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

FORM 10-K

Commission file number 0-22616

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

Securities registered pursuant to Section 12(g) of the Act:

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

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. o

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

        As of March 10, 2004, there were 86,999,281 shares of the Registrant's common stock, par value $0.01 per share, issued and outstanding, excluding shares of the Registrant's common stock issuable upon the exercise of Series A Warrants to purchase 10,313,158 shares of the Registrant's common stock.

        The aggregate market value of the Registrant's voting stock held by non-affiliates as of March 10, 2004, based on the closing price for the Registrant's common stock on the Nasdaq National Market on such date, was approximately $4.1 billion.

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 ý    No o

TABLE OF CONTENTS

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

        Various statements contained in this document constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. Words like "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify these forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated whether expressed or implied, by these forward-looking statements. These factors include:

•

potential adverse developments with respect to our liquidity or results of operations;



•

the significant debt payments commencing in 2005 and other contractual commitments coming due over the next several years;



•

the success of our proposed refinancing transaction;



•

our ability to fund and execute our business plan;



•

the impact of new business opportunities requiring significant up-front investments;



•

our ability to attract and retain customers, increase our overall market penetration and react to competition from providers of alternative services;



•

our ability to integrate our billing systems;



•

our significant management changes;



•

our ability to develop and maintain back-up for our critical systems;



•

our ability to respond adequately to technological developments;



•

our ability to maintain contracts that are critical to our operations;



•

our ability to continue to design networks, install facilities, obtain and maintain any required governmental licenses or approvals and finance construction and development, in a timely manner at reasonable costs and on satisfactory terms and conditions;



•

interest rate and currency exchange rate fluctuations; and



•

the impact of our recent reorganization and subsequent organizational restructuring.

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

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PART I

NTL CORPORATE STRUCTURE

NTL's Completed Restructuring

        On January 10, 2003, we emerged from reorganization under Chapter 11 of the US Bankruptcy Code. As part of the plan of reorganization, which we refer to as the Plan, we substantially reduced our indebtedness. In addition, since the completion of the Plan, we have enhanced our management team. We have a new chairman—James F. Mooney, a new chief executive officer—Simon P. Duffy, and a new chief financial officer—Scott E. Schubert. Prior to joining us, Mr. Mooney was the executive vice president and chief operating officer of Nextel Communications Inc., Mr. Duffy was the chief financial officer of Orange SA and Mr. Schubert was the chief financial officer of WilTel Communications.

        Pursuant to the Plan, our former parent NTL Europe, Inc., formerly known as NTL Incorporated, and its subsidiaries and affiliates were split into two separate groups, with us and NTL Europe, Inc. each emerging as independent public companies. We were renamed "NTL Incorporated" and became the holding company for the former NTL group's principal UK and Ireland assets. NTL Europe, Inc. became the holding company for the former NTL group's continental European and various other assets. All of the outstanding securities of NTL Europe, Inc. and some of its subsidiaries, including us, were cancelled. We issued shares of our 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. As a result, we are no longer affiliated with NTL Europe, Inc.

Historical Structure of the Company

        We were incorporated in 1993 as a Delaware corporation and continued as a publicly-traded holding company until February 1999. From February 1999 until January 10, 2003, the effective date of the Plan, or the Effective Date, we were a wholly-owned subsidiary of NTL (Delaware), Inc., a Delaware corporation, which was incorporated in February 1999, to effect a reorganization into a holding company structure under Section 251(g) of the Delaware General Corporation Law. The holding company structure was implemented to pursue opportunities outside of the UK and Ireland, and was accomplished through a merger. Our stockholders at the time became stockholders of the new holding company, NTL (Delaware), Inc., and we became a wholly-owned subsidiary of the new holding company. The new holding company took the name NTL Incorporated until May 2000 when it was changed to NTL (Delaware), Inc., its current name.

        In May 2000 another new holding company structure was implemented in connection with the acquisition of the residential assets of Cable & Wireless Communications plc, referred to in this annual report as CWC (the operations acquired from CWC are called ConsumerCo), and was similarly accomplished through a merger. The stockholders of NTL (Delaware), Inc. became stockholders of the new holding company, and NTL (Delaware), Inc. became a subsidiary of the new holding company, and we remained a subsidiary of NTL (Delaware), Inc., referred to in this annual report as NTL Delaware. The new holding company then took the name NTL Incorporated, which remained its name until the Effective Date of the Plan, at which time its name was changed to NTL Europe, Inc., referred to in this annual report as NTL Europe. On February 21, 2001, NTL Europe contributed the assets of ConsumerCo to us.

        We remained a subsidiary of NTL Europe and NTL Delaware until the Effective Date, at which time NTL Europe and its wholly owned subsidiary NTL Delaware were separated from us pursuant to the Plan and we took the name NTL Incorporated.

        We conduct our operations through direct and indirect wholly-owned subsidiaries. Our principal executive office is located at 909 Third Avenue, Suite 2863, New York, New York 10022, and our telephone number is (212) 906-8440. Our World Wide Web site is www.ntl.com and the investor

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relations section of our web site is located at www.ntl.com/locales/gb/en/investors/companyinfo/default.asp. We make available free of charge, through the investor relations section of our web site, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as soon as reasonably practical after they are filed with the Securities and Exchange Commission. Our filings are also available to the public at the web site maintained by the Securities and Exchange Commission, www.sec.gov.

