DIAMOND CABLE COMMUNICATIONS LTD - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)
x		Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended:

MARCH 31, 2003


(Mark One)
o		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from to .

Commission File Number 33-83740

DIAMOND CABLE COMMUNICATIONS LIMITED
(Exact name of registrant as specified in its charter)


England and Wales		N/A

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

		Secretary
		NTL Incorporated
		110 East 59^th Street
Diamond Plaza, Daleside Road		New York, NY 10022
Nottingham NG2 3GG, England		(212) 906-8440

(Address of Registrant’s principal executive offices)		(Name, address and telephone
		number of agent for service)

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 x No o

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

As of March 31, 2003, there were 59,138,852 shares of the Registrant’s Ordinary Shares of 2.5 pence each outstanding. The Registrant is a wholly owned subsidiary of NTL Incorporated and there is no market for the Registrant’s shares.

APPLICABLE ONLY TO REGISTRANTS 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 x No o

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and December 31, 2002
		Condensed Consolidated Statement of Operations for Three Months Ended March 31, 2003 and 2002 and January 1, 2003 (Unaudited)
		Condensed Consolidated Statement of Shareholder’s Deficiency for the Three Months Ended March 31, 2003 (Unaudited)
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 and January 1, 2003 (Unaudited)
		Notes To Condensed Consolidated Financial Statements (Unaudited)
	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
	Risk Factors
PART II. OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
	SIGNATURES
EX-99.1: CERTIFICATION OF CEO AND CFO

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

TABLE OF CONTENTS


			Page
			Number

PART I	FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and December 31, 2002	2

		Condensed Consolidated Statements of Operations for Three Months Ended March 31, 2003 and 2002 and January 1, 2003 (Unaudited)	3

		Condensed Consolidated Statement of Shareholder’s Equity (Deficiency) for the Three Months Ended March 31, 2003 (Unaudited)	4

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 and January 1, 2003 (Unaudited)	5

		Notes to the Condensed Consolidated Financial Statements (Unaudited)	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

	Item 4.	Controls and Procedures	29

	Risk Factors		30

PART II	OTHER INFORMATION

	Item 6.	Exhibits and Reports on Form 8-K	38

	SIGNATURES		39

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS
(in £’000s)


			March 31,			December 31,
			2003			2002

			Reorganized			Predecessor
			Company			Company

			(Unaudited)			(See Note)
Assets
Current assets
	Cash and cash equivalents			£140			£12,168
	Trade receivables — less allowance for doubtful accounts of £1,876 (2003) and £2,847 (2002)			17,674			15,952
	Other			282			498

		Total current assets		18,096			28,618
Property and equipment — net				365,948			486,142
Deferred financing costs — net of accumulated amortization of £349 (2003) and £15,468 (2002)				3,343			9,684
Goodwill				—			66,647
Franchise costs				—			316
Customer list- net of accumulated amortization of £3,140 (2003)				63,421			—
Reorganization value in excess of amounts allocable to identifiable assets				79,262			—

Total assets				£530,070			£591,407

Liabilities and shareholder’s equity (deficiency)
Current liabilities
	Accounts payable and accrued expenses			£10,653			£10,542
	Deferred revenue			5,410			4,525
	Due to affiliates			34,257			30,655
	Interest payable			3,309			—
	Current portion of long-term debt			252			1,960

Total current liabilities				53,881			47,682
Liabilities subject to compromise				—			1,029,422
Deferred income taxes				921			921
Long-term debt				160,709			—
Commitments and contingent liabilities
Shareholder’s deficiency:
	Ordinary shares: 150,000,060 authorized; 59,138,852 (2003) and 59,138,851 (2002) issued and outstanding			1,478			1,478
	Additional paid-in-capital			350,288			317,506
	Accumulated deficit			(37,207	)		(805,602	)

		Total shareholder’s equity (deficiency)		314,559			(486,618	)

Total liabilities and shareholder’s equity (deficiency)				£530,070			£591,407

Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date.

See accompanying notes.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in £’000s)


		Three Months Ended March 31,

		2003			2002

		Reorganized			Predecessor
		Company			Company

Revenue			£45,190			£46,530

Costs and expenses
	Operating costs (exclusive of depreciation shown separately below)		(20,714	)		(22,733	)
	Selling, general and administrative		(14,191	)		(14,823	)
	Other charges		(131	)		(7	)
	Depreciation		(11,273	)		(15,680	)
	Amortization		(3,140	)		—

			(49,449	)		(53,243	)

Operating loss			(4,259	)		(6,713	)
Other income (expense)
	Interest income		50			95
	Interest expense and amortization of debt discount and expense		(7,503	)		(31,297	)
	Interest expense to affiliate		(29,281	)		—
	Foreign exchange gains (losses), net		3,786			(20,939	)

Net loss			£(37,207	)		£(58,854	)


	January 1, 2003

	Predecessor Company

Interest expense to affiliate	£	(59,850	)
Fresh-start adoption — intangible assets		78,860
Fresh-start adoption — long-term debt		723,533
Fresh-start adoption — fixed assets		(113,965	)

Net income		£628,578

See accompanying notes.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY (DEFICIENCY)
(Unaudited)
(in £000’s except number of shares)


	Ordinary Shares				Additional			Comprehensive						Total
					Paid-in-			income			Accumulated			Shareholder's
	Shares		Par		capital			(loss)			Deficit			Equity (Deficiency)

Predecessor Company
Balance at December 31, 2002		59,138,851		£1,478		£317,506						£(805,602	)		£(486,618	)
Net income		—		—		—		£	628,578			628,578			628,578

Exit transactions		1		—		14,380						—			14,380
Fresh start adjustment		—		—	£	(177,024	)					177,024			—

Reorganized Company
Balance at January 1, 2003		59,138,852		£1,478		154,862						—			156,340
Release of debt obligations		—		—		195,426						—			195,426
Net loss		—		—		—			£(37,207	)		(37,207	)		(37,207	)

Balance at March 31, 2003		59,138,852		£1,478		£350,288						£(37,207	)		£314,559

See accompanying notes.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in £’000s)


			Three Months Ended March 31,

			2003			2002

			Reorganized			Predecessor
			Company			Company

Net cash (used in) provided by operating activities				£(6,901	)		£3,923

Investing activities
	Purchase of property and equipment			(5,044	)		(5,719	)

		Net cash used in investing activities		(5,044	)		(5,719	)

Financing activities
	Principal payments			(83	)		(95	)
	Capital lease payments			—			(27	)

		Net cash used in financing activities		(83	)		(122	)

Decrease in cash and cash equivalents				(12,028	)		(1,918	)
Cash and cash equivalents at beginning of period				12,168			4,535

Cash and cash equivalents at end of period				£140			£2,617

Supplemental disclosure of cash flow information
	Cash paid during the period for interest			£20,196			£10,351


			January 1, 2003

			Predecessor Company

Net cash (used in) provided by operating activities				£—

Investing activities
		Net cash used in investing activities		—

Financing activities
		Net cash used in financing activities		—

Decrease in cash and cash equivalents				—
Cash and cash equivalents at beginning of period				12,168

Cash and cash equivalents at end of period				£12,168

Supplemental disclosure of cash flow information
	Cash paid during the period for interest			£	—

See accompanying notes.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

Organization and Business

Diamond Cable Communications Limited (formerly Diamond Cable Communications Plc) (the “Company”) is a limited company incorporated under the laws of England and Wales. The Company is a holding company that holds all of the shares of various companies that operate broadband communications networks for telephone, cable television and Internet services in the United Kingdom (the “UK”). The Company holds these shares through an intermediate holding company, Diamond Holdings Limited (formerly Diamond Holdings Plc) (“Diamond Holdings”). The Company is a wholly owned subsidiary of NTL Incorporated. When used herein, the “Group “ refers to the Company with subsidiaries.

Chapter 11 Reorganization

On May 8, 2002, the Company and Diamond Holdings (together the “Debtors”) filed a prearranged joint reorganization plan (the “Plan”) under Chapter 11 of Title 11 of the US Bankruptcy Code. The Debtors filed jointly with NTL Incorporated, NTL (Delaware), Inc., NTL Communications Corp. and Communications Cable Funding Corp. Also, on May 8, 2002, the Debtors filed proceedings for Administration in England. The Company’s operating subsidiaries were not included on the Chapter 11 filing. The Plan became effective on January 10, 2003, (the “Effective Date”) at which time the Company emerged from Chapter 11 reorganization.

Pursuant to the Plan, the entity formerly known as NTL Incorporated and its subsidiaries and affiliates were split into two separate groups, and the Company’s parent company and NTL Europe, Inc. each emerged as independent public companies. The entity formerly known as NTL Communications Corp. was renamed “NTL Incorporated” and became the holding company for the former NTL group’s principal UK and Ireland assets. Prior to consummation of the Plan, NTL Communications Corp was a wholly-owned subsidiary of the entity then known as NTL Incorporated, which, pursuant to the Plan, was renamed “NTL Europe, Inc.” and which became the holding company for the former NTL group’s continental European and certain other assets. Pursuant to the Plan, all of the outstanding securities of the Company’s former parent company (NTL Europe, Inc.) and certain of its subsidiaries, including the Company’s parent company, were cancelled, and the Company’s parent company issued shares of its common stock and Series A warrants and NTL Europe, Inc. issued shares of its common stock and preferred stock to various former creditors and stockholders of the Company’s former parent company and its subsidiaries, including the Company. The precise mix of new securities received by holders of each particular type of security of the Company’s former parent company and its subsidiaries was set forth in the Plan. The outstanding notes of Diamond Holding Limited and NTL (Triangle) LLC were not canceled and remain outstanding.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries (the “Group”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles 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 months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

The Company operated its business as a debtor-in-possession subject to the jurisdiction of the Bankruptcy Court during the period from May 8, 2002 until January 10, 2003. Accordingly, the Company’s consolidated financial statements for periods prior to its emergence from Chapter 11 reorganization were prepared in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”). In addition, the Company adopted fresh-start reporting upon its emergence from Chapter 11 reorganization in accordance with SOP 90-7. For financial reporting purposes, the effects of the consummation of the Plan as well as adjustments for fresh-start reporting have been recorded in the accompanying unaudited condensed consolidated financial statements as of January 1, 2003.

