10-Q 1 a2164601z10-q.htm 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-22616

NTL INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		52-1822078 (I.R.S. Employer Identification No.)
909 Third Avenue, Suite 2863 New York, New York (Address of principal executive offices)		10022 (Zip Code)

(212) 906-8440
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ý No o

The number of shares outstanding of the registrant's common stock as of November 4, 2005 was 85,170,019.

NTL INCORPORATED

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2005

INDEX

		Page
PART I. FINANCIAL INFORMATION		4
Item 1. Financial Statements		4
NTL Incorporated
	Condensed Consolidated Balance Sheets—September 30, 2005 and December 31, 2004	4
	Condensed Consolidated Statements of Operations—Three and Nine Months Ended September 30, 2005 and 2004	5
	Condensed Consolidated Statement of Shareholders' Equity—Nine Months Ended September 30, 2005	6
	Condensed Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2005 and 2004	8
	Notes to Condensed Consolidated Financial Statements	9
NTL Investment Holdings Limited
	Condensed Consolidated Balance Sheets—September 30, 2005 and December 31, 2004	33
	Condensed Consolidated Statements of Operations—Three and Nine Months Ended September 30, 2005 and 2004	34
	Condensed Consolidated Statement of Shareholders' Equity—Nine Months Ended September 30, 2005	35
	Condensed Consolidated Statements of Cash Flows—Nine Months Ended September 30, 2005 and 2004	36
	Notes to Condensed Consolidated Financial Statements	37
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		51
Item 3. Quantitative and Qualitative Disclosures about Market Risk		69
Item 4. Controls and Procedures		70
PART II. OTHER INFORMATION		71
Item 1. Legal Proceedings		71
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		71
Item 3. Defaults Upon Senior Securities		72
Item 4. Submission of Matters to a Vote of Security Holders		72
Item 5. Other Information		72
Item 6. Exhibits		72
SIGNATURES		73

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

Various statements contained in this document constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. Words like "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify these forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated, projected, forecasted, estimated or budgeted, whether expressed or implied, by these forward-looking statements. These factors include the following and those set forth under the caption "Risk Factors" in our Form 10-K that was filed with the SEC on March 16, 2005 and subsequent amendments thereto:

•: potential adverse developments with respect to our liquidity or results of operations;
•: our significant debt payments and other contractual commitments;
•: our ability to fund and execute our business plan;
•: our ability to generate cash sufficient to service our debt;
•: interest rate and currency exchange rate fluctuations;
•: our ability to complete the integration of our billing systems;
•: the impact of new business opportunities requiring significant up-front investments;
•: our ability to attract and retain customers and increase our overall market penetration;
•: our ability to compete against other communications and content distribution businesses;
•: our ability to maintain contracts that are critical to our operations;
•: our ability to respond adequately to technological developments;
•: our ability to develop and maintain back-up for our critical systems;
•: our ability to continue to design networks, install facilities, obtain and maintain any required governmental licenses or approvals, and finance construction and development, in a timely manner at reasonable costs and on satisfactory terms and conditions;
•: our ability to have an impact upon, or to respond effectively to, new or modified laws or regulations; and
•: factors relating to the proposed acquisition of Telewest Global, Inc. including (1) the failure to obtain and retain expected synergies from the proposed transaction, (2) rates of success in executing, managing and integrating key acquisitions, including the proposed acquisition, (3) the ability to achieve business plans for the combined company, (4) the ability to manage and maintain key customer relationships, (5) delays in obtaining, or adverse conditions contained in, any regulatory or third-party approvals in connection with the proposed acquisition, (6) availability and cost of capital, (7) the ability to manage regulatory, tax and legal matters, and to resolve pending matters within current estimates, and (8) other similar factors.

We assume no obligation to update our forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.

Note Concerning Currency of Financial Statements

Following the disposal of our operations in the Republic of Ireland in the second quarter of 2005, all of our revenue from continuing operations, and substantially all of our assets, are denominated in U.K. pounds sterling. Accordingly, we now report our results of operations and financial position in pounds sterling. Financial information for all periods presented in this report has been restated accordingly. See Note 1 to our financial statements.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NTL INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

			September 30, 2005			December 31, 2004
			(unaudited)			(see note)
Assets
Current assets
	Cash and cash equivalents		£	712.8		£	125.2
	Restricted cash			3.6			15.8
	Marketable securities			93.4			11.6
	Accounts receivable—trade, less allowance for doubtful accounts of £58.2 (2005) and £43.4 (2004)			208.8			207.3
	Prepaid expenses and other current assets			51.4			47.8
	Current assets held for sale			—			50.3

		Total current assets		1,070.0			458.0
Fixed assets, net				3,339.2			3,531.6
Reorganization value in excess of amounts allocable to identifiable assets				197.6			200.7
Customer lists, net				274.3			354.0
Other intangible assets, net				2.9			5.5
Investments in and loans to affiliates, net				—			0.7
Other assets, net of accumulated amortization of £29.8 (2005) and £8.0 (2004)				105.0			123.4
Other assets held for sale				—			819.4

Total assets			£	4,989.0		£	5,493.3

Liabilities and shareholders' equity
Current liabilities
	Accounts payable		£	149.5		£	114.0
	Accrued expenses and other current liabilities			247.4			300.1
	Interest payable			80.9			51.9
	Deferred revenue			111.3			109.5
	Current liabilities of discontinued operations			—			108.4
	Current portion of long-term debt			0.8			60.9

		Total current liabilities		589.9			744.8
Long-term debt, net of current portion				2,262.8			2,952.6
Deferred revenue and other long-term liabilities				135.3			217.2
Long-term liabilities of discontinued operations				—			4.2
Minority interest				1.0			—
Commitments and contingent liabilities
Shareholders' equity
	Preferred stock—$.01 par value; authorized 5.0 (2005 and 2004) shares; issued and outstanding none			—			—
	Common stock—$.01 par value; authorized 400.0 (2005 and 2004) shares; issued 88.4 (2005) and 87.7 (2004) and outstanding 85.2 (2005) and 87.7 (2004) shares			0.5			0.5
	Additional paid-in capital			2,691.9			2,670.0
	Treasury stock			(114.0	)		—
	Unearned stock-based compensation			(22.1	)		(17.0	)
	Accumulated other comprehensive income (loss)			36.2			(9.3	)
	Accumulated (deficit)			(592.5	)		(1,069.7	)

		Total shareholders' equity		2,000.0			1,574.5

Total liabilities and shareholders' equity			£	4,989.0		£	5,493.3

Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.

See accompanying notes.

NTL INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited) (in millions, except per share data)

		Three months ended September 30,						Nine months ended September 30,
		2005			2004			2005			2004
Revenue		£	482.7		£	498.5		£	1,463.0		£	1,488.0
Costs and expenses
	Operating costs (exclusive of depreciation shown separately below)		(200.2	)		(203.8	)		(603.1	)		(621.8	)
	Selling, general and administrative expenses		(116.2	)		(123.3	)		(358.3	)		(370.7	)
	Other charges		(1.3	)		(3.7	)		(2.4	)		(19.0	)
	Depreciation		(142.3	)		(149.8	)		(402.2	)		(440.8	)
	Amortization		(27.4	)		(25.7	)		(82.3	)		(77.1	)

	Total costs and expenses		(487.4	)		(506.3	)		(1,448.3	)		(1,529.4	)

Operating (loss) income			(4.7	)		(7.8	)		14.7			(41.4	)
Other income (expense)
	Interest income and other, net		6.8			1.6			21.6			5.4
	Interest expense		(51.7	)		(61.4	)		(180.2	)		(206.9	)
	Loss on extinguishment of debt		(2.0	)		—			(2.0	)		(162.2	)
	Share of (loss) income from equity investments		(0.2	)		(0.1	)		—			0.3
	Foreign currency transaction losses		(13.1	)		(9.2	)		(29.9	)		(16.0	)

(Loss) from continuing operations before income taxes and minority interest expense			(64.9	)		(76.9	)		(175.8	)		(420.8	)
Income tax benefit (expense)			12.4			(0.5	)		(8.7	)		(2.0	)
Minority interest expense			(1.0	)		—			(1.0	)		—

(Loss) from continuing operations			(53.5	)		(77.4	)		(185.5	)		(422.8	)

Discontinued operations
(Loss) income from discontinued operations before income taxes			—			(17.8	)		5.5			12.7
Income tax expense			—			(0.4	)		(0.2	)		(1.2	)
Gain on disposal, net of tax			1.4			—			657.4			—

	Income (loss) from discontinued operations		1.4			(18.2	)		662.7			11.5

Net (loss) income		£	(52.1	)	£	(95.6	)	£	477.2		£	(411.3	)

Basic and diluted net (loss) from continuing operations per share		£	(0.63	)	£	(0.88	)	£	(2.17	)	£	(4.85	)

Basic and diluted net income (loss) from discontinued operations per share		£	0.02		£	(0.21	)	£	7.74		£	0.13

Basic and diluted net (loss) income per share		£	(0.61	)	£	(1.09	)	£	5.57		£	(4.72	)

Average number of shares outstanding			85.1			87.4			85.6			87.1

See accompanying notes.

NTL INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(unaudited) (in millions, except per share data)

			Preferred Stock $.01 Par Value			Common Stock $.01 Par Value
			Preferred Stock $.01 Par Value			Common Stock $.01 Par Value			Additional Paid-In Capital		Unearned Stock-Based Compensation			Treasury Stock
			Shares	Par		Shares	Par		Additional Paid-In Capital		Unearned Stock-Based Compensation			Treasury Stock
Balance, December 31, 2004			—	£	—	87.7	£	0.5	£	2,670.0	£	(17.0	)	£	—
Exercise of stock options and tax effect			—		—	0.7		—		6.5		—			—
Stock option grants at fair value			—		—	—		—		15.4		(15.4	)		—
Purchase of shares			—		—	—		—		—		—			(114.0	)
Restricted stock amortized to operations			—		—	—		—		—		0.6			—
Issuance of stock amortized to operations			—		—	—		—		—		0.1			—
Stock options amortized to operations			—		—	—		—		—		7.7			—
Performance related stock awards amortized to operations			—		—	—		—		—		1.9			—
Comprehensive income:
	Net income for the nine months ended September 30, 2005		—		—	—		—		—		—			—
	Currency translation adjustment		—		—	—		—		—		—			—
	Net unrealized gains on derivatives		—		—	—		—		—		—			—
	Pension liability adjustment		—		—	—		—		—		—			—
		Total

Balance, September 30, 2005			—	£	—	88.4	£	0.5	£	2,691.9	£	(22.1	)	£	(114.0	)

See accompanying notes.

NTL INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (continued)

(unaudited) (in millions, except per share data)

					Accumulated Other Comprehensive Income (Loss)
			Comprehensive Income		Foreign Currency Translation		Pension Liability Adjustments			Net Unrealized Gains (Losses) on Derivatives			Accumulated (Deficit)			Total
Balance, December 31, 2004					£	16.8	£	(2.1	)	£	(24.0	)	£	(1,069.7	)	£	1,574.5
Exercise of stock options and tax effect						—		—			—			—			6.5
Stock option grants at fair value						—		—			—			—			—
Purchase of shares						—		—			—			—			(114.0	)
Restricted stock amortized to operations						—		—			—			—			0.6
Issuance of stock amortized to operations						—		—			—			—			0.1
Stock options amortized to operations						—		—			—			—			7.7
Performance related stock awards amortized to operations						—		—			—			—			1.9
Comprehensive income:
	Net income for the nine months ended September 30, 2005		£	477.2		—		—			—			477.2			477.2
	Currency translation adjustment			31.3		31.3		—			—			—			31.3
	Net unrealized gains on derivatives			12.1		—		—			12.1			—			12.1
	Pension liability adjustment			2.1		—		2.1			—			—			2.1

		Total	£	522.7

Balance, September 30, 2005					£	48.1	£	—		£	(11.9	)	£	(592.5	)	£	2,000.0

See accompanying notes.

NTL INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

			Nine months ended September 30,
			2005		2004
Net cash provided by operating activities			£ 300.1		£ 289.7
Investing activities
	Purchase of fixed assets		(220.4	)	(212.2	)
	Investments in and loans to affiliates		—		2.5
	Decrease in restricted cash		12.2		—
	Purchase of marketable securities		(93.3	)	—
	Proceeds from sale of marketable securities		18.5		—
	Proceeds from sale of assets		2.6		2.8
	Proceeds from sale of broadcast operations, net		1,229.0		—
	Proceeds from sale of Ireland operations, net		216.2		—

		Net cash provided by (used in) investing activities	1,164.8		(206.9	)

Financing activities
	Proceeds from employee stock option exercises		4.8		3.6
	Proceeds from new borrowings, net		—		2,905.1
	Principal payments on long-term debt		(781.7	)	(3,287.6	)
	Purchase of stock		(114.0	)	—
	Capital lease payments		(0.6	)	(0.9	)

		Net cash (used in) financing activities	(891.5	)	(379.8	)

Effect of exchange rate changes on cash and cash equivalents			14.2		—
Increase (decrease) in cash and cash equivalents			587.6		(297.0	)
Cash and cash equivalents, beginning of period			125.2		446.1

Cash and cash equivalents, end of period			£ 712.8		£ 149.1

See accompanying notes.

NTL INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1—Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004, or our 2004 Annual Report.

On December 1, 2004, we reached an agreement for the sale of our broadcast operations. The sale completed on January 31, 2005. The broadcast operations are accounted for as a discontinued operation and therefore, broadcast's results of operations have been removed from our results of continuing operations for all periods presented in this report. The results of operations of broadcast have been excluded from the components of "(Loss) from continuing operations" and shown under the caption "(Loss) income from discontinued operations" in the Statements of Operations.

On May 9, 2005, we sold our operations in the Republic of Ireland. The Ireland operations are accounted for as a discontinued operation and therefore, Ireland's results of operations have been removed from our results of continuing operations for all periods presented in this report. The results of operations of Ireland have been excluded from the components of "(Loss) from continuing operations" and shown under the caption "(Loss) income from discontinued operations" in the Statements of Operations.

Following the disposal of our Irish operations in the second quarter, all of our revenue from continuing operations and substantially all of our assets are denominated in pounds sterling. Accordingly, we report our results of operations and financial position in pounds sterling. Financial information for all prior periods presented in this report has been restated accordingly.

Certain prior period balances have been reclassified to conform to the current period presentation.

Basic and diluted net income (loss) per share is computed by dividing the net income (loss) by the average number of shares outstanding during the three and nine months ended September 30, 2005 and 2004. Outstanding warrants, options to purchase 3.1 million shares and 0.1 million shares of restricted stock at September 30, 2005 are excluded from the calculation of diluted net loss per share, since the inclusion of such warrants, options and shares is anti-dilutive. The average number of shares outstanding is computed as follows (in millions):

	Three months ended September 30,		Nine months ended September 30,
	2005	2004	2005		2004
Number of shares outstanding at start of period(1)	85.0	87.3	87.6		86.8
Issues of common stock	0.1	0.1	0.4		0.3
Repurchase of stock	—	—	(2.4	)	—

Average shares outstanding	85.1	87.4	85.6		87.1

(1): Excludes 0.1 million shares of restricted stock

Note 2—Discontinued Operations

Broadcast—On January 31, 2005, we sold our broadcast operations, a provider of commercial television and radio transmission services, to a consortium led by Macquarie Communications Infrastructure Group. Accordingly, we have accounted for the broadcast operations as discontinued operations. Revenue of the broadcast operations, reported in discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £21.4 million, respectively and for the three and nine months ended September 30, 2004 was £66.5 million and £210.6 million, respectively. Broadcast's pre-tax (loss) income, reported within discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £3.0 million, respectively, and for the three and nine months ended September 30, 2004 was £(20.7) million and £2.2 million, respectively.

Ireland—On May 9, 2005, we sold our operations in the Republic of Ireland to MS Irish Cable Holdings B.V., an affiliate of Morgan Stanley & Co. International Limited, for an aggregate purchase price of €333.4 million, or £225.5 million. Accordingly, we have accounted for the Ireland operations as discontinued operations. Revenue of the Ireland operations, reported in discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £25.6 million, respectively, and for the three and nine months ended September 30, 2004 was £17.9 million and £53.3 million, respectively. Ireland's pre-tax income, reported within discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £2.5 million, respectively, and for the three and nine months ended September 30, 2004 was £2.9 million and £10.5 million, respectively.

The assets and liabilities of the broadcast and Ireland operations reported as held-for-sale include (in millions):

		September 30, 2005		December 31, 2004
		(unaudited)
Current assets held for sale
	Accounts receivable, net	£	—	£	31.9
	Prepaid expenses and other current assets		—		18.4

		£	—	£	50.3

Other assets held for sale
	Fixed assets, net	£	—	£	525.1
	Reorganization value in excess of amounts allocable to identifiable assets		—		97.7
	Customer lists, net		—		201.3
	Investments in and loans to affiliates, net		—		(5.4	)
	Other assets		—		0.7

		£	—	£	819.4

Current liabilities of discontinued operations
	Accounts payable	£	—	£	21.6
	Accrued expenses		—		49.4
	Deferred revenue		—		37.4

		£	—	£	108.4

Long-term liabilities of discontinued operations
	Deferred income taxes	£	—	£	0.1
	Other long-term liabilities		—		4.1

		£	—	£	4.2

Note 3—Acquisitions and Disposals

In November 2004, we acquired Virgin Media Group's remaining ownership interests in Virgin Net Limited together with the remaining interests held by existing and former management for £23.9 million. The acquisition increased our ownership in Virgin Net Limited from 49% to 100%. Virgin Net Limited provides internet services through the virgin.net ISP.