Summary Corporate Structure

        The following chart shows on a condensed basis, the corporate structure of NTL through which our operations are conducted. As of December 31, 2003 it does not show our operating or other intermediate companies.

*

Includes Diamond Holdings Limited, or Diamond Holdings, the issuer of the 10% Senior Notes due 2008 and 9¹/8% Senior Notes due 2008, and Diamond Cable Communications Limited, the guarantor of those series of notes and the parent company of Diamond Holdings.

**

Includes the subsidiaries which secure our Senior Credit Facility.

***

Includes NTL (Triangle) LLC, or NTL Triangle, the issuer of the 11.2% Senior Discount Debentures due 2007.

Exchange rates

        The following table sets forth, for the periods indicated, the high, low, period average and period end noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York expressed as US dollars per £1.00. The noon buying rate of the UK pound on March 8, 2004 was $1.85 per £1.00.

(1)

The average rate is the average of the noon buying rates on the last day of each month during the relevant period.

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        The above rates may differ from the actual rates used in the preparation of the consolidated financial statements and other financial information appearing in this annual report on Form 10-K. Our inclusion of these exchange rates is not meant to suggest that the UK pound amounts actually represent these US dollar amounts or that these amounts could have been converted into US dollars at any particular rate, if at all.

        Unless we otherwise indicate, all UK pound amounts as of December 31, 2003 are translated to US dollars at an exchange rate of $1.7842 to £1.00, and all amounts disclosed for the year ended December 31, 2003 are based on an average exchange rate of $1.6348 to £1.00. All amounts disclosed as of December 31, 2002 are based on an exchange rate of $1.6095 to £1.00, and all amounts disclosed for the year ended December 31, 2002 are based on an average exchange rate of $1.5025 to £1.00. All amounts disclosed as of December 31, 2001 are based on an exchange rate of $1.4543 to £1.00, and all amounts disclosed for the year ended December 31, 2001 are based on an average exchange rate of $1.4392 to £1.00. US dollar amounts for any individual quarter are determined by multiplying the UK pound financial result for the period from January 1 to the end of the current quarter by the average exchange rate for the same period and subtracting from this total the US dollar converted financial result for the previous quarter of that fiscal year as computed above. The variation between the 2002 and 2003 exchange rates has impacted the dollar comparisons significantly.

        The assets and liabilities of our UK and Ireland subsidiaries have been translated using the exchange rates in effect at the balance sheet dates, and revenues and expenses have been translated at the average rates for the respective years.

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Item 1.    Business

RECENT DEVELOPMENTS

        On March 8, 2004, we entered into a commitment letter with Credit Suisse First Boston, Deutsche Bank, AG London, Goldman Sachs International and Morgan Stanley Senior Funding, Inc relating to a £2.425 billion new credit facility. The commitment by these lenders is subject to customary conditions as well as the issuance of high yield notes the proceeds of which, together with the proceeds from the new credit facility, will be sufficient to repay in full our existing senior credit facilities and our existing notes issued by Diamond Holdings and NTL Triangle. The aim of any new financing is to extend the maturity of our indebtedness and to reduce our weighted average cost of debt. We cannot provide any assurance that this refinancing transaction will be consummated.

ABOUT NTL INCORPORATED

        We are a leading broadband and communications services company in the UK and the Republic of Ireland based on total residential subscriber numbers. We provide our services to our customers through five reportable segments.

•

ntl: home provides residential telephone, cable television and Internet services, as well as wholesale Internet access solutions to Internet Service Providers, or ISPs, in the UK.



•

ntl: business provides data, voice and Internet services to large businesses, public sector organizations and small- and medium-sized enterprises, or SMEs, located near our existing residential broadband network in the UK.



•

ntl: broadcast provides digital television, or DTV, analog television, or ATV, and radio broadcast transmission services, network management, tower site rental and satellite and media services, as well as radio communications to public safety organizations in the UK.



•

ntl: carriers provides national and international communications transport services to communications companies in the UK and the Republic of Ireland.



•

ntl: Ireland provides primarily cable television services, as well as telephone and Internet services, to residential customers and television, data, voice and Internet services to business customers in the Republic of Ireland.

        Our reportable segments are supported by various central shared services, including ntl: networks, which manages our UK national network. Other shared services include finance, IT and human resources. ntl: Ireland relies upon these central shared services to a lesser extent than our other reportable segments.

        For the year ended December 31, 2003, our consolidated revenues by reportable segment were as follows:

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Business Strategy

        Our management team is focusing our efforts on improving the overall performance of our business. We are accomplishing this in a number of ways, including through:

•

Increased Focus on Profitability of Services and Customers—We instituted a number of initiatives to review major services within each of our reportable segments. We are using this information to emphasize our services and customers that are more profitable and to migrate away from those that are less profitable. To help us achieve these goals, we have significantly invested in our sales and marketing resources. In 2003, we grew our ntl: home sales and marketing employee force by approximately 55%. The increased headcount in sales and marketing has helped us increase customer penetration by adding approximately 181,500 net customers and 513,900 revenue generating units in 2003.



