communications Corp issued 300.0 million rate hedging transactions. principal amount of 12 per cent notes due 2008. Strategic partnership Our long-term debt has an average maturity Our strategic partner, France Telecom, has helped of approximately six years, with approximately us to achieve a number of significant goals through 50 per cent in US dollars. the investment of £5.2 billion ($7.8 billion) in equity capital in NTL, including the important acquisitions Foreign currency and interest rate exposure of CWC ConsumerCo and Cablecom. France The company is exposed to various market risks, Telecom owns Orange and Freeserve in the including changes in foreign currency exchange United Kingdom, and we believe there will be rates and interest rates. We have entered into significant opportunities to cross market and financial instruments to manage and reduce the bundle our services in the future. impact of changes in foreign currency exchange rates and to reduce the impact of changes in As we enter 2001, we are poised for an exciting interest rates. The counterparties are major period of growth – reaping the benefits of what we financial institutions. have sown in the United Kingdom and developing the broadband opportunities throughout Europe. Foreign exchange contracts During the year the proportion of US dollar debt has been reduced as a result of entering into the John Gregg sterling and Swiss franc denominated bank facilities. To the extent that the company obtains 46 NTL annual report 2000 •Selected financial data www.ntl.com

Selected financial data

The following table sets forth certain financial data for the years ended December 31, 2000, 1999, 1998, 1997 and 1996. This information should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this annual report.

Year ended December 31 (in millions, except per share data) 2000 1999 1998 1997 1996 (1) (2) (3) (4) Income statement data Operating revenues $2,840.8 $1,584.1 $747.0 $491.8 $228.3 (Loss) before extraordinary item (2,963.7) (732.7) (503.9) (328.6) (254.5) Net (loss) (2,963.7) (735.7) (534.6) (333.1) (254.5) Basic and diluted net (loss) per common share (Loss) per common share before extraordinary item (5) (14.54) (6.75) (8.12) (6.79) (5.25) Net (loss) per common share (5) (14.54) (6.78) (8.60) (6.88) (5.25) Weighted average number of common shares used in the computation of basic and diluted net loss per common share (5) 217.1 119.4 64.4 50.2 48.5

As of December 31 (in millions) 2000 1999 1998 1997 1996 (1) (2) (3) (4) Working capital (deficiency) $(840.0) $2,261.4 $600.5 $(52.3) $242.1 Fixed assets, net 12,693.0 5,597.7 3,854.4 1,757.0 1,459.5 Total assets 28,383.7 12,211.6 6,194.1 2,421.6 2,454.6 Long-term debt 15,044.1 8,798.0 5,043.8 2,015.1 1,732.2 Redeemable preferred stock 2,083.2 141.8 124.1 108.5 – Shareholders' equity (deficiency) 8,367.4 2,136.9355.2 (61.7) 328.1

(1) In March 2000, the Company purchased Cablecom for an aggregate purchase price of $3,528.7 million, including intangibles of $2,355.3 million. In May 2000, the Company purchased ConsumerCo for an aggregate purchase price of $13,111.0 million, including intangibles of $8,879.0 million. The net assets and results of operations of Cablecom and ConsumerCo are included in the consolidated financial statements from their respective dates of acquisition.

(2) In March 1999, the Company purchased Diamond for an aggregate purchase price of $984.6 million, including intangibles aggregating $1,323.0 million. In April 1999, the Company purchased the Australian National Transmission Network for an aggregate purchase price of $425.8 million, including intangibles of $220.6 million. In July 1999, the Company acquired Cablelink for an aggregate purchase price of $700.5 million, including intangibles of $669.6 million. In August and December 1999, the Company acquired the 1G Networks of France Telecom for an aggregate purchase price of $61.9 million, including intangibles of $64.7 million. In September 1999, the Company acquired the shares of Workplace Technologies plc, for an aggregate purchase price of $175.0 million, including intangibles of $176.9 million. The net assets and results of operations of Diamond, the Australia National Transmission Network, Cablelink, the 1G Networks and Workplace Technologies are included in the consolidated financial statements from their respective dates of acquisition.

(3) In June and September 1998, the Company purchased ComTel for an aggregate purchase price of $969 million, including intangibles aggregating $224 million. In October 1998, the Company purchased Comcast UK for an aggregate purchase price of $600 million, including intangibles of $130 million. In December 1998, the Company purchased EGT for an aggregate purchase price of $151 million, including intangibles of $45 million. The net assets and results of operations of ComTel, Comcast UK and EGT are included in the consolidated financial statements from their respective dates of acquisition.

(4) In May 1996, the Company purchased NTL Group Limited for an aggregate purchase price of $439 million, including goodwill of approximately $263 million. The net assets and results of operations of NTL Group Limited are included in the consolidated financial statements from the date of the acquisition.

(5) After giving retroactive effect to the five-for-four stock split by way of stock dividend paid in October 1999 and the five-for-four stock split by way of stock dividend paid in February 2000.

The Company did not declare or pay any cash dividends during the years indicated. 47 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations

Results of operations regulated services, and increases in satellite and media services used by Years ended December 31, 2000 and 1999 broadcast and media customers. The Company expects growth in broadcast As a result of the completion of the acquisitions of Diamond Cable services to be driven primarily by contracts related to the increased demand Communications Limited (‘Diamond’) in March 1999, the Australian for tower infrastructure by wireless services operators expanding and National Transmission Network (‘NTL Australia’) in April 1999, Cablelink upgrading their networks for wireless broadband, the privatization of Limited (‘Cablelink’) in July 1999, the ‘1G Networks’ of France Telecom in national broadcast networks, the digitalization of analog television and radio August and December 1999, NTL Business Limited (formerly Workplace signals and the further development of programming for the European Technologies plc) (‘NTL Business’) in September 1999, the cable assets markets requiring satellite and terrestrial distribution services. of the Cablecom Group (‘Cablecom’) in March 2000 and the consumer cable telephone, internet and television operations of Cable & Wireless Operating expenses (including network expenses) increased to $1,387.6 Communications plc (‘CWC’) (the operations acquired from CWC are million from $798.6 million as a result of increases in interconnection and called ‘ConsumerCo’) in May 2000, the Company consolidated the results programming costs due to customer growth. Operating expenses as a of operations of these businesses from the dates of acquisition. percentage of revenues declined to 48.8% from 50.4%. The 2000 and 1999 expense includes $649.6 million and $171.9 million, respectively, from A significant component of the results since May 2000 is associated with acquired companies. the acquisition of ConsumerCo. Prior to the acquisition, the ConsumerCo business had been losing customers on a quarterly basis. Since the Selling, general and administrative expenses increased to $1,109.1 million acquisition, ConsumerCo has experienced a dramatic turnaround in from $574.6 million as a result of increases in telecommunications and customer additions, as well as materially reduced monthly churn. As the cable television sales and marketing costs and increases in additional quality of the ConsumerCo customers’ experience continues to improve, personnel and overhead to service the increasing customer base. the Company expects to continue to reduce churn and increase penetration. The 2000 and 1999 expense includes $483.4 million and $58.7 million, However, this will cause certain costs to increase through the second respectively, from acquired companies. quarter of 2001. Pursuant to the terms of various UK licenses, the Company incurred license For the year ended December 31, 1999, certain revenues have been fees paid to the Independent Television Commission (‘ITC’) to operate as the reclassified from business telecommunications to broadcast transmission exclusive service provider in certain of its franchise areas. Upon a request and other and certain costs have been reclassified from operating expenses by the Company in 1999, the ITC converted all of the Company’s fee bearing to selling, general and administrative expenses to conform to the 2000 exclusive licenses to non-exclusive licenses at the end of 1999, and the classifications. Company’s liability for license payments ceased upon the conversion. Franchise fees were $16.5 million in 1999. Consumer telecommunications and television revenues increased to $1,819.8 million from $834.3 million as a result of acquisitions and from In September 2000, the Board of Directors approved modifications customer growth that increased the Company’s current revenue stream. to certain stock options granted to employees in November 1999 through The 2000 and 1999 revenue includes $1,063.4 million and $167.1 million, May 2000. Options to purchase an aggregate of approximately 16.5 million respectively, from acquired companies. The Company’s immediate goal shares of the Company’s common stock with a weighted average exercise is to drive the majority of revenue growth from ARPU increases rather than price of $64.39 per share were modified such that the exercise price was adding new customers; this allows the Company to maintain revenue targets, reduced to $44.50 per share and the vesting schedule was delayed and/or have a lower capital requirement due to fewer installations, and drive higher lengthened. This change did not affect the exercise price of options granted EBITDA as the Company reduces front-loaded costs such as customer to the Chairman of the Board, the President and Chief Executive Officer acquisition costs and higher initial maintenance costs. and the Company’s directors. In accordance with APB Opinion No. 25, ‘Accounting for Stock Issued to Employees’ and related interpretations, Business telecommunications revenues increased to $702.2 million the Company is accounting for these options as a variable plan beginning from $452.5 million as a result of acquisitions, customer growth and in September 2000. The Company will recognize non-cash compensation increases in carrier services revenues. The 2000 and 1999 revenue includes expense for the difference between the quoted market price of the $234.3 million and $92.8 million, respectively, from acquired companies. Company’s common stock and the exercise price of the vested options The Company continues to focus specific sales and marketing effort on while the options remain outstanding. winning business customers in its franchise areas and promoting broadband for small businesses. Carrier services revenues increased due Other charges of $92.7 million in 2000 include restructuring costs of to growth in services provided by the Company’s wholesale operation to $65.9 million and information technology integration costs of $26.8 million. other telephone companies. Revenue growth in carrier services is primarily Restructuring costs relate to the Company's announcement in November dependent upon the Company’s ability to continue to attract new customers 2000 of its completion of a consolidation review. Based on a comprehensive and expand services to existing customers. review of the combined Company following the acquisition of ConsumerCo and the integration of several other acquired businesses, the Company Broadcast transmission and other revenues increased to $318.8 million identified significant efficiency improvements and cost savings. The from $297.3 million. Included in these amounts are revenues of $55.0 million restructuring provision includes employee severance and related costs and $40.0 million from NTL Australia in 2000 and 1999, respectively. The UK of $47.9 million for approximately 2,300 employees to be terminated and increase reflects increases in broadcast television and FM radio customers lease exit costs of $18.0 million. As of December 31, 2000, approximately and accounts, which exceeded price cap reductions in the Company’s 360 of the employees had been terminated. None of the provision had been 48 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations continued

utilized through December 31, 2000. The information technology integration Consumer telecommunications and television revenues increased costs of $26.8 million were incurred for the integration of acquired to $834.3 million from $355.6 million as a result of acquisitions and companies' information technology. Other charges of $16.2 million from customer growth that increased the Company's current revenue in 1999 were incurred for the cancellation of certain contracts. stream. The 1999 and 1998 revenue includes $471.9 million and $74.2 million, respectively, from acquired companies. Corporate expenses increased to $47.5 million from $29.4 million due to an increase in various overhead costs. Business telecommunications revenues increased to $452.5 million from $157.7 million as a result of acquisitions, customer growth and Depreciation and amortization expense increased to $2,122.8 million increases in carrier service revenues. The 1999 and 1998 revenue includes from $791.3 million due to an increase in depreciation of telecommunications $200.8 million and $8.5 million, respectively from acquired companies. and cable television equipment. The 2000 and 1999 expense includes Carrier services revenues increased due to growth in telephone services $1,481.1 million and $215.9 million, respectively, from acquired provided by the Company's wholesale operation to other telephone companies, including amortization of acquisition related intangibles. companies. Revenue growth in carrier services is primarily dependent upon the Company's ability to continue to attract new customers and Interest income and other, net, decreased to $1.6 million from $49.4 expand services to existing customers. million as a result of increases in the net losses of affiliates accounted for by the equity method and decreases in interest income. Broadcast transmission and other revenues increased to $297.3 million from $231.3 million due to revenues of $40.0 million from NTL Australia Interest expense increased to $1,036.8 million from $680.7 million due to in 1999, from increases in broadcast television and FM radio customers the issuance of additional debt, and the increase in the accretion of original and accounts, which exceeded price cap reductions in the Company's issue discount on the deferred coupon notes. The 2000 and 1999 expense regulated services and from increases in satellite and media services includes $380.4 million and $134.5 million, respectively, related to used by broadcast and media customers. acquisitions. Interest of $590.1 million and $222.1 million was paid in the years ended December 31, 2000 and 1999, respectively. Other telecommunications revenues decreased to zero from $2.4 million due to the sales of the assets of the Company's wholly-owned subsidiary, Foreign currency transaction (losses) gains decreased to losses of OCOM Corporation, to AirTouch Communications, Inc. and to Cellular $120.6 million from gains of $12.7 million primarily due to the effect Communications of Puerto Rico, Inc. during 1998. of unfavorable changes in exchange rates. The Company’s results of operations are impacted by changes in foreign currency exchange rates Operating expenses increased to $798.6 million from $400.9 million as follows. NTL Incorporated and certain of its subsidiaries have cash, as a result of increases in interconnection costs and programming cash equivalents and debt denominated in foreign currencies that are costs due to customer growth. The 1999 and 1998 expense includes affected by changes in exchange rates. In addition, foreign subsidiaries $360.0 million and $51.1 million, respectively, from acquired companies. of the Company whose functional currency is not the US dollar hold cash, cash equivalents and debt denominated in US dollars which are affected Selling, general and administrative expenses increased to $574.6 million by changes in exchange rates. from $270.7 million as a result of increases in telecommunications and cable television sales and marketing costs and increases in additional The Company recorded an extraordinary loss from the early personnel and overhead to service the increasing customer base. In addition, extinguishment of debt of $3.0 million in 1999 as a result of the repayment $47.4 million of the increase was due to the new national brand and of the bridge loan incurred in connection with the Cablelink acquisition. advertising campaign, which began in the second quarter of 1999 and continued into 2000. The 1999 and 1998 expense includes $222.1 million Years ended December 31, 1999 and 1998 and $25.1 million, respectively, from acquired companies. As a result of the completion of the acquisitions of ComTel in June and September 1998, NTL (Triangle) LLC (formerly Comcast UK Cable Pursuant to the terms of various UK licenses, the Company incurred Partners Limited) (‘NTL Triangle’) in October 1998, EGT in December 1998, license fees paid to the ITC to operate as the exclusive service provider Diamond in March 1999, NTL Australia in April 1999, Cablelink in July 1999, in certain of its franchise areas. Upon a request by the Company in 1999, the ‘1G Networks’ of France Telecom in August and December 1999 and the ITC converted all of the Company's fee bearing exclusive licenses to NTL Business in September 1999, the Company consolidated the non-exclusive licenses by the end of 1999, and the Company's liability for results of operations of these businesses from the dates of acquisition. license payments ceased upon the conversion. Franchise fees decreased The results of these businesses are not included in the 1998 results except to $16.5 million from $25.0 million due to the reversal of the accrued for the results of operations of ComTel, NTL Triangle and EGT from the liability for franchise fees of $13.6 million. The 1999 amount includes dates of acquisition. Diamond franchise fees of $5.0 million.