Pursuant to fresh-start reporting, a new entity was deemed created for financial reporting purposes and the carrying value of assets and liabilities was adjusted. The carrying value of assets was adjusted to their reorganization value that is equivalent to their estimated fair value. The carrying value of liabilities was adjusted to their present value. Since fresh-start reporting materially changed the carrying values recorded in the Company’s consolidated balance sheet, a black line separates the financial statements for periods after the adoption of fresh-start reporting from the financial statements for periods prior to the adoption.

The term “Predecessor Company” refers to the Company and its subsidiaries for periods prior to and including December 31, 2002. The term “Reorganized Company” refers to the Company and its subsidiaries for periods subsequent to January 1, 2003. The effects of the consummation of the Plan as well as adjustments for fresh-start reporting recorded as of January 1, 2003 are Predecessor Company transactions and are presented in the accompanying condensed consolidated statements of operations and cash flows dated January 1, 2003. All other results of operations and cash flows on January 1, 2003 are Reorganized Company transactions.

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

Historical Structure of the Company

In May 1999, the Company and Diamond Holdings converted from public limited companies to limited companies and thereby changed their names to Diamond Cable Communications Limited and Diamond Holdings Limited, respectively.

On March 8, 1999, the share exchange was completed whereby all of the holders of the Company’s ordinary and deferred shares exchanged their shares for newly issued common stock of NTL Incorporated (formerly NTL Communications Corp). The Company is a wholly-owned subsidiary of NTL Incorporated (“NTL”).

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

2. Reorganization and Emergence from Chapter 11

Background of Restructuring

Both the equity and debt capital markets experienced periods of significant volatility in 2001 and 2002, particularly for securities issued by telecommunications and technology companies. As a result, the ability of NTL Incorporated and its subsidiaries to access those markets as well as its ability to obtain financing from its bank lenders and equipment suppliers became severely restricted. In addition, NTL Incorporated and its subsidiaries, including the Company, had no further funds available, or were unable to draw upon funds, under NTL’s credit facilities. As a result of these factors, together with its substantial leverage, on January 31, 2002, NTL Incorporated announced that it had appointed professional advisors to advise on strategic and recapitalization alternatives to strengthen its balance sheet, reduce debt and put an appropriate capital structure in place for its business.

Promptly upon obtaining the requisite waivers from the lenders under its credit facilities in March 2002, NTL Incorporated and certain of its subsidiaries commenced negotiations with a steering committee of the unofficial committee of its bondholders and the committee’s legal and financial advisors.

NTL Incorporated and its subsidiaries failed to make interest payments on some of the outstanding notes starting on April 1, 2002. NTL Incorporated also failed to declare or pay dividends on certain series of its outstanding preferred stock due to a lack of available surplus under Delaware law.

On April 16, 2002, NTL Incorporated announced that it and an unofficial committee of its bondholders had reached an agreement in principle on a comprehensive recapitalization of the former NTL group. To implement the proposed recapitalization plan, on May 8, 2002, the Company, the Company’s parent company and certain of the other subsidiaries of NTL Incorporated filed cases and a pre-arranged joint reorganization plan under Chapter 11 of the U.S. Bankruptcy Code. In connection with the filing, some members of the unofficial creditors’ committee of bondholders entered into a credit facility agreement (referred to as the “DIP facility”) committing to provide a

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

wholly-owned subsidiary of the Company’s parent company with up to $500.0 million in new debt financing (NTL Delaware committed to provide up to an additional $130.0 million under the DIP facility.).

As a result of the payment defaults as well as the voluntary filing under Chapter 11 by NTL Incorporated and certain of its subsidiaries on May 8, 2002, there was an event of default under all of NTL Incorporated and its subsidiaries’ credit facilities and the indentures governing all of their publicly traded debt, other than debt of NTL (Triangle) LLC.

The Plan was confirmed by the Bankruptcy Court on September 5, 2002. During the fall of 2002, NTL Incorporated negotiated with a group of lenders to lender into a new financing arrangement to repay the DIP facility, to repay certain obligations and to provide liquidity to the Company and its subsidiaries. The Plan became effective on January 10, 2003, at which time the Company and Diamond Holdings emerged from Chapter 11 reorganization. In connection with the Company’s emergence from Chapter 11 reorganization, the Company’s parent company and certain of its subsidiaries issued $558.249 million aggregate principal face amount of 19% Senior Secured Notes due 2010 (the “Exit Notes”) on January 10, 2003. Initial purchasers of the Company’s parent company’s Exit Notes also purchased 500,000 shares of the Company’s parent company’s common stock on that date. The gross proceeds from the sale of the Exit Notes and such shares totaled $500.0 million. The proceeds were used in part to repay all amounts outstanding under the DIP facility and to purchase from NTL Delaware a £90.0 million note of NTL (UK) Group Inc. and to repay certain other obligations. Also on January 10, 2003, the Company’s parent company and its lending banks amended its existing credit facilities.

The Group has historically incurred operating losses and negative operating cash flow. In addition, the Group required and expects to continue to require significant amounts of capital to finance construction of its networks, connection of customers to the networks, other capital expenditures and for working capital needs including debt service requirements. As of March 31, 2003, the Company had approximately £0.1 million in cash and cash equivalents on hand. The Company estimates that the Group’s cash from operations, net of its capital expenditures and debt service requirements will be approximately £8 million to £12 million from April 1, 2003 to March 31, 2004.

Reorganization Value

The Company adopted fresh-start reporting upon its emergence from Chapter 11 reorganization in accordance with SOP 90-7. The Company engaged an independent financial advisor to assist in the determination of its reorganization value as defined in SOP 90-7. The Company and its independent financial advisor determined the Company’s reorganization value was £556.3 million. This determination was based upon various valuation methods, including discounted projected cash flow analysis, selected comparable market multiples of publicly traded companies and other applicable ratios and economic information relevant to the operations of the Company. Certain factors that were incorporated into the determination of the Company’s reorganization value included the following:

• Reporting unit 10 year cash flow projections

• Corporate income tax rates of 30% in the UK

• Present value discount factor of 15%

• Residual value representing the sum of the value beyond 10 years into perpetuity was calculated using the Gordon Growth Model

The cash flow projections are based on economic, competitive and general business conditions prevailing when the projections were prepared. They are also based on a variety of estimates and assumptions which, though considered reasonable by management, may not be realized, and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. A change in the estimates and assumptions about revenue, operating cash flow, tax rates and capital expenditures may have had a significant effect on the determination of the Company’s reorganization value.

The Company determined that its reorganization value computed as of the Effective Date of January 10, 2003 consisted of the following (in thousands):

Present value of discounted cash flows of the emerging entity £ 518,000

Current assets 28,618

Other assets 9,684

Reorganization value
£ 556,302

The Company adopted fresh-start reporting because the holders of NTL Incorporated’s voting common shares immediately before filing and confirmation of the Plan received less than 50% of NTL Incorporated’s voting shares of the emerging company, and because the Company’s reorganization value is less than its post-petition liabilities and allowed claims, as shown below (in thousands):

Allowed claims:

Liabilities subject to compromise
£ 1,029,422

Post petition liabilities:

Current liabilities
47,682

Deferred income taxes
921

1,078,025

Reorganization value 556,302

£ 521,723

Fresh-Start Reporting

In accordance with SOP 90-7, the Company adopted fresh-start reporting on January 1, 2003. The following reconciliation of the Predecessor Company’s consolidated balance sheet as of December 31, 2002 to that of the Reorganized Company as of January 1,2003 gives effect to the emergence from Chapter 11 reorganization and the adoption of fresh-start reporting.

The Company engaged an independent financial advisor to assist in the determination of the reorganization value (or fair value) of its assets and the present value of its liabilities. This determination resulted in the fresh-start

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

reporting adjustments to write-down fixed assets and write-up intangible assets to their fair values. In addition, the Company’s total reorganization value exceeded the amounts allocable to identifiable assets that resulted in a new indefinite-lived intangible asset.

The adjustments entitled “Emergence from Chapter 11” reflect the consummation of the Plan. The adjustments entitled “Fresh-Start” reflect the adoption of fresh-start reporting.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)



					December 31, 2002									January 1, 2003
								Emergence
					Predecessor			from			Fresh-			Reorganized
					Company			Chapter 11			Start			Company

					(In £000s)
	Assets
	Current assets
		Cash and cash equivalents			£	12,168								£	12,168
		Trade receivables, net				15,952									15,952
		Other				498									498

			Total current assets			28,618			—			—			28,618

	Fixed assets
		Property and equipment, net				486,142					£	(113,965	)		372,177
	Other assets
		Deferred financing costs, net				9,684									9,684
		Goodwill				66,647						(66,647	)		—
		Franchise costs				316						(316	)		—
		Customer lists										66,561			66,561
		Reorganization value in excess of fair market value										79,262			79,262

			Total assets		£	591,407		£	—		£	(35,105	)	£	556,302

Liabilities and shareholder’s equity (deficit)
Liabilities not subject to compromise
Current liabilities
				Accounts payable and accrued expenses	£	10,542								£	10,542
				Deferred revenue		4,525									4,525
				Due to affiliates		30,655									30,655
				Interest payable				£	18,487						18,487
				Current portion of long-term debt		1,960					£	(1,708	)		252

				Total current liabilities		47,682			18,487			(1,708	)		64,461

				Long-term debt, net of discount					203,282			(45,733	)		157,549
				Long-term debt due to affiliates					853,123			(676,092	)		177,031
				Deferred income taxes		921			—			—			921

				Total liabilities not subject to compromise		48,603			1,074,892			(723,533	)		399,962

Liabilities subject to compromise
				Long-term debt		971,567			(971,567	)					—
				Notes payable to affiliates		12,117			(12,117	)					—
				Accrued interest		45,738			(45,738	)					—

				Total liabilities subject to compromise		1,029,422			(1,029,422	)		—			—

				Ordinary shares		1,478									1,478
				Additional paid-in capital		317,506			14,380			(177,024	)		154,862
				Accumulated earnings (deficit)		(805,602	)		(59,850	)		865,452			—

				Total shareholder’s equity (deficit)		(486,618	)		(45,470	)		688,428			156,340

				Total liabilities and shareholder’s equity (deficit)	£	591,407		£	—		£	(35,105	)	£	556,302

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Pro Forma Results of Operations

The unaudited condensed consolidated pro forma results of operations for the three months ended March 31, 2002 assuming the emergence from Chapter 11 reorganization and the adoption of fresh-start reporting occurred on January 1, 2002 follows (in thousands). The pro forma results of operations are not necessarily indicative of the results that would have occurred had the emergence from Chapter 11 reorganization and the adoption of fresh-start reporting occurred on January 1, 2002, or that might occur in the future.