•

Continued Improvements to Our Capital Structure—Since emerging from bankruptcy under a plan of reorganization in January 2003, we have focused on stabilizing and rationalizing our capital structure to provide for long-term financial flexibility. Our reorganization resulted in the conversion of $10.9 billion of debt into equity. Following our reorganization, we had long-term debt less discount of £3.9 billion, or $6.3 billion. In connection with our rights offering in November 2003, we repaid approximately $1.2 billion of our obligations due under our 19% Senior Secured Notes due 2010 and our working capital facility, which substantially reduced our debt and interest expense. As of December 31, 2003, our long-term debt less discount was £3.2 billion, or $5.7 billion. The US dollar debt balance as of December 31, 2003 reflects a decline of the US dollar against the UK pound during 2003.



•

Improved Cost Controls—We continue to look critically at major expense categories. We also benchmark our costs against our competitors. As a result, we are continuing to pursue a number of cost reduction initiatives. By the end of 2003, we had significantly completed reorganizing our work force, reducing headcount by approximately 1,500 employees. On September 30, 2003, we amended our IT outsourcing agreement with IBM and are renegotiating various other vendor contracts to receive more favorable contract terms. Additionally, we recently announced the closure of our Brighton call center. We continue to look at other operational enhancements to further improve our cost controls, including further reducing headcount in various aspects of our business.



•

Realizing the Full Potential of Our Existing Network Asset Base—Our business is underpinned by a significant investment in our network infrastructure. We believe that we can successfully grow our business without having to expand or significantly upgrade our existing assets. For example, as of December 31, 2003, there were approximately 8.4 million homes passed by our ntl: home network. Homes passed is a cable industry term for the number of homes that can be connected to our network without further extending the cable distribution plant. Approximately 2.9 million of these homes currently use at least one of our services. Approximately 6.8 million of those homes are broadband-ready. Broadband-ready refers to homes that could receive broadband service without additional network investment. Accordingly, with limited infrastructure upgrade and capital investment, we have access to a substantial supply of potential new customers. We plan to focus our marketing efforts primarily on customers that are broadband-ready in order to increase our revenues and improve our profit margins. Our targeted marketing efforts resulted in the acquisition of approximately 432,100 new broadband customers in 2003 and as of March 1, 2004, we are now serving over 1 million customers.



•

Customer Retention and Improving Revenue Growth—In order to increase our revenues and profitability, we are emphasizing the retention of existing customers as well as selling more of our services to these customers. Accordingly, we have made the significant investment in sales and marketing resources discussed above. These efforts also include price incentives for

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customers who subscribe to more than one of our services. We are also seeking to improve customer service. Our success in improving our customer service is evidenced by a reduction in our residential customer churn in the UK. Customer churn is a cable industry term for the percentage of customers who stop using a provider's services. ntl: home lowered its annualized customer churn rate to 13.2% for the fourth quarter of 2003 from 15.9% for the fourth quarter of 2002. Our annualized customer churn rate is calculated by dividing the number of customers lost in the most recent quarter, multiplied by four, by the average total number of customers we serviced during that quarter.

•

Rationalization and Integration of Disparate IT Systems—Our historical growth through acquisitions has resulted in numerous billing systems and technology infrastructure. We are in the process of merging most of these systems onto a single platform for use by our ntl: home and ntl: business reportable segments. We expect this integration to reduce costs and improve customer call center efficiencies. The integration program is substantially on plan. Through December 31, 2003, we have expended approximately £55 million, or $98 million, of which approximately £33 million, or $59 million, was incurred in 2003. We estimate that the total project cost for this integration will be £75 million, or $134 million. We are seeking to complete this integration by late 2004.

Our Businesses

        Our operations expanded significantly between 1998 and 2000, primarily through acquisitions. Since 2001, we have focused on restructuring, integrating these operations and improving the services we offer.

ntl: home

        Our ntl: home segment provides residential telephone, cable television and Internet services in the UK as well as wholesale Internet access solutions to UK ISPs. We are the largest direct provider of residential broadband services in the UK. We refer to each service we provide as a revenue generating unit, or RGU. For example, if we provided one customer with broadband Internet and telephone services, this customer would represent two RGUs. As of December 31, 2003, we had approximately 2.9 million ntl: home customers, representing approximately 5.5 million RGUs. As of December 31, 2003, our customer penetration rate was approximately 36.9%. The customer penetration rate measures the number of customers for our services divided by the number of homes within our service area that can potentially be served by our network with minimal connection costs. For the year ended December 31, 2003, ntl: home revenues increased by 14.2% to $2,442.5 million from $2,139.0 million in 2002, and expressed in UK pounds revenues increased by 4.9% to £1,494.1 million from £1,423.7 million during the same period.

        During 2003, ntl: home added 181,500 net new customers compared with a net loss of 174,300 customers in 2002. This achievement is primarily the result of our efforts since 2002 to improve the pricing and packaging of our services, improve our customer service experience and re-build a sales force that had previously been scaled back. Our gross activations increased to 557,800 in 2003 from 292,800 in 2002. In addition, our deactivations declined from 467,100, or a 16.8% average customer churn rate in 2002 to 376,300, or a 13.4% average customer churn rate in 2003.

ntl: home Services

Bundling advantage

        In addition to providing our customers with better service, we also continue our efforts to cross-sell or up-sell our services to existing customers. As of December 31, 2003, we had approximately 949,200 broadband Internet subscribers. Our packaging and pricing are designed to encourage our

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customers to use multiple services like dual telephone and broadband Internet access, dual telephone and narrowband Internet access, dual telephone and television, or triple telephone, television and Internet access. For example, our Family Pack bundle offers over 100 television channels and a telephone line rental, and is subscribed for by approximately 70% of our DTV customers. In addition, we offer subscribers "two-for-one" incentives, like a free basic DTV subscription (for 12 months) with the purchase of our 24 hour unlimited UK call package.