For the years ended December 31, 1999 and 1998, certain revenues Other charges of $16.2 million in 1999 were incurred for the cancellation have been reclassified from business telecommunications to broadcast of certain contracts. Other charges of $4.2 million reversed in 1998 were transmission and other and certain costs have been reclassified between the result of changes to a restructuring reserve that was recorded in 1997. selling, general and administrative expenses and operating expenses to conform to 2000 classifications. Corporate expenses increased to $29.4 million from $17.1 million due to an increase in various overhead costs. 49 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations continued

Depreciation and amortization expense increased to $791.3 million from The Company estimates that these requirements, net of cash from $266.1 million due to an increase in depreciation of telecommunications operations, will aggregate up to approximately $2,400.0 million in 2001. and cable television equipment. The 1999 and 1998 expense includes The Company's commitments at December 31, 2000 for equipment and $430.1 million and $45.9 million, respectively, from acquired companies, services through 2001 of approximately $390.0 million are included in the including amortization of acquisition related intangibles. anticipated requirements. The Company had approximately $639.4 million in cash and securities on hand at December 31, 2000. The company expects Interest expense increased to $680.7 million from $328.8 million due to utilize the proceeds from the issuance of notes in January and February to the issuance of additional debt, and the increase in the accretion of 2001 and a portion of its bank facilities to fund the balance of these requirements. original issue discount on the deferred coupon notes. The 1999 expense includes $184.8 million from acquired companies. Interest of $222.1 million In January 2001, NTL Communications Corp. (‘NTL Communications’) and $118.3 million was paid in the years ended December 31, 1999 and issued ᇾ200.0 million ($187.8 million) principal amount of 12»% Senior 1998, respectively. Notes due 2008. In February 2001, NTL Communications issued an additional ᇾ100.0 million principal amount of 12»% Senior Notes due 2008 Other gains of $493.1 million in 1999 are from the sale of the Company’s at a price of 101.0% of the aggregate principal amount at maturity, plus investment in Cable London. accrued interest, or ᇾ101.5 million ($95.3 million) (together, the ‘2001 Euro Notes’). The underwriter’s discount and commissions were ᇾ6.8 million Foreign currency transaction gains increased to $12.7 million from ($6.4 million). Interest is payable semiannually in cash at the rate of 12»% $4.2 million primarily due to the effect of favorable changes in the exchange per annum beginning on August 1, 2001. The 2001 Euro Notes may not be rates on the Company's pound sterling and Euro denominated notes in 1999. redeemed by the Company except in limited circumstances.

The Company recorded an extraordinary loss from the early extinguishment NTL Business and NTL Communications Limited (‘NTLCL’), wholly-owned of debt of $3.0 million in 1999 as a result of the repayment of the bridge loan indirect subsidiaries of the Company, have the option to draw on the unused incurred in connection with the Cablelink acquisition. The Company recorded portion of the £2,500.0 million ($3,738.8 million) commitment amounting to an extraordinary loss from the early extinguishment of debt of $30.7 million £222.8 million ($333.2 million) at December 31, 2000. The unused portion of in 1998 as a result of the redemption of the 10¿% Notes and the repayment the commitment is available for refinancing ConsumerCo indebtedness and of a bank loan. for working capital requirements of the UK Group, as defined. For purposes of this credit agreement, Diamond Cable Communications Limited and Recent accounting pronouncements subsidiaries, NTL Triangle and subsidiaries and certain other entities are In December 1999, the Securities and Exchange Commission issued Staff excluded from the UK Group. Accounting Bulletin No. 101 (‘SAB 101’), ‘Revenue Recognition in Financial Statements.’ SAB 101 provides guidance on the recognition, presentation NTLCL entered into a £1,300.0 million ($1,944.2 million) credit agreement and disclosure of revenue in financial statements. SAB 101 was required with a group of banks dated May 30, 2000. Pursuant to the credit agreement, to be adopted retroactive to January 1, 2000. The adoption of SAB 101 had in connection with the issuance in October 2000 of $500.0 million aggregate no significant effect on revenues or results of operations. principal amount of NTL Communications 11¿% notes and the issuance in January and February 2001 of ᇾ300.0 million aggregate principal amount Effective January 1, 2001, the Company adopted SFAS No. 133, ‘Accounting of NTL Communications 2001 Euro Notes, the commitment was reduced for Derivative Instruments and Hedging Activities,’ as amended by SFAS by £255.1 million ($381.4 million). As of December 31, 2000, there were no Nos. 137 and 138. The new accounting standard requires that all derivative amounts borrowed under this agreement. NTLCL and other members of instruments be recorded on the balance sheet at fair value. Changes in the the UK Group (as defined above) may utilize the proceeds under this credit fair value of derivatives are recorded each period in the results of operations agreement to finance the working capital requirements of the UK Group, or in other comprehensive income (loss), depending on whether a derivative provided that in no event shall the proceeds be used for a purpose other than is designated as a fair value or cash flow hedge. The ineffective portion of all to finance the construction, capital expenditure and working capital needs of hedges will be recognized in the results of operations. a cable television or telephone or telecommunications business, or a related business, in the UK or Ireland. Interest is payable at least every six months at On January 1, 2001, the Company recorded all of its outstanding derivative LIBOR plus a margin rate of 4.5% per annum. The margin rate shall increase instruments at their fair value. The outstanding derivative instruments by 0.5% on the three month anniversary of the initial advance and by an were comprised of cross currency swaps to hedge exposure to movements additional 0.5% on each subsequent three month anniversary, up to in the British pound/US dollar exchange rate, and a number of zero cost a maximum total interest rate of 16% per annum. The unused portion collars to hedge exposure to floating interest rates on certain of its debt. of the commitment is subject to a commitment fee of 0.75% payable The aggregate fair value on January 1, 2001 was a liability of $9.0 million, quarterly. Principal is due in full on March 31, 2006. of which $6.8 million was recorded as an expense and $2.2 million was recorded as other comprehensive loss. Cablecom has the option to draw on a revolving loan facility of up to CHF 1,400.0 million ($864.1 million). The revolving facility is intended Liquidity and capital resources to finance operating expenses, working capital and other capital The Company will continue to require significant amounts of capital to expenditures of Cablecom and subsidiaries and for their general corporate finance construction of its local and national networks, for connection financing requirements. As of December 31, 2000, Cablecom had borrowed of telephone, telecommunications, internet and cable television customers CHF 520.0 million ($320.9 million) under the revolving loan facility with an to the networks, for other capital expenditures and for debt service. effective interest rate of 6.02%. 50 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations continued

The revolving facility is available until May 2003. The interest rate, interest (2) Cumulative Preferred Stock, stated value $1,850.0 million, dividends payment requirements and principal payments for the revolving facility accrue at 5% per annum and are cumulative on a quarterly basis and are the same as for the term loan facility (see below). The revolving facility are payable in additional shares of Cumulative Preferred Stock in March includes a commitment fee of 0.75% payable quarterly on the unused 2002, holders other than any commercial banks or their affiliates portion of the revolving facility commitment, which is reduced to 0.50% (a ‘Qualified Holder’) may at any time after September 2000 elect, when over 50% of the commitment is utilized. subject to certain conditions, for the Cumulative Preferred Stock to be exchanged for up to a 50% interest in a new Company which will own Regarding the Company’s estimated cash requirements described above, certain or all of the Company’s broadband communications, broadcast there can be no assurance that: (a) actual construction costs will not exceed and cable television interests in Continental Europe outside of France, the amounts estimated or that additional funding substantially in excess redeemable for cash in March 2002 at the option of a Qualified Holder; of the amounts estimated will not be required, (b) conditions precedent to advances under credit facilities will be satisfied when funds are required, NTL Delaware (c) the Company and its subsidiaries will be able to generate sufficient cash (3) 5¾% Convertible Subordinated Notes due December 15, 2009, principal from operations to meet capital requirements, debt service and other amount at maturity of $1,200.0 million, interest payable semi-annually obligations when required, (d) the Company will be able to access such cash from June 15, 2000, redeemable at the Company’s option on or after flow or (e) the Company will not incur losses from its exposure to exchange December 18, 2002, convertible into shares of the company’s common rate fluctuations or be adversely affected by interest rate fluctuations. stock at a conversion price of $108.18 per share;

A wholly-owned indirect subsidiary of the company, Premium TV Limited, NTL Business and NTLCL has entered into media partnerships with UK football clubs whereby (4) Credit Agreement of £1,300.0 million ($1,944.2 million) of NTLCL, Premium TV Limited will receive certain marketing and sponsorship rights. no amounts were outstanding as of December 31, 2000, interest Premium TV Limited will provide loan facilities to the clubs, repayable payable at least every six months at LIBOR plus a margin rate of through the issue of shares in the football clubs, as well as provide funding 4.5% per annum, which is subject to adjustment, the unused portion to joint ventures with the clubs. At December 31, 2000, the aggregate of the commitment is subject to a commitment fee of 0.75% payable commitment was £56.8 million ($84.9 million). In addition, Premium TV quarterly, principal is due in full on March 31, 2006, pursuant to the Limited expects to pay fees of up to £59.0 million ($88.2 million) over five credit agreement, following the issuance in October 2000 of $500.0 years for the right to enter into a joint venture with the Football League million aggregate principal amount of NTL Communication's 11¿% to set-up an internet portal for all 72 Football League clubs who wish senior notes and the issuance in January and February 2001 of to participate. ᇾ300.0 million aggregate principal amount of NTL Communications 12»% senior notes, the commitment was reduced by £255.1 million In August 2000, the Company announced that it had signed an agreement in ($381.4 million); partnership with Morgan Stanley Dean Witter Private Equity to buy France Telecom’s 49.9% stake in Noos, the leading broadband company in France (5) Credit Agreement of £2,500.0 million ($3,738.3 million), of which offering cable television, telephony and internet services. Pursuant to the £2,277.2 million ($3,405.6 million) was outstanding at December 31, agreement, the Company will acquire 27% of Noos for approximately 2000, interest payable at least every six months at LIBOR plus $627.0 million. However, definitive documentation has not yet been executed a margin rate of 2.25% per annum, which is subject to adjustment, regarding the transaction and there can be no assurance that agreement effective interest rate of 8.283% at December 31, 2000, the unused will be reached on such documentation. portion of the commitment is subject to a commitment fee of 0.75% payable quarterly, which is reduced to 0.50% when over 50% of the The accreted value at December 31, 2000 of the Company’s consolidated commitment is utilized, principal is due in six quarterly installments long-term indebtedness, including the redeemable preferred stock, is beginning on June 30, 2004; $17,127.3 million, representing approximately 67.2% of total capitalization. The following summarizes the terms of the significant notes, credit facilities Cablecom and redeemable preferred stock issued by the Company and its subsidiaries (6) Term Loan Facility of CHF 2,700.0 million ($1,666.4 million), interest (including the 2001 Euro Notes issued by NTL Communications in January payable at least every six months at Swiss LIBOR plus a margin rate and February 2001). of 2.5% per annum, which is subject to adjustment after March 2001, effective interest rate of 6.03% at December 31, 2000, principal is due NTL Incorporated over six years in quarterly installments beginning on March 31, 2004; (1) Senior Redeemable Exchangeable Preferred Stock due February 15, 2009, stated value of $100.0 million, dividends accrue at 13% per annum (7) Revolving Facility of CHF 1,400.00 million ($864.1 million), of which CHF payable quarterly in arrears, at the Company’s option until February 15, 520.0 million ($320.9 million) was outstanding at December 31, 2000, 2004, dividends may be paid in cash, by the issuance of additional shares interest payable at least every six months at Swiss LIBOR plus a margin or in any combination of the foregoing, redeemable at the Company’s rate of 2.5% per annum, which is subject to adjustment after March option on or after February 15, 2002, and on any dividend payment date 2001, effective interest rate of 6.02% at December 31, 2000, the unused the Company may exchange all of the outstanding shares for 13% portion of the commitment is subject to a commitment fee of 0.75% debentures due 2009; payable quarterly, which is reduced to 0.50% when over 50% of the commitment is utilized, principal is due over six years in quarterly installments beginning on March 31, 2004; 51 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations continued

NTL Communications (19) 9¿% Senior Euro Notes due November 15, 2009, principal amount (8) 12¾% Senior Deferred Coupon Notes due April 15, 2005, principal at maturity of ᇾ350.0 million ($328.6 million), interest payable semi- amount at maturity of $277.8 million, interest payable semi-annually annually from May 15, 2000, redeemable at the Company’s option from October 15, 2000, redeemable at the Company’s option on or after on or after November 15, 2004; April 15, 2000; (20) 11½% Senior Deferred Coupon Euro Notes due November 15, 2009, (9) 11½% Senior Deferred Coupon Notes due February 1, 2006, principal principal amount at maturity of ᇾ210.0 million ($197.1 million), interest amount at maturity of $1,050.0 million, interest payable semi-annually payable semi-annually beginning on May 15, 2005, redeemable at the beginning on August 1, 2001, redeemable at the Company’s option on Company’s option on or after November 15, 2004; or after February 1, 2001; (21) 11¿% Senior Notes due October 1, 2010, principal amount at maturity (10) 10% Senior Notes due February 15, 2007, principal amount at maturity of $500.0 million, interest payable semi-annually beginning on April 1, of $400.0 million, interest payable semi-annually from August 15, 1997, 2001, redeemable at the Company’s option on or after October 1, 2005; redeemable at the Company’s option on or after February 15, 2002; (22) 12»% Senior Euro Notes due February 1, 2008, principal amount at (11) 9½% Senior Sterling Notes due April 1, 2008, principal amount at maturity ᇾ300.0 million, interest payable semi-annually beginning maturity of £125.0 million ($186.9 million), interest payable semi- on August 1, 2001; annually from October 1, 1998, redeemable at the Company’s option on or after April 1, 2003; NTL Triangle (23) 11.2% Senior Discount Debentures due November 15, 2007, principal (12) 10¾% Senior Deferred Coupon Sterling Notes due April 1, 2008, amount at maturity of $517.3 million, interest payable semi-annually principal amount at maturity of £300.0 million ($448.7 million), interest beginning on May 15, 2001, redeemable at NTL Triangle’s option after payable semi-annually beginning on October 1, 2003, redeemable at November 15, 2000; the Company’s option on or after April 1, 2003; Diamond (13) 9¾% Senior Deferred Coupon Notes due April 1, 2008, principal (24) 13¼% Senior Discount Notes due September 30, 2004, principal amount at maturity of $1,300.0 million, interest payable semi-annually amount at maturity of $285.1 million, interest payable semi-annually beginning on October 1, 2003, redeemable at the Company’s option from March 31, 2000, redeemable at Diamond’s option after on or after April 1, 2003; September 30, 1999;

(14) 9¾% Senior Deferred Coupon Sterling Notes due April 15, 2009, (25) 11¾% Senior Discount Notes due December 15, 2005, principal amount principal amount at maturity of £330.0 million ($493.5 million), interest at maturity of $531.0 million, interest payable semi-annually beginning payable semi-annually beginning on October 15, 2004, redeemable on June 15, 2001, redeemable at Diamond’s option on or after at the Company’s option on or after April 15, 2004; December 15, 2000;

(15) 11½% Senior Notes due October 1, 2008, principal amount at maturity (26) 10¾% Senior Discount Notes due February 15, 2007, principal amount of $625.0 million, interest payable semi-annually from April 1, 1999, at maturity of $420.5 million, interest payable semi-annually beginning redeemable at the Company’s option on or after October 1, 2003; on August 15, 2002, redeemable at Diamond’s option on or after December 15, 2002; (16) 12»% Senior Deferred Coupon Notes due October 1, 2008, principal amount at maturity of $450.0 million, interest payable semi-annually (27) 10% Senior Sterling Notes due February 1, 2008, issued by Diamond beginning on April 1, 2004, redeemable at the Company’s option Holdings plc, a wholly-owned subsidiary of Diamond, principal amount on or after October 1, 2003; at maturity of £135.0 million ($201.9 million), interest payable semi- annually from August 1, 1998, redeemable at Diamond’s option on (17) 7% Convertible Subordinated Notes due December 15, 2008, principal or after February 1, 2003; and amount at maturity of $599.3 million, interest payable semi-annually from June 15, 1999, convertible into shares of the Company’s common (28) 9% Senior Notes due February 1, 2008, issued by Diamond Holdings stock at a conversion price of $39.20 per share, redeemable at the plc, principal amount at maturity of $110.0 million, interest payable Company’s option on or after December 15, 2001; semi-annually from August 1, 1998, redeemable at Diamond’s option on or after February 1, 2003. (18) 9¼% Senior Euro Notes due November 15, 2006, principal amount at maturity of ᇾ250.0 million ($234.7 million), interest payable semi-annually from May 15, 2000; 52 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations continued