	Three Months Ended
	March 31, 2002

Total revenue		£ 46,350




Net (loss)		(17,420	)

3. Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 replaced Emerging Issues Task Force Issue No. 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity is recognized when the liability is incurred. Under Issue No. 94-3, a liability for an exit cost as defined is recognized at the date of a commitment to an exit or disposal plan. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this standard did not have a significant effect on the results of operations, financial condition or cash flows of the Group.

In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” effective for the Group on January 1, 2003. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible fixed assets and the associated asset retirement costs. The adoption of this standard did not have a significant effect on the results of operations, financial condition or cash flows of the Group.

4. Comprehensive Loss

Consolidated comprehensive loss for the three months ended March 31, 2003 and 2002 was £37.2 million and £58.9 million, respectively.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

5. Property and Equipment

Property and equipment consists of (in £000’s):


		Reorganized			Predecessor
		Company			Company

	Estimated	March 31,			December 31,
	Useful Life	2003			2002

	(Unaudited)
Operating Equipment	3-40 years		£338,807			£771,778
Other Equipment	3-50 years		13,818			24,575
Construction in progress			24,596			4,742

			377,221			801,095
Accumulated depreciation			(11,273	)		(314,953	)

			£365,948			£486,142

The change in property and equipment is primarily the result of the £114.0 million reduction in the carrying value upon the adoption of fresh-start reporting as of January 1, 2003.

6. Intangible Assets

The change in intangible assets is primarily the result of the £66.6 million increase in the carrying value of customer lists, the £66.6 million decrease in the carrying value of goodwill, the £79.3 million increase in reorganization value in excess of amounts allocable to identifiable assets and the £0.3 million decrease in the carrying value of franchise costs upon the adoption of fresh-start reporting as of January 1, 2003. Customer lists are amortized on a straight-line basis over approximately five years.

Estimated aggregate amortization expense for each of the five succeeding fiscal years from December 31, 2002 is as follows: £12.6 million in 2003, £12.6 million in 2004, £12.6 million in 2005, £12.6 million in 2006 and £12.6 million in 2007.

7. Liabilities subject to compromise

Liabilities subject to compromise consist of (in £’000s):


	March 31,		December 31,
	2003		2002

	Reorganized		Predecessor
	Company		Company

Diamond Cable:
13 1/4% Senior Discount Notes		£—	£177,136
11 3/4% Senior Discount Notes		—	329,887
10 3/4% Senior Discount Notes		—	261,262
Diamond Holdings:
10% Senior Sterling Notes		—	135,000
9 1/8% Senior Notes		—	68,282
Other:
30% Loan Note		—	12,117
Accrued Interest		—	45,738

		£—	£1,029,422

Upon emergence from Chapter 11 reorganization and in accordance with the Plan, all of the outstanding public notes of Diamond Cable Communications Limited were acquired by NTL Incorporated. On February 4, 2003, NTL Incorporated released the Company from any further obligations to pay interest and/or principal on these notes. The Diamond Holdings Notes remain outstanding.

8. Long-term debt

Long-term debt consists of the following Notes payable (in £000’s):

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)


	March 31,		December 31,
	2003		2002

	Reorganized		Predecessor
	Company		Company

	(Unaudited)
10% Senior Sterling Notes, less unamortized discount of £25,672 (2003)		£109,328	£	—
9 1/8% Senior Notes, less unamortized discount of £19,871 (2003)		49,730		—
Mortgage loan		1,903		1,960

		160,961		1,960
Less current portion		252		1,960

		£160,709	£	—

9. Related Party Transactions

On March 31, 2003, the Company entered into a loan agreement with NTL under which £10.0 million had been borrowed on April 2, 2003. Interest is payable on any and all outstanding principal amounts from time to time from and including the date of the initial borrowing until such principal amounts are paid in full. The initial interest rate is 8.0% or such other rate as may be agreed from time to time. The outstanding principal and accrued and unpaid interest are payable upon demand.

Since the acquisition of the Company by NTL in March 1999, a subsidiary of NTL has been providing infrastructure and management support services to the Group. Benefits include usage of NTL network assets, network maintenance, marketing and shared overhead. Additionally, in 2001 certain elements of the Group’s network operations and customer operations were integrated with NTL’s national and regional operations in order for the Group to gain the advantage of NTL’s scale.

The related charges, which began in the fourth quarter of 1999, represent the Group’s portion of costs incurred by a subsidiary of NTL for the benefit of all UK operations within NTL. These charges are made on the basis of an allocation formula appropriate to each category of charge. The Group was charged £22.9 and £24.4 million for the three months ended March 31, 2003 and 2002, respectively. For 2003, £8.7 million was included in operating costs and £14.2 million was included in selling, general and administrative expense. For 2002, £9.6 million was included in operating costs and £14.8 million was included in selling, general and administrative expense. It is not practicable to determine the amount of these expenses that would have been incurred had the Group operated as an unaffiliated entity. In the opinion of management of the Group, the allocation method is reasonable.

As of March 31, 2003 and December 31, 2002, the due to affiliates balance includes payments made to third parties on behalf of the Group by a subsidiary of NTL. The Group has reduced direct transactions with third parties as a result of the continued integration of the Group with NTL. The Group has therefore had its liabilities to third parties significantly reduced, with a rise in amounts due to affiliates. The payments made on behalf of the Group represent directly attributable expenses incurred by the Group.

10. Commitments and Contingent Liabilities

As of March 31, 2003, the Company had no commercial commitments.

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

11. Condensed Consolidating Financial Statements of Diamond Cable Communications Limited

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

On February 6, 1998, Diamond Holdings, a subsidiary of the Company, issued £135.0 million principal amount of its 10% Senior Notes due February 1, 2008 and $110.0 million principal amount of its 9 1/8% Senior Notes due February 1, 2008 (together, the “1998 Notes”). The 1998 Notes have been fully and unconditionally guaranteed by the Company as to principal, interest and other amounts due. The Company has no independent operations and no subsidiaries other than Diamond Holdings. Diamond Holdings is restricted in its ability to make funds available to the Company except for funds to pay interest on the Company’s Notes and £5.0 million annually. The following condensed consolidating financial information of the Company as of March 31, 2003 and December 31, 2002 and for the three months ended March 31, 2003, on January 1, 2003 and three months ended March 31, 2002 is being provided pursuant to Article 3-10(c) of Regulation S-X.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Note 11 (continued)


	Three Months Ended March 31, 2003

	Diamond			Diamond									Consolidated
Statement of Operations	Cable			Holdings			Subsidiaries			Adjustments			Diamond Cable

Revenue		£—			£—			£45,190			£—			£45,190

Costs and expenses
Operating		—			—			(20,714	)		—			(20,714	)
Selling, general and administrative		—			—			(14,191	)		—			(14,191	)
Other charges		—			—			(131	)		—			(131	)
Depreciation and amortization		—			—			(14,413	)		—			(14,413	)

		—			—			(49,449	)		—			(49,449	)

Operating loss		—			—			(4,259	)		—			(4,259	)
Other income (expense)
Interest income		3,242			4,667			50			(7,909	)		50
Interest expense and amortization of debt discount and expenses		—			(7,477	)		(26	)		—			(7,503	)
Interest expense to affiliates		(29,281	)		—			(7,909	)		7,909			(29,281	)
Foreign exchange gains (losses), net		5,981			9			(2,204	)		—			3,786
Equity in net loss of subsidiary		(17,149	)		(14,348	)		—			31,497			—

Net (loss) income		£(37,207	)		£(17,149	)		£(14,348	)		£31,497			£(37,207	)


	January 1, 2003

				Diamond								Consolidated
Statement of operations	Diamond Cable			Holdings			Subsidiaries			Adjustments		Diamond Cable

Interest expense to affiliates	£	(59,850	)	£	—		£	—		£	—	£	(59,850	)
Fresh-start adoption		676,092			47,441			(35,105	)		—		688,428
Equity in net loss of subsidiary		12,336			(35,105	)		—			22,769		—

Net income (loss)	£	628,578		£	12,336		£	(35,105	)	£	22,769	£	628,578

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Note 11 (continued)


	Three Months Ended March 31, 2002

													Consolidated
Statement of Operations	Diamond Cable			Diamond Holdings			Subsidiaries			Adjustments			Diamond Cable

Revenue		£—			£—			£46,530			£—			£46,530

Costs and expenses
Operating		—			—			(22,733	)		—			(22,733	)
Selling, general and administrative		—			—			(14,823	)		—			(14,823	)
Other charges		—			—			(7	)		—			(7	)
Depreciation and amortization		—			—			(15,680	)		—			(15,680	)

		—			—			(53,243	)		—			(53,243	)