On January 31, 2005, we sold our broadcast operations, a provider of commercial television and radio transmission services, to a consortium led by Macquarie Communications Infrastructure Group. Upon the sale, we recorded a gain on disposal of £520.2 million, of which £1.4 was recorded in the three months ended September 30, 2005 in respect of the resolution of purchase price and other adjustments relating to the broadcast operations. See Note 2—Discontinued Operations.

On May 9, 2005, we sold our telecommunications operations in the Republic of Ireland to MS Irish Cable Holdings B.V., an affiliate of Morgan Stanley. Upon the sale, we recorded a gain on disposal of £137.2 million, net of tax of £8.3 million. See Note 2—Discontinued Operations.

On October 2, 2005, we entered into a merger agreement with Telewest Global, Inc., or Telewest, and Merger Sub Inc., our wholly owned subsidiary. The merger agreement provides that Merger Sub will merge with and into Telewest, with Telewest continuing as the surviving corporation and as our wholly owned subsidiary. In connection with the merger agreement, on October 2, 2005, NTL and our wholly owned subsidiary, NTL Investment Holdings Limited, or NTLIH, entered into a commitment letter and certain other agreements related to the financing of the proposed merger. At the effective time of the merger, each share of Telewest common stock will be converted into the right to receive (i) $16.25 in cash, without interest, and (ii) 0.115 of a share of our common stock (together with cash in lieu of fractional shares of our common stock). The merger is subject to certain customary conditions, including (i) approval by stockholders of NTL and of Telewest and (ii) regulatory approvals. See Note 6—Long-Term Debt.

Note 4—Fixed Assets

Fixed assets consist of (in millions):

			Estimated Useful Life	September 30, 2005			December 31, 2004
				(unaudited)
Operating equipment
	Cable distribution plant		8 - 30 years	£	3,218.8		£	3,155.8
	Switches and headends		8 - 10 years		312.4			311.1
	Customer premises equipment		5 - 10 years		896.1			771.9
	Other operating equipment		8 - 20 years		65.8			66.0

		Total operating equipment			4,493.1			4,304.8

Other equipment
	Land		—		4.4			4.5
	Buildings		30 years		65.1			65.1
	Leasehold improvements		20 years or, if less, the lease term		65.5			65.8
	Computer infrastructure		3 - 5 years		235.4			221.5
	Other equipment		5 - 12 years		62.7			56.4

		Total other equipment			433.1			413.3

					4,926.2			4,718.1
Accumulated depreciation					(1,633.1	)		(1,233.1	)

					3,293.1			3,485.0
Construction in progress					46.1			46.6

				£	3,339.2		£	3,531.6

Note 5—Intangible Assets

Intangible assets consist of (millions):

			Estimated Useful Life	September 30, 2005		December 31, 2004
			(unaudited)
Intangible assets not subject to amortization:
	Reorganization value in excess of amounts allocable to identifiable assets			£	197.6	£	200.7

Intangible assets subject to amortization:
	Costs
		Non-compete agreements	1 year	£	2.8	£	2.8
		Trademark license	5 years		3.2		3.2
		Customer lists	3 - 5 years		560.6		560.6

					566.6		566.6

	Accumulated amortization
		Non-compete agreements			2.5		0.4
		Trademark license			0.6		0.1
		Customer lists			286.3		206.6

					289.4		207.1

				£	277.2	£	359.5

Estimated aggregate amortization expense for each of the five succeeding fiscal years from December 31, 2004 is as follows: £109.5 million in 2005, £106.2 million in 2006, £105.6 million in 2007, £34.6 million in 2008 and £3.6 million in 2009.

The change in the carrying amount of reorganization value in excess of amounts allocable to identifiable assets during the nine months ended September 30, 2005 is as follows (in millions) (unaudited):

Reorganization value in excess of amounts allocable to identifiable assets—December 31, 2004	£	200.7
Adjustments to deferred tax accounts		(3.1	)

Reorganization value in excess of amounts allocable to identifiable assets—September 30, 2005	£	197.6

The movement in reorganization value in excess of amounts allocable to identifiable assets during the nine months ended September 30, 2005 includes a tax expense of approximately £3.1 million relating to the use of tax attributes that existed as of January 10, 2003, the date that we emerged from Chapter 11 reorganization. The deferred tax asset relating to these tax attributes had previously been offset by a valuation allowance.

Note 6—Long-Term Debt

Long-term debt consists of (in millions):

	September 30, 2005			December 31, 2004
	(unaudited)
8.75% US Dollar Senior Notes due 2014	£	240.2		£	221.8
9.75% Sterling Senior Notes due 2014		375.0			375.0
8.75% Euro Senior Notes due 2014		153.3			159.0
US Dollar Floating Rate Senior Notes due 2012		—			52.2
Senior Credit Facility		1,455.2			2,165.0
Capital leases		38.4			38.9
Other		1.5			1.6

		2,263.6			3,013.5
Less: current portion		(0.8	)		(60.9	)

	£	2,262.8		£	2,952.6

The effective interest rates on the variable interest rate debt were as follows:

		September 30, 2005		December 31, 2004
Floating Rate Senior Notes due 2012		n/a		7.07%
Senior Credit Facility		7.04%		7.13%

On February 4, 2005 we voluntarily prepaid £500 million of principal outstanding under our Senior Credit Facility using the proceeds from the sale of our broadcast operations. On June 14, 2005 and July 14, 2005 we repaid a further £200 million and £23 million, respectively, using the proceeds from the sale of our Ireland operations. As a consequence, scheduled repayments in 2006 and beyond have reduced. On July 15, 2005 we redeemed all of the $100 million principal amount of the Floating Rate Senior Notes due 2012 at a redemption price of 103% of the principal amount.

In connection with the merger agreement with Telewest, we and NTLIH have agreed to a commitment letter with several financial institutions who have agreed to arrange and to underwrite the new credit facilities described below.

The new credit facilities comprise two separate facilities, (a) a senior secured credit facility in an aggregate principal amount of £3.3 billion, comprising a £3.2 billion 5-year amortizing term loan facility and a £100 million 5-year multicurrency revolving credit facility, and (b) a 1-year (automatically extendable to a 10-year) senior subordinated bridge facility in an aggregate principal amount of £1.8 billion to be made available to Communications Cable Funding Corporation ("CCFC"), one of our subsidiaries. In addition, we and NTLIH agreed to engage the financial institutions for any take-out financing for the bridge facility. The terms of the facilities are subject to further amendments prior to the closing of the merger transaction.

Note 7—Derivative Instruments and Hedging Activities

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. As some of our indebtedness accrues interest at variable rates, we have exposure to

volatility in future cash flows and earnings associated with variable interest rate payments. Also, all of our revenue and substantially all of our operating costs are earned and paid in pounds sterling but we pay interest and principal obligations on some of our indebtedness in U.S. dollars and euros. As a result, we have exposure to volatility in future cash flows and earnings associated with changes in foreign currency exchange rates on payments of principal and interest on a portion of our indebtedness.

Our objective in managing our exposure to fluctuations in interest rates and foreign currency exchange rates is to decrease the volatility of our earnings and cash flows caused by changes in underlying rates. To achieve this objective, we enter into derivative financial instruments. We have established policies and procedures to govern the strategic management of these exposures through a variety of derivative financial instruments, including interest rate swaps, cross-currency interest rate swaps and foreign currency forward rate contracts. By policy, we do not enter into derivative financial instruments with a level of complexity or with a risk that is greater than the exposure to be managed.

In accordance with FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", or FAS 133, we recognize derivative financial instruments as either assets or liabilities measured at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. To the extent that the derivative instrument is designated and considered to be effective as a cash flow hedge of an exposure to future changes in interest rates or foreign currency exchange rates, the change in fair value of the instrument is deferred in other comprehensive income. Amounts recorded in other comprehensive income are reclassified to the income statement to match the corresponding cash flows on the underlying hedged transaction. Changes in fair value of any instrument not designated as a hedge or considered to be ineffective as a hedge are reported in earnings immediately.

The fair values of our derivative instruments were as follows (in millions):

		September 30, 2005		December 31, 2004
		(unaudited)
Included within other long term assets:
	Interest rate swaps	£	8.1	£	1.2

Included within other current liabilities:
	Foreign currency forward rate contracts	£	—	£	2.0

Included within deferred revenue and other long-term liabilities:
	Foreign currency forward rate contracts	£	24.7	£	33.7
	Interest rate swaps		20.0		25.2

		£	44.7	£	58.9

Interest Rate Swaps—Hedging of Interest Rate Sensitive Obligations

As of September 30, 2005 we had outstanding interest rate swap agreements to manage the exposure to variability in future cash flows on the interest payments associated with £1,250 million of our outstanding Senior Credit Facility, which accrues at variable rates based on LIBOR. The interest rate swaps allow us to receive interest based on LIBOR in exchange for payments of interest at fixed rates of 5.30% and 5.10%. The interest rate swaps became effective on October 14, 2004 and mature on April 14, 2007. The net settlement of £3.0 million under these interest rate swaps is included within interest expense for the nine months ended September 30, 2005.

We have designated these interest rate swaps as cash flow hedges under FAS 133, because they hedge against changes in the amount of future cash flows attributable to changes in LIBOR. In the nine months ended September 30, 2005, we recorded £3.7 million of unrealized losses in accumulated other comprehensive income (loss) as a result of the increase in fair market value of these interest rate hedges. There was no realized gain or loss arising from any ineffectiveness of these interest rate swaps.

Cross-Currency Interest Rate Swaps—Hedging the Interest Payments of Senior Notes and Senior Credit Facility

As of September 30, 2005, we had outstanding cross-currency interest rate swaps with principal amounts of $820.2 million and €151.0 million. We currently hedge the pound sterling value of interest payments on the U.S. dollar denominated 8.75% Senior Notes due 2014, interest payments on the U.S. dollar denominated portion of our Senior Credit Facility, and the interest payments on the euro denominated portion of our Senior Credit Facility. Under these cross-currency swaps, we receive interest in U.S. dollars at a fixed rate of 8.75% and variable rate based on LIBOR, and in euros at variable rate based on LIBOR, in exchange for payments of interest in pound sterling at a fixed rate of 9.42%, and variable rate LIBOR based on the pound sterling equivalent of $820.2 million and €151.0 million. The net settlement of £4.3 million under these cross-currency interest rate swaps is included within interest expense for the nine months ended September 30, 2005.

We have designated these cross-currency swaps as cash flow hedges under FAS 133 because they hedge the changes in the pound sterling value of the interest payments on our U.S. dollar denominated Senior Notes and the U.S. dollar and euro denominated portion of our Senior Credit Facility, that result from changes in the U.S. dollar, euro and pound sterling exchange rates. In the nine months ended September 30, 2005, we recorded £1.6 million of unrealized losses and £17.4 million of unrealized gains in accumulated other comprehensive income (loss) as a result of the changes in fair market value of these cross currency interest rate swaps. There was a realized gain in the three and nine months ended September 30, 2005 of £1.6 million arising from the settlement of these cross-currency interest rate swaps on the interest payments of the Floating rate Notes due 2012.

Foreign Currency Forward Rate Contracts—Hedging the Principal Obligations of the U.S. Dollar Senior Notes and Senior Credit Facility

As of September 30, 2005, we had outstanding foreign currency forward rate contracts to purchase $820.2 million and €151.0 million, maturing in April 2009. These contracts hedge changes in the pound sterling value of the U.S. dollar and euro denominated principal obligation of the 8.75% Senior Note due 2014, and variable rate LIBOR Senior Credit Facility, caused by changes in the U.S. dollar, euro and pound sterling exchange rates.

The foreign currency forward rate contracts are not effective hedges under FAS 133. As such, the contracts are carried at fair value on our balance sheet with changes in the fair value recognized immediately in the income statement. The foreign currency forward rate contracts do not subject us to material volatility in our earnings and cash flows because changes in the fair value partially mitigate the gains or losses on the translation of our U.S. dollar and euro denominated debt into pound sterling, in accordance with FASB Statement No. 52, Foreign Currency Translation. Changes in fair value of these contracts are reported within foreign exchanges gains (losses).

Net changes in the fair value of the foreign currency forward rate contracts recognized in (loss) from continuing operations for the three and nine months ended September 30, 2005 and 2004 were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2005		2004		2005	2004
	(unaudited) (in millions)
Net (loss) gain in fair value of foreign currency forward rate contracts	£(0.6	)	£(9.9	)	£11.0	£(6.1	)

On October 2, 2005, we and NTLIH entered into an agreement with several financial institutions to provide (i) senior secured credit facilities in an aggregate principal amount of £3.3 billion, comprising a £3.2 billion 5-year amortizing term loan facility and a £100 million 5-year multicurrency revolving working capital facility, and (ii) a 1-year (automatically extendable to a 10-year) senior subordinated bridge facility in an aggregate principal amount of £1.8 billion to be made available to CCFC, in connection with the combination transaction with Telewest Global, Inc. As a result of this agreement, we have discontinued the hedge designation on October 2, 2005 of the cross currency and interest rate swaps related to the interest payments on the senior debt facilities. Net unrealized losses of £9.1 million have been included in other comprehensive income at September 30, 2005 and will be reclassified to earnings as the hedged item affects earnings, or the forecasted future transaction is no longer considered probable of occurring. Future changes in fair value with respect to these instruments will be recorded in the statement of operations.

Note 8—Fair Values of Financial Instruments

In estimating the fair value of our financial instruments we have used the following methods and assumptions:

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

Marketable securities: The carrying amounts reported in the consolidated balance sheets approximate fair value.

Long-term debt: The carrying amount of the senior credit facility approximates its fair value. The fair values of our other debt in the following table are based on the quoted market prices.

The carrying amounts and fair values of our financial instruments are as follows (in millions):

		September 30, 2005				December 31, 2004
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(unaudited)
Cash and cash equivalents		£	712.8	£	712.8	£	125.2	£	125.2
Restricted cash			3.6		3.6		15.8		15.8
Marketable securities			93.4		93.4		11.6		11.6
Long-term debt:
	8.75% US Dollar Senior Notes due 2014	£	240.2	£	246.8	£	221.8	£	251.8
	9.75% Sterling Senior Notes due 2014		375.0		380.6		375.0		404.1
	8.75% Euro Senior Notes due 2014		153.3		161.8		159.0		177.6
	Floating Rate Senior Notes due 2012		—		—		52.2		54.0
	Senior Credit Facility		1,455.2		1,455.2		2,165.0		2,165.0

Note 9—Stock Based Compensation

Our stock-based employee compensation plans are described more fully in Note 13 of our 2004 Annual Report. Effective as of January 1, 2003, we adopted the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," prospectively for all stock options granted after December 31, 2002. The fair value of each option is estimated on the date of grant using a Black-Scholes option-pricing model. For the three and nine months ended September 30, we expensed £3.0 million and £9.8 million, respectively, in 2005 and £3.9 million and £11.3 million, respectively, in 2004, related to stock-based compensation.

The following weighted-average assumptions have been used in the Black-Scholes option pricing model for 2005 and 2004:

	For the nine months ended September 30,
	2005		2004
Risk-free Interest Rate	4.03	%	3.97	%
Expected Dividend Yield	0	%	0	%
Expected Volatility	0.74		0.84
Expected Lives	3.6		3.4

A summary of the activity and related information for stock options for the nine months ended September 30, 2005 and 2004 is as follows:

	2005				2004
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
	(unaudited)
Outstanding—beginning of period	3,140,977		$	22.89	3,229,967		$	13.85
Granted	896,930			64.32	818,500			46.90
Exercised	(630,433	)		14.11	(604,890	)		12.88
Expired	—			—	(5,200	)		12.00
Forfeited	(278,349	)		13.95	(194,400	)		12.77

Outstanding—end of period	3,129,125		$	37.33	3,243,977		$	22.43

Exercisable at end of the period	818,943		$	24.78	465,443		$	19.81

Weighted-average grant date fair value of options granted during the period			$	31.50			$	48.40

Exercise prices for options outstanding as of September 30, 2005 are as follows:

Range of exercise prices	Number of options outstanding	Weighted average exercise price		Weighted average remaining contractual life	Number of shares currently exercisable	Weighted average exercise price
$0.01	200,000	$	0.01	8.6	99,999	$	0.01
$9.00 to $15.00	1,360,610		13.70	7.5	499,344		14.55
$40.00 to $50.00	140,000		45.03	8.3	63,000		43.35
$50.01 to $60.00	128,900		59.09	8.6	36,600		59.03
$60.01 to $70.00	1,099,615		63.58	9.5	40,000		60.27
$70.01 to $80.00	200,000		71.60	8.3	80,000		71.60

Note 10—Employee Benefit Plans

Effective December 31, 2003, we adopted SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits." This standard requires the disclosure of the components of net periodic benefit cost recognized during interim periods.