Management does not anticipate that the Company and its subsidiaries Item 7a. Quantitative and Qualitative disclosures about market risk will generate sufficient cash flow from operations to repay at maturity the Market risk entire principal amount of the outstanding indebtedness of the Company The Company is exposed to various market risks, including changes in and its subsidiaries. Accordingly, the Company may be required to consider foreign currency exchange rates and interest rates. Market risk is the a number of measures, including: (a) refinancing all or a portion of such potential loss arising from adverse changes in market rates and prices, indebtedness, (b) seeking modifications to the terms of such indebtedness, such as foreign currency exchange and interest rates. The Company does (c) seeking additional debt financing, which may be subject to obtaining not enter into derivative financial instruments for trading or speculative necessary lender consents, (d) seeking additional equity financing, or (e) purposes. The Company has entered into derivative financial instruments a combination of the foregoing. to hedge exposure to movements in the British pound/US dollar exchange rate, and interest rates related to certain of its floating interest rate debt. The Company’s operations are conducted through its direct and indirect The counterparties are major financial institutions. wholly-owned subsidiaries. As a holding company, the Company holds no significant assets other than cash, securities and its investments in and Foreign exchange contracts advances to its subsidiaries. The Company’s ability to pay cash dividends To the extent that the Company obtains financing in US dollars and incurs to its stockholders may be dependent upon the receipt of sufficient funds construction and operating costs in various other currencies, it will from its subsidiaries. In addition, NTL Delaware and NTL Communications encounter currency exchange rate risks. At December 31, 2000, the are also holding companies that conduct their operations through their Company had approximately $341.2 million in cash and cash equivalents respective subsidiaries. Accordingly, the ability of NTL Delaware or NTL denominated in foreign currencies to reduce this risk. In addition, the Communications to make scheduled interest and principal payments when Company's pound sterling and Euro denominated notes also reduce due to holders of their indebtedness may be dependent upon the receipt this risk. Furthermore, the Company's revenues are generated in foreign of sufficient funds from their subsidiaries. currencies while its interest and principal obligations with respect to most of the Company's existing indebtedness are payable in US dollars. Consolidated statements of cash flows Cash (used in) provided by operating activities was $(301.9) million and In October 2000, the Company entered into cross currency swaps to hedge $53.6 million in the years ended December 31, 2000 and 1999, respectively. exposure to movements in the British pound/US dollar exchange rate. Cash paid during the year for interest exclusive of amounts capitalized The notional amount of the cross currency swaps was £135.0 million at was $495.0 million and $180.3 million in 2000 and 1999, respectively. December 31, 2000. The remainder of this change is primarily due to the increase in the net loss and changes in working capital as a result of the timing of receipts Interest rates and disbursements. The fair market value of long-term fixed interest rate debt and the amount of future interest payments on floating interest rate debt are subject to Purchases of fixed assets were $2,257.0 million in 2000 and $1,211.3 million interest rate risk. Generally, the fair market value of fixed interest rate debt in 1999 as a result of the continuing fixed asset purchases and construction, will increase as interest rates fall and decrease as interest rates rise. including purchases and construction by acquired companies. In September 2000, the Company entered into zero cost collars to hedge Acquisitions, net of cash acquired of $10,940.0 million, proceeds from exposure to the floating interest rate indebtedness incurred under the borrowings, net of financing costs of $6,870.1 million, proceeds from Cablecom term loan facility and revolving loan facility. The notional amount issuance of preferred stock of $1,862.0 million, proceeds from issuance of the zero cost collars was CHF 1,200.0 million at December 31, 2000. of redeemable preferred stock of $1,850.0 million and proceeds from issuance of common stock of $2,327.6 million in 2000, were primarily for the acquisitions of Cablecom and ConsumerCo including the term loan facility and the credit agreement entered into with groups of banks, the common and preferred shares issued to France Telecom and the preferred stock issued to France Telecom and certain commercial banks. Included in proceeds from borrowings, net of financing costs, is $1,353.0 million of borrowings under credit facilities that was not related to acquisitions. Included in principal payments are $1,197.5 million of repayments of amounts borrowed under credit agreements.

The cash used for other assets of $510.8 million in 2000 was primarily for investments in and loans to unconsolidated entities. 53 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations continued

The following table provides information about the Company’s long-term fixed and floating interest rate debt and derivative financial instruments that are sensitive to changes in interest rates and foreign currency exchange rates.

Year ending Year ending Year ending Year ending Year ending Fair value 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 Thereafter Total 12/31/00 Long-term debt including current portion US dollars Fixed rate – – - $285.1 $808.8 $7,172.1 $8,266.0 $6,087.1 Average interest rate 13.25% 12.09% 9.74% UK pound Fixed rate – – – – – £890.0 £890.0 £516.7 Average interest rate 10.09% Average forward exchange rate 1.5097 Euro Fixed rate – – – – – ᇾ810.0 ᇾ810.0 ᇾ614.4 Average interest rate 10.10% Average forward exchange rate 0.9717 UK pound Floating rate £4.8 £4.8 £4.8 £90.0 £2,187.2 - £2,291.6 £2,291.6 Average interest rate LIBOR LIBOR LIBOR LIBOR LIBOR plus 2.04% plus 2.04% plus 2.04% plus 2.25% plus 2.25% Average forward exchange rate 1.4988 1.4995 1.5001 1.5009 1.5014 CHF Floating rate – – – CHF128.8 CHF225.4 CHF2,865.8 CHF3,220.0 CHF3,220.0 Average interest rate Swiss LIBOR Swiss LIBOR Swiss LIBOR plus 2.5% plus 2.5% plus 2.5% Average forward exchange rate 0.65090.6588 0.6961 Interest rate derivative financial instruments related to long-term debt Interest rate swaps Notional CHF amount CHF1,200.0 CHF1,200.0 CHF1,200.0 CHF1,200.0 – – CHF1,200.0 CHF(11.0) Average floor strike rate 3.27% 3.27% 3.27% 3.27% Average cap strike rate 5.15% 5.15% 5.15% 5.15% Currency swap agreements related to long-term debt Receipt of US dollars Notional UK pound amount £135.0 – – – – – £135.0 £(1.5) Average contract rate 1.4765 54 NTL annual report 2000 •Management’s discussion www.ntl.com

Management’s discussion and analysis of financial condition and results of operations continued

Quarterly results of operations

The following is a summary of the quarterly results of operations for the years ended December 31, 2000 and 1999.

Three months ended 2000 (In millions, except per share data) March 31 June 30 September 30 December 31 Revenues $490.9 $666.3 $830.7 $852.9 Operating (loss) (191.1) (330.4) (525.8) (871.6) Net (loss) (397.7) (616.5) (770.3) (1,179.2) Basic and diluted net (loss) per common share (3.02) (3.57) (3.08) (4.57)

Three months ended 1999 (In millions, except per share data) March 31 June 30 September 30 December 31 (1) Revenues $313.4 $360.2 $417.1 $493.4 Operating (loss) (121.2) (168.9) (151.6) (200.8) (Loss) income before extraordinary item (230.4) (348.5) (278.1) 124.3 Net (loss) income (230.4) (348.5) (278.1) 121.3 Basic net (loss) income per common share before extraordinary item (2.44) (3.13) (2.31) 0.75 Basic net (loss) income per common share (2.44) (3.13) (2.31) 0.73 Diluted net (loss) income per common share before extraordinary item (2.44) (3.13) (2.31) 0.62 Diluted net (loss) income per common share (2.44) (3.13) (2.31) 0.60

(1) In November 1999, the Company sold its investment in Cable London for cash of approximately $692.5 million and recognized a gain of $493.1 million. 55 NTL annual report 2000 •Consolidated balance sheets www.ntl.com

Consolidated balance sheets

December 31 (In millions) 2000 1999 Assets Current assets Cash and cash equivalents $579.4 $2,597.2 Marketable securities 60.0 344.5 Accounts receivable – trade, less allowance for doubtful accounts of $141.4 (2000) and $85.6 (1999) 729.1 294.2 Other 432.0 82.7 Total current assets 1,800.5 3,318.6

Fixed assets, net 12,693.0 5,597.7 Intangible assets, net 13,061.0 2,927.8 Other assets, net of accumulated amortization of $91.9 (2000) and $49.4 (1999) 829.2 367.5 Total assets $28,383.7 $12,211.6

Liabilities and shareholders’ equity Current liabilities Accounts payable $506.3 $224.7 Accrued expenses and other 1,280.6 438.2 Accrued construction costs 196.9 79.8 Interest payable 151.3 71.1 Deferred revenue 492.8 160.8 Current portion of long-term debt 12.6 82.6 Total current liabilities 2,640.5 1,057.2

Long-term debt 15,044.1 8,798.0 Other 43.1 – Commitments and contingent liabilities Deferred income taxes 205.4 77.7 Redeemable preferred stock – $.01 par value, plus accreted dividends; liquidation preference $2,085.7; less unamortized discount of $2.5 (2000) and $2.8 (1999); issued and outstanding 2.0 (2000) and 0.1 (1999) shares 2,083.2 141.8

Shareholders’ equity Series preferred stock – $.01 par value; authorized 10.0 shares; liquidation preference $2,858.1; issued and outstanding 2.9 (2000) and 1.3 (1999) shares – – Common stock – $.01 par value; authorized 800.0 shares; issued and outstanding 272.1 (2000) and 132.4 (1999) shares 2.7 1.3 Additional paid-in capital 13,764.7 4,125.1 Accumulated other comprehensive (loss) (448.9) (2.1) (Deficit) (4,951.1) (1,987.4) 8,367.4 2,136.9 Total liabilities and shareholders’ equity $28,383.7 $12,211.6

See accompanying notes. 56 NTL annual report 2000 •Consolidated statements of operations www.ntl.com

Consolidated statements of operations

Year ended December 31 (In millions, except per share data) 2000 1999 1998 Revenues Consumer telecommunications and television $1,819.8 $834.3 $355.6 Business telecommunications 702.2 452.5 157.7 Broadcast transmission and other 318.8 297.3 231.3 Other telecommunications – – 2.4 2,840.8 1,584.1 747.0

Costs and expenses Operating expenses 1,387.6 798.6 400.9 Selling, general and administrative expenses 1,109.1 574.6 270.7 Franchise fees – 16.5 25.0 Other charges 92.7 16.2 (4.2) Corporate expenses 47.5 29.4 17.1 Depreciation and amortization 2,122.8 791.3 266.1 4,759.7 2,226.6 975.6 Operating (loss) (1,918.9) (642.5) (228.6)

Other income (expense) Interest income and other, net 1.6 49.4 46.0 Interest expense (1,036.8) (680.7) (328.8) Other gains – 493.1 – Foreign currency transaction (losses) gains (120.6) 12.7 4.2 (Loss) before income taxes and extraordinary item (3,074.7) (768.0) (507.2) Income tax benefit 111.0 35.3 3.3 (Loss) before extraordinary item (2,963.7) (732.7) (503.9) Loss from early extinguishment of debt – (3.0) (30.7) Net (loss) (2,963.7) (735.7) (534.6) Preferred stock dividends (194.0) (73.7) (18.8) Net (loss) available to common shareholders $(3,157.7) $(809.4) $(553.4)

Basic and diluted net (loss) per common share (Loss) before extraordinary item $(14.54) $(6.75) $(8.12) Extraordinary item – (.03) (.48) Net (loss) per common share $(14.54) $(6.78) $(8.60)

Weighted average shares 217.1 119.4 64.4

See accompanying notes. 57 NTL annual report 2000 •Consolidated statement of cash flows www.ntl.com

Consolidated statements of cash flows

Year ended December 31 (In millions) 2000 1999 1998 Operating activities Net loss $(2,963.7) $(735.7) $(534.6) Adjustment to reconcile net loss to net cash (used in) provided by operating activities Depreciation and amortization 2,122.8 791.3 266.1 Loss from early extinguishment of debt – 3.0 30.7 Gain on sale of investment in Cable London PLC – (493.1) – Amortization of non competition agreements – – 1.4 Provision for losses on accounts receivable 98.9 46.2 27.3 Deferred income taxes (112.1) (37.3) (3.3) Amortization of original issue discount 473.4 451.4 232.7 Other (10.3) (10.6) (30.9) Changes in operating assets and liabilities, net of effect from business acquisitions Accounts receivable (366.6) (139.4) (70.4) Other current assets (69.5) (38.9) 22.6 Other assets 43.2 (25.2) – Accounts payable (83.7) 43.8 (2.6) Accrued expenses and other 379.3 126.2 15.3 Deferred revenue 186.4 71.9 26.8 Net cash (used in) provided by operating activities (301.9) 53.6 (18.9)

Investing activities Acquisitions, net of cash acquired (10,940.0) (1,128.3) (746.8) Purchase of fixed assets (2,257.0) (1,211.3) (772.2) Payment of deferred purchase price (2.9) –– Increase in other assets (510.8) (59.3) (35.6) Proceeds from sales of assets – 692.5 1.3 Purchase of marketable securities (158.4) (747.4) (540.6) Proceeds from sales of marketable securities 452.6 676.6 291.3 Net cash (used in) investing activities (13,416.5) (1,777.2) (1,802.6)

Financing activities Proceeds from borrowings, net of financing costs 6,870.1 3,019.4 3,525.6 Proceeds from issuance of preferred stock and warrants 1,862.0 1,250.0 – Proceeds from issuance of common stock 2,327.6 250.0 – Redemption of preferred stock – (125.3) – Principal payments (1,303.0) (758.2) (845.0) Cash released from (placed in) escrow for debt repayment 77.5 (87.0) (217.6) Consent solicitation payments – – (11.3) Proceeds from issuance of redeemable preferred stock 1,850.0 –– Proceeds from exercise of stock options and warrants 44.2 42.1 6.8 Net cash provided by financing activities 11,728.4 3,591.0 2,458.5

Effect of exchange rate changes on cash (27.8) (6.5) 0.4 (Decrease) increase in cash and cash equivalents (2,017.8) 1,860.9 637.4 Cash and cash equivalents at beginning of year 2,597.2 736.3 98.9 Cash and cash equivalents at end of year $579.4 $2,597.2 $736.3

Supplemental disclosure of cash flow information Cash paid during the year for interest exclusive of amounts capitalized $495.0 $180.3 $90.5 Income taxes paid 6.7 2.4 0.3

Supplemental schedule of noncash financing activities Accretion of dividends and discount on preferred stock $98.1 $44.4 $19.1 Conversion of Convertible Notes, net of unamortized deferred financing costs – 269.3 187.0 Preferred stock issued for an acquisition – – 178.5 Common stock and stock options issued for acquisitions 5,488.3 978.0 600.5 Warrants issued in connection with consent solicitations – – 10.1 Conversion of series preferred stock 7.6 ––

See accompanying notes. 58 NTL annual report 2000 •Consolidated statement of shareholders’ equity www.ntl.com