        We believe that we are uniquely positioned in our service areas to use bundling to increase our customer base, reduce our customer churn rate and increase our profitability. As of December 31, 2003, over 70% of our customers received multiple services from us, and each of our ntl: home customers represented on average approximately two RGUs. In our service areas, we are the only service provider that can provide the full range of services that we offer. The table below shows other typical service providers who offer their services in our areas:

3

= service available.

5

5     = service not available.

(1)

Although BT Group plc, or BT, and British Sky Broadcasting Group plc, or BSkyB co-market each other's telephone and television services, customer and technical support remains distinct and customers are required to retain and pay for the different services separately.

(2)

For example, Freeserve, Tiscali and Virgin.net.

(3)

For example, Alpha Telecom, One.Tel, Tesco and Carphone Warehouse.

Broadband Internet access

        We were the first communications provider in the UK to launch a high-speed cable modem Internet service. This service links customers of our local cable networks to the Internet at up to 20 times the speed possible over standard telephone lines. Broadband Internet usage by residential customers remains a relatively new and undeveloped market. As of December 31, 2003, out of approximately 6.8 million homes currently able to receive broadband Internet service from us, we had approximately 949,200 residential broadband customers, a penetration rate of 14.0%.

        Unlike standard dial-up Internet, our broadband Internet service is an "always on" service, eliminating logging-on delays and the need to log off while using the telephone. We offer three tiers of broadband Internet services to our customers: 150Kb/s, 600Kb/s and 1024Kb/s, or 1Mb/s. Our 600Kb/s service provides an advantage over competing digital subscriber line, or DSL, services, which are generally offered at speeds of approximately 512Kb/s.

Cable television

        We offer both ATV and DTV to our customers. We have a number of ATV packages, which can be supplemented with premium channels and/or pay per view services. We also offer a wide range of digital services, including access to over 150 channels, advanced interactive features and a range of pay

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per view services. The selection of cable channels that we currently offer to our customers varies based on the particular area in which the service is provided. This variation is a result of the different channels offered by the various cable networks we acquired over the past several years and will decrease as DTV continues to be rolled out. In addition to offering many of the popular channels available on BSkyB's satellite platform, we also offer to all of our digital customers, through our joint venture with Telewest Communications plc, or Telewest, a cable-only movie, sport and special events pay per view television service called "Front Row." Front Row represented the first alternative in the UK to BSkyB in the provision of films and sports events through pay television.

        Our DTV technology enables a significant range of interactive services to be delivered that make use of the always-on return path. Examples of interactive services include game playing, television email and access to news, entertainment and information services from an on-screen menu.

        As of December 31, 2003, we provided cable television services to approximately 2.0 million residential customers, of which approximately 1.3 million received our DTV service and approximately 693,600 received our ATV service. This represents a decrease since December 31, 2002 of approximately 31,700 residential television customers, which includes an increase of approximately 101,000 DTV service customers and a decrease of approximately 132,700 ATV service customers. As of December 31, 2003, the penetration rate for our residential cable television services was approximately 26.0%.

Telephone

        We provide local, national and international telephone services to our residential customers. We tier our product offering with attractive pricing that includes "Talk Plans" that enable customers to make unlimited local and national calls for a fixed monthly fee in addition to the standard line rental. We believe that this combination of product tiering and pricing adds value to our offerings and enhances our market competitiveness. As of December 31, 2003, we provided telephone service to approximately 2.5 million residential customers, an increase of approximately 113,500 telephone service customers since December 31, 2002. As of December 31, 2003, the penetration rate for our residential telephone services was approximately 33.5%.

Additional services

        We provide wholesale Internet access solutions, including network services, call center operations and customer provisioning and billing to three of the leading UK ISPs, AOL, Virgin.net and Tesco.net. As of December 31, 2003, we had seven wholesale Internet customers. We also provide dial-up Internet services to approximately 407,900 customers as of December 31, 2003, a decrease of 35,500 customers since December 31, 2002. In addition, we provide Internet access to customers who are not directly connected to our network. As of December 31, 2003, we had approximately 117,700 of these indirect access customers, an increase of approximately 48,800 since December 31, 2002.

ntl: home Strategy

        Our network infrastructure enables us to offer existing and new customers within our service areas bundled services that include telephone, television and Internet services. We continue to focus on increasing customer penetration of relatively higher margin services like broadband Internet and telephone services through our competitively-priced bundled packages. We believe this will enable us to increase customer use of our services, thereby increasing our RGUs and average revenues per customer. From time to time, we have discussed with some of our suppliers of television programming content, including BSkyB, more favorable pricing or bundling terms. We and BSkyB have reached agreement on the main principles of a marketing incentive scheme that will provide us with improved economic terms based on increased sales of BSkyB's premium movie and sports channels. Conclusion

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of this deal is subject to certain matters, including the negotiation of a long form carriage agreement. Accordingly, there can be no assurance that any changes to the terms of our current agreement will be made. We also continue to focus on improving our customer service in order to minimize our customer churn rate while continuing to decrease our operating costs. We expect to improve customer call center efficiencies, provide customers with on-line access to their accounts and improve overall customer satisfaction with the integration of our different billing systems to a common platform.

ntl: home Customer Statistics

        The following table illustrates our residential customer statistics as of December 31, 2003 and 2002:

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(1)

Homes marketable refers to the number of homes within our service area that can potentially be served by our network with minimal connection costs. This is lower than homes passed owing to restrictions imposed by some landlords on accessing some multi-tenant buildings.