Components of Net Periodic Benefit Costs

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005			2004
	(unaudited) (in millions)
Service costs	£	0.6		£	1.6		£	2.3		£	4.9
Interest costs		3.6			3.6			10.9			10.4
Expected return on plan assets		(3.9	)		(3.6	)		(11.2	)		(10.4	)
Amortization of transition obligations		—			(0.1	)		—			(0.1	)
FAS 88 adjustment		—			—			(0.1	)		—

Net periodic benefit costs	£	0.3		£	1.5		£	1.9		£	4.8

Employer Contributions

We previously disclosed in our financial statements for the year ended December 31, 2004, that we expected to contribute £60.1 million to our pension plans in 2005. For the three and nine months ended September 30, 2005, we contributed £0.9 million and £59.3 million, respectively, to our pension plans. We presently anticipate contributing an additional £0.8 million to fund our pension plans in 2005 for a total of £60.1 million.

Note 11—Other Charges Including Restructuring Charges

Other charges of £1.3 million and £2.4 million for the three and nine months ended September 30, 2005, respectively, represent the costs incurred in connection with our call center consolidation program. The costs include £0.8 million for involuntary employee termination and related costs, £1.5 million for lease exit costs and £0.4 million for other costs. On April 7, 2004, we announced the consolidation over the next eighteen months of our thirteen customer service call centers into three equipped to handle anticipated expansion of our customer base. Following an internal review, we decided to retain and develop three specialist call centers, to be supported by four sales and customer support sites, located throughout the UK. As part of the consolidation, we intend to make additional investments in technology and training in order to streamline processes and generate efficiencies. As of September 30, 2005, we have incurred £26.5 million and we expect to incur approximately £29.0 million of costs to execute this program.

Other charges of £3.7 million and £19.0 million for the three and nine months ended September 30, 2004, respectively, were restructuring charges incurred in connection with our call center consolidation program and relate to involuntary employee termination and related costs in respect of approximately 2,300 employees all of whom were terminated by September 30, 2005 and other costs incurred in connection with our call center consolidation program.

The following table summarizes the restructuring charges incurred and utilized in the nine months ended September 30, 2005:

	Involuntary Employee Termination and Related Costs			Lease Exit Costs			Other			Total
	(unaudited) (in millions)
Balance, December 31, 2004	£	1.7		£	28.4		£	0.2		£	30.3
Released		—			—			(0.3	)		(0.3	)
Charged to expense		0.8			1.5			0.4			2.7
Interest		—			2.5			—			2.5
Utilized		(2.5	)		(7.6	)		(0.3	)		(10.4	)

Balance, September 30, 2005	£	—		£	24.8		£	—		£	24.8

Note 12—Related Party Transactions

We have entered into several transactions with related parties as described below.

Refinancing Transactions

We completed a transaction on April 13, 2004 in which our indirect wholly owned subsidiary, NTL Cable PLC, issued £375 million aggregate principal amount of 9.75% senior notes due 2014, $425 million aggregate principal amount of 8.75% senior notes due 2014, €225 million aggregate principal amount of 8.75% senior notes due 2014 and $100 million aggregate principal amount of floating rate senior notes due 2012. Some of our significant stockholders were holders of the 10% senior sterling notes due 2008 and 9¹/8% senior notes due 2008 of Diamond Holdings Limited and of the 11.2% discount debentures due 2007 of NTL (Triangle) LLC, which were redeemed on May 13, 2004 in connection with the transaction. Some of these stockholders, including managed accounts and affiliates of W.R. Huff Asset Management Co., L.L.C., acquired a substantial quantity of the notes issued in the transaction. On behalf of managed accounts and affiliates, W.R. Huff Asset Management Co., L.L.C. is a significant participant in the market for non-investment grade debt securities.

In consideration for financial and business services, subject to the successful completion of the refinancing, a related entity of W.R. Huff Asset Management Co., L.L.C. was paid $7.5 million on April 27, 2004.

In May 2004, our board granted to each of Eric Koza and Karim Samii, who were then each employees of W.R. Huff Asset Management Co., L.L.C. or its affiliates, the right to receive 20,000 restricted shares of our common stock under the 2003 Stock Option Plan. The restricted stock award was made in consideration of financial and business services provided to us by Messrs. Koza and Samii. Mr. Samii is no longer an employee of W.R. Huff Asset Management Co., L.L.C. or its affiliates. Shares authorized under the 2003 Stock Option Plan, including those granted to Messrs. Koza and Samii, were registered under a registration statement on Form S-8 that we filed with the SEC on May 6, 2004.

Note 13—Comprehensive (Loss) Income

Comprehensive (loss) income comprises:

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005		2004
	(unaudited) (in millions)
Net (loss) income for period	£	(52.1	)	£	(95.6	)	£	477.2	£	(411.3	)
Currency translation adjustment		7.4			5.3			31.3		2.3
Net unrealized gains (losses) on derivatives		6.5			(10.0	)		12.1		(8.9	)
Pension liability adjustment		—			—			2.1		—

Comprehensive (loss) income	£	(38.2	)	£	(100.3	)	£	522.7	£	(417.9	)

Note 14—Income taxes

At each period end, it is necessary for us to make certain estimates and assumptions to compute the provision for income taxes including, but not limited to the expected operating income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in the United Kingdom and the extent to which this income (or loss) may also be taxed in the United States, permanent and temporary differences, the likelihood of deferred tax assets being recovered and the outcome of contingent tax risks. At each interim period, management uses the best information available to develop these estimates and assumptions, which are used to compute the forecast effective tax rate for the full year which is applied in computing the income tax expense or benefit for the interim period. In accordance with generally accepted accounting principles, the impact of revisions to these estimates are recorded as income tax expense or benefit in the period in which they become known. Accordingly, the accounting estimates used to compute the provision for income taxes have and will change as new events occur, as more experience is acquired, as additional information is obtained and our tax environment changes. To the extent that the estimate changes during a subsequent quarter the effect of the change on prior quarters as well as on the current quarter is included in tax expense for the current quarter. Income taxes for the three months ended September 30, 2005 include a credit of £16.0 million resulting from a change in our estimated annual effective tax rate.

Note 15—Commitments and Contingent Liabilities

At September 30, 2005, we were committed to pay £123.0 million for equipment and services. This amount includes £2.2 million for operations and maintenance contracts and other commitments from October 1, 2006 to September 30, 2007. The aggregate amount of the fixed and determinable portion of these obligations for the succeeding five fiscal years is as follows (in millions):


2006	£	120.8
2007		2.2
2008		—
2009		—
2010		—

	£	123.0

We are involved in certain disputes and litigation arising in the ordinary course of our business. None of these matters are expected to have a material adverse effect on our financial position, results of operations or cash flows.

Our banks have provided guarantees in form of performance bonds on our behalf as part of our contractual obligations. The fair value of the guarantees has been calculated by reference to the monetary value for each performance bond. The amount of commitment expires over the following periods (in millions):


2006	£	12.2
2007		—
2008		—
2009		—
2010		—
Thereafter		8.3

	£	20.5

Note 16—Condensed consolidated financial information

On April 13, 2004, our wholly owned subsidiary, NTL Cable PLC, or NTL Cable, issued £375 million aggregate principal amount of 9.75% senior notes due 2014, $425 million aggregate principal amount of 8.75% senior notes due 2014, €225 million aggregate principal amount of 8.75% senior notes due 2014 and $100 million aggregate principal amount of floating rate notes due 2012, together referred to as the Senior Notes. We and certain of our subsidiaries, namely Cable Communications Funding Corp., NTL (UK) Group, Inc. and NTL Communications Limited, have guaranteed the Senior Notes on a senior basis. NTL Investment Holdings Limited, or NTLIH, has guaranteed the Senior Notes on a senior subordinated basis.

We present the following condensed consolidated financial information as of September 30, 2005 and December 31, 2004 and for the three and nine months ended September 30, 2005 and September 30, 2004 as required by Article 3-10(d) of Regulation S-X.

		September 30, 2005
Balance sheets		Company		NTL Cable		Other guarantors			NTLIH		All other subsidiaries			Adjustments			Total
		(in millions)
Cash and cash equivalents		£	443.2	£	—	£	—		£	0.1	£	269.5		£	—		£	712.8
Restricted cash			—		—		—			—		3.6			—			3.6
Marketable securities			93.4		—		—			—		—			—			93.4
Other current assets			1.0		—		0.3			—		258.9			—			260.2

	Total current assets		537.6		—		0.3			0.1		532.0			—			1,070.0
Fixed assets, net			—		—		—			—		3,339.2			—			3,339.2
Intangible assets, net			—		—		(6.6	)		—		481.4			—			474.8
Investments in, and loans to, affiliates			1,477.2		1,693.2		1,432.0			3,916.8		935.7			(9,454.9	)		—
Other assets, net			—		—		—			62.1		42.9			—			105.0

	Total assets	£	2,014.8	£	1,693.2	£	1,425.7		£	3,979.0	£	5,331.2		£	(9,454.9	)	£	4,989.0

Other current liabilities		£	4.8	£	35.0	£	2.7		£	94.7	£	814.6		£	(361.9	)	£	589.9
Long-term debt			10.0		859.7		—			3,036.5		4,647.0			(6,290.4	)		2,262.8
Other long-term liabilities			—		—		8.4			44.7		82.2			—			135.3
Minority interest			—		—		—			—		1.0			—			1.0
Shareholders' equity			2,000.0		798.5		1,414.6			803.1		(213.6	)		(2,802.6	)		2,000.0

	Total liabilities and shareholders' equity	£	2,014.8	£	1,693.2	£	1,425.7		£	3,979.0	£	5,331.2		£	(9,454.9	)	£	4,989.0

		December 31, 2004
Balance sheets		Company		NTL Cable		Other guarantors		NTLIH		All other subsidiaries			Adjustments			Total
		(in millions)
Cash and cash equivalents		£	38.2	£	1.1	£	—	£	—	£	85.9		£	—		£	125.2
Restricted cash			—		—		—		—		15.8			—			15.8
Marketable securities			11.6		—		—		—		—			—			11.6
Current assets held for sale			—		—		—		—		50.3			—			50.3
Other current assets			0.4		—		—		—		254.7			—			255.1

	Total current assets		50.2		1.1		—		—		406.7			—			458.0
Fixed assets, net			—		—		—		—		3,531.6			—			3,531.6
Intangible assets, net			—		—		—		—		560.2			—			560.2
Investments in, and loans to, affiliates			1,537.0		1,725.5		1,501.6		3,907.4		0.7			(8,671.5	)		0.7
Other assets, net			—		—		—		78.3		45.1			—			123.4
Other assets held for sale			—		—		—		—		819.4			—			819.4

	Total assets	£	1,587.2	£	1,726.6	£	1,501.6	£	3,985.7	£	5,363.7		£	(8,671.5	)	£	5,493.3

Current liabilities of discontinued operations		£	—	£	—	£	—	£	—	£	108.4		£	—		£	108.4
Other current liabilities			12.7		67.4		0.9		189.2		741.9			(375.7	)		636.4

	Total current liabilities		12.7		67.4		0.9		189.2		850.3			(375.7	)		744.8
Long-term debt			—		1,348.6		54.9		3,424.6		5,094.0			(6,969.5	)		2,952.6
Other long-term liabilities			—		—		—		58.9		158.3			—			217.2
Long-term liabilities of discontinued operations			—		—		—		—		4.2			—			4.2
Shareholders' equity			1,574.5		310.6		1,445.8		313.0		(743.1	)		(1,326.3	)		1,574.5

	Total liabilities and shareholders' equity	£	1,587.2	£	1,726.6	£	1,501.6	£	3,985.7	£	5,363.7		£	(8,671.5	)	£	5,493.3

		Three months ended September 30, 2005
Statements of operations		Company			NTL Cable			Other guarantors			NTLIH			All other subsidiaries			Adjustments			Total
		(in millions)
Revenue		£	—		£	—		£	—		£	—		£	482.7		£	—		£	482.7
Operating costs			—			—			—			—			(200.2	)		—			(200.2	)
Selling, general and administrative expenses			(3.8	)		—			—			—			(112.4	)		—			(116.2	)
Other charges			—			—			—			—			(1.3	)		—			(1.3	)
Depreciation and amortization			—			—			—			—			(169.7	)		—			(169.7	)

	Operating loss		(3.8	)		—			—			—			(0.9	)		—			(4.7	)
Interest and other income, net			4.7			19.4			4.3			75.7			1.1			(98.4	)		6.8
Interest expense			(0.2	)		(19.3	)		—			(61.0	)		(69.6	)		98.4			(51.7	)
Loss on extinguishment of debt			—			(2.0	)		—			—			—			—			(2.0	)
Share of (loss) from equity investments			—			—			—			—			(0.2	)		—			(0.2	)
Foreign currency (losses) gains			(2.2	)		—			—			(13.7	)		2.8			—			(13.1	)
Minority interest expense			—			—			—			—			(1.0	)		—			(1.0	)
Income tax benefit			—			—			12.4			—			—			—			12.4

	(Loss) income from continuing operations		(1.5	)		(1.9	)		16.7			1.0			(67.8	)		—			(53.5	)
(Loss) income from discontinued operations			—			—			(8.4	)		—			9.8			—			1.4
Equity in net loss of subsidiaries			(50.6	)		(65.4	)		(75.9	)		(66.4	)		—			258.3			—

	Net loss	£	(52.1	)	£	(67.3	)	£	(67.6	)	£	(65.4	)	£	(58.0	)	£	258.3		£	(52.1	)

		Nine months ended September 30, 2005
Statements of operations		Company			NTL Cable			Other guarantors			NTLIH			All other subsidiaries			Adjustments			Total
		(in millions)
Revenue		£	—		£	—		£	—		£	—		£	1,463.0		£	—		£	1,463.0
Operating costs			—			—			—			—			(603.1	)		—			(603.1	)
Selling, general and administrative expenses			(11.2	)		—			—			—			(347.1	)		—			(358.3	)
Other charges			—			—			—			—			(2.4	)		—			(2.4	)
Depreciation and amortization			—			—			—			—			(484.5	)		—			(484.5	)

	Operating (loss) income		(11.2	)		—			—			—			25.9			—			14.7
Interest and other income, net			12.0			65.3			21.2			228.0			8.3			(313.2	)		21.6
Interest expense			(0.4	)		(65.8	)		(0.1	)		(212.1	)		(215.0	)		313.2			(180.2	)
Loss on extinguishment of debt			—			(2.0	)		—			—			—			—			(2.0	)
Share of income from equity investments			—			—			—			—			—			—			—
Foreign currency (losses) gains			(9.8	)		—			—			(52.4	)		32.3			—			(29.9	)
Minority interest expense			—			—			—			—			(1.0	)		—			(1.0	)
Income tax benefit (expense)			1.1			—			(9.8	)		—			—			—			(8.7	)

	(Loss) income from continuing operations		(8.3	)		(2.5	)		11.3			(36.5	)		(149.5	)		—			(185.5	)
(Loss) income from discontinued operations			—			—			(8.4	)		—			671.1			—			662.7
Equity in net income of subsidiaries			485.5			475.9			475.4			512.4			—			(1,949.2	)		—

	Net income	£	477.2		£	473.4		£	478.3		£	475.9		£	521.6		£	(1,949.2	)	£	477.2

		Three months ended September 30, 2004
Statements of operations		Company			NTL Cable			Other guarantors			NTLIH			All other subsidiaries			Adjustments			Total
		(in millions)
Revenue		£	—		£	—		£	—		£	—		£	498.5		£	—		£	498.5
Operating costs			—			—			—			—			(203.8	)		—			(203.8	)
Selling, general and administrative expenses			(1.6	)		—			—			—			(121.7	)		—			(123.3	)
Other charges			0.1			—			—			—			(3.8	)		—			(3.7	)
Depreciation and amortization			—			—			—			—			(175.5	)		—			(175.5	)

	Operating loss		(1.5	)		—			—			—			(6.3	)		—			(7.8	)
Interest and other income, net			0.3			37.2			22.7			63.4			2.1			(124.1	)		1.6
Interest expense			—			(37.6	)		(0.2	)		(78.5	)		(69.2	)		124.1			(61.4	)
Loss on extinguishment of debt			—			—			—			—			—			—			—
Share of (loss) income from equity investments			(1.2	)		—			—			—			1.1			—			(0.1	)
Foreign currency gains (losses)			1.1			(0.1	)		—			(13.5	)		3.3			—			(9.2	)
Income tax expense			(0.3	)		—			(0.2	)		—			—			—			(0.5	)

	(Loss) income from continuing operations		(1.6	)		(0.5	)		22.3			(28.6	)		(69.0	)		—			(77.4	)
(Loss) from discontinued operations			—			—			—			—			(18.2	)		—			(18.2	)
Equity in net loss of subsidiaries			(94.0	)		(118.6	)		(113.2	)		(90.0	)		—			415.8			—