Operating loss		—			—			(6,713	)		—			(6,713	)
Other income (expense)
Interest income		30,100			4,829			95			(34,929	)		95
Interest expense and amortization of debt discount and expenses		(25,913	)		(5,317	)		(34,996	)		34,929			(31,297	)
Foreign exchange losses, net		(1,306	)		(126	)		(19,507	)		—			(20,939	)
Equity in net loss of subsidiary		(61,735	)		(61,121	)		—			122,856			—

Net loss		£(58,854	)		£(61,735	)		£(61,121	)		£122,856			£(58,854	)

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Note 11(continued)


	March 31, 2003

	Diamond		Diamond							Consolidated
Balance Sheet	Cable		Holdings		Subsidiaries		Adjustments			Diamond Cable

Current assets		£70		£78		£17,948		£—			£18,096
Investments in and advances to subsidiaries		315,410		474,312		—		(789,722	)		—
Fixed and noncurrent assets		—		3,343		508,631		—			511,974

Total assets		£315,480		£477,733		£526,579		£(789,722	)		£530,070

Current liabilities		£—		£3,309		£50,572		£—			£53,881
Long-term debt		—		159,058		1,651		—			160,709
Due to affiliates		—		—		190,273		(190,273	)		—
Liabilities subject to compromise		—		—		—		—			—
Deferred income taxes		921		—		—		—			921
Shareholder’s equity (deficiency)		314,559		315,366		284,083		(599,449	)		314,559

Total liabilities and shareholder’s equity (deficiency)		£315,480		£477,733		£526,579		£(789,722	)		£530,070


	December 31, 2002

	Diamond			Diamond									Consolidated
Balance Sheet	Cable			Holdings			Subsidiaries			Adjustments			Diamond Cable

Current assets		£238			£239			£28,141			£—			£28,618
Investments in and advances to subsidiaries		315,549			(468,266	)		—			152,717			—
Fixed and noncurrent assets		6,169			3,515			553,105			—			562,789

Total assets		£321,956			£(464,512	)		£581,246			£152,717			£591,407

Current liabilities		£—			£—			£47,682			£—			£47,682
Long-term debt		—			—			—			—			—
Due to affiliates		—			—			1,206,489			(1,206,489	)		—
Liabilities subject to compromise		807,653			221,769			—			—			1,029,422
Deferred income taxes		921			—			—			—			921
Shareholder’s equity (deficiency)		(486,618	)		(686,281	)		(672,925	)		1,359,206			(486,618	)

Total liabilities and shareholder’s equity (deficiency)		£321,956			£(464,512	)		£581,246			£152,717			£591,407

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Note 11(continued)


	Three Months Ended March 31, 2003

	Diamond			Diamond									Consolidated
Statement of Cash Flows	Cable			Holdings			Subsidiaries			Adjustments			Diamond Cable

Net cash (used in) provided by operating activities		£168			£(20,035	)		£(6,901	)		£19,867			£(6,901	)
Investing activities:
(Advances to) repayments from subsidiaries, net		(168	)		20,035			—			(19,867	)		—
Purchase of property and equipment		—			—			(5,044	)		—			(5,044	)

Net cash provided by (used in) investing activities		(168	)		20,035			(5,044	)		(19,867	)		(5,044	)

Financing activities:
Principal payments		—			—			(83	)		—			(83	)

Net cash provided by (used in) financing activities		—			—			(83	)		—			(83	)

Decrease in cash and cash equivalents		—			—			(12,028	)		—			(12,028	)
Cash and cash equivalents at beginning of period		70			70			12,028			—			12,168

Cash and cash equivalents at end of period		£70			£70			£—			£—			£140


	January 1, 2003

	Diamond		Diamond						Consolidated
Statement of cash flows	Cable		Holdings		Subsidiaries		Adjustments		Diamond Cable

Net cash (used in) provided by operating activities	£	—	£	—	£	—	£	—	£	—
Investing activities:
Net cash (used in) provided by investing activities		—		—		—		—		—
Financing activities:
Net cash provided by (used in) financing activities		—		—		—		—		—

Increase in cash and cash equivalents		—		—		—		—		—
Cash and cash equivalents at beginning of period		70		70		12,028		—		12,168

Cash and cash equivalents at end of period	£	70	£	70	£	12,028	£	—	£	12,168

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)

Note 11(continued)


	Three Months Ended March 31, 2002

	Diamond												Consolidated
Statement of Cash Flows	Cable			Diamond Holdings			Subsidiaries			Adjustments			Diamond Cable

Net cash (used in) provided by operating activities		£8,606			£(4,341	)		£3,783			£(4,125	)		£3,923
Investing activities:
(Advances to) repayments from subsidiaries, net		(8,536	)		4,411			—			4,125			—
Purchase of property and equipment		—			—			(5,719	)		—			(5,719	)

Net cash provided by (used in) investing activities		(8,536	)		4,411			(5,719	)		4,125			(5,719	)

Financing activities:
Principal payments		—			—			(95	)		—			(95	)
Capital lease payments		—			—			(27	)		—			(27	)

Net cash provided by (used in) financing activities		—			—			(122	)		—			(122	)

Increase (decrease) in cash and cash equivalents		70			70			(2,058	)		—			(1,918	)
Cash and cash equivalents at beginning of period		—			—			4,535			—			4,535

Cash and cash equivalents at end of period		£70			£70			£2,477			£—			£2,617

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

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

Overview

Diamond Cable Communications Limited (formerly Diamond Cable Communications Plc) (the “Company”) is a holding company which holds all of the shares of various companies which operate broadband communications networks for telephone, cable television and Internet services in the United Kingdom (the “UK”). The Company holds these shares through an intermediate holding company, Diamond Holdings Limited (formerly Diamond Holdings Plc) (“Diamond Holdings”). Except as the context may otherwise require, references to the “Group” refer to the Company and its subsidiaries.

NTL’s Completed Restructuring

We are a wholly-owned subsidiary of NTL Incorporated. On May 8, 2002, NTL Incorporated (then known as NTL Communications Corp.), NTL Europe, Inc. (then known as NTL Incorporated and the former parent company of NTL Communications Corp.) and certain of their subsidiaries, including us and Diamond Holdings, filed a pre-arranged joint reorganization plan, referred to in this Annual Report as the Plan, under Chapter 11 of the US Bankruptcy Code. Our operating subsidiaries were not included in the Chapter 11 filing, nor were the other operating subsidiaries of NTL Incorporated and NTL Europe, Inc. Also on May 8, 2002, we and Diamond Holdings filed proceedings for Administration in England. The Plan became effective on January 10, 2003, at which time we, Diamond Holdings and NTL Incorporated, our parent company, emerged from Chapter 11 reorganization and Administration.

Pursuant to the Plan, the entity formerly known as NTL Incorporated and its subsidiaries and affiliates were split into two separate groups, and NTL Incorporated and NTL Europe, Inc. each emerged as independent public companies. The entity formerly known as NTL Communications Corp. was renamed “NTL Incorporated” and became the holding company for the former NTL group’s principal UK and Ireland assets. Prior to consummation of the Plan, our parent company, then known as NTL Communications Corp., was a wholly-owned subsidiary of the entity then known as NTL Incorporated, which, pursuant to the Plan, was renamed “NTL Europe, Inc.” and which became the holding company for the former NTL group’s continental European and certain other assets. We are no longer affiliated with NTL Europe, Inc.

Upon consummation of the Plan on January 10, 2003:

• the 13-1/4% Senior Discount Notes due 2004, 11-3/4% Senior Discount Notes due 2005 and 10-3/4% Senior Discount Notes due 2007 issued by Diamond Cable Communications Limited were acquired by NTL Incorporated and the former holders of these Senior Discount Notes were issued shares of common stock of NTL Incorporated. Subsequently on February 4, 2003, we were released from any further obligations to pay interest and/or principal on such notes;

• the Senior Notes issued by Diamond Holdings were reinstated and accrued interest due but not paid on August 1, 2002 was paid (with accrued interest thereon); and

• the 30% Loan Notes issued by Diamond Cable Communications Limited to NTL Incorporated were cancelled in exchange for the issuance to NTL Incorporated of one share of Diamond Cable Communications Limited.

Background of Restructuring

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

Both the equity and debt capital markets experienced periods of significant volatility in 2001 and 2002, particularly for securities issued by telecommunications and technology companies. As a result, the ability of our former ultimate parent company, then known as NTL Incorporated (now NTL Europe, Inc.) and its subsidiaries, including us, to access those markets as well as its ability to obtain financing from its bank lenders and equipment suppliers became severely restricted. In addition, the former NTL Incorporated and its subsidiaries, including us, had no further funds available, or were unable to draw upon funds under their credit facilities. As a result of these factors, together with its substantial leverage, on January 31, 2002, the former NTL Incorporated announced that it had appointed professional advisors to advise on strategic and recapitalization alternatives to strengthen its balance sheet, reduce debt and put an appropriate capital structure in place for its business.

Promptly upon obtaining the requisite waivers from the lenders under its credit facilities, in March 2002, the former NTL Incorporated commenced negotiations with a steering committee of the unofficial committee of its bondholders and the committee’s legal and financial advisors.

The former NTL Incorporated and its subsidiaries, including us, failed to make interest payments on some of our and their outstanding notes starting on April 1, 2002. The former NTL Incorporated also failed to declare or pay dividends on certain series of its outstanding preferred stock, due to a lack of available surplus under Delaware law.

On April 16, 2002, the former NTL Incorporated announced that it and the unofficial committee of its public bondholders had reached an agreement in principle on a comprehensive recapitalization of the former NTL group. To implement the proposed recapitalization plan, on May 8, 2002, we, Diamond Holdings, our current parent company then known as NTL Communications Corp. (now NTL Incorporated), the former NTL Incorporated and another of its subsidiaries (collectively referred to in this annual report as the Debtors) filed cases and a pre-arranged joint reorganization plan under Chapter 11 of the US Bankruptcy Code. In connection with the filing, some members of the unofficial creditors’ committee of bondholders entered into a credit facility agreement, referred to in this annual report as the DIP facility, committing to provide a wholly-owned subsidiary of the current NTL Incorporated with up to $500 million in new debt financing (NTL Delaware committed to provide up to an additional $130 million under the DIP facility).