(2)

Dual customers include those subscribing to both ATV and DTV services.

(3)

Triple customers include those subscribing to four services: telephone, Internet, ATV and DTV services.

(4)

Includes 96,400 customers who have not logged on during the prior 30 days.

(5)

Each telephone, television and broadband Internet subscriber directly connected to our network counts as one RGU. Accordingly, a subscriber who receives both telephone and television service counts as two RGUs. RGUs may include subscribers receiving some services for free or at a reduced rate in connection with incentive offers.

(6)

Penetration rate measures the number of subscribers for our services divided by the number of marketable homes that our services pass.

(7)

Disconnects include customers which cancel service owing to moving premises. If these customers re-connect in another area, they are considered to be new customers.

(8)

Customer churn rate is calculated by dividing the number of customers lost in the most recent quarter, multiplied by four, by the average total number of customers we serviced during that quarter.

ntl: business

        ntl: business provides a wide range of voice, data and Internet based communications services for our business customers. ntl: business targets large businesses, public sector organizations and SMEs. We generally divide our customers into three categories based on revenues generated or revenues expected to be generated by that customer:

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Tier 1—each Tier 1 customer generally provides us with more than £100,000 of revenues annually.

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•

Tier 2—each Tier 2 customer generally provides us with between £25,000 and £100,000 of revenues annually.



•

Tier 3—each Tier 3 customer generally provides us with less than £25,000 of revenues annually.

        This segmentation of existing customers enables divisional directors to devote resources and provide levels of service appropriate to levels of customer revenues. We primarily focus on our Tier 1 and Tier 2 customers. For the year ended December 31, 2003, ntl: business revenues decreased by 1.8% to $461.2 million from $469.8 million in 2002, and revenues expressed in UK pounds decreased by 9.8% to £282.1 million from £312.7 million. For the year ended December 31, 2003, Tier 1 and Tier 2 customers accounted for a majority of ntl: business's revenues, with Tier 1 customers accounting for a significant portion of those revenues. Our customers include Cambridgeshire County Council, Hertfordshire County Council, Blue Arrow, Fujitsu, HSS Hire Shops and Glasgow City Council.

ntl: business Services

Voice Services

Business Exchange Lines

        Our business exchange lines provide our business customers with analog telephone services that connect to customer telephone handsets or private automatic branch exchanges, or PABXs. Revenues for this service are derived from service installation, line rental and usage charges.

Business Line ISDN 30

        Our Business Line ISDN 30 service delivers 30 digital exchange lines over a single physical access link. The exchange lines may be used for voice or data applications or a mix of both. The number of digital exchange lines is sized to a customer's needs. Revenues for this service are derived from service installation, line rental and usage charges.

Centrex

        Our single and multi-site Centrex solutions provide customers with the facilities of a PABX without the need to invest in the provision and maintenance of a local PABX. Telephone calls between users within a building or in different buildings are handled through our network but appear to the user to be transferred through a local PABX. Revenues for this service are derived from installation, equipment rental, line rental and call charges.

Data Services

Leased Lines

        Our leased line services provide high quality dedicated connections between two customer locations. Customers use leased lines for voice, data and video applications, and for forming the basis of private networks. Service speeds are available at 2Mb/s, 10Mb/s, 34Mb/s, 45Mb/s, 100Mb/s, 155Mb/s and 1000Mb/s or 1Gb/s. Revenues for this service are derived from service installation and recurring rental charges based on distance.

Virtual Private Network

        We provide virtual private connections between customer locations. Virtual private networks deliver several connections over a single access link. This provides the benefits of a dedicated private network at a lower cost. Revenues for this service are derived from installation, access circuit rental and virtual connection rental charges.

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Structured Cabling

        We provide in-building structured cabling services which include design, installation and project management of cable installations and upgrades. Revenues for this service are determined on a project by project basis.

LAN Services

        We provide design, installation and maintenance services for our customers' local area networks, or LANs. Revenues for this service are determined on a project by project basis.

Internet

Dedicated Internet Access

        We provide high speed dedicated Internet access to organizations that support web services from their own locations as well as organizations that have heavy demands for access to the Internet. Because we own our network, we can provide competitively-priced Internet access at higher speeds. In addition, we also provide cable modem access to our smaller customers. Our pricing is based on installation charges and recurring rental charges that vary based on the speed of access.

ntl: business Strategy

        Our network infrastructure passes within 200 meters of more than 570,000 business premises in the UK. We use our network infrastructure and brand to offer voice, data and Internet services to these business customers. We are currently focused on our existing business customer base with an emphasis on providing them a full set of services at competitive prices. We have also undertaken a detailed review of our cost base in this segment, with a view to right-sizing the organization for our customer base and improving profitability. For example, ntl: business decreased its headcount from approximately 2,100 employees in December 2002 to approximately 1,300 employees in December 2003. We plan to return to selective, capital-efficient customer growth in 2004.

ntl: broadcast

        ntl: broadcast provides site leasing, broadcast transmission, satellite, media, public safety communications and other network services. We use our wireless communication and broadcast transmission infrastructure in the UK and our facilities management expertise to provide our customers with enhanced services. Our ntl: broadcast segment has approximately 1,100 customers, including the leading UK mobile wireless operators, all major commercial television and radio broadcasters and public safety organizations like the police, fire and ambulance services across the UK. For the year ended December 31, 2003, ntl: broadcast revenues increased by 13.6% to $439.2 million from $386.6 million in 2002, and revenues expressed in UK pounds increased by 4.4% to £268.6 million from £257.3 million in 2002. This growth has been driven in part by the continued rollout of digital radio services and the growth achieved in public safety services.