	Net loss	£	(95.6	)	£	(119.1	)	£	(90.9	)	£	(118.6	)	£	(87.2	)	£	415.8		£	(95.6	)

		Nine months ended September 30, 2004
Statements of operations		Company			NTL Cable			Other guarantors			NTLIH			All other subsidiaries			Adjustments			Total
		(in millions)
Revenue		£	—		£	—		£	—		£	—		£	1,488.0		£	—		£	1,488.0
Operating costs			—			—			—			—			(621.8	)		—			(621.8	)
Selling, general and administrative expenses			(9.1	)		—			—			—			(361.6	)		—			(370.7	)
Other charges			0.1			—			—			—			(19.1	)		—			(19.0	)
Depreciation and amortization			—			—			—			—			(517.9	)		—			(517.9	)

	Operating loss		(9.0	)		—			—			—			(32.4	)		—			(41.4	)
Interest and other income, net			2.9			64.0			65.5			226.0			5.2			(358.2	)		5.4
Interest expense			—			(69.7	)		(1.6	)		(211.3	)		(282.5	)		358.2			(206.9	)
Loss on extinguishment of debt			—			—			—			(36.2	)		(126.0	)		—			(162.2	)
Share of income from equity investments			—			—			—			—			0.3			—			0.3
Foreign currency gains (losses)			1.2			2.0			0.3			(30.1	)		10.6			—			(16.0	)
Income tax expense			(1.0	)		—			(1.0	)		—			—			—			(2.0	)

	(Loss) income from continuing operations		(5.9	)		(3.7	)		63.2			(51.6	)		(424.8	)		—			(422.8	)
Income from discontinued operations			—			—			—			—			11.5			—			11.5
Equity in net loss of subsidiaries			(405.4	)		(470.9	)		(469.4	)		(419.3	)		—			1,765.0			—

	Net loss	£	(411.3	)	£	(474.6	)	£	(406.2	)	£	(470.9	)	£	(413.3	)	£	1,765.0		£	(411.3	)

	Nine months ended September 30, 2005
Statements of cash flows	Company			NTL Cable			Other guarantors			NTLIH			All other subsidiaries			Adjustments			Total
	(millions)
Net cash (used in) provided by operating activities	£	(15.2	)	£	24.2		£	60.3		£	(48.1	)	£	278.9		£	—		£	300.1
Investing activities:
Purchases of fixed assets		—			—			—			—			(220.4	)		—			(220.4	)
Repayments from (advances to) affiliates		56.2			494.2			519.7			537.2			(797.1	)		(810.2	)		—
Proceeds from sale of assets		—			—			—			—			2.6			—			2.6
Dividends received		523.8			—			—			—			—			(523.8	)		—
Decrease in restricted cash		—			—			—			—			12.2			—			12.2
Proceeds from sale of broadcast operations, net		—			—			—			—			1,229.0			—			1,229.0
Proceeds from sale of Ireland operations, net		—			—			—			—			216.2			—			216.2
Proceeds from sale of marketable securities		18.5			—			—			—			—			—			18.5
Purchase of marketable securities		(93.3	)		—			—			—			—			—			(93.3	)

Net cash provided by investing activities		505.2			494.2			519.7			537.2			442.5			(1,334.0	)		1,164.8

Financing activities:
Dividends paid		—			—			(523.8	)		—			—			523.8			—
Proceeds from new borrowings		10.0			58.9			—			739.7			—			(808.6	)		—
Proceeds from employee stock options		4.8			—			—			—			—			—			4.8
Purchase of stock		(114.0	)		—			—			—			—			—			(114.0	)
Principal payments		—			(578.4	)		(56.2	)		(1,228.7	)		(537.8	)		1,618.8			(782.3	)

Net cash (used in) financing activities		(99.2	)		(519.5	)		(580.0	)		(489.0	)		(537.8	)		1,334.0			(891.5	)

Effect of exchange rate changes		14.2			—			—			—			—			—			14.2
Increase (decrease) in cash and cash equivalents		405.0			(1.1	)		—			0.1			183.6			—			587.6
Cash and cash equivalents at start of period		38.2			1.1			—			—			85.9			—			125.2

Cash and cash equivalents at end of period	£	443.2		£	—		£	—		£	0.1		£	269.5		£	—		£	712.8

	Nine months ended September 30, 2004
Statements of cash flows	Company			NTL Cable			Other guarantors			NTLIH			All other subsidiaries			Adjustments			Total
	(millions)
Net cash (used in) provided by operating activities	£	(22.5	)	£	1.2		£	(0.1	)	£	187.1		£	124.0		£	—		£	289.7
Investing activities:
Purchases of fixed assets		—			—			—			—			(212.2	)		—			(212.2	)
(Advances to) repayments from affiliates		—			(784.1	)		(21.0	)		(173.7	)		2.5			978.8			2.5
Proceeds from sale of assets		—			—			—						2.8			—			2.8

Net cash (used in) investing activities		—			(784.1	)		(21.0	)		(173.7	)		(206.9	)		978.8			(206.9	)

Financing activities:
Proceeds from borrowings, net		—			784.1			—			2,739.6			527.0			(1,145.6	)		2,905.1
Proceeds from employee stock options		3.6			—			—			—			—			—			3.6
Principal payments		—			—			—			(2,792.8	)		(662.5	)		166.8			(3,288.5	)

Net cash provided by (used in) financing activities		3.6			784.1			—			(53.2	)		(135.5	)		(978.8	)		(379.8	)

(Decrease) increase in cash and cash equivalents		(18.9	)		1.2			(21.1	)		(39.8	)		(218.4	)		—			(297.0	)
Cash and cash equivalents, start of period		63.1			—			21.1			39.8			322.1			—			446.1

Cash and cash equivalents, end of period	£	44.2		£	1.2		£	—		£	—		£	103.7		£	—		£	149.1

Note 17—Recent Accounting Pronouncements

On March 30, 2005, the Financial Accounting Standards Board, FASB, released Interpretation (FIN) No. 47, Accounting for Conditional Asset Retirement Obligations—An Interpretation of FASB Statement No. 143. FIN 47 addresses the timing of liability recognition for legal obligations associated with the retirement of a tangible long-lived asset when the timing and (or) method of settlement of the obligation are conditional on a future event. FIN 47 concludes that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated. The adoption of FIN 47 will not have any material impact on our future financial results.

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment. Under a rule issued by the Securities and Exchange Commission (SEC) in April 2005, SFAS No. 123(R) was amended and is now effective for public companies for annual, rather than interim, periods that begin after June 15, 2005. SFAS No. 123(R) requires

companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. We adopted, in January 2003, the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, prospectively for all stock options granted after December 31, 2002. In March 2005, the SEC also issued Staff Accounting Bulletin No. 107 (SAB No. 107), which summarizes the staff's views regarding share-based payment arrangements for public companies. We have evaluated the impact of SFAS No. 123(R) and SAB 107 on our results of operations and financial position and do not expect that the impact will be material.

NTL INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

			September 30, 2005			December 31, 2004
			(unaudited)			(see note)
Assets
Current assets
	Cash and cash equivalents		£	269.2		£	85.5
	Restricted cash			2.6			14.9
	Accounts receivable—trade, less allowance for doubtful accounts of £54.6 (2005) and £39.0 (2004)			194.3			195.9
	Prepaid expenses and other current assets			49.4			47.4
	Current assets held for sale			—			50.3

		Total current assets		515.5			394.0
Fixed assets, net				3,154.9			3,331.7
Reorganization value in excess of amounts allocable to identifiable assets				197.9			197.9
Customer lists, net				254.4			328.5
Other intangible assets, net				2.9			5.5
Other assets, net of accumulated amortization of £29.8 (2005) and £8.0 (2004)				105.0			123.4
Due from affiliates				59.8			—
Other assets held for sale				—			824.8

Total assets			£	4,290.4		£	5,205.8

Liabilities and shareholders' equity
Current liabilities
	Accounts payable		£	149.3		£	112.6
	Accrued expenses and other current liabilities			237.6			287.0
	Interest payable			48.2			140.4
	Deferred revenue			104.0			104.0
	Due to affiliates			151.7			132.0
	Current liabilities of discontinued operations			—			108.4
	Current portion of long-term debt			0.8			60.9

		Total current liabilities		691.6			945.3
Long-term debt, net of current portion				2,667.8			3,729.0
Deferred revenue and other long-term liabilities				126.9			214.3
Long-term liabilities of discontinued operations				—			4.2
Minority interest				1.0			—
Commitments and contingent liabilities
Shareholders' equity
	Share capital—£0.001 par value; authorized 1,000,000 ordinary shares (2005 and 2004); issued and outstanding 121,006 (2005) and (2004) ordinary shares			—			—
	Additional paid-in capital			1,399.9			1,399.9
	Accumulated other comprehensive (loss)			(11.9	)		(26.1	)
	Accumulated (deficit)			(584.9	)		(1,060.8	)

		Total shareholders' equity		803.1			313.0

Total liabilities and shareholders' equity			£	4,290.4		£	5,205.8

Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.

See accompanying notes.

NTL INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited) (in millions)

		Three months ended September 30,						Nine months ended September 30,
		2005			2004			2005			2004
Revenue		£	452.6		£	468.2		£	1,371.2		£	1,399.0
Costs and expenses
	Operating costs (exclusive of depreciation shown separately below)		(188.3	)		(194.2	)		(568.3	)		(593.1	)
	Selling, general and administrative expenses		(103.8	)		(112.0	)		(320.8	)		(339.8	)
	Other charges		(1.2	)		(3.7	)		(2.3	)		(18.0	)
	Depreciation		(136.0	)		(142.1	)		(383.3	)		(418.7	)
	Amortization		(25.5	)		(23.8	)		(76.7	)		(71.2	)

	Total costs and expenses		(454.8	)		(475.8	)		(1,351.4	)		(1,440.8	)

Operating (loss) income			(2.2	)		(7.6	)		19.8			(41.8	)
Other income (expense)
	Interest income and other, net		3.1			1.5			10.7			4.5
	Interest expense		(55.9	)		(82.5	)		(197.9	)		(263.1	)
	Loss on extinguishment of debt		—			—			—			(162.2	)
	Foreign currency transaction losses		(10.9	)		(9.2	)		(20.1	)		(18.5	)

(Loss) from continuing operations before income taxes and minority interest expense			(65.9	)		(97.8	)		(187.5	)		(481.1	)
Minority interest expense			(1.0	)		—			(1.0	)		—

(Loss) from continuing operations			(66.9	)		(97.8	)		(188.5	)		(481.1	)

Discontinued operations
(Loss) income from discontinued operations before income taxes			—			(20.4	)		5.5			11.4
Income tax expense			—			(0.4	)		(0.2	)		(1.2	)
Gain on disposal			1.5			—			659.1			—

	(Loss) income from discontinued operations		1.5			(20.8	)		664.4			10.2

Net (loss) income		£	(65.4	)	£	(118.6	)	£	475.9		£	(470.9	)

See accompanying notes.

NTL INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(unaudited) (in millions, except per share data)

								Accumulated Other Comprehensive Income (Loss)
	Share Capital £0.001 par value										Net Unrealized (Losses) Gains On Derivatives
	Share Capital £0.001 par value			Additional Paid-In Capital		Comprehensive Income (Loss)		Pension Liability Adjustments						Accumulated (Deficit)
	Shares	Par		Additional Paid-In Capital		Comprehensive Income (Loss)		Pension Liability Adjustments						Accumulated (Deficit)			Total
Balance, December 31, 2004	121,006	£	—	£	1,399.9			£	(2.1	)	£	(24.0	)	£	(1,060.8	)	£	313.0
Comprehensive income:
Net income for the nine months ended September 30, 2005	—		—		—	£	475.9		—			—			475.9			475.9
Net unrealized gains on derivative instruments	—		—		—		12.1		—			12.1			—			12.1
Pension liability adjustment	—		—		—		2.1		2.1			—			—			2.1

						£	490.1

Balance, September 30, 2005	121,006	£	—	£	1,399.9			£	—		£	(11.9	)	£	(584.9	)	£	803.1

See accompanying notes.

NTL INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in millions)

			Nine months ended September 30,
			2005			2004
Net cash provided by operating activities			£	219.7		£	342.8
Investing activities
	Purchase of fixed assets			(217.6	)		(229.5	)
	Decrease (increase) in restricted cash			12.3			(0.5	)
	Proceeds from sale of assets			2.9			4.0
	Advances to affiliates			(59.8	)		—
	Proceeds from the sale of broadcast operations, net			1,227.8			—
	Proceeds from the sale of Ireland operations, net			216.2			—

		Net cash provided by (used in) investing activities		1,181.8			(226.0	)

Financing activities
	Proceeds from new borrowings, net			—			2,923.6
	Principal payments on long-term debt			(1,217.8	)		(3,288.7	)

		Net cash (used in) financing activities		(1,217.8	)		(365.1	)

Increase (decrease) in cash and cash equivalents				183.7			(248.3	)
Cash and cash equivalents, beginning of period				85.5			351.2

Cash and cash equivalents, end of period			£	269.2		£	102.9

See accompanying notes.

NTL INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1—Basis of Presentation

Basis of Presentation

We are an independent wholly-owned subsidiary of NTL Incorporated, or NTL.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2004, included in the NTL Cable plc Form S-4 filed with the Securities and Exchange Commission on April 8, 2005.

In accordance with Staff Accounting Bulletin No 54, the impact of NTL's operations as a debtor-in-possession and its subsequent emergence from Chapter 11 and adoption of fresh-start reporting in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, has been reflected in these financial statements.

Certain prior period balances have been reclassified to conform to the current period presentation.

Note 2—Discontinued Operations

Broadcast—On January 31, 2005, we sold our broadcast operations, a provider of commercial television and radio transmission services, to a consortium led by Macquarie Communications Infrastructure Group. Accordingly, we have accounted for the broadcast operations as discontinued operations. Revenue of the broadcast operations, reported in discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £21.4 million, respectively, and for the three and nine months ended September 30, 2004 was £66.5 million and £210.6 million, respectively. Broadcast's pre-tax income (loss), reported within discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £3.0 million, respectively, and for the three and nine months ended September 30, 2004 was £(23.3) million and £0.9 million, respectively.

Ireland—On May 9, 2005, we sold our operations in the Republic of Ireland to MS Irish Cable Holdings B.V., an affiliate of Morgan Stanley & Co. International Limited, for an aggregate purchase price of €333.4 million, or £225.5 million. Accordingly, we have accounted for the Ireland operations as discontinued operations. Revenue of the Ireland operations, reported in discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £25.6 million, respectively, and for the three and nine months ended September 30, 2004 was £17.9 million and £53.3 million, respectively. Ireland's pre-tax income reported within discontinued operations, for the three and nine months ended September 30, 2005 was £nil and £2.5 million, respectively, and for the three and nine months ended September 30, 2004 was £2.9 million and £10.5 million, respectively.

The assets and liabilities of the broadcast and Ireland operations reported as held-for-sale include (in millions):

		September 30, 2005		December 31, 2004
		(unaudited)
Current assets held for sale
	Accounts receivable, net	£	—	£	31.9
	Prepaid expenses and other current assets		—		18.4

		£	—	£	50.3

Other assets held for sale
	Fixed assets, net	£	—	£	525.1
	Reorganization value in excess of amounts allocable to identifiable assets		—		97.7
	Customer lists, net		—		201.3
	Other assets		—		0.7

		£	—	£	824.8

Current liabilities of discontinued operations
	Accounts payable	£	—	£	21.6
	Accrued expenses		—		49.4
	Deferred revenue		—		37.4

		£	—	£	108.4

Long-term liabilities of discontinued operations
	Deferred income taxes	£	—	£	0.1
	Other long-term liabilities		—		4.1

		£	—	£	4.2

Note 3—Acquisitions and Disposals

In November 2004, NTL transferred to us its interests in Virgin Net Limited. In addition, we acquired Virgin Media Group's 51% ownership interests in Virgin Net Limited with the interests held by existing and former management for £23.9 million. These acquisitions resulted in Virgin Net Limited becoming our indirect wholly-owned subsidiary.

On January 31, 2005, we sold our broadcast operations, a provider of commercial television and radio transmission services, to a consortium led by Macquarie Communications Infrastructure Group. Upon the sale, we recorded a gain on disposal of £513.6 million of which £1.5 was recorded in the three months ended September 30, 2005 in respect of the resolution of purchase price and other adjustments relating to the broadcast operations. See Note 2—Discontinued Operations.

On May 9, 2005, we sold our operations in the Republic of Ireland to MS Irish Cable Holdings B.V., an affiliate of Morgan Stanley & Co. International Limited, for an aggregate purchase price of €333.4 million, or £225.5 million. Upon the sale, we recorded a gain on disposal of £145.5 million. See Note 2—Discontinued Operations.