Consolidated statement of shareholders’ equity

Series Preferred Stock $.01 Par Value Common Stock $.01 Par Value (In millions) Shares Par Shares Par Balance, December 31, 1997 – – 32.2 $0.3 Exercise of stock options 0.3 – Exercise of warrants 0.1 Accreted dividends on preferred stock Accretion of discount on preferred stock Conversion of 7¼% convertible subordinated notes 6.9 0.1 Conversion of series preferred stock – 1.9 – Preferred stock issued for an acquisition 0.2 – Common stock issued for an acquisition 18.8 0.2 Warrants issued in connection with consent solicitations Comprehensive income Net loss for the year ended December 31, 1998 Currency translation adjustment Total Balance, December 31, 1998 0.2 – 60.2 0.6 Exercise of stock options 1.8 – Exercise of warrants 0.1 – Common stock issued for cash 2.7 – Preferred stock issued for cash 1.2 – Warrants issued for cash Accreted dividends on preferred stock – Accretion of discount on preferred stock Redemption of series preferred stock (0.1) – Conversion of 7% convertible subordinated notes 7.3 0.1 Common stock issued for an acquisition 12.7 0.1 Stock options issued in connection with an acquisition Issuance of warrants Stock splits 47.6 0.5 Comprehensive income Net loss for the year ended December 31, 1999 Currency translation adjustment Total Balance, December 31, 1999 1.3 – 132.4 1.3 Exercise of stock options 2.3 – Rescission of stock option exercises (0.2) Exercise of warrants 1.3 – Common stock issued for cash 42.2 0.4 Preferred stock issued for cash 2.0 – Common stock issued for an acquisition 84.9 0.9 Conversion of series preferred stock (0.5) – 9.2 0.1 Preferred stock issued for dividends – Accreted dividends on preferred stock 0.1 – Accretion of discount on preferred stock Comprehensive loss Net loss for the year ended December 31, 2000 Currency translation adjustment Unrealized net losses on investments Total Balance, December 31, 2000 2.9 – 272.1 $2.7

See accompanying notes. 59 NTL annual report 2000 •Consolidated statement of shareholders’ equity www.ntl.com

Accumulated Other Comprehensive Loss Foreign Unrealized Additional Comprehensive currency net losses paid-in capital loss translation on investments (Deficit) $538.1 $117.0 $(717.1) 6.3 0.5 (18.8) (0.3) 186.9 – 178.5 600.3 10.1

$(534.6) (534.6) (12.3) (12.3) $(546.9) 1,501.6 104.7 (1,251.7) 41.3 0.8 250.0 1,233.8 16.2 (44.1) (0.3) (125.3) 269.2 971.3 6.6 4.5 (0.5)

$(735.7) (735.7) (106.8) (106.8) $(842.5) 4,125.1 (2.1) (1,987.4) 36.3 (1.1) 9.0 2,327.2 1,862.0 5,487.4 7.5 9.4 (97.8) (0.3)

$(2,963.7) (2,963.7) (432.6) (432.6) (14.2) $(14.2) $(3,410.5) $13,764.7 $(434.7) $(14.2) $(4,951.1) 60 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements

1. Corporate restructuring and business Foreign currency translation On May 18, 2000, NTL Incorporated completed a corporate restructuring to The financial statements of the Company’s foreign subsidiaries have create a holding company structure. The formation of the holding company been translated into US dollars in accordance with SFAS No. 52, ‘Foreign was part of NTL Incorporated’s acquisition of certain assets of Cable & Currency Translation.‘ All balance sheet accounts have been translated Wireless Communications plc (‘CWC’). The holding company restructuring using the current exchange rates at the respective balance sheet dates. was accomplished through a merger so that all the stockholders of NTL Statement of operations amounts have been translated using the average Incorporated at the effective time of the merger became stockholders of the exchange rates for the respective years. The translation gains or losses new holding company, and NTL Incorporated became a subsidiary of the resulting from the change in exchange rates have been reported as a new holding company. The new holding company has taken the name NTL component of accumulated other comprehensive (loss). Foreign currency Incorporated (and together with its subsidiaries, the ‘Company’) and the transaction gains and losses are included in the results of operations holding company’s subsidiary simultaneously changed its name to NTL as incurred. (Delaware), Inc. (and together with its subsidiaries, ‘NTL Delaware‘). Cash equivalents The Company, through its subsidiaries, owns and operates broadband Cash equivalents are short-term highly liquid investments purchased with communications networks for telephone, cable television and internet a maturity of three months or less. Cash equivalents were $256.2 million services in the UK, Ireland, France and Switzerland, and transmission and $2,101.8 million at December 31, 2000 and 1999, respectively, which networks for television and radio broadcasting in the UK and Australia. consisted primarily of US Treasury bills (2000 only), bank time deposits and Based on revenues and identifiable assets, the Company’s predominant corporate commercial paper. At December 31, 2000 and 1999, $68.5 million lines of business are consumer services, business services and broadcast and $2,039.5 million, respectively, of the cash equivalents were denominated transmission and related services in the UK. Consumer services include in foreign currencies. telephony, cable television, Internet access and interactive services. Business services include telephony, national and international wholesale Marketable securities carrier telecommunications, and radio communications services for the Marketable securities are classified as available-for-sale, which are carried emergency services community. Broadcast transmission and related at fair value. Unrealized holding gains and losses on securities, net of tax, services include digital and analog television and radio broadcasting, rental are carried as a component of accumulated other comprehensive (loss). of antenna space on the Company’s owned and leased towers and sites and The amortized cost of debt securities is adjusted for amortization of associated services, and satellite and media services. premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses and declines in value 2. Significant accounting policies judged to be other than temporary will be included in interest income. Use of estimates The cost of securities sold or matured is based on the specific identification The preparation of financial statements in conformity with accounting method. Interest on securities is included in interest income. principles generally accepted in the US requires management to make estimates and assumptions that affect the amounts reported in the financial Marketable securities at December 31, 2000 and 1999 consisted of statements and accompanying notes. Actual results could differ from corporate commercial paper. During the years ended December 31, 2000, those estimates. 1999 and 1998, there were no realized gains or losses on sales of securities. All of the marketable securities as of December 31, 2000 and 1999 had a Principles of consolidation contractual maturity of less than one year. The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities where the Company’s Fixed assets interest is greater than 50%. Significant intercompany accounts and Fixed assets are stated at cost, which includes amounts capitalized for labor transactions have been eliminated in consolidation. and overhead expended in connection with the design and installation of operating equipment. Depreciation is computed by the straight-line method Reclassification over the estimated useful lives of the assets. Estimated useful lives are as Certain prior year amounts have been reclassified to conform to the current follows: operating equipment – five to 40 years and other equipment – three year presentation. to 40 years.

Net (loss) per share Long-lived assets are reviewed for impairment whenever events or changes The Company reports its basic and diluted net (loss) per share in accordance in circumstances indicate that the carrying amount may not be recoverable. with Financial Accounting Standards Board (‘FASB‘) Statement of Financial If the sum of the expected future undiscounted cash flows is less than the Accounting Standards (‘SFAS‘) No. 128, ‘Earnings Per Share‘, as adjusted carrying amount of the asset, a loss is recognized for the difference between for stock splits. Stock options, warrants and convertible securities are the fair value and the carrying value of the asset. excluded from the calculation of net loss per common share as their effect would be antidilutive. Intangible Assets Intangible assets include goodwill, license acquisition costs, customer lists and other intangibles. Goodwill is the excess of the purchase price 61 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

over the fair value of net assets acquired in business combinations Advertising expense accounted for as purchases. Goodwill is amortized on a straight-line basis The Company charges the cost of advertising to expense as incurred. over the periods benefited of three, 10, 15 or 30 years. License acquisition Advertising costs were $113.0 million, $35.9 million and $34.0 million costs represent the portion of purchase price allocated to the cable in 2000, 1999 and 1998, respectively. television and telecommunications licenses acquired in business combinations. License acquisition costs are amortized on a straight-line Stock-based compensation basis over the remaining lives of the licenses at acquisition, which vary from The Company has adopted the disclosure-only provisions of SFAS No. 123, approximately two years to 23 years. Customer lists represent the portion ‘Accounting for Stock-Based Compensation.‘ The Company applies APB of the purchase price allocated to the value of the customer base. Customer Opinion No. 25, ‘Accounting for Stock Issued to Employees‘ (‘APB No. 25‘) lists are amortized on a straight-line basis over three or five years. Other and related interpretations in accounting for its stock option plans. intangibles include the portion of the purchase price allocated to the value of transmission and services contracts and the value of workforce in place. Derivative financial instruments Transmission and services contracts are amortized on a straight-line basis The Company uses financial instruments to hedge a portion, but not all, over the period benefited of eight years or 12 years. Workforce in place is of its exposure from floating interest rate debt and from movements amortized over the period benefited of four years. The Company continually in the British pound/US dollar exchange rate. Gains and losses on reviews the recoverability of the carrying value of these assets using the these instruments are deferred and recognized in the statement of same methodology that it uses for the evaluation of its other long-lived assets. operations when the related hedged transactions are recognized. To date, premiums paid for these contracts have not been material. Equity method investments The Company does not use derivative financial instruments for trading All investments in which the Company has the ability to exercise significant or speculative purposes. influence over the investee, but less than a controlling voting interest, are accounted for using the equity method. The investment in Cable London 3. Recent accounting pronouncements PLC was accounted for under the equity method. Equity method In December 1999, the Securities and Exchange Commission issued Staff investments are recorded at original cost and adjusted periodically to Accounting Bulletin No. 101 (‘SAB 101‘), ‘Revenue Recognition in Financial recognize the Company’s proportionate share of the investees’ net income Statements.‘ SAB 101 provides guidance on the recognition, presentation or losses after the date of investment, additional contributions made and and disclosure of revenue in financial statements. SAB 101 was required to dividends received. The difference between the Company’s recorded be adopted retroactive to January 1, 2000. The adoption of SAB 101 had no investment and its proportionate interest in the book value of the investees’ significant effect on revenues or results of operations. net assets are being amortized on a straight-line basis over 10 years. Effective January 1, 2001, the Company adopted SFAS No. 133, ‘Accounting Deferred financing costs for Derivative Instruments and Hedging Activities,‘ as amended by SFAS Deferred financing costs are incurred in connection with the issuance Nos. 137 and 138. The new accounting standard requires that all derivative of debt and are amortized over the term of the related debt. instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in the results of operations Capitalized interest or in other comprehensive income (loss), depending on whether a derivative Interest is capitalized as a component of the cost of fixed assets is designated as a fair value or cash flow hedge. The ineffective portion of constructed. In 2000, 1999 and 1998, interest of $95.0 million, all hedges will be recognized in the results of operations. $41.8 million and $27.8 million, respectively, was capitalized. On January 1, 2001, the Company recorded all of its outstanding derivative Revenue recognition instruments at their fair value. The outstanding derivative instruments Revenues are recognized at the time the service is rendered to the customer were comprised of cross currency swaps to hedge exposure to movements or the performance of the service has been completed. Charges for services in the British pound/US dollar exchange rate, and a number of zero cost that are billed in advance are deferred and recognized when earned. Rental collars to hedge exposure to floating interest rates on certain of its debt. revenues are recognized when earned on a monthly basis. Installation and The aggregate fair value on January 1, 2001 was a liability of $9.0 million, maintenance service revenues are recognized when the performance of the of which $6.8 million was recorded as an expense and $2.2 million was service has been completed. recorded as other comprehensive loss.

Cable television system costs, expenses and revenues 4. Certain significant risks and uncertainties The Company accounts for costs, expenses and revenues applicable Need for additional financing to the construction and operation of its broadband communications The Company will require additional financing in the future. There can networks in accordance with SFAS No. 51, ‘Financial Reporting by be no assurance that the required financing will be obtainable on Cable Television Companies.‘ acceptable terms. 62 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

4. Certain significant risks and uncertainties continued the fair value at the time of the announcement. In addition, the Company Concentrations issued options to purchase 191,000 shares of the Company’s common stock The Company’s broadcast transmission and related services business to holders of Diamond options, which were valued at $6.6 million. The is substantially dependent upon contracts with a small group of companies Company assumed Diamond’s debt including five different notes with an for the right to broadcast their programming, and upon site sharing aggregate principal amount at maturity of $1,564.6 million. Diamond is a agreements for a large number of its transmission sites. The loss of provider of telephone, cable television and internet services in England. any one of these contracts or agreements could have a material adverse effect on the business of the Company. In April 1999, a subsidiary of the Company (‘NTL Australia’) purchased all of the shares of the entity which owns the Australian National Transmission Currency risk Network for an aggregate purchase price of approximately $423.5 million. To the extent that the Company obtains financing in US dollars and incurs NTL Australia provides exclusive television and radio transmission services construction and operating costs in various other currencies, it will to Australia's national TV and radio broadcasters, serves regional and encounter currency exchange rate risks. In addition, the Company’s community TV and radio broadcasters and provides equipment hosting revenues are generated in foreign currencies while its interest and principal services to telecom operators and emergency service communications obligations with respect to approximately half of the company’s existing providers on its towers. indebtedness are payable in US dollars. In July 1999, the Company acquired Cablelink Limited (‘Cablelink’) 5. Fixed assets for IR£535.2 million ($692.5 million), of which IR£455.2 million Fixed assets consist of: ($589.0 million) was paid in cash and IR£80.0 million ($103.5 million) was paid through the issuance of Variable Rate Redeemable Guaranteed December 31 Loan Notes due 2002. Cablelink provides multi-channel television (in millions) 2000 1999 and information services in Dublin, Galway and Waterford, Ireland. Operating equipment $11,753.2 $5,111.3 The Company acquired the five franchise areas comprising the Other equipment 1,145.2 715.2 ‘1G Networks’ of France Telecom for approximately 373.2 million French Construction-in-progress 1,611.1 669.4 francs ($60.1 million) in two stages completed in August and December 1999. 14,509.5 6,495.9 The 1G Networks hold exclusive licenses to provide analog and digital Accumulated depreciation (1,816.5) (898.2) television services in four franchise areas in Ile-de-France (Greater Paris) $12,693.0 $5,597.7 and in the franchise areas of Toulon and LaValette.

Depreciation expense for the years ended December 31, 2000, 1999, and In September 1999, the Company acquired the shares of Workplace 1998 was $996.6 million, $490.3 million and $207.5 million, respectively. Technologies plc, one of the UK’s leading data network service integrators, in exchange for £105.2 million ($172.5 million), of which £100.7 million 6. Intangible assets ($165.1 million) was paid in cash and £4.5 million ($7.4 million) was paid Intangible assets consist of: through the issuance of demand notes.