        We also develop new service offerings to meet the needs of our customers and to drive the growth of our business. For example, over the last few years, we designed and implemented digital terrestrial television and digital audio broadcasting networks for many of our UK broadcast customers. ntl: broadcast is also using its core assets and competencies to provide innovative solutions to enhance the mobile coverage of our customers. Our solutions are based on technology that enables low power antennae to be discreetly placed away from the centralized transmission equipment in order to bring environmental and commercial benefits to mobile operators, local authorities and residents. Furthermore, with the recent migration from analog to digital systems in the public safety market, we have developed an integrated control room solution for the police market. We also developed and

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deployed a wireless call out system for emergency services that is being used by the Royal National Lifeboat Institution in the UK and the Republic of Ireland.

ntl: broadcast Services

Site Leasing Services

        We have the second largest independent portfolio of wireless towers and sites available for lease in the UK. Our network includes most of the major population centers and highways in the UK. As of December 31, 2003, we had a UK wireless infrastructure network of 2,222 multi-user tower sites and undeveloped sites. We own, lease, manage, license, share and have conditional options for or access to 1,526 UK tower, rooftop and third party-owned sites and have limited rights to access or acquire approximately 696 undeveloped sites. Our primary site leasing business is the leasing of antenna space on our sites to a diverse range of wireless service providers, including providers of mobile telephone, paging, specialized mobile radio and wireless local loop services. We have also developed a range of complementary services that use our tower expertise, including infrastructure services, site selection and acquisition, design and construction, antenna installation, network planning and management and tower maintenance. Our site leasing contracts generally have a duration of approximately 10 to 12 years. We also use the broadcast transmission sites of Crown Castle UK Limited, or Crown, a subsidiary of Crown Castle International Corp., pursuant to our reciprocal sharing arrangement with Crown. See "—Properties."

        Second generation, or 2G, wireless services have been the major driver of our growth to date, but we expect 3G wireless services to drive further revenue growth. During 2000, the UK government awarded five national universal mobile telecommunications systems, or UMTS, licenses. Each of these licenses has a duration of 20 years, commencing January 2002. Under the terms of these licenses, each operator is obligated to provide services to at least 80% of the UK population by December 2007. Construction of these networks commenced in 2001 and is expected to generate further demand for suitable existing and new sites over the next few years.

        The growth of wireless communications has created a need for good cellular coverage in all commercial areas, including reliable wireless communications infrastructure inside buildings. We believe this requires a new type of radio site that, unlike towers, will be located inside large public access buildings, like commercial spaces, transport hubs and shopping malls. We offer wireless connectivity services that provide enhanced cellular coverage in high traffic areas. As of December 31, 2003, we had 59 wireless connectivity services agreements in place for large public access buildings, 49 of which have been installed with shared coverage systems. Shared coverage systems allow us to carry the wireless traffic of more than one operator over our network at one time.

        We provide site leasing and services to approximately 340 wireless operators, including all UK mobile telephone operators, major paging companies and many of the largest wireless voice and data carriers.

Broadcast Transmission Services

        We provide television and radio broadcast transmission services through our broadcast transmission infrastructure network in the UK. We are one of only two major companies providing transmission sites and services to the broadcast industry in the UK. Unlike most broadcasters in the United States, we own and operate not only the towers, but also the broadcast transmission infrastructure. Therefore, our broadcast customers rely on our network and package of integrated turn-key services to distribute and broadcast their content. This opportunity has enabled us to develop strong relationships with our customers, which in turn has helped us to better understand their needs and to customize new services for them. Our broadcast customers generally hold long-term licenses and enter into service agreements with us that typically last for 8 to 12 years.

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        We provide analog and digital broadcast transmission services for national and regional television and radio broadcasters. Our ATV network provides coverage to almost all of the UK population from approximately 1,200 sites for ITV, Channel 4/S4C and the majority of the UK for Five, formerly Channel 5. Our DTV network provides coverage reaching most of the UK population from 80 sites for two national DTV licensees. We provide these licensees with the DTV carriage services they need to broadcast their channels.

        We provide a range of services to radio broadcasters, including target service area planning, site location, system build, operations and maintenance. Our customer base for analog radio includes over 200 commercial national, regional and local stations in the UK. Our radio business has grown significantly over recent years with the emergence of digital radio. As of December 31, 2003, the UK government has licensed our affiliate, Digital One Limited, or Digital One, as the only national commercial digital radio licensee as well as 42 regional and local commercial licensees. We have secured contracts to build the transmission and supporting network for Digital One as well as for 38 of these 42 regional and local licensees.

Satellite and Media Services

        We provide satellite and media services in the UK and additional value-added services to generate incremental revenue. We own and operate satellite up-linking facilities consisting of over 30 fixed satellite up-link dishes able to access over 50 satellites achieving global coverage through international partners and a network of mobile and transportable up-links, management and systems. We provide our satellite customers with program and content distribution services for over 180 full-time channels through satellite and fiber. In addition, we have facilities for value-added services like playout services, remote satellite news and full outside broadcast. Our full-time satellite and playout services contracts generally have a duration of 3 to 5 years.