On October 2, 2005, NTL entered into a merger agreement with Telewest Global, Inc., or Telewest, and Merger Sub Inc., NTL's wholly owned subsidiary. The merger agreement provides that Merger Sub will merge with and into Telewest, with Telewest continuing as the surviving corporation and as NTL's wholly owned subsidiary. In connection with the merger agreement, on October 2, 2005, we and NTL entered into a commitment letter and certain other agreements related to the financing of the proposed merger. At the effective time of the merger, each share of Telewest common stock will be converted into the right to receive (i) $16.25 in cash, without interest, and (ii) 0.115 of a share of NTL's common stock (together with cash in lieu of fractional shares of its common stock). The merger is subject to certain customary conditions, including (i) approval by stockholders of NTL and of Telewest and (ii) regulatory approvals. See Note 6—Long-Term Debt.

Note 4—Fixed Assets

Fixed assets consist of (in millions):

			Estimated Useful Life	September 30, 2005			December 31, 2004
				(unaudited)
Operating equipment
	Cable distribution plant		8 - 30 years	£	3,037.5		£	2,978.8
	Switches and headends		8 - 10 years		299.0			297.6
	Customer premises equipment		5 - 10 years		856.3			721.0
	Other operating equipment		8 - 20 years		62.1			62.4

		Total operating equipment			4,254.9			4,059.8

Other equipment
	Land		—		4.1			4.2
	Buildings		30 years		60.3			60.3
	Leasehold improvements		20 years or, if less, the lease term		61.6			61.7
	Computer infrastructure		3 - 5 years		231.4			217.5
	Other equipment		5 - 12 years		60.6			54.4

		Total other equipment			418.0			398.1

					4,672.9			4,457.9
Accumulated depreciation					(1,554.2	)		(1,172.8	)

					3,118.7			3,285.1
Construction in progress					36.2			46.6

				£	3,154.9		£	3,331.7

Note 5—Intangible Assets

Intangible assets consist of (millions):

			Estimated Useful Life	September 30, 2005		December 31, 2004
			(unaudited)
Intangible assets not subject to amortization:
	Reorganization value in excess of amounts allocable to identifiable assets			£	197.9	£	197.9

Intangible assets subject to amortization:
	Costs
		Non-compete agreements	1 year	£	2.8	£	2.8
		Trademark license	5 years		3.2		3.2
		Customer lists	3 - 5 years		519.4		519.4

					525.4		525.4

	Accumulated amortization
		Non-compete agreements			2.5		0.4
		Trademark license			0.6		0.1
		Customer lists			265.0		190.9

					268.1		191.4

				£	257.3	£	334.0

Estimated aggregate amortization expense for each of the five succeeding fiscal years from December 31, 2004 is as follows: £101.7 million in 2005, £98.5 million in 2006, £97.8 million in 2007, £32.4 million in 2008 and £3.6 million in 2009.

Note 6—Long-Term Debt

Long-term debt consists of (in millions):

	September 30, 2005			December 31 2004
	(unaudited)
Senior Credit Facility	£	1,455.2		£	2,165.0
Convertible Unsecured Loan Notes due 2058 due to affiliates		—			445.8
8.75% US Dollar Loan Notes due 2014 due to NTL Cable plc		240.2			221.8
9.75% Sterling Loan Notes due 2014 due to NTL Cable plc		375.0			375.0
8.75% Euro Loan Notes due 2014 due to NTL Cable plc		153.3			159.0
Floating Rate Loan Notes due 2012 due to NTL Cable plc		56.5			52.2
Other loan notes due to affiliates		348.5			330.6
Capital leases		38.4			38.9
Other		1.5			1.6

		2.668.6			3,789.9
Less: current portion		(0.8	)		(60.9	)

	£	2,667.8		£	3,729.0

The effective interest rates on the variable interest rate debt were as follows:

		September 30, 2005		December 31, 2004
Floating Rate Senior Notes due 2012		8.10	%	7.07	%
Senior Credit Facility		7.04	%	7.13	%

On February 4, 2005 we voluntarily prepaid £500 million of principal outstanding under our Senior Credit Facility using the proceeds from the sale of our broadcast operations. On June 14, 2005 we repaid £200 million and on July 14, 2005 we repaid £23 million using the proceeds from the sale of our Ireland operations. As a consequence, scheduled repayments in 2006 and beyond have reduced. The Convertible Unsecured Loan Notes due 2058 due to affiliates, of which £76.7 million were denominated in pounds sterling and $707.1 million were denominated in US Dollars, were redeemed in February 2005.

In connection with NTL's merger agreement with Telewest, we and NTL have agreed to a commitment letter with several financial institutions who have agreed to arrange and to underwrite the new credit facilities described below.

The new credit facilities comprise two separate facilities, (a) a senior secured credit facility in an aggregate principal amount of £3.3 billion, comprising a £3.2 billion 5-year amortizing term loan facility and a £100 million 5-year multicurrency revolving credit facility, and (b) a 1-year (automatically extendable to a 10-year) senior subordinated bridge facility in an aggregate principal amount of £1.8 billion to be made available to CCFC. In addition, we and NTL agreed to engage the financial institutions for any take-out financing for the bridge facility. The terms of the facilities are subject to further amendments prior to the closing of the merger transactions.

Note 7—Derivative Instruments and Hedging Activities

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. As some of our indebtedness accrues interest at variable rates, we have exposure to volatility in future cash flows and earnings associated with variable interest rate payments. Also, all of our revenue and substantially all of our operating costs are earned and paid in pounds sterling, but we pay interest and principal obligations on some of our indebtedness in U.S. dollars and euros. As a result, we have exposure to volatility in future cash flows and earnings associated with changes in foreign currency exchange rates on payments of principal and interest on a portion of our indebtedness.

In accordance with FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, or FAS 133, we recognize derivative financial instruments as either assets or liabilities measured at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. To the extent that the derivative instrument is designated and considered to be effective as a cash flow hedge of an exposure to future changes in interest rates or foreign currency exchange rates, the change in fair value of the instrument is deferred in other comprehensive income. Amounts recorded in other comprehensive income are reclassified to the income statement to match the corresponding cash flows on the underlying hedged transaction. Changes in fair value of any instrument not designated as a hedge or considered to be ineffective as a hedge are reported in earnings immediately.

The fair values of our derivative instruments were as follows (in millions):

		September 30, 2005		December 31, 2004
		(unaudited)
Included within other long term assets:
	Interest rate swaps	£	8.1	£	1.2

Included within deferred revenue and other long-term liabilities:
	Foreign currency forward rate contracts	£	24.7	£	33.7
	Interest rate swaps		20.0		25.2

		£	44.7	£	58.9

Interest Rate Swaps—Hedging of Interest Rate Sensitive Obligations

rates of 5.30% and 5.10%. The interest rate swaps became effective on October 14, 2004 and mature on April 14, 2007. The net settlement of £3.0 million under these interest rate swaps is included within interest expense for the three months ended September 30, 2005.

We have designated these interest rate swaps as cash flow hedges under FAS 133, because they hedge against changes in the amount of future cash flows attributable to changes in LIBOR. In the nine months ended September 30, 2005, we recorded £3.7 million of unrealized losses in accumulated other comprehensive income (loss) as a result of the decrease in fair market value of these interest rate hedges. There was no realized gain or loss arising from any ineffectiveness of these interest rate swaps.

Cross-Currency Interest Rate Swaps—Hedging the Interest Payments of Senior Notes and Senior Credit Facility

We have designated these cross-currency swaps as cash flow hedges under FAS 133 because they hedge the changes in the pound sterling value of the interest payments on our U.S. dollar denominated Senior Notes and the U.S. dollar and euro denominated portion of our Senior Credit Facility, that result from changes in the U.S. dollar, euro and pound sterling exchange rates. For the nine months ended September 30, 2005, we recorded £1.6 million of unrealized losses and £17.4 million of unrealized gains in accumulated other comprehensive income (loss) as a result of the changes in fair market value of these cross-currency interest rate swaps.

Foreign Currency Forward Rate Contracts—Hedging the Principal Obligations of the U.S. Dollar Senior Notes and Senior Credit Facility

As of September 30, 2005, we had outstanding foreign currency forward rate contracts to purchase $820.2 million and €151.0 million, maturing in April 2009. These contracts hedge changes in the pound sterling, U.S. dollar and euro value of the principal obligation of the 8.75% Senior Note due 2014, and variable rate LIBOR Senior Credit Facility, caused by changes in the U.S. dollar, euro and pound sterling exchange rates.

The foreign currency forward rate contracts are not effective hedges under FAS 133. As such, the contracts are carried at fair value on our balance sheet with changes in the fair value recognized immediately in the income statement. The forward rate contracts do not subject us to material volatility in our earnings and cash flows because changes in the fair value directionally and partially mitigate the gains or losses on the translation of our U.S. dollar and euro denominated debt into our functional currency, pound sterling, in accordance with FASB Statement No. 52, Foreign Currency Translation. Changes in fair value of these contracts are reported with foreign exchanges gains (losses).

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005		2004
	(unaudited) (in millions)
Net (loss) gain in fair value of foreign currency forward rate contracts	£	(0.6	)	£	(9.9	)	£	9.0	£	(6.1	)

On October 2, 2005, we and NTL entered into an agreement with several financial institutions to provide (i) senior secured credit facilities in an aggregate principal amount of £3.3 billion, comprising a £3.2 billion 5-year amortizing term loan facility and a £100 million 5-year multicurrency revolving working capital facility and (ii) a 1-year (automatically extendable to a 10-year) senior subordinated bridge facility in an aggregate principal amount of £1.8 billion to be made available to CCFC in connection with NTL's combination transaction with Telewest Global, Inc. As a result of this agreement, we have discontinued on October 2, 2005 the hedge designation of the cross currency and interest rate swaps related to the interest payments on the senior debt facilities. Net unrealized losses of £9.1 million have been included in other comprehensive income at September 30, 2005 and will be reclassified to earnings as the hedged item affects earnings, or the forecasted future transaction is no longer considered probable of occurring. Future changes in fair value with respect to these instruments will be recorded in the statement of operations.

Note 8—Fair Values of Financial Instruments

In estimating the fair value of our financial instruments we have used the following methods and assumptions:

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

Marketable securities: The carrying amounts reported in the consolidated balance sheets approximate fair value.

Long-term debt: The carrying amount of the senior credit facility approximates its fair value. The fair values of our other debt in the following table are based on the quoted market prices.

The carrying amounts and fair values of our financial instruments are as follows (in millions):

		September 30, 2005				December 31, 2004
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(unaudited)
Cash and cash equivalents		£	269.2	£	269.2	£	85.5	£	85.5
Restricted cash			2.6		2.6		14.9		14.9
Long-term debt:
	Senior Credit Facility	£	1,455.2	£	1,455.2	£	2,165.0	£	2,165.0
	Convertible Unsecured Loan Notes		—		—		445.8		445.8
	8.75% US Dollar Loan Notes due 2014 due to NTL Cable plc		240.2		246.8		221.8		251.8
	9.75% Sterling Loan Notes due 2014 due to NTL Cable plc		375.0		380.6		375.0		404.1
	8.75% Euro Loan Notes due 2014 due to NTL Cable plc		153.3		161.8		159.0		177.6
	Floating Rate Loan Notes due 2012		56.5		56.5		52.2		54.0
	Other loan notes due to affiliates		348.5		348.5		330.6		330.6

Note 9—Employee Benefit Plans

Components of Net Periodic Benefit Costs

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005			2004
	(unaudited) (in millions)
Service costs	£	0.6		£	1.6		£	2.2		£	4.9
Interest costs		3.6			3.6			10.8			10.4
Expected return on plan assets		(3.8	)		(3.6	)		(11.1	)		(10.4	)
Amortization of transition obligations		—			(0.1	)		—			(0.1	)
FAS 88 adjustment		—			—			(0.1	)		—

Net periodic benefit costs	£	0.4		£	1.5		£	1.8		£	4.8

Employer Contributions

We previously disclosed in our financial statements for the year ended December 31, 2004, that we expected to contribute £59.9 million to our pension plans in 2005. For the three and nine months ended September 30, 2005, we contributed £0.8 million and £59.1 million to our pension plans. We presently anticipate contributing an additional £0.8 million to fund our pension plans in 2005 for a total of £59.9 million.

Note 10—Other Charges Including Restructuring Charges

Other charges of £1.2 million and £2.3 million for the three and nine months ended September 30, 2005, respectively, represent the costs incurred in connection with our call center consolidation program. The costs include £0.8 million for involuntary employee termination and related costs, £1.5 million for lease exit costs and £0.3 million for other costs. On April 7, 2004, we announced the consolidation over the next eighteen months of our thirteen customer service call centers into three equipped to handle anticipated expansion of our customer base. Following an internal review, we decided to retain and develop three specialist call centers, to be supported by four sales and customer support sites, located throughout the UK. As part of the consolidation, we intend to make additional investments in technology and training in order to streamline processes and generate efficiencies. As of September 30, 2005, we have incurred £25.0 million and we expect to incur approximately £29.0 million of costs to execute this program.

Other charges of £3.7 million and £18.0 million for the three and nine months ended September 30, 2004, respectively, were restructuring charges incurred in connection with our call center consolidation program and relate to involuntary employee termination and related costs in respect of approximately 2,300 employees all of whom were terminated by September 30, 2005 and other costs incurred in connection with our call center consolidation program.

The following table summarizes the restructuring charges incurred and utilized in the nine months ended September 30, 2005:

	Involuntary Employee Termination and Related Costs			Lease Exit Costs			Other			Total
	(unaudited) (in millions)
Balance, December 31, 2004	£	1.6		£	26.8		£	0.1		£	28.5
Released		—			—			(0.3	)		(0.3	)
Charged to expense		0.8			1.5			0.3			2.6
Interest		—			2.5			—			2.5
Utilized		(2.4	)		(6.0	)		(0.1	)		(8.5	)

Balance, September 30, 2005	£	—		£	24.8		£	—		£	24.8

Note 11—Related Party Transactions

We are a wholly-owned subsidiary of NTL. We charge NTL and its other affiliates for operating costs and selling, general and administrative expenses incurred by us on their behalf. The following information summarizes our significant related party transactions with NTL and its affiliates (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2005		2004		2005		2004
	(unaudited) (in millions)
Operating costs	£	4.4	£	2.5	£	13.0	£	7.5
Selling, general and administrative expenses		8.6		7.8		26.3		21.6

The above recharges are recorded in operating costs and selling, general and administrative expenses and offset the respective costs incurred.

Intercompany interest is charged to us by NTL and its affiliates based on intercompany debt balances. Intercompany interest expense is calculated using a weighted average interest rate of external borrowings by NTL and its affiliates. The following information summarizes the amounts of intercompany interest charged to us by NTL and its affiliates, which is included within interest expense in our statements of operations:

	Three months ended September 30,				Nine months ended September 30,
	2005		2004		2005		2004
	(unaudited) (in millions)
Interest income		1.0		—		1.0		—
Interest expense	£	21.8	£	39.6	£	72.4	£	90.7

The amounts due to NTL and its affiliates included in our consolidated balance sheets as of September 30, 2005 and December 31, 2004 were as follows (in millions):

	September 30, 2005		December 31, 2004
	(unaudited)
Due from affiliates	£	59.8	£	—
Interest payable		57.2		22.6
Amounts due to affiliates		151.7		132.0
Long term debt		1,116.3		1,224.1

Note 12—Comprehensive (Loss) Income

Comprehensive (loss) income comprises:

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005		2004
	(unaudited) (in millions)
Net (loss) income for period	£	(65.4	)	£	(118.6	)	£	475.9	£	(470.9	)
Net unrealized gains (losses) on derivatives		6.5			(10.0	)		12.1		(8.9	)
Pension liability adjustment		—			—			2.1		—

Comprehensive (loss) income	£	(58.9	)	£	(128.6	)	£	490.1	£	(479.8	)

Note 13—Commitments and Contingent Liabilities

At September 30, 2005, we were committed to pay £123.0 million for equipment and services. This amount includes £2.2 million for operations and maintenance contracts and other commitments from

October 1, 2006 to September 30, 2007. The aggregate amount of the fixed and determinable portion of these obligations for the succeeding five fiscal years is as follows (in millions) (unaudited):


2006	£	120.8
2007		2.2
2008		—
2009		—
2010		—

	£	123.0


2006	£	12.2
2007		—
2008		—
2009		—
2010		—
Thereafter		8.3

	£	20.5

Note 14—Recent Accounting Pronouncements

of equity instruments based on the grant-date fair value of the award. We adopted, in January 2003, the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, prospectively for all stock options granted after December 31, 2002. In March 2005, the SEC also issued Staff Accounting Bulletin No. 107 (SAB No. 107), which summarizes the staff's views regarding share-based payment arrangements for public companies. We have evaluated the impact of SFAS No. 123(R) and SAB 107 on our results of operations and financial position and do not expect that the impact will be material.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

We are one of the leading communications and content distribution companies in the U.K., providing broadband internet access, telephone and television services to over 3.3 million residential customers as of September 30, 2005, including more than 1.7 million broadband customers. We also provide internet and telephone services to our residential customers who are not connected to our cable network via access to other companies' telecommunications networks and via an internet service provider operated by our subsidiary, Virgin Net Limited. We offer what we refer to as a "triple play" bundle of internet, telephone and television services through competitively-priced bundled packages. We also provide a range of voice services to business and public sector organizations, as well as a variety of data communications solutions from high speed internet access to fully managed business communications networks and communication transport services.