December 31 These acquisitions were accounted for as purchases, and accordingly, the net assets and results of operations of the acquired businesses have (in millions) 2000 1999 been included in the consolidated financial statements from the dates of Goodwill, net of accumulated amortization acquisition. The aggregate purchase price of $2,347.8 million, including of $1,103.6 (2000) and $193.8 (1999) $12,523.0 $2,477.1 costs incurred of $21.2 million, plus the fair value of liabilities assumed License acquisition costs, net of net of tangible assets acquired aggregated $2,454.8 million, which has accumulated amortization of been allocated as follows: $143.5 million to license acquisition costs, $215.8 (2000) and $141.7 (1999) 139.2 225.0 $130.9 million to customer lists, $69.4 million to other intangibles and Customer lists, net of accumulated $2,111.0 million to goodwill. amortization of $110.7 (2000) and $30.9 (1999) 318.2 159.3 Other intangibles, net of accumulated The Company made the following acquisitions in 2000: amortization of $13.8 (2000) and $3.2 (1999) 80.6 66.4 $13,061.0 $2,927.8 On May 30, 2000, the Company acquired the consumer cable telephone, internet and television operations of CWC in the UK (‘ConsumerCo’). The Company made the following acquisitions in 1999: The Company paid cash of £2,917.0 million ($4,364.7 million) and issued an aggregate of 84.9 million shares of its common stock in In March 1999, the Company acquired Diamond Cable Communications plc exchange for all of the shares of CWC. In addition, the Company paid (‘Diamond’). The Company issued an aggregate of 19.9 million shares of £2,155.3 million ($3,225.0 million) to repay a portion of ConsumerCo’s debt. common stock in exchange for each ordinary share and deferred share The Company’s common stock was valued at $5,488.3 million, the fair value of Diamond. The Company’s common stock was valued at $971.4 million, at the time of the announcement. 63 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

This acquisition was funded by a new bank facility under which £2,376.0 The sale of the Cable London interest was an ‘Asset Sale’ for purposes million ($3,555.2 million) was borrowed and by an additional investment of the Company’s Indentures for certain of its notes. The Company used by France Telecom in the Company, as described below. an amount equal to the proceeds from the sale to invest in ‘Replacement Assets’ by November 2000. On March 28, 2000, the Company acquired the cable assets of the Cablecom Group (‘Cablecom’) in Switzerland for cash of CHF 5,800.0 million ($3,510.2 8. Long-term debt million), a substantial portion of which was funded by a new bank facility Long-term debt consists of: of CHF 2,700.0 million ($1,630.5 million) and the Company’s issuance of $1,850.0 million of preferred stock to France Telecom and a group of December 31 commercial banks. (in millions) Notes 2000 1999 NTL Delaware These acquisitions were accounted for as purchases, and accordingly, 5¾% Convertible Subordinated Notes (a) $1,200.0 $1,200.0 the net assets and results of operations of the acquired businesses have been included in the consolidated financial statements from the dates of ConsumerCo acquisition. The aggregate purchase price of $16,639.7 million, including Term Loan Facility and other 21.7 – costs incurred of $51.5 million, exceeded the fair value of net tangible assets NTL Business acquired by $11,161.1 million, which has been allocated as follows: $248.9 Credit Agreement (w) 3,030.3 – million to customer lists, $37.4 million to other intangibles, $73.1 million Cablecom to deferred tax liabilities and $10,947.9 million to goodwill. Term Loan Facility (x) 1,666.4 – Revolving Facility (x) 320.9 – The pro forma unaudited consolidated results of operations for the years ended December 31, 2000 and 1999 assuming consummation of the above Other 15.3 – mentioned transactions as of January 1, 1999 is as follows. A significant NTL Communications component of the pro forma results is associated with the acquisition 12¾% Senior Deferred of ConsumerCo. The historical results of ConsumerCo reflect certain Coupon Notes (b) 277.8 268.1 intercompany costs and expenses as they were prior to the separation 11½% Senior Deferred Coupon Notes (c) 1,040.5 930.4 of ConsumerCo which was completed in the second quarter of 2000. 10% Senior Notes (d) 400.0 400.0 These costs and expenses do not necessarily reflect the costs and expenses 9½% Senior Sterling Notes, that would have been incurred had ConsumerCo reported as a separate less unamortized discount (e) 186.5 201.4 entity for these periods. Therefore the historical results of ConsumerCo 10¾% Senior Deferred which are included in the pro forma results below are not reflective of Coupon Sterling Notes (f) 353.6 343.7 results on a going forward basis. 9¾% Senior Deferred Coupon Notes (g) 1,048.5 952.8 December 31 9¾% Senior Deferred (in millions, except per share data) 2000 1999 Coupon Sterling Notes (h) 360.8 354.4 ½ Total revenue $3,403.3 $3,295.8 11 % Senior Notes (i) 625.0 625.0 » (Loss) before extraordinary item (3,653.1) (2,803.1) 12 % Senior Deferred Coupon Notes (j) 323.6 287.0 Net (loss) (3,653.1) (2,806.1) 7% Convertible Subordinated Notes (k) 599.3 599.3 Basic and diluted net loss per share Variable Rate Redeemable Guaranteed Loan Notes (l) – 76.8 (Loss) before extraordinary item (14.53) (12.46) 9¼% Senior Euro Notes (m) 234.7 252.3 Net (loss) (14.53) (12.47) 9% Senior Euro Notes (n) 328.6 353.2 Amortization of intangible and other assets charged to expense for the years 11½% Senior Deferred ended December 31, 2000, 1999 and 1998 was $1,126.2 million, $301.0 Coupon Euro Notes (o) 127.9 123.1 million and $58.6 million, respectively. 11% Senior Notes, less unamortized discount (p) 489.6 – 7. Investment in Cable London PLC NTL Communications Limited NTL (Triangle) LLC (‘NTL Triangle’) (formerly known as NTL (Bermuda) Credit Agreement (w) 375.3 – Limited), a wholly-owned subsidiary of the Company, owned a 50% interest NTL Triangle in Cable London PLC (‘Cable London’). Pursuant to an agreement with 11.2% Senior Discount Debentures (q) 517.3 467.3 Telewest Communications plc (‘Telewest’) relating to NTL Triangle’s and Telewest’s respective 50% ownership interests in Cable London, in Other 5.2 8.0 November 1999 Telewest purchased all of NTL Triangle’s shares of Cable London for £428.0 million ($692.5 million) in cash. The Company recorded a gain of $493.1 million on the sale. 64 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

8. Long-term debt continued (i) 11½% Notes due October 1, 2008, principal amount at maturity of $625.0 Long-term debt consists of: million, interest payable semi-annually from April 1, 1999, redeemable at the Company’s option on or after October 1, 2003; December 31 » (in millions) Notes 2000 1999 (j) 12 % Notes due October 1, 2008, principal amount at maturity of $450.0 million, interest payable semi-annually beginning on Diamond April 1, 2004, redeemable at the Company’s option on or after 13¼% Senior Discount Notes (r) 285.1 285.1 October 1, 2003; 11¾% Senior Discount Notes (s) 531.0 476.2 10¾% Senior Discount Notes (t) 373.9 336.9 (k) 7% Convertible Notes due December 15, 2008, principal amount at 10% Senior Sterling Notes (u) 201.9 218.1 maturity of $599.3 million, interest payable semi-annually from June 15, 9% Senior Notes (v) 110.0 110.0 1999, convertible into shares of common stock at a conversion price of Other 6.0 11.5 $39.20 per share, redeemable at the Company’s option on or after December 15, 2001 (there are approximately 15.3 million shares of 15,056.7 8,880.6 common stock reserved for issuance upon conversion); Less current portion 12.6 82.6 $15,044.1 $8,798.0 (l) Variable Rate Redeemable Guaranteed Notes due January 5, 2002, principal amount at maturity of IR£60.0 million after redemption of (a) 5¾% Convertible Notes due December 15, 2009, principal amount at IR£20.0 million ($25.7 million) in 1999 using cash held in escrow, maturity of $1,200.0 million, interest payable semi-annually beginning remainder redeemed in March 2000 ($73.7 million) using cash held on June 15, 2000, redeemable at the Company’s option, on or after in escrow; December 18, 2002, convertible into shares of common stock at a conversion price of $108.18 per share (there are approximately (m) 9¼% Euro Notes due November 15, 2006, principal amount at maturity 11.1 million shares of common stock reserved for issuance upon of 250.0 million ($234.7 million), interest payable semi-annually from conversion); May 15, 2000;

(b) 12¾% Notes due April 15, 2005, principal amount at maturity of (n) 9% Euro Notes due November 15, 2009, principal amount at maturity $277.8 million, interest payable semi-annually from October 15, 2000, of 350.0 million ($328.6 million), interest payable semi-annually from redeemable at the Company’s option on or after April 15, 2000; May 15, 2000, redeemable at the Company’s option on or after November 15, 2004; (c) 11½% Notes due February 1, 2006, principal amount at maturity of $1,050.0 million, interest payable semi-annually beginning on August 1, (o) 11½% Deferred Euro Notes due November 15, 2009, principal amount 2001, redeemable at the Company’s option on or after February 1, 2001; at maturity of 210.0 million ($197.1 million), interest payable semi- annually beginning on May 15, 2005, redeemable at the Company’s (d) 10% Notes due February 15, 2007, principal amount at maturity of option on or after November 15, 2004; $400.0 million, interest payable semi-annually from August 15, 1997, redeemable at the Company’s option on or after February 15, 2002; (p) 11% Notes due October 1, 2010, issued in October 2000, principal amount at maturity of $500.0 million, interest payable semi-annually (e) 9½% Sterling Notes due April 1, 2008, principal amount at maturity of beginning on April 1, 2001, redeemable at the Company’s option on or £125.0 million ($186.9 million), interest payable semi-annually from after October 1, 2005; October 1, 1998, redeemable at the Company’s option on or after April 1, 2003; (q) 11.2% Debentures due November 15, 2007, principal amount at maturity of $517.3 million, interest payable semi-annually beginning on May 15, (f) 10¾% Sterling Notes due April 1, 2008, principal amount at maturity 2001, redeemable at NTL Triangle’s option after November 15, 2000; of £300.0 million ($448.7 million), interest payable semi-annually beginning on October 1, 2003, redeemable at the Company’s option (r) 13¼% Notes due September 30, 2004, principal amount at maturity of on or after April 1, 2003; $285.1 million, interest payable semi-annually from March 31, 2000, redeemable at Diamond’s option after September 30, 1999; (g) 9¾% Notes due April 1, 2008, principal amount at maturity of $1,300.0 million, interest payable semi-annually beginning on October 1, 2003, (s) 11¾% Notes due December 15, 2005, principal amount at maturity of redeemable at the Company’s option on or after April 1, 2003; $531.0 million, interest payable semi-annually beginning on June 15, 2001, redeemable at Diamond’s option on or after December 15, 2000; (h) 9¾% Sterling Notes due April 15, 2009, principal amount at maturity of £330.0 million ($493.5 million), interest payable semi-annually (t) 10¾% Notes due February 15, 2007, principal amount at maturity of beginning on October 15, 2004, redeemable at the Company’s option on $420.5 million, interest payable semi-annually beginning on August 15, or after April 15, 2004; 2002, redeemable at Diamond’s option on or after December 15, 2002; 65 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

(u) 10% Sterling Notes due February 1, 2008, issued by Diamond Holdings proceeds under this credit agreement to finance the working capital plc, principal amount at maturity of £135.0 million ($201.9 million), requirements of the UK Group, provided that in no event shall the interest payable semi-annually from August 1, 1998, redeemable proceeds be used for a purpose other than to finance the construction, at Diamond’s option on or after February 1, 2003; and capital expenditure and working capital needs of a cable television or telephone or telecommunications business, or a related business, in (v) 9% Notes due February 1, 2008, issued by Diamond Holdings plc, the UK or Ireland. Interest is payable at least every six months at LIBOR principal amount of $110.0 million, interest payable semi-annually plus a margin rate of 4.5% per annum. The margin rate shall increase from August 1, 1998, redeemable at Diamond’s option on or after by 0.5% on the three month anniversary of the initial advance and by an February 1, 2003. additional 0.5% on each subsequent three month anniversary, up to a maximum total interest rate of 16% per annum. The unused portion The indentures governing the notes contain restrictions relating to, of the commitment is subject to a commitment fee of 0.75% payable among other things: (i) incurrence of additional indebtedness and quarterly. Principal is due in full on March 31, 2006. The credit agreement issuance of preferred stock, (ii) dividend and other payment restrictions contains various financial and other covenants with respect to the UK and (iii) mergers, consolidations and sales of assets. Group, and restrictions on dividends and distributions by the UK Group.

During 2000, 1999 and 1998, the Company recognized $473.4 million, (x) In March 2000, the Company borrowed CHF 2,700.0 million ($1,666.4 $451.4 million and $232.7 million, respectively, of original issue discount million) under its term loan facility in connection with the acquisition of as interest expense. Cablecom. Interest is payable at least every six months at Swiss LIBOR plus a margin rate of 2.5% per annum, which is subject to adjustment In addition to the notes described above, subsidiaries of the Company have after March 2001 based on Cablecom’s ratio of senior debt to EBITDA. the following bank credit agreements outstanding: The effective rate of interest at December 31, 2000 was 6.03%. Principal is due over six years in eight quarterly installments beginning on March (w) In May 2000, NTL Business Limited (‘NTL Business’) and NTL 31, 2004. Cablecom has the option to draw on a revolving loan facility up Communications Limited (‘NTLCL’), wholly-owned indirect subsidiaries to an additional CHF 1,400.0 million ($864.1 million). The revolving facility of the Company, entered into a £2,500.0 million ($3,738.8 million) credit is intended to finance operating expenses, working capital and other agreement in connection with the ConsumerCo acquisition. As of capital expenditures of Cablecom and subsidiaries and for their general December 31, 2000, NTL Business had £2,026.3 million ($3,030.3 million) corporate financing requirements. As of December 31, 2000, Cablecom and NTLCL had £250.9 million ($375.3 million) outstanding under the had borrowed CHF 520.0 million ($320.9 million) under the revolving credit agreement. Interest is payable at least every six months at LIBOR loan facility with an effective rate of interest of 6.02%. The revolving plus a margin rate of 2.25% per annum, which is subject to adjustment facility is available until May 2003. The interest rate, interest payment based on the ratio of EBITDA to finance charges of the UK Group. requirements and principal payments for the revolving facility are The effective rate of interest at December 31, 2000 was 8.283%. the same as for the term loan facility. The revolving facility includes The unused portion of the commitment is available for refinancing a commitment fee of 0.75% payable quarterly on the unused portion ConsumerCo indebtedness and for working capital requirements of of the revolving facility commitment, which is reduced to 0.50% when the UK Group.For purposes of this credit agreement, Diamond and over 50% of the commitment is utilized. The term loan facility and the subsidiaries and NTL Triangle and subsidiaries and certain other revolving facility contain various financial and other covenants with entities are excluded from the UK Group. The unused portion of the respect to Cablecom and subsidiaries, and restrictions on dividends commitment is subject to a commitment fee of 0.75% payable quarterly, and distributions by Cablecom subsidiaries. which is reduced to 0.50% when over 50% of the commitment is utilized. Principal is due in six quarterly installments beginning on June 30, 2004. In September 1999, NTL Triangle repaid at maturity the $21.5 million The credit agreement contains various financial and other covenants due under its notes payable to Comcast U.K. Holdings, Inc. with respect to the UK Group, and restrictions on dividends and distributions by the UK Group. In connection with the Cablelink acquisition, the Company issued $704.6 million principal amount Senior Increasing Rate Notes due 2000. NTLCL entered into a £1,300.0 million ($1,944.2 million) credit In November 1999, the Company received net proceeds of $720.7 million agreement with a group of banks dated May 30, 2000. Pursuant to the from the issuance of the 9¼% Euro Notes, the 9% Euro Notes and the credit agreement, in connection with the issuance in October 2000 of 11½% Deferred Euro Notes, of which $716.5 million was used to repay $500.0 million aggregate principal amount of NTL Communications the Senior Increasing Rate Notes plus accrued interest. The Company Corp. (‘NTL Communications’) (a wholly-owned subsidiary of NTL recorded an extraordinary loss from the early extinguishment of the notes Delaware) 11% notes, the issuance in January 2001 of 200.0 million of $3.0 million in 1999. aggregate principal amount of NTL Communications 12»% Euro notes and the issuance in February 2001 of 100.0 million aggregate principal In connection with an acquisition, the Company borrowed an aggregate of amount of NTL Communications 12»% Euro notes, the commitment £475.0 million under a bank credit facility. In November 1998, the Company was reduced by £255.1 million ($381.4 million). As of December 31, 2000, received net proceeds of $849.0 million from the issuance of the 11½% there were no amounts borrowed under this agreement. NTLCL and Notes and the 12»% Notes, a substantial portion of which was used to repay other members of the UK Group (as defined above) may utilize the the $799.0 million outstanding under the bank loan. 66 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