As a result of the payment defaults as well as the voluntary filing under Chapter 11 by the Debtors on May 8, 2002, there was an event of default under all of the former NTL Incorporated and its subsidiaries’ credit facilities and the indentures governing all of their publicly traded debt, including the notes issued by us and Diamond Holdings, other than debt of NTL Triangle.

The Plan was confirmed by the Bankruptcy Court on September 5, 2002. During the fall of 2002, the former NTL Incorporated negotiated with a group of lenders to enter into a new financing arrangement to repay the DIP facility, to repay certain obligations and to provide liquidity to the current NTL Incorporated and its subsidiaries, including us. The Plan became effective on January 10, 2003 (referred to as the Effective Date), at which time the Debtors emerged from Chapter 11 reorganization. In connection with its emergence from Chapter 11 reorganization, the current NTL Incorporated and certain of its subsidiaries issued $558.249 million aggregate principal face amount of 19% Senior Secured Notes due 2010 (the Exit Notes) on January 10, 2003. Initial purchasers of the Exit Notes also purchased 500,000 shares of the current NTL Incorporated’s common stock on that date. The gross proceeds from the sale of the Exit Notes and such shares totaled $500 million. The proceeds were used in part to repay all amounts outstanding under the DIP facility (which was repaid on the Effective Date) and to purchase from NTL Delaware a £90 million note of NTL (UK) Group Inc. and to repay certain other obligations. Also on January 10, 2003, the current NTL Incorporated and its lending banks amended its existing credit facilities.

Liquidity and Capital Resources

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

Over the long term, the Company will continue to require cash to fund operations, service or repay its remaining debt and implement its strategy. In order to fund these requirements, the Company anticipates that it will use cash flow from operations and may also need to issue additional debt or equity securities or may need to secure additional bank financing. Given the restrictions on incurring additional debt that are in the indentures governing our outstanding notes, there can be no assurance that these sources of funds will be available to us.

Description of Indebtedness

Loan Note payable to NTL Incorporated

Diamond Holdings Senior Notes

In February 1998, Diamond Holdings issued 10% Senior Notes due February 1, 2008 and 9 1/8% Senior Notes

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

due February 1, 2008 (collectively, the “Senior Notes”). The Senior Notes are guaranteed by the Company as to payment of principal, interest and any other amounts due. In connection with the issuance of the Senior Notes, the Group terminated its existing bank facility.

As of March 31, 2003, Diamond Holdings has £135.0 million in principal amount of its 10% Senior Notes due February 1, 2008 and $110.0 million in principal amount of its 9 1/8% Senior Notes due February 1, 2008 outstanding. Interest on these notes is payable semiannually on February 1 and August 1.

Upon consummation of the Plan on January 10, 2003, the Senior Notes were reinstated and accrued interest due but not paid on August 1, 2002 was paid (with accrued interest thereon).

Contractual Obligations and Commercial Commitments

The Group had no significant commercial commitments as of March 31, 2003.

The following table includes aggregate information about the Group’s contractual obligations as of March 31, 2003 and the periods in which payments are due:


	Payments Due by Period

			Less than		1-3		4-5		After
Contractual Obligations	Total		1 Year		Years		Years		5 Years

	(in millions)
Long-Term Debt	£	204.6	£	—			£	204.6		—
Capital Lease Obligations		—		—		—		—		—
Operating Leases		—		—		—		—		—
Unconditional Purchase Obligations		—		—		—		—		—
Other Long-Term Obligations		1.9		0.3		0.5		0.5		0.6

Total Contractual Cash Obligations	£	206.5	£	0.3	£	0.5	£	205.1	£	0.6

Condensed Consolidated Statements of Cash Flows

Net cash (used in) provided by operating activities amounted to £(6.9) million and £3.9 million for the three months ended March 31, 2003 and 2002, respectively. The change is owing to the payment of outstanding interest due August 1, 2002, at exit.

Net cash used in investing activities amounted to £5.0 million and £5.7 million for the three months ended March 31, 2003 and 2002, respectively, primarily for continuing fixed asset purchases and construction. The Company will continue to minimize purchases of fixed assets in 2003 in an effort to conserve cash.

Net cash used in financing activities amounted to £0.1 million and £0.1 million in the three months ended March 31, 2003 and 2002, respectively, resulting from mortgage principal payments and capital lease payments.

Selected Operating Data

The following table sets forth certain data concerning the Company’s Franchises at March 31, 2003 and December 31, 2002:

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003


	March 31,			December 31,
	2003			2002

Homes passed(1)		794,000			794,000
Homes marketed(2)		695,334			712,600
Total customers(4)		335,902			331,553
Digital Cable Subscribers		111,931			107,877
Analogue Cable Subscribers		81,259			87,819
Broadband Internet Subscribers		104,659			75,826
Dial up Internet Subscribers		71,539			80,198
Telephone Subscribers		312,880			309,462
Penetration (Homes marketed)(3)		48.3	%		46.5	%
Average monthly revenue per customer		£37.29			£37.02
Churn		12.6	%		15.6	%

1. Homes passed is the number of homes that have had ducting buried outside.

2. Homes marketed is the number of homes for which the initial marketing phase (including door to door direct marketing) has been completed. Homes marketed at March 31, 2003 reflects an ongoing data cleansing exercise.

3. Penetration rate is calculated by dividing the number of customers by the number of homes.

4. Total customers at December 31, 2002 have been restated to include MATV customers.

Summarized consolidated financial information for the Company for the three months ended March 31, is as follows (in thousands, “NM” denotes percentage is not meaningful):


	Three Months Ended March 31						Increase/(Decrease)

	2003			2002

	Reorganized			Predecessor
	Company			Company			£			%

Revenues		£45,190		£	46,530			(1,340	)		(2.9	)
Operating costs		(20,714	)		(22,733	)		(2,019	)		(8.9	)
Selling, general and administrative expenses		(14,191	)		(14,823	)		(632	)		(4.3	)
Other charges		(131	)		(7	)		124		1,771.4
Depreciation and amortization		(14,413	)		(15,680	)		(1,267	)		(8.1	)

Operating loss		(4,259	)		(6,713	)		(2,454	)		(36.6	)

Interest expense		(7,503	)		(31,297	)		(23,794	)		(76.0	)
Interest expense to affiliate		(29,281	)		—			29,281		NM
Interest income		50			95			(45	)		(47.4	)
Foreign exchange gains (losses), net		3,786			(20,939	)		(24,725	)	(118.1		)

Net loss		£(37,207	)		£ (58,854	)		(21,647	)		(36.8	)

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

The emergence from Chapter 11 and the adoption of fresh-start reporting as of January 1, 2003 resulted in the following items of income (expense) that were recognized on that date (in thousands):


	January 1, 2003

	Predecessor Company

Interest expense to affiliate	£(59,850	)
Fresh-start adoption—intangible assets	78,860
Fresh-start adoption—long-term debt	723,533
Fresh-start adoption—fixed assets	(113,965	)

Net income	£628,578

Results of Operations for the Three Months Ended March 31, 2003 and 2002

Revenue decreased in the three months ended March 31, 2003 compared with 2002 primarily as a result of fewer customers owing to the capital constraints including reduced capital expenditure to connect new customers. This reduction was partly mitigated by price increases including the introduction of charges for the Group’s dial-up internet service (which was previously available without charge), upselling additional services to customers and from growth in broadband subscribers. The Company expects revenue increases in the future to be achieved by further growth in services such as digital television and broadband services.

Operating costs (including network expenses) for the three months ended March 31, 2003 and 2002 were £20.7 million and £22.7 million, respectively, representing a decrease of £2.0 million. Operating costs (including network expenses) as a percentage of revenue were 45.8% and 48.9% in the three months ended March 31, 2003 and 2002, respectively. The improved margin has resulted from efficiencies gained in the network and negotiated reductions in the costs of interconnection and television programming. Operating costs include certain costs which are charged by a subsidiary of NTL for the provision of network services and support, the use of NTL’s national backbone telephony network for carriage of the Group’s telephony traffic, as well as the provision of technical infrastructure and network capacity by NTL for the Group’s subscription Internet and digital cable services. In the three months ended March 31, 2003 and 2002, these charges were £8.7 million and £9.6 million, respectively.

Selling, general and administrative expenses for the three months ended March 31, 2003 and 2002 were £14.2 million and £14.8 million, respectively, representing a decrease of 4.3%. Selling, general and administrative expenses as a percentage of revenue were 31.4% and 31.9% in the three months ended March 31, 2003 and 2002, respectively. This reduction results from the continued progress NTL has made in improving efficiencies and reducing costs. Selling, general and administrative expenses include certain costs which are charged by a subsidiary of NTL for the provision of corporate services, including finance, legal, human resources and facility services, and for the provision of IT services, including the Group’s use of the related IT equipment. These charges were £14.2 million and £14.8 million in the three months ended March 31, 2003 and 2002, respectively.

Other charges of £131,000 in 2003 were allocated to the Group by a subsidiary of NTL and include employee severance and related costs.

Depreciation and amortization expense for three months ended March 31, 2003 and 2002 was £14.4 million and £15.7 million, respectively, representing a decrease of £1.3 million. The decrease was primarily due to a reduction in the carrying value of fixed assets subject to depreciation due to the adoption of fresh-start reporting. The depreciation decrease was offset by an increase in amortization of customer lists also due to the adoption of fresh-start reporting.

Interest expense and amortization of debt discount and expenses for the three months ended March 31, 2003 and 2002 was £7.5 million and £31.3 million, respectively, representing a decrease of £23.8 million. This reduction has been offset by an increase in interest expense to affiliates of £29.3 million. The increase in total interest payable is owing to the amortization of the difference between the book value of the long-term debt and its fair value adopted on January 1, 2003.