Our services are delivered through our wholly-owned local access communications network passing approximately 7.9 million homes in the U.K. The design and capability of our network provides us with the ability to offer "triple play" bundled services and a broad portfolio of reliable, competitive communications solutions to business customers.

We provide services to two categories of customers: residential customers and business customers, as follows:

•: Consumer. We provide internet, telephone and cable television services to residential customers in the U.K., and
•: Business. We provide internet, data and voice services to large businesses, public sector organizations and small and medium-sized enterprises, or SMEs, communications transport services, and wholesale internet access solutions to internet service providers, or ISPs.

Following the disposition of our operations in the Republic of Ireland, as described below, all of our revenue from continuing operations, and substantially all of our assets, are denominated in pounds sterling. Accordingly, we report our results of operations and financial position in pounds sterling. Financial information for all prior periods presented in this report has been restated accordingly.

On October 2, 2005, we entered into a merger agreement with Telewest Global, Inc., and Merger Sub Inc., our wholly owned subsidiary. The merger agreement provides, among other things, that Merger Sub will merge with and into Telewest, with Telewest continuing as the surviving corporation and as our wholly owned subsidiary. See "Note 3—Acquisitions and Disposals."

Revenue

Our consolidated revenue for the three and nine months ended September 30, 2005, was £482.7 million and £1,463.0 million, respectively. Our revenues by sales channel as a percentage of total revenue for the three and nine months ended September 30, 2005 and 2004 are set forth in the table below:

		Three months ended September 30,				Nine months ended September 30,
		2005		2004		2005		2004
Revenue:
	Consumer	78.2	%	75.7	%	78.0	%	75.0	%
	Business	21.8	%	24.3	%	22.0	%	25.0	%

Total revenue		100.0	%	100.0	%	100.0	%	100.0	%

The principal sources of revenue within each sales channel are:

•: Consumer—monthly fees and usage charges for telephone service, cable television service and internet access; and
•: Business—monthly fees and usage charges for inbound and outbound voice, data and internet services and charges for transmission, fiber and voice services provided to other telecommunications service providers over our national network.

Expenses

The principal components of our operating costs and selling, general and administrative expenses include:

•: payroll and other employee-related costs;
•: interconnection costs paid to other carriers related to telephone services;
•: television programming costs;
•: marketing and selling costs;
•: repairs and maintenance costs;
•: facility related costs, such as rent, utilities and rates; and
•: allowances for doubtful accounts.

Acquisitions and Disposals

In November, 2004, we acquired Virgin Media Group's remaining ownership interests in Virgin Net Limited together with the remaining interests held by existing and former management for £23.9 million. The acquisition increased our ownership in Virgin Net Limited from 49% to 100%. Virgin Net Limited provides internet services through the virgin.net ISP.

On January 31, 2005, we sold our broadcast operations to a consortium led by Macquarie Communications Infrastructure Group. The cash proceeds from the sale were approximately £1.27 billion. Our broadcast operations provided site leasing, broadcast transmission, satellite, media, public safety communications and other network services, utilizing broadcast transmission infrastructure, wireless communications and other facilities.

On October 2, 2005, we entered into a merger agreement with Telewest Global, Inc., and Merger Sub Inc., our wholly owned subsidiary. The merger agreement provides that Merger Sub will merge with and into Telewest, with Telewest continuing as the surviving corporation and as our wholly owned subsidiary. In connection with the merger agreement, on October 2, 2005, NTL and our wholly owned subsidiary, NTL Investment Holdings Limited, or NTLIH, entered into a commitment letter and certain other agreements related to the financing of the proposed merger. At the effective time of the merger, each share of Telewest common stock will be converted into the right to receive (i) $16.25 in cash, without interest, and (ii) 0.115 of a share of our common stock (together with cash in lieu of fractional shares of our common stock). The merger is subject to certain customary conditions, including (i) approval by stockholders of NTL and of Telewest and (ii) regulatory approvals.

We and NTLIH have agreed to a commitment letter with several financial institutions who have agreed to arrange and to underwrite the new credit facilities. The new credit facilities comprise two

separate facilities, (a) a senior secured credit facility in an aggregate principal amount of up to £3.3 billion, comprising a £3.2 billion 5-year amortizing term loan facility and a £100 million 5-year multicurrency revolving credit facility and (b) a 1-year (automatically extendable to a 10-year) senior subordinated bridge facility in an aggregate principal amount of £1.8 billion to be made available to CCFC, in connection with the combination transaction with Telewest Global, Inc. In addition, we and NTLIH agreed to engage the financial institutions for any take-out financing for the bridge facility. The terms of the facilities are subject to further amendments prior to the closing of the merger transaction.

Discontinued Operations

As a result of the sale of our broadcast and Ireland operations, we are accounting for the broadcast and Ireland operations as discontinued operations. Financial information for all prior periods presented in this report has been restated accordingly. The results of operations for the broadcast and Ireland operations have been excluded from the components of loss from continuing operations and shown in a separate caption, titled (loss) income from discontinued operations, and the assets and liabilities of the broadcast and Ireland operations are reported as held for sale as at December 31, 2004.

Revenue from the broadcast operations reported in discontinued operations for the three months ended September 30, 2005 and 2004 was £nil and £66.5 million respectively and for the nine months ended September 30, 2005 and 2004 was £21.4 million and £210.6 million respectively. Pre-tax income (loss) from broadcast operations, reported within discontinued operations, for the three months ended September 30, 2005 and 2004, was £nil and £(20.7) million respectively and for the nine months ended September 30, 2005 and 2004 was £3.0 million and £2.2 million respectively.

Revenue from the Ireland operations reported in discontinued operations for the three months ended September 30, 2005 and 2004 was £nil and £17.9 million respectively and for the nine months ended September 30, 2005 and 2004 was £25.6 and £53.3 million, respectively. Pre-tax income from Ireland operations, reported within discontinued operations, for the three months ended September 30, 2005 and 2004, was £nil and £2.9 million respectively and for the nine months ended September 30, 2005 and 2005 was £2.5 million and £10.5 million respectively.

Factors Affecting Our Business

Our residential customers account for the majority of our total revenue. The number of customers, the number and types of services that each customer uses and the prices we charge for these services drive our revenue. Our profit is driven by the relative margins on the types of services we provide to customers. For example, broadband internet is more profitable than analog television or ATV. Our packaging of services and our pricing are designed to encourage our customers to use multiple services like dual telephone and broadband. Factors affecting our profitability include customer churn, average revenue per user, or ARPU, and competition.

Summary Statistics

Selected statistics for U.K. residential customers for the three months ended September 30, 2005, as well as the four prior quarters, are set forth in the table below.

			For the three months ended
			September 30, 2005			June 30, 2005			March 31, 2005			December 31, 2004			September 30, 2004
Opening customers(1)				3,261,500			3,194,900			3,136,800			3,164,600			3,082,100
	Data cleanse(2)			—			—			—			(20,000	)		2,700
Adjusted opening customers				3,261,500			3,194,900			3,136,800			3,144,600			3,084,800
	Customer additions			218,600			205,500			195,100			185,200			190,700
	Customer disconnects			(164,700	)		(138,900	)		(137,000	)		(151,000	)		(148,900	)
		Net customer movement		53,900			66,600			58,100			34,200			41,800
	Reduction in customer count(3)			—			—			—			(42,000	)		(23,800	)
Closing customers(1)				3,315,400			3,261,500			3,194,900			3,136,800			3,102,800
Churn(4)				1.7	%		1.4	%		1.4	%		1.6	%		1.6	%
Revenue generating units(2,5)
	Television			1,940,000			1,961,800			1,960,000			1,979,600			2,056,100
		DTV		1,409,300			1,405,100			1,387,900			1,382,500			1,414,700
	Telephone			2,663,000			2,666,300			2,646,700			2,638,500			2,681,400
	Broadband			1,720,600			1,555,000			1,443,200			1,330,300			1,174,400
Total Revenue Generating Units				6,323,600			6,183,100			6,049,900			5,948,400			5,911,900
RGU/Customers				1.91x			1.90x			1.89x			1.90x			1.91x
Internet dial-up and DTV access(6)				535,500			618,200			695,400			754,800			346,900
Average revenue per user(7)			£	37.65		£	38.45		£	39.55		£	41.43		£	40.78

(1): Customer numbers include customers directly connected to our network, customers off our network and virgin.net customers.
(2): Data cleanse activity, as part of the harmonization of billing systems, resulted in adjustments to the number of recorded customers.
(3): In Q3-04 and Q4-04 we adjusted customer and RGU numbers following the implementation of a new credit policy and the resultant disconnection of inactive backlog customers.
(4): Customer churn is calculated by taking the total disconnects during the month and dividing them by the average number of customers during the month. Average monthly churn during a quarter is the average of the three monthly churn calculations within the quarter.
(5): Each telephone, television and broadband internet subscriber directly connected to our network counts as one RGU. Accordingly, a subscriber who receives both telephone and television service counts as two RGUs. RGUs may include subscribers receiving some services for free or at a reduced rate in connection with incentive offers.
(6): Dial-up internet customers have been adjusted to exclude metered customers who have not used the service within the last 30 days and include the ISP, virgin.net.
(7): Average Revenue Per User, or ARPU, is calculated on a monthly basis by dividing total revenue generated from the provision of telephone, cable television and internet services to customers who are directly connected to our network in that month, exclusive of VAT, by the average number of customers in that month. Quarterly ARPU is the average of the three months in that quarter.

Customer Churn. Customer churn is a measure of the number of customers who stop using our services. An increase in our customer churn can lead to increased costs and reduced revenue. We

continue to focus on improving our customer service and enhancing and expanding our service offerings to existing customers in an effort to manage our customer churn rate. Although our ability to reduce our customer churn rate beyond a base level is limited by factors like customers moving outside our network service area, in particular during the summer season, managing our customer churn rate is a significant component of our business plan. To help meet these objectives, we have consolidated the number of billing systems for our residential customers from eleven at the beginning of 2003 to three currently. No assurances can be made to the timing of our further integration efforts or the degree of integration we will ultimately accomplish. In addition, our customer churn rate may also increase if we are unable to deliver our services over our network without interruption or if we fail to match offerings by our competitors.

ARPU. Average Revenue Per User, or ARPU, is a measure we use to evaluate how effectively we are realizing potential revenue from customers. We believe that our "triple play" offering of telephone service, broadband access to the internet and DTV will prove attractive to our existing customer base and allow us to increase our ARPU by facilitating the sale of multiple services to each customer.

Competition. Our ability to acquire and retain customers and increase revenue depends on our competitive strength. There is significant competition in our markets, including through other broadband service providers, telephone services offered by BT, alternative internet access services like DSL, which is offered by BT, digital satellite television services offered by BSkyB and digital terrestrial television offered by Freeview. If competitive forces prevent us from charging the prices for these services that we plan to charge, or if our competition is able to attract our customers or potential customers we are targeting, our results of operations will be adversely affected.

Capital Expenditures. Our business requires substantial capital expenditures on a continuing basis for various purposes, including expanding, maintaining and upgrading our network, investing in new customer acquisitions, and offering new services. If we do not continue to invest in our network, our ability to retain and acquire customers may be hindered. Therefore, our liquidity and the availability of cash to fund capital projects are important drivers of our revenue. When our liquidity is restricted, so is our ability to meet our capital expenditure requirements. We believe that our cash on hand, together with cash from operations, and if required, drawdowns under the £250 million revolving tranche of our senior credit facility, will be sufficient for our cash requirements through September 30, 2006. The merger transaction with Telewest will be financed with cash on hand and new financings which are described in note 6.

Labor and overhead costs directly related to the construction and installation of fixed assets, including payroll and related costs of some employees and related rent and other occupancy costs, are capitalized. The payroll and related costs of some employees that are directly related to construction and installation activities are capitalized based on specific time devoted to these activities where identifiable. In cases where the time devoted to these activities is not specifically identifiable, we capitalized costs based upon estimated allocations. We are continuing to enhance our processes to reduce reliance upon these estimates in determining amounts capitalized. The labor and overhead costs capitalized for the three months ended September 30, 2005 and 2004 were approximately £6.7 million and £13.9 million respectively, and for the nine months ended September 30, 2005 and 2004 were £21.0 million and £42.3 million respectively.

The following table illustrates the calculation of labor and overhead costs capitalized as a percentage of total operating and selling, general and administrative expenses and as a percentage of cash used to purchase fixed assets (in millions).

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005			2004
Labor and overhead costs capitalized	£	6.7		£	13.9		£	21.0		£	42.3
Total operating costs and selling, general and administrative expenses		316.4			327.1			961.4			992.5
Labor and overhead costs capitalized as a percentage of total operating costs and selling, general and administrative expenses		2.1	%		4.2	%		2.2	%		4.3	%
Purchase of fixed assets		71.9			75.5			216.3			191.7
Labor and overhead costs capitalized as a percentage of purchase of fixed assets		9.3	%		18.4	%		9.7	%		22.1	%

Currency Movements. We encounter currency exchange rate risks because all of our revenue and substantially all of our operating costs are earned and paid primarily in pounds sterling, but we pay interest and principal obligations with respect to a portion of our existing indebtedness in U.S. dollars and euros. To the extent that the pound sterling declines in value against the U.S. dollar or the euro, the effective cost of servicing our U.S. dollar debt or euro debt will be higher. As of September 30, 2005, £463.5 million, or 20.5% of our long-term debt, was denominated in U.S. dollars and £256.2 million, or 11.3%, of our long-term debt was denominated in euros. To mitigate the risk from these exposures, we have implemented a cash flow hedging program. The objective of this program is to reduce the volatility of our cash flows and earnings caused by changes in underlying rates.

Seasonality. Some of our revenue streams are subject to seasonal factors. For example, telephone usage revenue by customers and businesses tends to be slightly lower during summer holiday months. Our customer churn rates include persons who disconnect service because of moves, resulting in a seasonal increase in our churn rates during the summer months when higher levels of U.K. house moves occur and students leave their accommodations between school years.

Integration of Billing Systems. Our historical growth through acquisitions resulted in our inheriting numerous billing systems, which had many differences in functionality, resulting in inefficiencies in our customer service processes. As a result of our billing systems integration program, we have consolidated the number of billing systems for our residential customers from eleven at the beginning of 2003 to three currently. We continue to evaluate how many billing systems we will utilize for residential and business customers, taking into account the prospects for improved efficiencies and better customer service as well as the impact on the business of additional migration of data. Accordingly, the timing and extent of further integration efforts remain under review. The total costs of the integration program, which has largely been completed, are approximately £100 million.

Call Center Consolidation. On April 7, 2004, we announced the consolidation over the next eighteen months of our thirteen U.K. customer service call centers into three equipped to handle anticipated expansion of our customer base. Following an internal review, we decided to retain and develop three specialist call centers, to be supported by four sales and customer support sites, located throughout the U.K. As part of the consolidation, we intend to make additional investments in technology and training in order to streamline processes and generate efficiencies. As of September 30, 2005, we have incurred £26.5 million of costs, and we expect to incur a total approximately £29.0 million of costs, to execute this program including property costs that will be expensed as the properties are vacated.

If the integration of our billing systems or the consolidation of our call centers is not successful, we could experience an adverse effect on our customer service, customer churn rate and costs of maintaining these systems going forward. We could also experience operational failures related to billing and collecting revenue from our customers which, depending on the severity of the failure, could have a material adverse effect on our business.

Consolidated Results of Operations from Continuing Operations

Three months ended September 30, 2005 and 2004

Revenue

For the three months ended September 30, 2005, consolidated revenue decreased by 3.2% to £482.7 million from £498.5 million during the same period in 2004. Our revenue by customer type for the three months ended September 30, 2005 and 2004 was as follows (in millions):

		2005	2004	Change
		£	£	%
Revenue:
	Consumer	377.5	377.5	—
	Business	105.2	121.0	(13.1	)%

Total revenue		482.7	498.5	(3.2	)%

Consumer: For the three months ended September 30, 2005, revenue from residential customers remained at the same level as for the three months ended September 30, 2004. An increase in the number of broadband internet subscribers as well as the inclusion of revenue of £13.0 million from our subsidiary Virgin Net following its acquisition in November 2004 has been offset by a fall in telephony usage revenue because of price competition, lower take up of fixed price talk-plans and promotional discounts.

Business: For the three months ended September 30, 2005, revenue from business customers decreased by 13.1% to £105.2 million from £121.0 million during the same period in 2004. £11.3 million of this decrease is caused by the loss of wholesale revenue from Virgin Net which ceased to be a third party business customer as a consequence of its acquisition by us in November 2004. Other factors contributing to the decrease include a decline in telephony usage revenue because of price competition in the market and the loss of revenue following the conclusion of a significant customer contract.