8. Long-term debt continued shares of its redeemable 5% Cumulative Preferred Stock (the ‘5% The Company recorded an extraordinary loss from the early extinguishment of Redeemable Preferred Stock’). The holders of the 5% Redeemable the bank loan of $18.6 million in 1998. Preferred Stock other than any commercial banks or their affiliates (a ‘Qualified Holder’) may at any time after September 2000 elect, subject to In October 1998, the Company redeemed its 10% Senior Deferred Coupon certain conditions, for the 5% Redeemable Preferred Stock to be exchanged Notes with an accreted value of $211.0 million for cash of $218.0 million. for up to a 50% interest in a new company which will own certain or all of the The Company recorded an extraordinary loss from the early extinguishment Company’s broadband communications, broadcast and cable television of the 10% Notes of $12.1 million in 1998, which included approximately interests in Continental Europe outside of France. Under certain $4.8 million of unamortized deferred financing costs. circumstances, at the Company’s option, any portion of the Company’s obligation that may not be satisfied by the exchange may be satisfied in a In 1998, the Company required consents from the holders of some of its security convertible into the Company’s common stock or cash. Dividends notes to modify certain indenture provisions in order to proceed with an on the 5% Redeemable Preferred Stock are cumulative on a quarterly acquisition. In October 1998, the Company paid $11.3 million in consent basis and are payable in additional shares of 5% Redeemable Preferred payments and issued warrants to purchase 1.2 million shares of common Stock in March 2002. As of December 31, 2000, the Company has accrued stock in lieu of additional consent payments of $10.1 million. $71.3 million for dividends. The 5% Redeemable Preferred Stock has a liquidation right of $1,000 per share plus accrued and unpaid dividends. Primarily all of the notes issued by NTL Communications, as well as the The 5% Redeemable Preferred Stock may be redeemed for cash in bank credit facilities, restrict the payment of cash dividends and loans to the March 2002 at the option of a Qualified Holder. Company. At December 31, 2000, restricted net assets were approximately $7,623.8 million. In February 1997, the Company issued 100,000 shares of its 13% Senior Redeemable Exchangeable Preferred Stock (the ‘Redeemable Preferred Long-term debt repayments are due as follows (in millions): Stock’). The Company received net proceeds of $96.6 million after discounts and commissions from the issuance of the Redeemable Preferred Stock. December 31 Discounts, commissions and other fees incurred of $3.7 million were 2001 $12.6 recorded as unamortized discount at issuance. Dividends accrue at 13% per annum ($130 per share) and are payable quarterly in arrears. Dividends 2002 10.8 accruing on or prior to February 15, 2004 may, at the option of the Company, 2003 8.4 be paid in cash, by the issuance of additional Redeemable Preferred Stock 2004 500.3 or in any combination of the foregoing. As of December 31, 2000, the 2005 4,219.9 Company has accrued $64.4 million for dividends and has issued Thereafter 11,046.8 approximately 62,000 shares for $61.7 million of such accrued dividends. $15,798.8 The Redeemable Preferred Stock may be redeemed, at the Company’s option, in whole or in part, at any time on or after February 15, 2002 at a In January and February 2001, NTL Communications issued 300.0 million redemption price of 106.5% of the liquidation preference of $1,000 per share ($281.6 million) aggregate principal amount of 12»% Senior Euro Notes that declines annually to 100% in 2005, in each case together with accrued due February 1, 2008. NTL Communications received proceeds of and unpaid dividends to the redemption date. The Redeemable Preferred approximately $275.3 million after underwriters’ discount and commissions Stock is subject to mandatory redemption on February 15, 2009. On any and other fees. Interest is payable semi-annually in cash at a rate of 12»% scheduled dividend payment date, the Company may, at its option, exchange per annum beginning on August 1, 2001. These notes may not be redeemed all of the shares of Redeemable Preferred Stock then outstanding for the by NTL Communications except in limited circumstances. company’s 13% Subordinated Exchange Debentures due 2009 (the ‘Subordinated Debentures’). On February 21, 2001, as required by the NTL Business and NTLCL credit agreement, NTL Communications completed a transaction whereby it The Subordinated Debentures, if issued, will bear interest at a rate of acquired the entire issued share capital of NTL (CWC Holdings) Limited (the 13% per annum, payable semi-annually in arrears on February 15 and entity that owns ConsumerCo) from NTL Incorporated and the entire issued August 15 of each year commencing with the first such date to occur after share capital of NTL Business from NTL Delaware in exchange for shares the date of exchange. Interest accruing on or prior to February 15, 2004 of its common stock. As a result of this transaction, ConsumerCo and NTL may, at the option of the Company, be paid in cash, by the issuance of Business became subsidiaries of NTL Communications. additional Subordinated Debentures or in any combination of the foregoing. The Subordinated Debentures will be redeemable, at the Company’s option, 9. Redeemable preferred stock in whole or in part, on or after February 15, 2002 at a redemption price of In March 2000, the Company received $1,850.0 million in cash from France 106.5% that declines annually to 100% in 2005, in each case together with Telecom and a group of commercial banks in exchange for 1.9 million accrued and unpaid interest to the redemption date. 67 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

The changes in the number of shares of Redeemable Preferred Stock Deferred income taxes reflect the net tax effects of temporary differences were as follows: between the carrying amounts of assets and liabilities for financial reporting 13% 5% purposes and the amounts used for income tax purposes. Significant Balance, December 31, 1997 110,000 – components of the deferred tax liabilities and assets are as follows: Issued for dividends 15,000 – December 31 Balance, December 31, 1998 125,000 – (in millions) 2000 1999 Issued for dividends 17,000 – Deferred tax liabilities Balance, December 31, 1999 142,000 – Fixed assets $100.3 $66.5 Issued for cash – 1,850,000 Intangibles 113.3 107.0 Issued for dividends 20,000 – Depreciation and amortization 288.8 – Balance, December 31, 2000 162,000 1,850,000 Total deferred tax liabilities 502.4 173.5 10. Other charges including restructuring charges Deferred tax assets Other charges of $92.7 million in 2000 include restructuring costs of Net operating losses 1,582.4 417.2 $65.9 million and information technology integration costs of $26.8 million. Net deferred interest expense 198.5 150.1 Restructuring costs relate to the Company’s announcement in November Depreciation and amortization – 269.9 2000 of its completion of a consolidation review. Based on a comprehensive Inventory 16.4 – review of the combined Company following the acquisition of ConsumerCo Purchase accounting liabilities 158.5 – and the integration of several other acquired businesses, the Company identified significant efficiency improvements and cost savings. Other 34.0 15.9 The restructuring provision includes employee severance and related costs Total deferred tax assets 1,989.8 853.1 of $47.9 million for approximately 2,300 employees to be terminated and Valuation allowance for deferred tax assets (1,692.8) (757.3) lease exit costs of $18.0 million. As of December 31, 2000, approximately Net deferred tax assets 297.0 95.8 360 of the employees contracts had been terminated. None of the provision Net deferred tax liabilities $205.4 $77.7 had been utilized through December 31, 2000. The information technology integration costs of $26.8 million were incurred for the integration of At December 31, 2000, the Company had a valuation allowance against its acquired companies’ information technology. deferred tax assets to the extent it was not more likely than not that such assets would be realized in the future. At December 31, 2000, the valuation Other charges of $16.2 million in 1999 were incurred for the cancellation allowance includes approximately $565.0 million, which, if realized, would of certain contracts. Other charges of $4.2 million reversed in 1998 were be accounted for as a reduction to goodwill or an increase in additional paid- the result of changes to a restructuring reserve that was recorded in 1997. in capital.

11. Income taxes At December 31, 2000, the Company had net operating loss carryforwards The benefit for income taxes consists of the following: of approximately $700.0 million for US federal income tax purposes that expire in varying amounts commencing in 2009. This excludes net operating December 31 loss carryforwards of companies that are resident in both the US and the (in millions) 2000 1999 1998 UK. The Company also has UK net operating loss carryforwards of Current approximately $4,000.0 million that have no expiration date. Pursuant to Federal $– $1.0 $– UK law, these net operating losses are only available to offset income of the State and local 0.2 1.0 – separate entity that generated the loss. A portion of the UK net operating Foreign 0.9 ––loss carryforward relates to dual resident companies, of which the US net operating loss carryforward amount is approximately $1,000.0 million. Total current 1.1 2.0 – Deferred In 2000, the Internal Revenue Service completed its federal income tax audit Federal – –– of the Company for the years 1993, 1994 and 1995. The audit resulted in a State and local – ––reduction in US net operating loss carryforwards that had no material Foreign (112.1) (37.3) (3.3) impact on the Company. The Company is currently undergoing a US federal Total deferred (112.1) (37.3) (3.3) income tax audit for the years 1996 and 1997. The Company does not expect $(111.0) $(35.3) $(3.3) that the audit adjustments will have a material adverse effect on its financial position, results of operations or cash flows. 68 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

11. Income taxes continued The reconciliation of income taxes computed at US federal statutory rates to income tax expense is as follows:

December 31 (in millions) 2000 1999 1998 (Benefit) at federal statutory rate (35%) $(1,076.1) $(269.9) $(188.3) Add Foreign losses with no benefit 815.7 110.2 87.9 US losses with no benefit 149.3 123.7 97.1 State and local income tax, net of federal benefit 0.1 0.7 – $(111.0) $(35.3) $(3.3)

12. Financial instruments The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets approximate fair value.

Long-term debt: The carrying amounts of the bank credit facilities and Variable Rate Notes approximate their fair values. The fair values of the Company’s other debt in the following table are based on the quoted market prices.

Redeemable Preferred Stock: The fair value of the 13% redeemable preferred stock is based on the quoted market price. The fair value of the 5% redeemable preferred stock is estimated using discounted cash flow analysis based on the Company’s current borrowing rate for similar types of arrangements.

The carrying amounts and fair values of the Company’s financial instruments are as follows:

December 31, 2000 December 31, 1999 (in millions) Carrying amount Fair value Carrying amount Fair value Cash and cash equivalents $579.4 $579.4 $2,597.2 $2,597.2 Long-term debt 5¾% Convertible Notes 1,200.0 582.0 1,200.0 1,290.0 Credit agreement 3,405.6 3,405.6 –– Term loan and revolving facilities 1,987.3 1,987.3 –– 12¾% Notes 277.8 255.6 268.1 278.5 11½% Notes 1,040.5 913.5 930.4 950.3 10% Notes 400.0 348.0 400.0 414.0 9½% Sterling Senior Notes 186.5 154.2 201.4 196.9 10¾% Sterling Notes 353.6 242.3 343.7 327.2 9¾% Notes 1,048.5 715.0 952.8 913.3 9¾% Sterling Notes 360.8 214.7 354.4 313.3 11½% Notes 625.0 556.3 625.0 682.8 12»% Notes 323.6 252.0 287.0 319.5 7% Convertible Notes 599.3 470.5 599.3 1,582.2 Variable Rate Notes –– 76.8 76.8 9¼% Euro Notes 234.7 207.7 252.3 254.8 9% Euro Notes 328.6 269.4 353.2 356.8 11½% Euro Deferred Notes 127.9 99.6 123.1 125.0 11% Senior Notes 489.6 445.0 –– 69 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

The carrying amounts and fair values of the Company’s financial instruments are as follows:

December 31, 2000 December 31, 1999 (in millions) Carrying amount Fair value Carrying amount Fair value 11.2% Debentures 517.3 439.7 467.3 486.3 13¼% Notes 285.1 270.8 285.1 305.4 11¾% Notes 531.0 467.3 476.2 499.1 10¾% Notes 373.9 281.7 336.9 340.6 10% Sterling Notes 201.9 161.5 218.1 218.1 9% Notes 110.0 89.7 110.0 108.9 Redeemable Preferred Stock 13% Redeemable Preferred Stock 161.9 121.3 141.8 154.4 5% Preferred Stock 1,921.3 1,781.8 ––

The Company has derivative financial instruments for purposes other than trading as follows. In 2000, the Company entered into cross currency swaps to hedge exposure to movements in the British pound/US dollar exchange rate, and a number of zero cost collars to hedge exposure to the floating interest rates on the Cablecom bank credit facility. The notional amount of the cross currency swaps was £135.0 million at December 31, 2000. These swaps have payment dates in 2001 that match interest payment dates for a portion of the NTL Communications notes. The fair value of the swaps at December 31, 2000 was $(2.2) million based on quoted market prices for comparable instruments. The notional amount of the zero cost collars was CHF 1,200.0 million at December 31, 2000. These collars have semiannual payment dates and mature in September 2004. The fair value of the collars at December 31, 2000 was $(6.8) million based on quoted market prices for comparable instruments.

13. Related party transactions the Company and CoreComm announced that they had entered into an The Company provided management, financial, legal and technical agreement to link their networks in order to create an international Internet services to Cellular Communications International, Inc. (‘CCII’) and backbone. In November 2000, CoreComm billed the Company $9.1 million Cellular Communications of Puerto Rico, Inc. (‘CCPR’). Certain officers primarily for usage of the network in 2001. and directors of the Company were officers and directors of CCII and CCPR. At December 31, 2000 and 1999, the Company had a payable to CoreComm In 1998, the Company charged CCPR, CCII and CoreComm Limited of $17.1 million and a receivable from CoreComm of $0.5 million, (‘CoreComm’) (which was formed in 1998 and has certain common officers respectively. and directors with the Company) $1.1 million, $1.0 million and $0.3 million, respectively, for direct costs where identifiable and a fixed percentage of 14. Shareholders’ equity its corporate overhead. In the fourth quarter of 1999, CoreComm began Stock splits charging the Company a percentage of its office rent and supplies expense. In September 1999, the Company declared a 5-for-4 stock split by way of In 1999, the Company charged CCPR, CCII and CoreComm $0.7 million, a stock dividend with respect to its common stock. The record date for this $0.4 million and $2.3 million, respectively, for direct costs where identifiable dividend was October 4, 1999 and the payment date was October 7, 1999. and a fixed percentage of its corporate overhead, net of CoreComm’s In January 2000, the Company declared a 5-for-4 stock split by way of a charges to the Company. Charges to CCPR and to CCII ceased in 1999 stock dividend with respect to its common stock. The record date for this due to each of them being acquired and a resulting termination of services. dividend was January 31, 2000 and the payment date was February 3, 2000. In 2000, the Company charged CoreComm $0.9 million for direct costs Common stock amounts in the notes to consolidated financial statements where identifiable and a fixed percentage of its corporate overhead, net of and all per share data have been adjusted to reflect the stock splits. CoreComm’s charges to the Company. These charges reduced corporate expenses in 2000, 1999 and 1998. It is not practicable to determine the Sales of preferred stock, common stock and warrants amounts of these expenses that would have been incurred had the In May 2000, in connection with the ConsumerCo acquisition, France Company operated as an unaffiliated entity. In the opinion of management Telecom paid £1,555.6 million ($2,327.6 million) for 42.2 million shares of the Company, the allocation methods are reasonable. of the Company’s common stock and £1,244.4 million ($1,862.0 million) for 2.0 million shares of the Company’s 5% Cumulative Participating The Company obtains billing and software development services from Convertible Preferred Stock (the ‘5% Preferred Stock’). CoreComm. CoreComm billed the Company $5.9 million, $4.6 million and $2.9 million in 2000, 1999 and 1998, respectively, for these services. In August 1999, the Company received $1,000.0 million in cash from France In addition, CoreComm billed the Company $6.7 million in October 2000 for Telecom in exchange for 750,000 shares of the Company’s 5% Preferred services to be rendered from January to September 2001. In March 2000, Stock and 4.2 million shares of the Company’s common stock. 70 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

14. Shareholders’ equity continued of the stated value per share. Dividends were payable when and if declared In January 1999, the Company received $500.0 million in cash from Microsoft by the Board of Directors. In June 2000, all of the outstanding shares of the Corp. (‘Microsoft’) in exchange for 500,000 shares of the Company’s 5.25% Series B Preferred Stock were converted into 903,000 shares of the Convertible Preferred Stock (the ‘5.25% Preferred Stock’) and warrants to Company’s common stock. purchase 1.9 million shares of the Company’s common stock at an exercise price of $53.76 per share. Dividends were payable quarterly at the Company’s The 5% Preferred Stock has a stated value of $1,000 per share, is convertible option in cash, common stock or additional shares of preferred stock. The into common stock at a conversion price of $80 per share and is redeemable Company issued approximately 25,000 shares of 5.25% Preferred Stock for 10 years from the issue date, at the Company’s option, for cash, shares of dividend payments of $24.6 million through December 31, 1999. In February common stock or a combination of both. The 5% Preferred Stock may be 2000, all of the 5.25% Preferred Stock was converted into 8.3 million shares redeemed by the Company on the earlier of seven years from the issue date of the Company’s common stock. or the date that is both four years from the issue date and after the Company’s common stock has traded above $96 per share for 25 Series preferred stock consecutive trading days. Dividends are payable quarterly at the Company’s In September 1998, the Company issued 125,000 shares of 9.9% Non-voting option in cash, common stock or additional shares of 5% Preferred Stock. Mandatorily Redeemable Preferred Stock, Series A (the ‘Series A Preferred The Company issued 108,000 shares of 5% Preferred Stock for dividend Stock’) in connection with an acquisition. Each share of Series A Preferred payments of $108.1 million through December 31, 2000. Stock had a stated value of $1,000. Cumulative dividends accrued at 9.9% of the stated value per share. Dividends were payable when and if declared by At December 31, 2000, the Company’s preferred stock would have been the Board of Directors. In December 1999, all of the outstanding shares of redeemable or convertible into an aggregate of 35.7 million shares of the Series A Preferred Stock were redeemed for cash of $140.8 million, the Company’s common stock. which included $15.5 million for accrued dividends.