A substantial portion of the Group’s existing debt obligations are denominated in U.S. dollars, while the Group’s revenues and expenses are generated and stated in UK pounds sterling. During the three months March 31, 2003 and 2002, the Group recognized net foreign exchange gains of £3.8 million and losses of £20.9 million, respectively, primarily owing to the unrealized losses on translation of its Discount Notes and 1998 Notes. Changes in foreign currency exchange rates may affect the Group’s ability to satisfy its obligations under these debt instruments as they become due.

Recent Accounting Pronouncements

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FORM 10-Q
QUARTER ENDED MARCH 31, 2003

Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity is recognized when the liability is incurred. Under Issue No. 94-3, a liability for an exit cost as defined is recognized at the date of a commitment to an exit or disposal plan. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this standard did not have a significant effect on the results of operations, financial condition or cash flows of the Group.

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

Certain statements contained herein constitute “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. When used herein, the words, “believe,” “anticipate,” “should,” “intend,” “plan,” “will,” “expects,” “estimates,” “projects,” “positioned,” “strategy,” and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

and other factors that may cause the actual results, performance or achievements of the Group, or industry results, to be materially different from those contemplated, projected, forecasted, estimated or budgeted, whether expressed or implied, by such forward-looking statements. Such factors include, among others, those set forth under the caption “Risk Factors” in this Form 10-Q as well as: the impact of our organizational restructuring and integration actions; our ability to maintain contracts that are critical to our operations; potential adverse developments with respect to our liquidity or results of operations; our ability to fund and execute our business plan; our ability to attract, retain and compensate key executives and associates; our ability to attract and retain customers; general economic and business conditions; technological developments; our ability to continue to design networks, install facilities, obtain and maintain any required governmental licenses or approvals and finance construction and development, all in a timely manner at reasonable costs and on satisfactory terms and conditions; assumptions about customer acceptance, churn rates, overall market penetration and competition from providers of alternative services; the impact of new business opportunities requiring significant up-front investment; and interest rate and currency exchange rate fluctuations. We assume no obligation to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting such statements.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The Group is 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, such as foreign currency exchange and interest rates. Since 1998, the Group has not entered into derivative financial instruments.

Foreign Exchange Risk

The principal form of market risk to which the Group is exposed is foreign exchange rate risk. Diamond Holdings’ Senior Notes, which constitute a substantial portion of the Group’s existing debt obligations, are denominated in U.S. dollars, while the Group’s revenues are generated and stated in UK pounds sterling. In the future, the Group may from time to time enter into foreign currency contracts based on its assessment of foreign currency market conditions and its effect on the Group’s operations and financial condition. Changes in currency exchange rates may have a material effect on the results of operations of the Group and the Group’s ability to satisfy its obligations, including obligations under outstanding debt instruments, as they become due.

Interest Rate Risk

The Group is exposed to interest rate risk on the fair market value of its long-term fixed interest rate debt. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. In the following table, fair values were determined from quoted market prices.

The following table provides information as of March 31, 2003 about our long-term fixed interest rate debt that is sensitive to changes in interest rates and foreign currency exchange rates.

Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate


																	Fair
		Year ended March 31,															Value
																	March 31,
		2004		2005		2006		2007		2008			Thereafter		Total		2003

Long-term Debt Including
Current Portion
U.S. Dollars
	Fixed Rate		—		—		—		—		$110.0			—		$110.0		$85.8
	Average Interest Rate										9.125	%
	Average Forward Exchange Rate										0.698
U.K. Pound
	Fixed Rate		—		—		—		—		£135.0			—		£135.0		£101.3
	Average Interest Rate										10.0	%

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The Company’s management, including the directors of NTL Group Limited*, the sole managing member of the Company, who also serve as the Chief Executive Officer and Chief Financial Officer of the Company’s indirect parent, NTL Incorporated, have conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-14(c) and Rule 15d-14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”). Based on that evaluation, the Directors have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s reports filed or submitted under the Exchange Act.

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FORM 10-Q
QUARTER ENDED MARCH 31, 2003

(b) Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in the Company’s internal controls, or in other factors that could significantly affect such internal controls.

* The Company has no Chief Executive Officer or Chief Financial Officer. Barclay Knapp and Scott E. Schubert are Directors of NTL Group Limited, the sole managing member of the Company, and are the Chief Executive Officer and Chief Financial Officer, respectively, of NTL Incorporated, the indirect parent of NTL Group Limited and the Company.

RISK FACTORS

We are a wholly-owned subsidiary of NTL Incorporated and are highly dependent upon NTL Incorporated and its subsidiaries. Accordingly, many of the following risk factors relate to NTL as a whole and, therefore, could have serious implications for us.

We have historically relied on NTL and its subsidiaries to meet our funding needs. NTL’s business is capital intensive and it has historically incurred losses and generated negative cash flows and there can be no assurance that NTL will be profitable in the future or that it will have sufficient liquidity to meet our cash flow needs, fund its working capital and capital expenditures and to meet its obligations under its existing debt instruments.

We are an intermediate holding company with no independent operations or significant assets other than investments in and advances to our subsidiaries. We do not generate sufficient cash flow from our operations to fund our operational expenses and interest payments. We have historically met our cash requirements through debt or equity from NTL Incorporated and other subsidiaries of NTL Incorporated. Thus, we are dependent on NTL’s financial health for our own.

NTL’s business is very capital intensive and has always required significant amounts of cash. Historically, construction, operating expenditures and interest costs have resulted in negative cash flow, which NTL expects will continue for the foreseeable future. NTL has also incurred and expects to continue to incur substantial losses. NTL cannot be certain that it will achieve or sustain profitability in the future. Failure to achieve profitability could diminish NTL’s ability to meet our cash flow needs, sustain operations, meet financial covenants, obtain additional required funds and make required payments on any indebtedness it has incurred or may incur.

NTL had net losses for the year ended December 31, 2002 of $2,375.8 million, and for the years ended December 31:

• 2001: $11,837.0 million (including an asset impairment charge of $8,160.6 million)

• 2000: $2,388.1 million

• 1999: $716.5 million

• 1998: $534.6 million

As of December 31, 2002, NTL’s accumulated deficit was $18.6 billion.

Moreover, NTL currently expects that it will require between £5.0 million and £15.0 million to fund its working capital and capital expenditures, net of cash from operations, in the twelve months from April 1, 2003 to March 31, 2004. NTL believes that its cash, cash equivalents and marketable securities on hand of $478.8 million as of March 31, 2003

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

will be sufficient for its cash requirements during the twelve months from April 1, 2003 to March 31, 2004.

In addition, beginning in 2005, a series of principal payments will come due on NTL’s existing debt instruments as they approach their respective maturity dates. NTL’s ability to make these payments and meet our cash flow needs and its other ongoing funding requirements is dependent upon a number of factors, including NTL’s existing cash balances, the cash flow generated by its operating subsidiaries, and its ability to obtain additional financing in the future. Failure to achieve profitability or maintain or achieve various other financial performance levels could in the future diminish NTL’s ability to meet our cash flow needs, sustain operations, meet financial covenants, obtain additional funds, and make required payments on its indebtedness.

We are an intermediate holding company that is dependent upon cash flow from our subsidiaries to meet our obligations; our ability to access that cash flow may be limited in some circumstances.

We are an intermediate holding company with no independent operations or significant assets other than our investments in and advances to our subsidiaries. We depend, in part, upon the receipt of sufficient funds from our subsidiaries to meet our obligations. In addition, the terms of existing and future indebtedness of us and our subsidiaries 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.

We are operationally completely integrated into NTL and thus are reliant on NTL’s management entirely for our business.

Because we are operated as a fully integrated part of NTL, we are entirely dependant upon NTL’s management to manage our business. Thus, the success or lack of success of NTL’s management team as a whole will be directly correlated to our success or failure. If there is a material adverse effect on NTL’s business as a whole, it is likely we would experience such a material adverse effect as well.

NTL’s substantial leverage could adversely affect its financial health.

NTL is, and, for the foreseeable future will continue to be, highly leveraged. As of March 31, 2003, the accreted value of NTL’s total long-term indebtedness less unamortized discount of $6,228.7 million represents 70.3% of its total capitalization.

NTL’s substantial indebtedness, coupled with the relatively high effective interest rate on its Exit Notes, could adversely affect its financial health by, among other things:

     • increasing its vulnerability to adverse changes in general economic conditions or increases in prevailing interest rates particularly for any borrowings at variable interest rates,

     • limiting its ability to obtain additional financing, if needed, and

     • requiring it to dedicate a substantial portion of its cash flow from operations to service its debt, which reduces the funds available for operations and future business opportunities.

NTL Incorporated is subject to restrictive debt covenants pursuant to its indebtedness.

As part of the implementation of the Plan, NTL Incorporated issued $558.249 million principal amount of Exit Notes to certain of its creditors under the terms of an indenture. In addition, it amended the terms of its existing

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FORM 10-Q
QUARTER ENDED MARCH 31, 2003

Senior Credit Facility and Working Capital Credit Facility.

The indentures governing NTL Incorporated’s outstanding notes, including its Exit Notes, among other things, significantly restrict and, in some cases, prohibit its ability and the ability of most of its subsidiaries to:

• incur additional debt;

• create or incur liens;

• pay dividends or make other equity distributions;

• purchase or redeem share capital;

• create restrictions on the payment of dividends or other amounts by its subsidiaries;

• make investments;

• sell assets;

• issue or sell share capital of certain subsidiaries;

• engage in transactions with affiliates; and

• effect a merger or consolidation of, or sell all or substantially all of its assets.