Expenses

Operating Costs. For the three months ended September 30, 2005 and 2004, operating costs, including network expenses, decreased by 1.8% to £200.2 million from £203.8 million during the same period in 2004. Operating costs as a percentage of revenue increased to 41.5% for the three months ended September 30, 2005, from 40.9% for the same period in 2004 primarily because of a reduction in telephony interconnect costs driven by lower usage on low margin call types partly offset by the impact of more installs in pre-wired consumer homes where the cost to install is expensed.

Selling, general and administrative expenses. For the three months ended September 30, 2005, selling, general and administrative expenses decreased by 5.8% to £116.2 million from £123.3 million for the same period in 2004. Selling, general and administrative expenses as a percentage of revenue decreased to 24.1% for the three months ended September 30, 2005, from 24.7% for the same period in 2004. This decrease arises because of lower employee costs due to a reduction in the number of employees following the involuntary employee terminations at the end of 2004, offset by increased spend on marketing and communications.

Other charges

Other charges of £1.3 million in the three months ended September 30, 2005 mainly relate to restructuring charges incurred in connection with lease exit costs. Other charges of £3.7 million for the three months ended September 30, 2004 relate to involuntary employee termination and related costs in respect of approximately 2,300 employees, all of whom were terminated by September 30, 2005, and other costs incurred in connection with our call center consolidation program.

The following table summarizes the restructuring charges incurred and utilized in the three months ended September 30, 2005 (in millions):

	Involuntary Employee Termination and Related Costs		Lease Exit Costs			Other			Total
Balance, June 30, 2005	£	—	£	25.0		£	—		£	25.0
Released		—		—			(0.1	)		(0.1	)
Charged to expense		—		1.5			(0.1	)		1.4
Interest		—		0.8			—			0.8
Utilized		—		(2.5	)		0.2			(2.3	)

Balance, September 30, 2005	£	—	£	24.8		£	—		£	24.8

Depreciation expense

For the three months ended September 30, 2005, depreciation expense decreased to £142.3 million from £149.8 million for the same period in 2004. This reduction in depreciation expense is because of the absence of depreciation on some assets that became fully depreciated in 2004.

Amortization expense

For the three months ended September 30, 2005, amortization expense increased to £27.4 million from £25.7 million for the same period in 2004. The increase in amortization expense relates to additional intangible assets arising from the acquisition of Virgin Net Limited during the fourth quarter of 2004.

Interest expense

For the three months ended September 30, 2005, interest expense decreased to £51.7 million from £61.4 million for the three months ended September 30, 2004, primarily as a result of the interest saving offset by the accelerated amortization of deferred financing costs following the prepayments totaling £723.0 million of our senior credit facility in 2005.

Loss on extinguishment of debt

For the three months ended September 30, 2005, loss on extinguishment of debt was £2.0 million and relates to the redemption of the Floating Rate Senior Notes due 2012 on July 15, 2005.

Foreign currency transaction (losses) gains

For the three months ended September 30, 2005, foreign currency transaction losses were £13.1 million as compared with losses of £9.2 million for the three months ended September 30, 2004. These losses for the three months ended September 30, 2005 were primarily because of the effect of changes in the exchange rate on our U.S. dollar and euro denominated debt and unrealized losses of £0.6 million arising from changes in the fair value of our foreign currency forward contracts. Our

results of operations will continue to be affected by foreign exchange rate fluctuations, since £463.5 million of our indebtedness is denominated in U.S. dollars and £256.2 million is denominated in euros.

Income tax expense

For the three months ended September 30, 2005, income tax benefit was £12.4 million as compared with a £0.5 million expense for the same period in 2004. The benefit resulted from a change in management's estimates and assumptions including the extent to which the estimated taxable income exceeds our post-bankruptcy net operating loss carry forwards ("NOLs") that reduced the forecasted effective tax rate for the year. In accordance with generally accepted accounting principles, the impact of revisions to estimates are recorded as income tax expense or benefit in the period in which they become known. Income taxes for the three months ended September 30, 2005 include a credit of £16.0 million resulting from a change in our estimated annual effective tax rate.

Minority interest expense

The minority interest expense of £1.0 million in the three months ended September 30, 2005 relates to the minority interest in the net assets of NTL (South Hertfordshire) Limited ("NTL South Herts"). No minority interest was recorded in the three months ended September 30, 2004 since the cumulative losses of NTL South Herts applicable to the minority interest exceeded the minority interest in the equity capital of NTL South Herts and there is no obligation on the part of the minority to make good such losses.

Loss from continuing operations

For the three months ended September 30, 2005, loss from continuing operations was £53.5 million as compared with a loss of £77.4 million for the same period in 2004. The reduction in loss from continuing operations is attributable to our reduced restructuring charges, lower depreciation, lower interest expense and income tax benefits.

Loss from continuing operations per share

Basic and diluted loss from continuing operations per common share for the three months ended September 30, 2005 was £0.63 and for the three months ended September 30, 2004 was £0.88. Basic and diluted loss from continuing operations per share is computed using an average of 85.1 million shares issued in the three months ended September 30, 2005 and an average of 87.4 million shares issued for the same period in 2004. Outstanding warrants, options to purchase 3.1 million shares and 0.1 million shares of restricted stock at September 30, 2005, are excluded from the calculation of diluted loss from continuing operations per share, since the inclusion of such warrants, options and shares is anti-dilutive.

Nine months ended September 30, 2005 and 2004

Revenue

For the nine months ended September 30, 2005, consolidated revenue decreased by 1.7% to £1,463.0 million from £1,488.0 million during the same period of 2004. Our revenue by customer type for the nine months ended September 30, 2005 and 2004 was as follows (in millions):

		2005	2004	Change
		£	£	%
Revenue:
	Consumer	1,140.6	1,116.6	2.1	%
	Business	322.4	371.4	(13.2)	%

Total revenue		1,463.0	1,488.0	(1.7)	%

Consumer: For the nine months ended September 30, 2005, revenue from residential customers increased by 2.1% to £1,140.6 million from £1,116.6 million during the same period in 2004. This increase is driven largely by growth in the number of broadband internet subscribers as well as the inclusion of revenue of £39.7 million from our subsidiary Virgin Net following its acquisition in November 2004. These increases have been offset by lower telephony usage revenue because of competitive pressure on pricing, lower take-up of fixed price talk-plans and higher promotional discounts as well as lower TV revenue due to lower ATV subscribers and lower premium channel revenue.

Business: For the nine months ended September 30, 2005, revenue from business customers decreased by 13.2% to £322.4 million from £371.4 million during the same period in 2004. This decrease is caused by the loss of £33.8 million of wholesale revenue from Virgin Net, which ceased to be a third party business customer as a consequence of its acquisition by us in November 2004, together with a decline in telephony revenue because of lower access and usage revenue and the loss of revenue following the conclusion of a significant customer contract partly offset by growth in wholesale install, new product and project revenue.

Expenses

Operating Costs. For the nine months ended September 30, 2005 and 2004, operating costs, including network expenses, decreased by 3.0% to £603.1 million from £621.8 million during the same period in 2004. Operating costs as a percentage of revenue decreased to 41.2% for the nine months ended September 30, 2005, from 41.8% for the same period in 2004 primarily because of a more favorable mix of consumer revenues, a reduction in telephony interconnect costs driven by lower usage on low margin call types and lower television content costs partly offset by the impact of more installs in pre-wired homes where the cost to install is expensed.

Selling, general and administrative expenses. For the nine months ended September 30, 2005, selling, general and administrative expenses decreased by 3.3% to £358.3 million from £370.7 million for the same period in 2004. Selling, general and administrative expenses as a percentage of revenue decreased to 24.5% for the nine months ended September 30, 2005, from 24.9% for the same period in 2004. Lower employee costs following the involuntary employee terminations at the end of 2004, maintenance costs savings through renegotiated contracts, and reduced levels of set-top box repair and recycling costs have been partly offset by higher spend on marketing and communications together with increased allowances for doubtful accounts.

Other charges

Other charges of £2.4 million in the nine months ended September 30, 2005 relate to restructuring charges incurred in connection with our call center consolidation program and lease exit costs. Other charges of £19.0 million for the nine months ended September 30, 2004 relate to involuntary employee terminations and related costs in respect of 2,300 employees, all of whom were terminated prior to September 30, 2005 and other costs incurred in connection with our call center consolidation program.

The following table summaries the restructuring charges incurred and utilized in the nine months ended September 30, 2005 (in millions):

	Involuntary Employee Termination and Related Costs			Lease Exit Costs			Other			Total
Balance, December 31, 2004	£	1.7		£	28.4		£	0.2		£	30.3
Released		—			—			(0.3	)		(0.3)
Charged to expense		0.8			1.5			0.4			2.7
Interest		—			2.5			—			2.5
Utilized		(2.5	)		(7.6	)		(0.3	)		(10.4)

Balance, September 30, 2005	£	—		£	24.8		£	—		£	24.8

Depreciation expense

For the nine months ended September 30, 2005, depreciation expense decreased to £402.2 million for from £440.8 million for the same period in 2004. This reduction in depreciation expense is because of the absence of depreciation on some assets that became fully depreciated in 2004.

Amortization expense

For the nine months ended September 30, 2005, amortization expense increased to £82.3 million from £77.1 million for the same period in 2004. The increase in amortization expense relates to additional intangible assets arising from the acquisition of Virgin Net Limited during the fourth quarter of 2004.

Interest expense

For the nine months ended September 30, 2005, interest expense decreased to £180.2 million from £206.9 million for the nine months ended September 30, 2004, primarily as a result of the interest saving offset by the accelerated amortization of deferred financing costs following the prepayments totaling £723.0 million of our Senior Credit Facility on February 4, 2005, June 14, 2005 and July 14, 2005, the redemption of the Floating Rate Senior Notes on July 15, 2005 and the effects of the refinancing transaction in April 2004 that lowered our weighted average interest expense.

Loss on extinguishment of debt

For the nine months ended September 30, 2005 and 2004, loss on extinguishment of debt was £2.0 million and £162.2 million, respectively. For the nine months ended September 30, 2005, the loss on extinguishment of debt relates to the redemption of the Floating Rate Senior Notes due 2012 on July 15, 2005. For the nine months ended September 30, 2004 the loss on extinguishment of debt relates to the redemption, or repayment, of our indebtedness in the refinancing transaction. The loss comprises the payment of the premium of £6.4 million on the redemption of the Diamond notes and

the expensing of the unamortized issue costs of £63.8 million and unamortized discount of £92.0 million.

Foreign currency transaction (losses) gains

For the nine months ended September 30, 2005, foreign currency transaction losses were £29.9 million as compared with losses of £16.0 million for the nine months ended September 30, 2004. These losses for the nine months ended September 30, 2005 were primarily because of the effect of changes in the exchange rate on the U.S. dollar and euro denominated debt and unrealized gains of £11.0 million arising from changes in the fair value of our foreign currency forward contracts. Our results of operations will continue to be affected by foreign exchange rate fluctuations since £463.5 million of our indebtedness is denominated in U.S. dollars and £256.2 million is denominated in euros.

Income tax expense

For the nine months ended September 30, 2005, income tax expense was £8.7 million as compared with £2.0 million for the same period in 2004.

The tax provision of £8.7 million is primarily comprised of federal taxes, which mainly relate to the use of proceeds arising from the sale of our broadcast operations, including the distribution of funds to NTL Incorporated.

Minority interest expense

The minority interest expense of £1.0 million in the nine months ended September 30, 2005 relates to the minority interest in the net assets of NTL South Herts. No minority interest was recorded in the nine months ended September 30, 2004 since the cumulative losses of NTL South Herts applicable to the minority interest exceeded the minority interest in the equity capital of NTL South Herts and there is no obligation on the part of the minority to make good such losses.

Loss from continuing operations

For the nine months ended September 30, 2005, loss from continuing operations was £185.5 million as compared with a loss of £422.8 million for the same period in 2004. The reduction in loss from continuing operations is attributable to the reduction in the loss on extinguishment of debt in the nine months ended September 30, 2005 and lower depreciation and interest expense.

Loss from continuing operations per share

Basic and diluted loss from continuing operations per common share for the nine months ended September 30, 2005 was £2.17 and for the nine months ended September 30, 2004 was £4.85. Basic and diluted loss from continuing operations per share is computed using an average of 85.6 million shares issued in the nine months ended September 30, 2005 and an average of 87.1 million shares issued for the same period in 2004. Outstanding warrants, options to purchase 3.1 million shares and 0.1 million shares of restricted stock at September 30, 2005, are excluded from the calculation of diluted loss from continuing operations per share, since the inclusion of such warrants, options and shares is anti-dilutive.

Statement of Cash Flows

Cash flow information provided below includes continuing and discontinued operations.

Nine Months Ended September 30, 2005 and 2004

For the nine months ended September 30, 2005, cash provided by operating activities increased to £300.1 million from £289.7 million for the nine months ended September 30, 2004. This increase was a result of the improvement in operating results and lower interest payments partly offset by reduced cash flows from discontinued operations due to the sale of our broadcast operations on January 31, 2005. For the nine months ended September 30, 2005, cash paid for interest, exclusive of amounts capitalized, decreased to £126.8 million from £197.0 million during the same period in 2004. This decrease resulted from lower level of debt, lower weighted average interest rates and re-scheduling of interest payments following our refinancing transaction.

For the nine months ended September 30, 2005, cash provided by investing activities was £1,164.8 million compared with cash used in investing activities of £206.9 million for the nine months ended September 30, 2004. The cash provided by investing activities in the nine months ended September 30, 2005 includes £1,229.0 million from the sale of our broadcast operations and £216.2 million for the sale of our Ireland operations. Purchases of fixed assets increased to £220.4 million for the nine months ended September 30, 2005 from £212.2 million for the same period in 2004.

Cash used in financing activities for the nine months ended September 30, 2005 was £891.5 million and £379.8 million in the nine months ended September 30, 2004. The principal components of cash used in financing activities for the nine months ended September 30, 2005 were as follows:

•: £114.0 million relating to repurchases of our common stock in the open market in February and April 2005. On January 31, 2005 we announced that we intended to use up to £475 million of the proceeds from the sale of our broadcast operations to repurchase shares of our common stock; and
•: repayments totaling £723.0 million on our senior credit facility on February 4, 2005, June 14, 2005 and July 14, 2005.
•: the redemption of the Floating Rate Senior Notes on July 15, 2005.

The principal components of the £379.8 million cash used in financing activities for the nine months ended September 30, 2004 relate to our refinancing transaction completed in April 2004 as follows:

•: £812.2 million was raised from the issuance of senior notes by our subsidiary, NTL Cable PLC;
•: £2,175.0 million was drawn under the new senior credit facility, which together with some of the proceeds of the issuance of the senior notes and cash on hand, was used to repay in full our then-existing senior credit facility; and
•: the remaining proceeds from the issuance of the senior notes, together with cash on hand, was used to redeem the Diamond notes and NTL Triangle debentures and pay transaction costs.

Liquidity and Capital Resources

In the second quarter of 2004, we completed our refinancing transaction from which we raised approximately £3.2 billion of indebtedness. The refinancing transaction extended the maturities on substantially all of our debt and lowered our weighted average interest expense. In particular:

•: On April 13, 2004, our wholly owned, newly formed subsidiary, NTL Cable PLC, issued £375 million aggregate principal amount of 9.75% senior notes due 2014, $425 million aggregate principal amount of 8.75% senior notes due 2014, €225 million aggregate principal amount of 8.75% senior notes due 2014 and $100 million aggregate principal amount of floating rate senior notes due 2012, together referred to as the senior notes. The senior notes were offered and sold

under Rule 144A and Regulation S. These senior notes were exchanged for registered securities with identical terms in May 2005.

•: Also, on April 13, 2004, we entered into a new fully underwritten £2,425 million senior secured credit facility, which includes a £250 million revolving tranche. On April 14, 2004 we drew down £2,175 million of our senior credit facility, which, together with some of the proceeds from the issuance of the new notes and cash on hand, we used to repay our then-existing senior credit facility.
•: The remaining proceeds from the notes offering, together with cash on hand, were used on May 13, 2004 to redeem the Diamond notes, redeem the Triangle debentures, and pay transaction costs.

The redemption of the Diamond notes and the Triangle debentures on May 13, 2004, as well as making Diamond Cable Communications Limited and its direct or indirect subsidiaries wholly owned subsidiaries of NTL Cable PLC as required by the terms of the indenture governing the notes and our senior credit facility, has provided us with additional flexibility to engage in intercompany transfer of funds and other transactions.

On February 4, 2005, we repaid £500 million of principal outstanding under our senior credit facility using proceeds from the sale of our broadcast operations. We repaid a further £223 million of principal outstanding under our senior credit facility using the proceeds from the sale of our Ireland operations in two installments of £200 million and £23 million on June 14, 2005 and July 14, 2005, respectively. On June 15, 2005, we issued a notice for the redemption of the $100 million aggregate principal amount of floating rate senior notes due 2012. On July 15, 2005, we redeemed all of the floating rate notes at a redemption price of 103% of the principal amount.