In December 1998, the Company issued 52,000 shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series B (the ‘Series B Preferred Stock’) in connection with an acquisition. Each share of Series B Preferred Stock had a stated value of $1,000. Cumulative dividends accrued at 9.9%

The changes in the number of shares of Series Preferred Stock, excluding the Redeemable Preferred Stock, were as follows:

Convertible Series A 9.9% Series A 9.9% Series B 5.25% 5% Balance, December 31, 1997 780 – – – – Conversion into common stock (780) – – – – Issued for acquisitions – 125,000 52,000 – – Balance, December 31, 1998 – 125,000 52,000 – – Issued for cash – – – 500,000 750,000 Issued for dividends – – – 25,000 5,000 Redemption – (125,000) – – – Balance, December 31, 1999 – – 52,000 525,000 755,000 Issued for cash – – – – 2,000,000 Issued for dividends – – – 3,000 103,000 Conversion into common stock – – (52,000) (528,000) – Balance, December 31, 2000 – – – – 2,858,000 71 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

Warrants Options will expire 10 years after the date of the grant. No additional options The Company has the following warrants outstanding as of December 31, will be granted under these plans. 2000: (a) warrants to purchase an aggregate of 243,000 shares of common stock at $15.22 per share issued in 1996 that expire in 2006 (256,000 were There are 83,438,000 shares of common stock reserved for issuance under originally issued), (b) warrants to purchase an aggregate of 997,000 shares the 1998 Non-Qualified Stock Option Plan, and there are 31,478,000 shares of common stock at $27.77 per share issued in 1998 that expire in 2008 available for issuance at December 31, 2000. (1,197,000 were originally issued) and (c) warrants to purchase an aggregate of 1,875,000 shares of common stock at $53.76 per share issued in 1999 that The exercise price of a NQSO shall be determined by the Compensation expire in 2004 (1,875,000 were originally issued). and Option Committee. Options are generally exercisable ratably over five to 10 years while the optionee remains an employee of the Company. Shareholder rights plan Options will expire 10 years after the date of the grant. The Rights Agreement provides that 0.48 of a Right will be issued with each share of common stock issued on or after October 13, 1993. The Rights In September 2000, the Board of Directors approved modifications to certain are exercisable upon the occurrence of certain potential takeover events and stock options granted to employees in November 1999 through May 2000. will expire in October 2003 unless previously redeemed by the Company. Options to purchase an aggregate of approximately 16.5 million shares of When exercisable, each Right entitles the owner to purchase from the the Company’s common stock with a weighted average exercise price of company one one-hundredth of a share of Series A Junior Participating $64.39 per share were modified such that the exercise price was reduced to Preferred Stock (‘Rights Preferred Stock’) at a purchase price of $100. $44.50 per share and the vesting schedule was delayed and/or lengthened. This change did not affect the exercise price of options granted to the The Rights Preferred Stock will be entitled to a minimum preferential Chairman of the Board, the Chief Executive Officer and the Company’s quarterly dividend payment of $.01 per share and will be entitled to an directors. In accordance with APB No. 25 and related interpretations, aggregate dividend of 208.33 times the dividend, if any, declared per share the Company is accounting for these options as a variable plan beginning of common stock. In the event of liquidation, the holders of Rights Preferred in September 2000. The Company will recognize non-cash compensation Stock will be entitled to a minimum preferential liquidation payment of expense for the difference between the quoted market price of the $1 per share and will be entitled to an aggregate payment of 208.33 times the Company’s common stock and the exercise price of the vested options payment made per share of common stock. Each share of Rights Preferred while the options remain outstanding. Stock will have 208.33 votes and will vote together with the common stock. In the event of any merger, consolidation or other transaction in which shares In December 2000, the Board of Directors approved the rescission of of common stock are changed or exchanged, each share of Rights Preferred the exercise of ISOs for 156,000 shares of the Company’s common stock, Stock will be entitled to receive 208.33 times the amount received per share and the Company returned cash of $1.1 million. The rescission was of common stock. The Rights are protected by customary antidilution provisions. accounted for as a modification of the original options that resulted in a new measurement date. On the new measurement date the Company Stock options recognized no compensation expense. There are 3,381,000 shares and 10,396,000 shares of common stock reserved for issuance under the 1991 Stock Option Plan and the 1993 Stock Pro forma information regarding net loss and net loss per share is required Option Plan, respectively. These plans provide that incentive stock options by SFAS No. 123, and has been determined as if the Company had (‘ISOs’) be granted at the fair market value of the Company’s common stock accounted for its employee stock options under the fair value method of on the date of grant, and nonqualified stock options (‘NQSOs’) be granted at that statement. The fair value for these options was estimated at the date not less than 85% of the fair market value of the Company’s common stock of grant using the Black-Scholes option pricing model with the following on the date of grant. Options are exercisable as to 20% of the shares subject weighted-average assumptions for 2000, 1999 and 1998: risk-free interest thereto on the date of grant and become exercisable as to an additional 20% rates of 5.30%, 6.81% and 5.02%, respectively, dividend yield of 0%, volatility of the shares subject thereto on each January 1 thereafter, while the optionee factor of the expected market price of the Company’s common stock of .385, remains an employee of the Company. Options will expire 10 years after the .336 and .331, respectively, and a weighted-average expected life of the date of the grant. No additional options will be granted under these plans. option of 10 years.

There are 156,000 shares and 500,000 shares of common stock reserved for The Black-Scholes option valuation model was developed for use in issuance under 1991 and 1993 Non-Employee Director Stock Option Plans, estimating the fair value of traded options which have no vesting restrictions respectively. Under the terms of these plans, options will be granted to and are fully transferable. In addition, option valuation models require the members of the Board of Directors who are not employees of the company input of highly subjective assumptions including the expected stock price or any of its affiliates. These plans provide that all options be granted at the volatility. Because the Company’s stock options have characteristics fair market value of the Company’s common stock on the date of grant, significantly different from those of traded options and because changes and options will expire 10 years after the date of the grant. Options are in the subjective input assumptions can materially affect the fair value exercisable as to 20% of the shares subject thereto on the date of grant and estimate, in management’s opinion, the existing models do not necessarily become exercisable as to an additional 20% of the shares subject thereto provide a reliable single measure of the fair value of its stock options. on each subsequent anniversary of the grant date while the optionee remains a director of the Company. 72 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

14. Shareholders’ equity continued For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. Following is the Company’s pro forma information:

December 31 (in millions, except per share data) 2000 1999 1998 Pro forma net (loss) $(3,220.3) $(822.7) $(580.7) Basic and diluted pro forma net (loss) per share $(15.73) $ (7.51) $(9.31)

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:

2000 1999 1998 Number of options Weighted-average Number of options Weighted-average Number of options Weighted-average (in millions) exercise price (in millions) exercise price (in millions) exercise price Outstanding – beginning of year 29.2 $24.60 25.7 $17.29 12.7 $10.23 Granted 34.8 54.90 6.4 50.35 13.9 24.06 Exercised (2.1) 17.13 (2.6) 15.95 (0.5) 13.59 Forfeited (0.5) 83.31 (0.3) 24.22 (0.4) 29.74 Outstanding – end of year 61.4 $41.52 29.2 $24.60 25.7 $17.29

Exercisable at end of year 16.3 $21.82 12.2 $14.97 11.0 $10.59

Weighted-average fair value of options, calculated using the Black-Scholes option pricing model, granted during 2000, 1999 and 1998 is $32.19, $30.97 and $13.13 respectively.

The following table summarizes the status of the stock options outstanding and exercisable at December 31, 2000:

Stock options outstanding Stock options exercisable Number of Weighted- Weighted Number of Weighted- Range of options remaining average exercise options average exercise Exercise Prices (in millions) contractual life price (in millions) price $0.12 to $9.36 4.8 2.2 Years $ 5.230 4.8 $ 5.230 $9.72 to $18.40 4.0 5.2 Years $ 15.012 4.0 $ 15.007 $19.86 to $27.84 11.9 7.0 Years $ 23.354 3.7 $ 23.173 $28.06 to $35.64 0.6 7.9 Years $ 30.937 0.3 $ 30.946 $36.12 to $40.19 0.8 9.8 Years $ 38.756 0.2 $ 38.716 $42.44 to $47.44 15.8 9.7 Years $ 44.448 1.2 $ 44.391 $48.38 to $53.76 5.2 8.2 Years $ 50.364 1.6 $ 50.383 $57.60 to $63.63 17.7 9.4 Years $ 63.421 0.3 $ 59.485 $68.20 to $75.56 0.2 9.0 Years $ 75.413 0.1 $ 75.387 $91.13 to $101.41 0.4 9.2 Years $ 93.713 0.1 $ 93.713 Total 61.4 16.3

As of December 31, 2000, the Company had 126.6 million shares of its common stock reserved for issuance upon the exercise of warrants and stock options and the conversion of debt and preferred stock. 73 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

15. Employee benefit plans 16. Leases Certain subsidiaries of the Company operate defined benefit pension plans Leases for buildings, office space and equipment extend through 2031. in the UK and Switzerland. The assets of the Plans are held separately from Total rental expense for the years ended December 31, 2000, 1999 and 1998 those of the Company and are invested in specialized portfolios under the under operating leases was $56.2 million, $36.7 million and $29.4 million, management of an investment group. The pension cost is calculated using respectively. the attained age method. The Company’s policy is to fund amounts to the defined benefit plans necessary to comply with the funding requirements Future minimum lease payments under noncancellable operating leases as prescribed by the laws and regulations in the UK and Switzerland. as of December 31, 2000 are as follows (in millions):

December 31 December 31 (in millions) 2000 1999 2001 $65.5 Change in benefit obligation 2002 61.1 Benefit obligation at beginning of year $197.1 $213.4 2003 58.3 Acquisition 116.9 10.7 2004 52.0 Service cost 16.7 12.0 2005 47.1 Interest cost 16.8 12.0 Thereafter 225.2 Actuarial gains (3.4) (40.9) $509.2 Benefits paid (8.3) (5.2) Foreign currency exchange rate changes (11.7) (4.9) 17. Commitments and contingent liabilities At December 31, 2000, the Company was committed to pay approximately Benefit obligation at end of year $324.1 $197.1 $1,340.0 million for equipment and services, which includes approximately $950.0 million for certain operations and maintenance contracts through 2008. Change in plan assets Fair value of plan assets at beginning of year $278.4 $225.3 The Company had certain exclusive local delivery operator licenses for Acquisition 133.2 10.1 Northern Ireland and other franchise areas in the UK. Pursuant to these Actual return on plan assets 15.8 43.1 licenses, various subsidiaries of the Company were required to make Company contributions 12.5 7.6 monthly cash payments to the Independent Television Commission (‘ITC’) during the 15-year license terms. Upon a request by the Company in 1999, Plan participants’ contributions 6.2 2.9 the ITC converted all of the Company’s fee bearing exclusive licenses to non- Benefits paid (8.3) (5.3) exclusive licenses by the end of 1999. In 1999 and 1998, the Company paid Foreign currency exchange rate changes (17.6) (5.3) $30.1 million and $25.0 million, respectively, in connection with these Fair value of plan assets at end of year $420.2 $278.4 licenses. Since the Company’s liability for the license payments ceased upon the conversion, in 1999 the Company reversed an accrual for franchise Funded status of the plan $96.1 $81.3 fees of $13.6 million. Unrecognized net actuarial gains (79.2) (89.3) A wholly-owned indirect subsidiary of the Company, Premium TV Limited, Unrecognized transition obligation 6.2 8.1 has entered into media partnerships with various UK football clubs whereby Prepaid benefit cost $23.1 $0.1 Premium TV Limited will receive certain marketing and sponsorship rights. Premium TV Limited will provide loan facilities to the clubs, repayable Actuarial assumptions through the issue of shares in the football clubs, as well as provide funding Weighted average discount rate 4.50% – 6.00% 6.25% to joint ventures with the clubs. At December 31, 2000, the aggregate Weighted average rate of commitment was £56.8 million ($84.9 million). In addition, Premium TV compensation increase 2.00% – 4.25% 4.50% Limited expects to pay fees of up to £59.0 million ($88.2 million) over five Expected long-term rate of years for the right to enter into a joint venture with the Football League to set- return on plan assets 5.50% – 7.75% 8.00% up an internet portal for all 72 Football League clubs who wish to participate.

The components of net pension costs are as follows: In August 2000, the Company announced that it had signed an agreement December 31 in partnership with Morgan Stanley Dean Witter Private Equity to buy France Telecom’s 49.9% stake in Noos, the leading broadband company in France (in millions) 2000 1999 1998 offering cable television, telephony and Internet services. Pursuant to the Service cost $16.7 $12.0 $13.4 agreement, the Company will acquire 27% of Noos for approximately Interest cost 16.8 12.0 14.7 $627.0 million. The Company will issue 12-month redeemable preferred Actual return on plan assets (15.7) (43.1) (24.2) stock to France Telecom for 80% of the $627.0 million consideration and Net amortization and deferral (19.4) 26.8 8.3 6-year redeemable preferred stock for the remaining 20%. $(1.6) $7.7 $12.2 74 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

17. Commitments and contingent liabilities continued In 2000, components of the National Telecoms segment became part The Company is involved in certain disputes and litigation arising in the of the Broadcast Services segment, and the remainder of National Telecoms ordinary course of its business. None of these matters are expected to have was renamed Business Services. The rental of antenna space on the a material adverse effect on the Company’s financial position, results of Company’s owned and leased towers and sites and associated services, operations or cash flows. and satellite and media services became components of Broadcast Services. The 1999 and 1998 segment information has been reclassified 18. Industry segments to conform to the 2000 segments. Also, certain goodwill and related The Company has four reportable segments: Broadcast Services, amortization was reclassified to Broadcast Services from Shared Services Consumer Services, Business Services, and Shared Services. in all of the periods presented. The Broadcast Services segment operates in the UK and Australia and includes digital and analog television and radio broadcasting, rental of The accounting policies of the segments are the same as those described antenna space on the Company’s owned and leased towers and sites and in the Significant Accounting Policies note. The Company’s management associated services, and satellite and media services. Consumer Services evaluates segment performance based on various financial and non- include telephony, cable television, Internet access and interactive services financial measurements. The results of operations data utilized in financial in regional franchise areas in the UK, Ireland, France and Switzerland. measurements are revenues and EBITDA, which is earnings before interest, The Business Services segment operates primarily in the UK and includes taxes, depreciation and amortization, corporate expenses, franchise fees, telephony, national and international wholesale carrier telecommunications, other charges, other gains, foreign currency transactions gains (losses) and and radio communications services to the emergency services community. extraordinary items. The Company’s primary measure of profit or loss is Shared Services principally include network and information technology EBITDA. Certain selling, general and administrative expenses are allocated management, finance, human resources and facilities management. to segments based on revenues. Management does not allocate costs of Shared Services also includes assets and related depreciation and shared services departments and jointly used assets for purposes of amortization that are not allocated to another segment. In 1998, Shared measuring segment performance. The reportable segments are strategic Services included OCOM Corporation, a subsidiary that operated long business units that are managed separately and offer different services. distance and microwave transmission businesses in the US until June 1998.