        We believe that our ability to offer a full range of services, including content gathering, distribution and transmission, is uncommon in the UK market. We have expanded our service offerings over time to meet the growing needs of our customer base.

        Our satellite and media customers include programmers who own and operate packages of content or channels, news agencies, sports broadcasters and production companies. Our customers include CNN, Turner Classic Movies, the Cartoon Network, the British Broadcasting Corporation, or the BBC, the Discovery Channel, QVC, the Associated Press Television Network and BSkyB.

Public Safety Services

        We offer a wide range of communications services to public safety organizations. These services include the design and operation of radio networks, voice and data services and the provision of support, maintenance and facility management services. We provide independent systems integration services, in both mobile radio communications and fixed-line communication networks, making a wide range of technologies suitable and effective for the demanding public safety environment. We have introduced a new range of managed services for radio and integrated communications technology. As a result, we are the UK's largest provider of radio communications managed services in the public safety sector. We have also secured new managed services contracts to connect regional police forces to their new airwave digital network.

        We provide services to approximately 400 customers in the public safety sector. The Metropolitan Police in London is our largest public safety customer.

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ntl: broadcast Strategy

        Our strategy is to continue to build strong customer relationships with existing customers and to provide differentiated service offerings to both existing and new customers. Capital investment within ntl: broadcast is largely focused on gaining new contracts. We seek to secure contracts that are long-term and cash generative.

        In the site leasing services area, our strategy is to maximize long-term site leasing contracts by increasing the number of mobile operators leasing our tower network. We also provide coverage solutions in public buildings and cities in the UK using our fiber network.

        Within broadcast transmission and satellite and media services, our strategy is to be the technical out-sourcing partner of choice by providing end-to-end connectivity services using our various products and infrastructure.

        Within the public safety sector, we manage communications systems that are mission critical for our public safety customers. As the public safety market transitions from analog to digital systems, we are providing transition management services and we are seeking to enter into new service contracts with our customers.

ntl: carriers

        We provide external network services to national and international telecommunications operations by supplying fiber and transmission capacity to connect carriers to national and local networks in the UK and Ireland. Our ntl: carriers segment has over 40 customers. Customers include fixed line and mobile telecommunications operators, like Orange Personal Communications Services Limited, or Orange, and BT Global Services. For the year ended December 31, 2003, ntl: carriers revenues increased by 2.3% to $183.8 million from $179.7 million in 2002, and revenues expressed in UK pounds decreased by 6.0% to £112.4 million from £119.6 million.

        Our contracts with fixed line and mobile telecommunication operators, other than prepaid contracts, have an average duration of approximately five years. As of December 31, 2003, there was an average of three years remaining on these contracts. Our largest ntl: carriers contract is a five-year, £235 million contract with Orange, which expires in 2006. This contract encompasses the design, construction and maintenance of network infrastructure for Orange. For the year ended December 31, 2003, revenues from services provided under this contract were approximately £42.8 million. The contract is structured so that revenues are paid after each phase of construction is completed. Each individual phase is contracted for a five-year period.

ntl: carriers Services

        We provide external network services to national and international telecommunications operations in the UK and Ireland. We provide customers with a mix of dark fiber, bandwidth, voice and support services, including equipment maintenance, monitoring and co-location. We also have connectivity to many of the UK's international cable landing stations. These are shore-based locations where major submarine cable operators land their sea cables. The wholesale market saw the reorganization or bankruptcy in 2002 of many of the new entrant operators, especially those companies whose focus had been on serving carriers. As a result of this, several customers that had signed contracts with us are no longer in business. While this will have some effect on ntl: carriers revenues for 2004, most of our existing contracts are now with telecommunications companies with high volumes of retail traffic. Furthermore, our sales focus is on UK telecommunications companies who service the retail rather than the wholesale markets.

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        We supply core inter-switch capacity to UK mobile operators. We also supply connectivity between switch sites and local aggregation points from various mobile base stations. We have commercial relationships with four of the five incumbent mobile operators in the UK.

ntl: carriers Strategy

        We expect to continue serving the retail service provider marketplace through our strategy of providing high quality and competitively priced services, customized to meet the needs of other telecommunications operators that need to expand their networks. We have migrated from building large networks to incrementally developing existing assets and new products. In addition, we are benefiting from our customers' decision to lease additional capacity instead of constructing their own networks.

ntl: Ireland

        We provide cable television and MMDS telephone, and Internet services in the Republic of Ireland. Our network service areas are located in Dublin, Galway and Waterford. As of December 31, 2003, we had approximately 327,200 residential cable television customers in Ireland, a decrease of approximately 21,900 customers from December 31, 2002. As of December 31, 2003, we had a 70.6% customer penetration rate in the 463,700 homes passed by our cable network. We also had approximately 4,050 business customers at December 31, 2003, a decrease of approximately 600 customers from December 31, 2002. For the year ended December 31, 2003, approximately 85% of our revenues were derived from residential customers and approximately 15% of our revenues were derived from business customers. Telephone and Internet services currently contribute minimally to our residential revenues.

        The decrease in the number of residential customers is partially a result of our implementing a more rigorous credit policy that caused involuntary disconnections of some of our customers. This did not have a significant overall impact on our consolidated results of operations or cash flow.