The agreements governing the senior notes and our senior credit facility significantly and, in some cases absolutely, restrict our ability and the ability of most of our subsidiaries to:

•: incur or guarantee additional indebtedness;
•: pay dividends or make other distributions, or redeem or repurchase equity interests or subordinated obligations;
•: make investments;
•: sell assets, including the capital stock of subsidiaries;
•: enter into sale/leaseback transactions;
•: create liens;
•: enter into agreements that restrict the restricted subsidiaries' ability to pay dividends, transfer assets or make intercompany loans;
•: merge or consolidate or transfer all or substantially all of our assets; and
•: enter into transactions with affiliates.

Our business is capital intensive, we are highly leveraged, and we have historically incurred operating losses and negative cash flow, partly as a result of our construction costs, operating expenditures and interest costs. We require significant amounts of capital to connect customers to our network, expand and upgrade our network, offer new services and integrate our billing systems and customer databases. For the period of October 1, 2005 through September 30, 2006, we expect to spend between £290 million and £340 million on acquiring fixed assets. We must also regularly service interest payments with cash flows from operations. Our ability to sustain operations, meet financial covenants under our indebtedness, and make required payments on our indebtedness could be impaired if we are

unable to maintain or achieve various financial performance measures. The merger transaction with Telewest will be funded with cash on hand and new financings which are described in note 6.

Our ability to service our capital needs, to service our obligations under our indebtedness and to fund our ongoing operations will depend upon our ability to generate cash. For the nine months ended September 30, 2005, our cash increased by £587.6 million; however, this was principally because of the proceeds from the sale of our broadcast and Ireland operations.

Although we expect to generate positive cash flow in the future, we cannot assure you that this will be the case. We believe that our cash on hand, together with cash from operations and, if required, drawdowns under the £250 million revolving tranche of our credit facility, will be sufficient for our cash requirements through at least September 30, 2006. However, our cash requirements after September 30, 2006 may exceed these sources of cash. This may require that we obtain additional financing in excess of the financing incurred in the refinancing transaction. We may not be able to obtain financing at all, or on favorable terms, or we may be contractually prevented by the terms of the senior notes or our senior credit facility from incurring additional indebtedness.

We are a holding company with no independent operations or significant assets other than our investments in our subsidiaries. As a result, we will depend upon the receipt of sufficient funds from our subsidiaries to meet our obligations.

In addition, the terms of our and our subsidiaries' existing and future indebtedness, the application of tax rules and regulations in the U.S. and U.K. and the laws of the jurisdictions under which those subsidiaries are organized limit the payment of dividends, loan repayments and other distributions to us under many circumstances or make these transactions impractical or economically inefficient.

Our debt agreements and the debt agreements of some of our subsidiaries contain restrictions on our ability to transfer cash between groups of our subsidiaries. As a result of these restrictions, although our overall liquidity may be sufficient to satisfy our obligations, we may be limited by covenants in some of our debt agreements from transferring cash to other subsidiaries that might require funds. In addition, cross-default provisions in our other indebtedness may be triggered if we default on any of these debt agreements.

Derivative Instruments and Hedging Activities

In the refinancing transaction, we incurred obligations in a combination of U.S. dollars, euros and pound sterling at fixed and variable interest rates. As a result we are exposed to variability in our cash flows and earnings resulting from changes in foreign currency exchange rates and interest rates.

We have entered into a number of derivative instruments with a number of counter-parties to manage our exposures to changes in interest rates and foreign currency exchange rates. The derivative instruments consist of interest rate swaps, cross-currency interest rate swaps and foreign currency forward contracts. On October 2, 2005, we entered into an agreement with several financial institutions for new credit facilities in connection with the combination transaction with Telewest Global, Inc. As a result of this, we have discontinued the hedge designation of certain of our hedges.

Interest rate swaps

We have entered into a number of interest rate swaps to hedge the variability in future interest payments on the senior credit facility which accrues interest at variable rates based on LIBOR. The interest rate swaps allow us to receive interest based on LIBOR in exchange for payments of interest at fixed rates of 5.30% and 5.10%. The net settlement of £3.0 million under the interest rate swaps is included within interest expense for the nine months ended September 30, 2005.

We have designated the interest rate swaps as cash flow hedges under FAS 133 because they hedge against changes in LIBOR. The interest rate swaps are recognized as either assets or liabilities and measured at fair value. Changes in the fair value are recorded within other comprehensive income (loss).

Cross-currency interest rate swaps

We have entered into a number of cross-currency interest rate swaps to hedge the variability in the pound sterling value of interest payments on the 8.75% Senior Notes due 2014 and variable rate based on LIBOR interest payments on the senior credit facility due 2012, denominated in U.S. dollars and euros. Under the cross-currency interest rate swaps we receive interest in U.S. dollars at a rate of 8.75%, and U.S. dollar and euros at a variable rate based on LIBOR, and we pay interest in pound sterling at a rate of 9.42%, and at a variable rate based on LIBOR. The net settlement of £4.3 million under the cross-currency interest rate swap is included within interest expense for the nine months ended September 30, 2005.

We have designated the cross-currency interest rate swaps as cash flow hedges under FAS 133 because they hedge against changes in the pound sterling value of the interest payments on the Senior Notes and senior credit facility that result from changes in the U.S. dollar, pound sterling and euro exchange rates. The cross-currency interest rate swaps are recognized as either assets or liabilities and measured at fair value. For cross-currency interest swaps deemed to be effective under FAS 133 changes in the fair value are recorded either within other comprehensive income (loss). Changes in the fair value of interest rate swaps deemed to be ineffective are recorded in interest expense.

Foreign currency forward contracts

We have entered into a number of forward contracts maturing on April 14, 2009 to purchase a total of $820.2 million and €151.0 million. The contracts hedge the variability in the pound sterling value of the principal obligation of the 8.75% senior notes and on the senior credit facility based on a variable rate of LIBOR, resulting from changes in the U.S. dollar, pound sterling and euro exchange rates.

The forward contracts are not effective as hedges under FAS 133. The forward contracts are still recognized as either assets or liabilities and measured at fair value but changes in the fair value are reported in the income statement. However, the forward contracts do not subject us to material volatility in our earnings and cash flows because changes in the fair value directionally and partially mitigate the gains or losses on the translation of the U.S. dollar and euro denominated senior notes and senior credit facility into pounds sterling.

Description of Outstanding Indebtedness

The terms of the significant notes and credit facilities issued by our subsidiaries as at September 30, 2005 are summarized below.

Senior Credit Facility

•: The principal amount outstanding is £1,455.2 million. Our senior credit facility comprises a term facility denominated in a combination of pound sterling, euros and U.S. dollars totaling £1,455.2 million and a revolving facility of £250 million. The revolving facility was undrawn at September 30, 2005. On February 4, 2005, June 14, 2005 and July 14, 2005 we repaid and cancelled £723 million of the term facility.
•: Our senior credit facility bears interest at LIBOR plus mandatory costs plus a margin rate. The term facility and the revolving facility have different margin rates. At September 30, 2005, the

effective average annual interest rate on the term facility was 7.04%. Interest is payable at least semi-annually.

•: The principal amount outstanding under the term facility is repayable by semi-annual installments beginning September 2004. The voluntary prepayment of £500 million made on February 4, 2005 included the scheduled repayments due in 2005 and the prepayment of £200 million made on June 14, 2005 included the scheduled repayments due in 2006 and reduced the scheduled repayments thereafter.
•: Most of our assets are secured under the senior credit facility.
•: We are subject to financial maintenance tests under our senior credit facility, including tests of liquidity, coverage and leverage ratios applied to us and some of our subsidiaries. As at September 30, 2005, we were in compliance with these covenants.

Senior Notes

•: 9.75% Senior Notes due April 15, 2014—The principal amount at maturity is £375 million. Interest is payable semi-annually on April 15 and October 15 commencing October 15, 2004.
•: 8.75% Senior Notes due April 15, 2014—The principal amount at maturity is $425 million. Interest is payable semi-annually on April 15 and October 15 commencing October 15, 2004.
•: 8.75% Senior Notes due April 15, 2014—The principal amount at maturity is €225 million. Interest is payable semi-annually on April 15 and October 15 commencing October 15, 2004.
•: Floating Rate Senior Notes due October 15, 2012—On July 15, 2005 we redeemed the Floating Rate Senior Notes in full.

Contractual Obligations and Commercial Commitments

The following table includes aggregate information about our contractual obligations as of September 30, 2005, and the periods in which payments are due (in millions).

Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Long-Term Debt Obligations	£	2,225.2	£	0.3	£	212.1	£	266.4	£	1,746.4
Capital Lease Obligations		117.8		4.5		8.6		8.1		96.6
Operating Lease Obligations		312.1		40.7		70.8		49.6		151.0
Purchase Obligations		123.0		120.8		2.2		—		—
Other Long-Term Liabilities reflected in the registrant's balance sheet under GAAP		—		—		—		—		—

Total	£	2,778.1	£	166.3	£	293.7	£	324.1	£	1,994.0

The following table includes information about our commercial commitments as of September 30, 2005. Commercial commitments are items that we could be obligated to pay in the future. They are not required to be included in the consolidated balance sheet (in millions).

			Amount of Commitment Expiration per Period
Other Commercial Commitments	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Guarantees	£	20.5	£	12.2	£	—	£	—	£	8.3
Lines of Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Standby Repurchase Obligations		—		—		—		—		—
Other Commercial Commitments		—		—		—		—		—

Total Commercial Commitments	£	20.5	£	12.2	£	—	£	—	£	8.3

Guarantees relate to performance bonds provided by banks on our behalf as part of our contractual obligations. The fair value of the guarantees has been calculated by reference to the monetary value of each bond.

On October 2, 2005, we entered into an agreement to combine with Telewest Global, Inc. and an agreement with several financial institutions to provide syndicated senior secured credit facilities and a senior subordinated bridge facility totalling £5.1 billion to refinance the existing debt of the Company, finance the acquisition of Telewest and to finance the ongoing working capital needs and general corporate requirements of NTLIH and its subsidiaries and the Telewest group of companies. See "Note 3—Acquisitions and Disposals."

Transactions with Related and Certain Other Parties

In consideration for financial and business services, subject to the successful completion of the financing, a related entity of W.R. Huff Asset Management Co., L.L.C. was paid $7.5 million on April 27, 2004.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, like foreign currency exchange and interest rates. As some of our indebtedness accrues interest at variable rates, we have exposure to volatility in future cash flows and earnings associated with variable interest rate payments.

Also, all of our revenues and a substantial portion of our operating costs are earned and paid in pound sterling but we pay interest and principal obligations on some of our indebtedness in U.S. dollars and euros. As of September 30, 2005, £463.5 million, or 20.5% of our long-term debt, was denominated in U.S. dollars and £256.2 million, or 11.3%, of our long-term debt was denominated in euros. As a result, we have exposure to volatility in future cash flows and earnings associated with changes in foreign exchange rates on payments of principal and interest on a portion of our indebtedness.

To mitigate the risk from these exposures, we have implemented a cash flow hedging program. The objective of this program is to reduce the volatility of our cash flows and earnings caused by changes in underlying rates. To achieve this objective we have entered into a number of derivative instruments. The derivative instruments utilized comprise interest rate swaps, cross-currency interest rate swaps and foreign currency forward contracts. We do not enter into derivative instruments for trading or speculative purposes. See Note 7—Derivative Instruments and Hedging Activities and Management's Discussion and Analysis of Financial Condition and Results of Operations—Derivative Instruments and Hedging Activities.

The fair market value of long-term fixed interest rate debt and the amount of future interest payments on variable interest rate debt are subject to interest rate risk.

The following table provides information as of September 30, 2005, about our long-term fixed and variable interest rate debt by maturity that is sensitive to changes in interest rates and foreign currency exchange rates (in millions, except percentages).

		Three months ended December 31, 2005	Year ended December 31,
			Year ended December 31,							Fair Value September 30, 2005
			2006	2007	2008	2009	Thereafter		Total	Fair Value September 30, 2005
Long-term debt including current portion
US Dollars
	Fixed rate	—	—	—	—	—	$425.0		$425.0	$436.7
	Average interest rate						8.75	%
	Average forward exchange rate						£0.56
Pound Sterling
	Fixed rate	—	—	—	—	—	£375.0		£375.0	£380.6
	Average interest rate						9.75	%
Euro
	Fixed rate	—	—	—	—	—	€225.0		€225.0	€237.4
	Average interest rate						8.75	%
	Average forward exchange rate						£0.77
Pound Sterling
	Variable Rate	—	—	£76.4	£135.3	£132.9	£199.4		£544.0	£544.0
	Average interest rate	—	—	LIBOR plus 1.75%	LIBOR plus 1.75%	LIBOR plus 1.75%	LIBOR plus 1.75	%
Pound Sterling
	Variable Rate	—	—	—	—	—	£585.0		£585.0	£585.0
	Average interest rate						LIBOR plus 3.00	%
Euro
	Variable Rate	—	—	—	—	—	€151.0		€151.0	€151.0
	Average interest rate						LIBOR plus 3.00	%
	Average forward exchange rate						£0.75
US Dollars
	Variable Rate	—	—	—	—	—	$395.2		$395.2	$395.2
	Average interest rate						LIBOR plus 3.00	%
	Average forward exchange rate						£0.56

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of such period, these controls and procedures are effective to ensure that information required to be disclosed by the registrant in the reports the registrant files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the registrant in the reports that it files or submits is accumulated and communicated to the registrant's management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting. There have not been any changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

PTV, formerly NTL Europe, and some of its former officers, including Barclay Knapp, our former president and chief executive officer, have been named as defendants in a number of purported securities class action lawsuits and one individual action brought by former PTV stockholders. The complaints in those cases generally allege that the defendants failed to disclose PTV's financial condition, finances and future prospects accurately in press releases and other communications with investors prior to filing its Chapter 11 case in federal court. The defendants filed motions to dismiss the actions and, on July 31, 2003, the court entered an order dismissing the complaint in the individual action without prejudice to filing an amended complaint and deferred its decision on the complaint in the class action lawsuits. On August 20, 2003, the plaintiff in the individual action filed an amended complaint which the defendants moved to dismiss. The cases have been consolidated for all purposes before the U.S. District Court for the Southern District of New York. On December 7, 2004, the court denied in part and granted in part the defendants' motions to dismiss all actions. The court denied the defendants' motions to dismiss claims based on factual allegations that PTV (i) failed to disclose material difficulties it faced in integrating acquired companies, (ii) failed to disclose material practices that inflated subscriber numbers (with respect to some defendants), and (iii) failed to disclose the cash flow status of its largest acquisition during the relevant period (with respect to some defendants). The court found no factual support for the plaintiffs' other allegations. The defendants have informed us that they intend to defend these lawsuits vigorously. While PTV has been released from monetary liability (other than PTV's insurance coverage) in these actions as a result of the completion of the Plan, the case remains pending against PTV and the individuals named as defendants. We have not been named as a defendant. We may be liable for indemnification claims from some of PTV's former officers and directors, including Mr. Knapp, to the extent PTV's insurance coverage is insufficient.

Two separate proceedings that were initiated in the U.S. Bankruptcy Court for the Southern District of New York by Owl Creek Asset Management, L.P. and JMB Capital Partners, L.P. requesting that we be held liable for alleged damages attributable to their trading in our "when-issued" common stock prior to the completion of the Plan were voluntarily dismissed by the plaintiffs in June 2003 without prejudice to recommencement in state court where related litigation against third parties is pending. The third parties are primarily the counterparties to the various trades made by Owl Creek Asset Management, L.P. and JMB Capital Partners, L.P. On March 16, 2004, in an action to which we are not a party, a state court in New York granted the summary judgment motion of a U.S. broker dealer to require that "when-issued" trading in our common stock prior to the completion of the Plan be settled on an adjusted basis by the parties to the action in a manner to be set forth in an order of the state court, which was entered on July 1, 2004. Several plaintiffs have appeals pending. On March 30, 2004, Owl Creek Asset Management, L.P. and JMB Capital Partners, L.P. filed a complaint in the Supreme Court of the State of New York seeking to hold us and PTV liable for alleged damages attributable to some of their trading in our common stock on a "when-issued" basis. Another party has notified NTL and PTV that it intends to assert a similar claim, as may other parties in the future. On April 13, 2004, the plaintiff agreed to adjourn the case until there has been a final determination in the aforementioned state court action, including any appeals in that action, by the U.S. broker dealer.

We are involved in various other disputes and litigation arising in the ordinary course of our business. None of these matters is expected to have a material adverse effect on our financial position, results of operation or cash flow.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1		Certification of Chief Executive Officer, pursuant to Rule 13(a)-14(a) and Rule 15d-14(a) of the Exchange Act.
31.2		Certification of Chief Financial Officer, pursuant to Rule 13(a)-14(a) and Rule 15d-14(a) of the Exchange Act.
32.1		Certifications of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NTL INCORPORATED
Date: November 8, 2005	By:	/s/ SIMON P. DUFFY
		Simon P. Duffy Chief Executive Officer, President and Director
Date: November 8, 2005	By:	/s/ JACQUES KERREST
		Jacques Kerrest Chief Financial Officer

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NTL INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in millions)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

SIGNATURES