Similar restrictive covenants are contained in the Senior Credit Facility and Working Capital Credit Facility which are applicable to NTL Incorporated and most of its subsidiaries. In addition, under its credit facilities, NTL Incorporated and its subsidiaries must comply with certain financial covenants specifying various financial performance levels that they are required to meet. In the event they were to fail to meet any of these covenants and were unable to cure such breach or otherwise renegotiate such covenant, the lenders under those facilities would have significant rights to seize control of most of NTL’s assets. Such a default, or a breach of any of the other obligations in the indenture governing the Exit Notes, could also trigger a default under the Exit Notes.

The covenants in NTL Incorporated’s credit facilities and the indentures governing its outstanding notes and any future debt may significantly restrict NTL’s future operations. Furthermore, upon the occurrence of any event of default under the indentures governing NTL Incorporated’s notes, credit facilities or the agreements governing any other debt of its subsidiaries, the lenders could elect to declare all amounts outstanding under such indentures, credit facilities or agreements, together with accrued interest, to be immediately due and payable. If those lenders accelerate the payment of those amounts, there can be no assurance that the assets of NTL Incorporated and its subsidiaries will be sufficient to repay in full those amounts.

Our Chapter 11 reorganization and uncertainty over our financial condition may harm our business and our brand name.

Adverse publicity or news coverage regarding our recent Chapter 11 reorganization and financial condition could have an adverse effect on parts of our business. Similarly, negative press about the financial condition of other cable and pay television operations and alternative telecom carriers in general may affect our reputation. For example, one of our key strategies is to increase our penetration of higher value small to medium size enterprises, or SMEs, and provide increased retail services of bundled voice, data and Internet services for SMEs. However, due to the negative publicity surrounding our Chapter 11 reorganization and our financial condition and the potential effect of that publicity on our brand name, we may find it difficult to convince SMEs to take up our services. Although we have successfully consummated the Plan, there is no assurance that such negative publicity will not adversely impact our

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

results of operations or have a long-term effect on our brand.

In addition, uncertainty during our recapitalization process may have adversely affected our relationships with our suppliers. If suppliers become increasingly concerned about our financial condition, they may demand faster payments or refuse to extend normal trade credit, both of which could further adversely affect our cash conservation measures and our results of operations. We may not be successful in obtaining alternative suppliers if the need arises and this would adversely affect our results of operations.

The telecommunications industry is subject to rapid technological changes and we cannot predict the effect of any changes on our businesses.

The telecommunications industry is subject to rapid and significant changes in technology and the effect of technological changes on our businesses cannot be predicted. Our core offerings may become outdated due to technological breakthroughs rendering our products out of date. In addition, our business plan contemplates the introduction of services using new technologies. Our investments in those new services, such as those related to the 3G mobile network, may prove premature and we may not realize anticipated returns on these new products. The cost of implementation for emerging and future technologies could be significant, and our ability to fund such implementation may depend on our ability to obtain additional financing. We cannot be certain that we would be successful in obtaining any additional financing required.

We are subject to significant competition in each of our business areas and we expect that competition will intensify — if we are unable to compete successfully, our financial conditions and results of operations could be adversely affected.

We face significant competition from established and new competitors in each of our businesses. In particular, in two of our three key lines of business — telephony and television — the markets are dominated by our competitors (BT and BSkyB, respectively), who have very large market shares and generally have less financial and operating constraints than we do. As existing technology develops and new technologies emerge, we believe that competition will intensify in each of our business areas, particularly business telecommunications and the Internet. Some of our competitors have substantially greater financial and technical resources than we do. Moreover, we may also be required to reduce prices if our competitors reduce prices, or as a result of any other downward pressure on prices for telecommunications services, which could have an adverse effect on us.

In addition, BSkyB has access to various movie and sports programming content, with which they create some of the most popular pay TV channels in the UK. We carry several of those channels on our systems. Although there are competing channel providers, the position of programming supplier to NTL undoubtedly is an advantage to BSkyB, not only because the Sky brand is a feature of our cable TV service, but also because we are dependant upon the supply of these Sky premium channels allowing BSkyB to influence pricing and bundling. Thus far, regulators have not disturbed the pricing arrangements imposed on us by BSkyB. NTL is currently negotiating with BSkyB a formal, long-term agreement for the supply of certain BSkyB channels, and believes this will be concluded amicably. However, in the event that we are unable to conclude an agreement successfully, NTL may be faced with uncertainty over the terms and charges of such supply, now and in the future.

If we are unable to compete successfully, our financial condition and results of operations could be adversely affected.

NTL’s growth has been curtailed by funding constraints.

NTL has significantly decreased the amount it is spending on capital expenditures due to liquidity constraints during the recapitalization process and expects to further reduce capital expenditures during 2003. The decrease in capital expenditure is the

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FORM 10-Q
QUARTER ENDED MARCH 31, 2003

result of NTL’s need to divert increasing amounts of its financial resources to meet liquidity requirements. As a result, we may be unable to increase our customers in the short term and our near-term revenue and future revenue growth may be adversely affected.

NTL remains subject to the risks of successfully integrating the acquisitions through which it has historically grown its business. In particular, NTL is in the process of integrating its various billing and operation platforms — if it does not complete this integration, NTL could experience an adverse effect on its customer service, churn rate and operating costs.

NTL has historically grown its business through acquisitions. This has resulted in its exposure to the risk of failing to successfully integrate those acquisitions, in particular, workforce, management, network and systems. A significant result of NTL’s growth through acquisitions is that it has inherited a variety of distinct billing and customer service systems from various companies that it has acquired. NTL is in the process of integrating its various billing systems and customer databases in an effort to improve one of the main tools it uses to provide customer service; however, it does not as yet have an integrated billing and operational platform. There can be no assurance that this integration project will be successful. If the full integration of NTL’s billing and customer service systems is not successful, NTL could experience an adverse effect on its customer service, churn rate and costs of maintaining these systems going forward. NTL could also experience operational failures related to billing and collecting revenue from its customers, which, depending on the severity of the failure, could have a material adverse effect on its business.

Moreover, the integration process has involved a number of internal reorganizations of NTL’s business as NTL continues to strive for better performance. These reorganizations have typically involved, among other things, the termination of employees made redundant as a result of the process. Although NTL cannot predict precisely the effect that this has had, it is likely these internal reorganizations have negatively impacted employee morale. If NTL undertakes additional internal reorganizations they will similarly likely negatively impact morale. Negative effects on employee morale can have a negative effect on NTL’s operations generally.

One of NTL’s key strategies is to reduce customer churn. However there can be no assurance that NTL will successfully accomplish this or that its churn rate will not increase.

NTL has experienced rapid growth and development in a relatively short period, either through acquisitions or connecting customers to its network. One of NTL’s biggest challenges as it has grown has been to limit its customer churn. The successful implementation of NTL’s business plan depends upon a reduction in the percentage of customers that stop using its services.

In order to reduce churn in the future, NTL aims to improve customer service. This improvement will be difficult to obtain without an integrated billing system and a customer database across NTL’s entire network. If the integration of NTL’s various billing system is not successful, it could experience an adverse effect on customer service and, in turn, the churn rate.

NTL plans to increase its customer and revenue generating unit (referred to in this quarterly report as an RGU) base in 2003. If demand for NTL’s products and services is greater than anticipated, its customer service call centers could experience a higher than expected volume of calls. If customer service suffered as a result, it could contribute to churn. NTL’s business plan also includes the migration of its customers from analog to digital service. The migration process could also increase churn levels.

NTL’s ability to reduce churn could also be adversely affected by the availability of competing services in the UK, such as the digital satellite and digital terrestrial television services offered by BSkyB and the BBC, and telephone, Internet and broadband services offered by BT. BT and BSkyB have regularly launched strong direct and indirect win-back campaigns to entice NTL’s customers to churn and move to these competing services.

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Another part of our strategy to reduce churn is to increase take up of broadband services by our existing customers. If this increased level of take up does not materialize we may have difficulties in reducing churn levels, which would adversely impact our results of operations.

NTL’s prospects will depend in part on its ability to control its costs while maintaining and improving service levels following our recent restructuring.

As a result of capital constraints imposed on NTL’s business during our recent restructuring, NTL has been engaged in a process of reducing expenditures in a variety of areas, including by way of a substantial reduction in capital expenditure, a reduction in the number of employees and the outsourcing of some functions. NTL’s prospects will depend in part on its ability to continue to control costs and operate more efficiently, while maintaining and improving existing service levels. In particular, in order to reduce costs we are in the process of negotiating with several of our vendors for better terms under existing and future agreements. We cannot be certain that such negotiations will conclude successfully.

Failure to successfully market broadband to NTL’s existing customer base will adversely impact NTL’s revenue and results of operations.

A significant component of NTL’s strategy is to successfully market broadband products to its existing consumer customer base. NTL believes that its “triple play” offering of telephony, broadband access to the Internet and digital television will prove attractive to its existing customer base and allow it to increase its average revenue per user. However, NTL faces significant competition in these markets, through digital satellite and digital terrestrial television and through alternative Internet access media, such as the DSL service offered by BT and Freeserve. Additionally, some of NTL’s competitors have substantially greater financial and technical resources than NTL does. If NTL is unable to charge the prices for broadband services that are anticipated in its business plan in response to competition or if NTL’s competition offers a better product to its customers, NTL’s results of operations will be adversely affected.

NTL is dependent upon a small number of key personnel.

A small number of key executive officers manage NTL’s businesses. The loss of one or more of these executive officers could have a material adverse effect on NTL. NTL believes that its future success will depend in large part on its continued ability to attract and retain highly skilled and qualified personnel. Although NTL has entered into employment contracts with all of its executive officers, those contracts cannot prevent such individuals from resigning. If an individual does resign, he or she is bound by certain non-compete clauses which may or may not discourage the individual from leaving.

NTL’s principal businesses are subject to government regulation, including pricing regulation, and changes in current regulations may adversely affect it.

NTL’s principal business activities are regulated and supervised by various governmental bodies. Changes in laws, regulations or governmental policy or the interpretations of those laws or regulations affecting our activities and those of NTL’s competitors, such as licensing requirements, changes in price regulation and deregulation of interconnection arrangements, could have a material adverse effect on NTL.