(in millions) Broadcast Consumer Business Shared Total Year ended December 31, 2000 Revenues $318.8 $1,819.8 $702.2 $– $2,840.8 Depreciation and amortization 81.4 1,455.7 153.0 432.7 2,122.8 EBITDA (1) 151.9 447.6 226.2 (481.6) 344.1 Expenditures for long-lived assets 91.5 1,469.4 637.8 732.3 2,931.0 Total assets (2) 1,051.1 22,339.8 1,525.5 3,467.3 28,383.7 Year ended December 31, 1999 Revenues $297.3 $834.3 $452.5 $– $1,584.1 Depreciation and amortization 69.8 528.3 58.8 134.4 791.3 EBITDA (1) 150.1 233.5 106.6 (279.3) 210.9 Expenditures for long-lived assets 74.5 591.3 356.7 131.8 1,154.3 Total assets (3) 1,127.6 6,106.5 805.9 4,171.6 12,211.6 Year ended December 31, 1998 Revenues $231.3 $355.6 $157.7 $2.4 $747.0 Depreciation and amortization 41.7 143.5 17.8 63.1 266.1 EBITDA (1) 115.2 67.6 12.3 (119.7) 75.4 Expenditures for long-lived assets 165.9 413.9 220.4 67.1 867.3 Total assets 645.8 3,100.5 406.1 2,041.7 6,194.1

(1) Represents earnings before interest, taxes, depreciation and amortization, franchise fees, other charges, corporate expenses, other gains, foreign currency transaction (losses) gains and extraordinary items.

(2) At December 31, 2000, shared assets included $487.1 million of cash, cash equivalents and marketable securities, $1,815.4 million of goodwill and $1,164.8 million of other assets.

(3) At December 31, 1999, shared assets included $2,669.4 million of cash, cash equivalents and marketable securities, $925.0 million of goodwill and $577.2 million in other assets.

The reconciliation of segment combined EBITDA to loss before income taxes and extraordinary item is as follows: 75 NTL annual report 2000 •Notes to consolidated financial statements www.ntl.com

Notes to consolidated financial statements continued

December 31 (in millions) 2000 1999 1998 Segment Combined EBITDA $344.1 $ 210.9 $ 75.4 (Add) Deduct Franchise fees – 16.5 25.0 Other charges 92.7 16.2 (4.2) Corporate expenses 47.5 29.4 17.1 Depreciation and amortization 2,122.8 791.3 266.1 Interest income and other, net (1.6) (49.4) (46.0) Interest expense 1,036.8 680.7 328.8 Other gains – (493.1) – Foreign currency transaction losses (gains) 120.6 (12.7) (4.2) 3,418.8 978.9 582.6 Loss before income taxes and extraordinary item $(3,074.7) $(768.0) $(507.2)

19. Geographic information (in millions) US UK Switzerland Other Total 2000 Revenues $– $2,434.8 $277.3 $128.7 $2,840.8 Long-lived assets 26.7 21,751.7 3,839.8 965.0 26,583.2 1999 Revenues $– $1,508.2 $– $75.9 $1,584.1 Long-lived assets 1.6 8,227.6 – 663.8 8,893.0 1998 Revenues $2.4 $744.6 $– $– $747.0 Long-lived assets 1.2 4,988.4 – – 4,989.6 76 NTL annual report 2000 •Report of Independent Auditors www.ntl.com

Report of Independent Auditors

The Board of Directors and shareholders NTL Incorporated We have audited the consolidated balance sheets of NTL Incorporated and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NTL Incorporated and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

Ernst & Young LLP New York, New York March 2, 2001 77 NTL annual report 2000 •Corporate information www.ntl.com

Corporate information

Independent Auditors Last sale price Ernst & Young LLP High Low 787 Seventh Avenue 1999 New York, NY 10019 First quarter 53.20 34.40 Second quarter 64.08 47.04 Form 10-K and quarterly shareholder information The Company’s 2000 annual report on Form 10-K excluding exhibits, Third quarter 67.32 52.56 but including financial statements and financial statement schedules, Fourth quarter 101.20 51.75 is available without charge upon written request to the address below. 2000 The Form 10-K is also available on the internet at www.ntl.com/investors. First quarter 109.10 82.00 Second quarter 91.50 53.00 Quarterly information will be available to all shareholders immediately Third quarter 59.88 39.19 upon its release, free of charge, via fax, by calling (212) 906-8440 or through Fourth quarter 49.25 21.81 the internet at www.ntl.com/investors. To receive a copy by mail, please send your written request to: 2001 First quarter ended on March 30, 2001 $39.20 $22.75 Investor Relations NTL Incorporated On March 30, 2001, the closing sale price for the Company’s common stock, 110 East 59 Street as reported on the New York Stock Exchange was $25.15. As of March 30, 26 Floor 2001, there were approximately 6,000 record holders of the common stock. New York, NY 10022 This figure does not reflect beneficial ownership of shares held in nominee name. Transfer agent and registrar for common stock Continental Stock Transfer & Trust company The Company has never paid cash dividends on its common stock. Pursuant 2 Broadway to the indentures governing the Company’s senior notes and the certificates New York, NY 10004 of designation governing the Company’s preferred stock, certain provisions currently materially limit the Company’s ability to pay dividends on the Stock listing Company’s equity securities. In addition, there are legal and contractual The Company’s common stock is traded on the New York Stock Exchange restrictions on the ability of the Company’s subsidiaries to transfer funds under the symbol ‘NLI’ and on EASDAQ under the symbol ‘NTLI’. to the Company in the form of cash dividends, loans or advances. See The following table sets forth, for the periods indicated, the high and ‘Management’s discussion and analysis of financial condition and results low last sale prices as reported on both the New York Stock Exchange of operations – liquidity and capital resources’. The Company does not and the Nasdaq Stock Market. The stock listing moved to the New York currently intend to pay cash dividends in the foreseeable future on shares Stock Exchange on October 27, 2000. The information set forth below of its capital stock. The Company anticipates that for the foreseeable future gives retroactive effect to the 5-for-4 stock split in October 1999 and any cash flow generated from subsidiaries’ operations will be used to develop the 5-for-4 stock split in February 2000. and expand the Company’s business and for debt service. Any future determination as to the payment of dividends will be at the discretion of the Company’s Board of Directors and will depend upon the Company’s operating results, financial condition and capital requirements, indenture and other contractual restrictions, general business conditions and such other factors as the Company’s Board of Directors deems relevant. There can be no assurance that the Company will pay dividends at any time in the future. 78 NTL annual report 2000 •Directors and officers www.ntl.com

directors and officers

Directors Officers George S. Blumenthal George S. Blumenthal Chairman of the Board and Treasurer Barclay Knapp Barclay Knapp Robert T. Goad President and Chief Executive Officer Chief Executive Officer, Columbia Management Inc Richard J. Lubasch Sidney R. Knafel Executive Vice President, General Counsel Managing Partner, SRK Management Company & Secretary

Ted H. McCourtney John F. Gregg General Partner, Venrock Associates Senior Vice President, Chief Financial Officer

Del Mintz Stephen A. Carter Senior Partner, TeleTrak Managing Director and Chief Operating President, Cleveland Mobile TeleTrak, Inc. Officer; UK and Ireland

Alan J. Patricof Steven L. Wagner Chairman, Patricof & Co. Ventures, Inc. Vice President, Marketing

Warren Potash Gregg N. Gorelick Private Investor Vice President, Controller

Michael S. Willner Bruno Claude President, Insight Communications Company, L.P. Managing Director and Chief Operating Officer; Continental Europe Jean-Louis Vinciguerra Senior Executive Vice President Bret Richter and Chief Financial Officer, France Telecom Vice President, Corporate Finance and Development Bernard Izérable Senior Vice President, Europe, France Telecom

Michel Bertinetto International Director, Central Europe, France Telecom 79 NTL annual report 2000 •How to find us www.ntl.com

how to find us

NTL UK NTL France (Head Office for both the Home and Business Chief Executive Officer: Bernard Touraine divisions, and many of the support functions) 22, Quai Gallieni Managing Director & Chief Operating Officer: 92150 Suresnes Cedex Stephen A. Carter France NTL House Tel: +33 (0) 141 44 60 00 Bartley Wood Business Park Fax: +33 (0) 141 44 60 99 Hook www.ntl.fr Hampshire RG27 9UP CABLECOM GmbH Tel : 01256 75 2000 Chief Executive Officer: Ueli Dietiker Fax : 01256 75 2100 Zollstrasse 42 Or you can find us on the web at www.ntl.com. Postfach CH-8021 ZÜRICH NTL Home Switzerland Group Managing Director: Scott Falconer Tel: +41 (0) 1 277 91 11 Call 0500 500 500 to find out more about our Fax: +41 (0) 1 277 92 92 products and services, or visit us on the web www.cablecom.ch at www.askntl.com E-KABEL NTL Business Chief Operating Officer: Warren Mobley Group Managing Director: Chris Hutchings Feldstrasse 16 To find out more about the range of Business 64331 WEITERSTADT products available ring 0800 052 2345, or (Frankfurt) Germany you’ll find ntl: business on the web at Tel: +49 (0) 61 51 67 09 500 www.ntl.com/inbusiness Fax: +49 (0) 61 51 67 09 109

NTL Broadcast BREDBANDSBOLAGET Group Managing Director: Peter Douglas President & Chief Operating Officer: NTL Broadcast Jan Morten Ruud Crawley Court Milleniumhuset Winchester Årstaängsvägen 21B Hampshire 117 43 STOCKHOLM, Sweden SO21 2QA Tel: +46 (0) 8 506 983 00 Tel: 01962 823434 Fax: +46 (0) 8 549 046 08 Fax: 01962 822378 www.bredband.com Visit us at ntl.com/broadcast NTL Inc NTL Broadcast Australia (New York. Main office in the USA) Managing Director, Australia: Tom Bennie Chief Executive Officer: Barclay Knapp NTL Australia Pty Ltd 110 East 59th Street Level 2 26th Floor NY 655 Pacific Highway NY 10022 St Leonards USA Sydney Tel: 001 212 906 8440 NSW, 2065 Fax: 001 212 752 1157 Australia Visit our Investors site at www.ntl.com/investors Tel: +61 2 8425 4666 Fax: +61 2 9437 0510 ntl.com/australia

NTL Europe Managing Director and Chief Operating Officer: Bruno Claude 22, Quai Gallieni 92150 Suresnes Cedex France Tel: +33 (0) 141 44 60 00 Fax: +33 (0) 141 44 60 98 80 NTL annual report 2000 •Coming soon www.ntl.com

coming soon

In 1899 the Durham Electrical Power Soon, telephones will no longer ring Distribution Company built the first in empty rooms. If you want to be power station in Britain, supplying found, the network will find you. electricity to Gateshead. Although The telephone in your pocket or on their goal was to make a profit your desk or running as a program selling something people wanted, on your computer will tell you who the electricity they provided ended is calling and let you pick up or pass up changing the world in ways that the call on. If you don’t want to be the company’s founders could never found then the telephone network have imagined. will not even make the phone ring.It will pass the call to your Easily available electric power computerised messaging service, extended the working day by which will be able to handle simple illuminating offices and factories questions and problems itself, when the sun was not in the sky. saving the harder or more It transformed housework, making interesting stuff for you to deal vacuum cleaners and washing with when you’re next online. machines possible. It changed our eating habits, running fridges Soon, you will be able to watch any and cookers and microwave ovens. television programme you like, And, of course, it powered televisions when you like, because your in almost every household in the favourite shows will be stored locally country, giving us all a window in your home and everything else on the global village. will be available on demand over the network. The pioneers of electricity would not be surprised at the recent Soon your daily newspaper will development of digital networks and really be ‘yours’, containing stories their use for television, telephone that interest you, and assembled and internet services. They would from every news story available. quickly realise that the world is, It may be printed at home, or you once again, being turned upside may prefer to read it on a small down by a new technology. For while screen you hold in your hand as the obvious changes are few – more you sit on the train. And it will be computers in people’s homes, updated every hour, or every minute a general assumption that you will – it will be up to you. be able to exchange e-mail with your friends and family as well as your In this new world, access to a network work colleagues, digital television, that is always on, always present and and always on internet access – the blindingly fast will not be restricted long-term impact is equally profound. to the few or the wealthy. Like water or electricity or gas, centre, with notes stuck to the broadband networking will be in every fridge door replaced by video home, every office, every building and messages, e-mail and online at the corner of every street, as well calendars. A teenager’s bedroom as in the airwaves to support vast may still have its games console, numbers of mobile devices. but instead of playing in isolation young people will play over the The network that links together our network, against others who share many computers, and the services their obsession. Add a video camera that are available over that network, and you can discuss tactics with your are already central to many friends, or send video e-mails to businesses. In fact, the network your Gran on her birthday between is so important that nobody thinks games. And in the living room the that the world economy can screen in the corner can provide continue to grow, or even remain pure entertainment, whether you stable, without full participation want to relax in front of a soap, take by all nations, all companies and – part in the latest quizzes or even eventually – all people. have a part in your own interactive onscreen drama: it will be your That participation will go far beyond choice. what we see today. People will use the network in ways which will Looking at a screen will never be as stretch our imagination and challenge good as looking into someone’s face, our ideas of how the world works. and a bedtime story always sounds It will happen in the office, of course, better if you’re in the same room where videoconferencing will cut instead of talking on the phone. travel costs and business systems Whether you’re playing with your will be spread across offices and children or attending a high level even continents. But the impact on meeting, there are times you just our lives will go far beyond changes have to be present. But there are in the workplace. many other times when you can work as effectively via e-mail, a Universal, permanent and affordable mobile internet connection, or access to the network can give us even online chat. Once you have the back our freedom to choose how network, always on and always fast we organise our lives and our living enough, then being there becomes spaces. Instead of having to put up a choice, not an obligation. with large, out of town supermarkets, built because economies of scale NTL’s network and the services demand them, we can use the available over it will let us rediscover economies of the network to order the good things that we seem to most of our groceries online. Then have lost in the drive to higher smaller shops, providing personal productivity and greater efficiency – service, specialist items and the fresh things like local shops, evenings food that cannot be bought from a playing games with the family and screen, can move back into our High jobs that allow us flexibility over Streets, revitalising town centres. where and when we work. Because the network is not about technology: In the home, the kitchen may it is about people, and helping us become a real communications all live the lives we want. ntl.com annual report 2000 nulrpr 2000 report annual

broadband

ntl Incorporated ntl United Kingdom ntl Europe 110 East 59th Street and Ireland 22, Quai Gallieni New York Bartley Wood 92150 Suresnes Cedex NY 10022 Business Park France USA Hook, Hampshire RG27 9UP T +33 (0) 141 44 6000 T +1 212 906 8440 F +33 (0) 141 44 6098 F +1 212 752 1157 T +44 (0) 1256 752000 F +44 (0) 1256 752100