NTL is also subject to regulatory initiatives of the European Commission. Changes in EU Directives may reduce NTL’s range of programming and increase the costs of purchasing television programming or require NTL to provide access to our cable network infrastructure to other service providers, which could have a material adverse effect on NTL.

NTL is dependent upon many critical systems and processes, many of which are dependent upon hardware that is concentrated in a small number of locations. If a catastrophe were to occur at one or more of those locations, it could have a material adverse effect on NTL’s business.

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NTL’s business is dependent on many sophisticated critical systems, which support all of the various aspects of its operations from its network to its billing and customer service systems. The hardware supporting a large number of critical systems is housed in a relatively small number of locations. If one or more of these locations were to be subject to fire, natural disaster, terrorism, power loss, or other catastrophe, it could have a material adverse effect on and cause irreparable harm to NTL’s business. NTL is currently studying ways to improve its disaster recovery to prevent or mitigate such a potential failure. However, despite any disaster recovery, security and service continuity protection measures NTL has or may in the future undertake, there can be no assurance that these measures will be sufficient. In addition, although NTL builds its network in resilient rings to ensure the continuity of network availability in the event of any damage to its underground fibers, should any ring be cut twice in different locations, it is likely that no transmission signals will be able to pass, which could cause significant damage to NTL’s business. This is especially so in relation to NTL’s Sirius undersea ring connecting the UK to the Republic of Ireland: any simultaneous cut of the Northern and Southern rings would isolate NTL’s Irish networks from its UK networks for an extended period.

NTL does not insure the underground portion of our cable network.

NTL obtains insurance of the type and in the amounts that it believes are customary for similar companies. Consistent with this practice, NTL does not insure the underground portion of its cable network. Substantially all of NTL’s cable network is constructed underground. Any catastrophe that affects NTL’s underground cable network could result in substantial uninsured losses.

We and NTL are subject to currency risk because we obtained significant financing and may in the future obtain additional financing in U.S. dollars but generally generate revenues and incur expenses in pounds sterling and Euros.

We and NTL encounter currency exchange rate risks because we generate revenues and incur construction and operating expenses in pounds sterling and Euros while we pay interest and principal obligations with respect to a significant amount of our existing indebtedness in U.S. dollars. There can be no assurance that any hedging transactions we might enter into will be successful or that shifts in the currency exchange rates will not have a material adverse effect on us. For example, to the extent that the pound sterling declines in value against the U.S. dollar, and we have not fully hedged against such declines, the effective cost of servicing our U.S. dollar debt will be higher and we will incur currency losses.

NTL’s broadcast services and carrier telecommunications businesses are dependent upon certain important contracts.

NTL’s broadcast services business has contracts for the provision of television broadcasting transmission services with the ITV national network of 15 affiliated television stations, Channel 4/S4C and Channel 5. The majority of the prices that NTL may charge these companies for transmission services are subject to regulation by the UK Office of Telecommunications (referred to in this quarterly report as OFTEL). Although, historically, the ITV companies and Channel 4/S4C have renewed their contracts with NTL, there can be no assurance that they will do so upon expiration of the current contracts, that they will not negotiate terms for provision of transmission services by NTL on a basis less favorable to it or that they would not seek to obtain from third parties a portion of the transmission services that NTL currently provides.

Other contracts important to NTL’s broadcast services business include a contract for the provision of communication services to the Metropolitan Police. This contract is subject to renewal and there can be no assurance that the renewal will be on the same basis, or that the Metropolitan Police will not seek other parties to provide the services.

NTL’s carrier services and mobile business has a contract with Orange plc for the design, build and maintenance of its mobile transmission network. The minimum term of this contract is scheduled to expire in 2006 and there can be no assurance that it will be renewed.

In addition, NTL’s carrier services and mobile business currently has a contract with Vodafone for the supply of mobile transmission services, including core inter-switch and backhaul network capacity. This contract is scheduled to terminate in October 2004 and there are no present indications that it will be renewed.

The loss of any one of these contracts could have a material adverse effect on the relevant NTL business division.

NTL’s broadcast services business is dependent upon site sharing arrangements with its principal competitor.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

As a result of, among other factors, a natural shortage of potential transmission sites and the difficulties in obtaining planning permission for erection of further masts, Crown Castle U.K. Ltd. and NTL have made arrangements to share a large number of tower sites. There can be no assurance that the site sharing arrangements will not be terminated. Termination of the site sharing arrangements would have a material adverse effect on NTL.

Under the present arrangements for analog broadcast services, one of the parties is the owner, lessor or licensor of each site and the other party is entitled to request a license to use specified facilities at that site. Each site license granted pursuant to the site sharing agreement is for an initial period expiring on December 31, 2005, subject to title to the site and to the continuation in force of the site sharing agreement. Each site sharing agreement provides that, if requested by the sharing party, it will be extended for further periods. Either party may terminate the agreement by giving 5 years’ written notice until December 31, 2005 or at any date which is a date 10 years or a multiple of 10 years after December 31, 2005. With respect to digital broadcast services, NTL and Crown Castle UK Ltd are negotiating a formal arrangement pending finalization of a separate digital site sharing agreement which is envisaged to be on terms similar to the existing analog site sharing agreement. Presently the parties are operating under an informal arrangement pending finalization of the formal arrangement. Although NTL believes that such formalization will be concluded successfully, it cannot be certain of that conclusion.

Some provisions of the agreements governing the indebtedness of NTL Incorporated, us and our respective subsidiaries, certain provisions of our respective certificates of incorporation and NTL Incorporated’s stockholder rights plan could delay or prevent transactions involving a change of control of us or NTL Incorporated.

We and NTL Incorporated may, under some circumstances involving a change of control, be obligated to offer to repurchase substantially all of our respective outstanding notes, and repay other indebtedness (including bank facilities). There can be no assurance that we or NTL Incorporated, as the case may be, will have available financial resources necessary to repurchase such notes or indebtedness in those circumstances.

If NTL Incorporated cannot repurchase and repay this indebtedness in the event of a change of control, the failure to do so would constitute an event of default under the indentures and agreements under which that indebtedness was incurred and could result in a cross-default under other indebtedness. The threat of this could have the effect of delaying or preventing transactions involving a change of control of NTL Incorporated, including transactions in which stockholders might otherwise receive a substantial premium for their shares over then current market prices, and may limit the ability of its stockholders to approve transactions that they may deem to be in their best interest.

NTL Incorporated’s stockholder rights plan and certain provisions of its certificate of incorporation may have the effect, alone or in combination with each other or with the existence of authorized but unissued common stock and preferred stock, of preventing or making more difficult transactions involving a change of control of NTL Incorporated. Certain provisions of our certificate of incorporation may have a similar effect with respect to a change of control involving us.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:


99.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

During the quarter ended March 31, 2003, the Company filed a Current Report on Form 8-K, dated January 9, 2003, reporting under Item 7, Financial Statements and Exhibits, that Diamond Cable Communications Limited and Diamond Holdings Limited gave notice to The National Association of Securities Dealers, Inc. that Diamond Holdings Limited will pay on January 10, 2003 interest on its Notes which was due but not paid on August 1,2002 (including interest accruing on such unpaid interest payment through the date of payment). There were no financial statements filed with this report.

DIAMOND CABLE COMMUNICATIONS LIMITED
FORM 10-Q
QUARTER ENDED MARCH 31, 2003

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.


	DIAMOND CABLE COMMUNICATIONS LIMITED

Date: May 15, 2003	By:	/s/ Barclay Knapp

		Barclay Knapp
		Director

Date: May 15, 2003	By:	/s/ Scott E. Schubert

		Scott E. Schubert
		Director

CERTIFICATIONS

I, Barclay Knapp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Diamond Cable Communications Limited;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003 /s/ Barclay Knapp

Barclay Knapp

Director*

I, Scott E. Schubert, certify that:

* The Company has no Chief Executive Officer or Chief Financial Officer. Barclay Knapp and Scott E. Schubert are Directors of the Company and are Chief Executive Officer and Chief Financial Officer, respectively, of NTL Incorporated, the parent of the Company.


Present value of discounted cash flows of the emerging entity	£	518,000
Current assets		28,618
Other assets		9,684

Reorganization value	£	556,302


Allowed claims:
Liabilities subject to compromise	£	1,029,422
Post petition liabilities:
Current liabilities		47,682
Deferred income taxes		921

		1,078,025
Reorganization value		556,302

	£	521,723

1.		Homes passed is the number of homes that have had ducting buried outside.

2.		Homes marketed is the number of homes for which the initial marketing phase (including door to door direct marketing) has been completed. Homes marketed at March 31, 2003 reflects an ongoing data cleansing exercise.

3.		Penetration rate is calculated by dividing the number of customers by the number of homes.

4.		Total customers at December 31, 2002 have been restated to include MATV customers.

	•		2001: $11,837.0 million (including an asset impairment charge of $8,160.6 million)

	•		2000: $2,388.1 million

	•		1999: $716.5 million

	•		1998: $534.6 million


	• increasing its vulnerability to adverse changes in general economic conditions or increases in prevailing interest rates particularly for any borrowings at variable interest rates,

	• limiting its ability to obtain additional financing, if needed, and

	• requiring it to dedicate a substantial portion of its cash flow from operations to service its debt, which reduces the funds available for operations and future business opportunities.

	•		incur additional debt;

	•		create or incur liens;

	•		pay dividends or make other equity distributions;

	•		purchase or redeem share capital;

	•		create restrictions on the payment of dividends or other amounts by its subsidiaries;

	•		make investments;

	•		sell assets;

	•		issue or sell share capital of certain subsidiaries;

	•		engage in transactions with affiliates; and

	•		effect a merger or consolidation of, or sell all or substantially all of its assets.

	1.		I have reviewed this quarterly report on Form 10-Q of Diamond Cable Communications Limited;

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and