        For the year ended December 31, 2003, ntl: Ireland revenues increased by 31.7% to $118.5 million from $90.0 million in 2002, revenues expressed in UK pounds increased 21.0% to £72.5 million from £59.9 million, and revenues expressed in euros increased by 10.1% to €104.8 million from €95.2 million.

ntl: Ireland Services

Cable Television

        In the Republic of Ireland, we primarily offer ATV services within our three network service areas. Our analog service has a basic pack of 15 television channels. It carries Irish and UK channels and a selection of quality satellite channels.

        We also offer DTV services in all of our network service areas. Our digital service packaging and pricing strategy is to encourage our analog subscribers to upgrade to the digital service while retaining the basic analog entry package. We provide a basic DTV package offering a wide selection of digital channels with a low entry price point. If subscribers upgrade to digital, encouraging subscription to additional services like digital premium sports, movie services and special interest channels can generate further revenues. As of December 31, 2003, we had 58,600 digital subscribers.

MMDS

        We launched our digital MMDS service in April 2003. As of December 31, 2003, we had approximately 12,718 digital MMDS subscribers, as well as approximately 4,377 analog MMDS subscribers. We plan to continue marketing our MMDS services.

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Business Services

        Our service offerings in the Republic of Ireland include business telecommunications and Internet services. We provide dedicated lines to business customers in our Dublin network service area for Internet access with speeds ranging from 64Kb/s to 34Mb/s. We also sell leased lines in Dublin to customers requiring connectivity. One of our business objectives is to achieve higher penetration within large corporate businesses based in the Dublin region.

ntl: Ireland Strategy

        ntl: Ireland will focus on revenue growth per customer through continued migration of residential analog customers to our digital service and on a gradual expansion of broadband services within our cable network. ntl: Ireland will also continue to focus on profitable growth and effective utilization of available network capacity for its business customers.

Our Network

        Our business is underpinned by significant investment by us and the companies we have acquired in our network infrastructure. We believe that we can successfully grow our business by generating additional revenue from our existing assets with limited infrastructure upgrade and capital investment.

        ntl: networks operates, manages and maintains the core network infrastructure that transports our voice, Internet, data, optical and digital television services. The networks group governs the architecture of all of our networks, plans and implements network capacity and operates our telephone, data and backbone transmission networks. It plans network strategy and creates architecture for national and local access networks, setting technical standards for the whole network. It also manages our network security and the radio frequency spectrum on the broadband local access network. There are two dedicated network sites.

Infrastructure

        Our broadband communications network in the UK currently passes approximately 8.4 million homes. Our high-capacity two-way local broadband fiber networks serve entire communities throughout our regional franchise areas. Our fiber optic cables also pass a significant number of businesses in these areas and are connected to distribution points or nodes.

        The core network has a fiber backbone that is approximately 9,900 kilometers long. This includes 7,600 kilometers which are owned or operated by us and approximately 2,300 kilometers which are leased fiber from other network owners. A total of 99 switches direct telephony traffic around the core and local networks. In addition, we have more than 500 hub sites, points of presence, repeater nodes or other type of network site, and over 140 radio sites.

        The transmission network uses synchronous digital hierarchy. This technology allows high-speed data transmission and redirects transmissions in the event of a problem to prevent any disruption. Our backbone network also provides asynchronous transfer mode, or ATM, and Internet protocol, or IP, services. The duct network was built with sufficient duct capacity to accommodate up to 2,300 fibers on the majority of the network. This network was designed to enable the placement of active components, like routing devices, close to our customers, allowing us to offer a broad range of voice and data services. The backbone transmission network connects all our voice switches and broadband Internet protocol routers.

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        We have a variety of alternative methods to carry our national telecommunications network over the "last mile" to the premises of those customers which are located outside of our cabled areas. We:

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obtain permits to construct telecommunications networks, and build out our network to reach our customers. Although this is often the most costly means of reaching a customer, the expense can be justified in the case of larger customers or where a significant level of traffic is obtained from a customer;



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lease circuits on the local networks of other service providers to connect to our customer's premises. Although this may reduce the operating margin on a particular account, it requires significantly less capital expenditure than a direct connection, and can often be put in place relatively quickly and can be replaced with a direct connection at a later date if traffic volumes justify it; and



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connect customers to our national telecommunications network via our extensive tower infrastructure by implementing point-to-point microwave radio links between tower sites and our customers.

IT

        We outsource the management of the primary elements of our IT systems to IBM, pursuant to an agreement with IBM which terminates in 2013. We retain control of our IT activities that are fundamental to our competitive advantage and key to the development of our intellectual property. The services IBM provides include:

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management of our mid-range IT equipment;



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software application development;



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software application maintenance and support;



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management of our internal voice and data network;



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end-user help desk services; and



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end-user desk top and lap top computing support.

        On September 30, 2003, we amended our agreement with IBM. Under this amended agreement, prices for services previously provided to us by IBM were renegotiated on terms more favorable to us. IBM will also provide additional services to us. Under the amended agreement, annual service charges may be reduced if we successfully implement our integrated billing systems and, as a result, achieve cost savings. Although this agreement terminates in accordance with its terms in 2013, we have the right to terminate it, with or without cause, on or after May 23, 2006, subject to paying a termination fee. If we terminate the contract on or before December 31, 2010, we must pay a termination fee equal to £15 million. This fee decreases each subsequent year to approximately £5.0 million in 2013.

Competition

        We face significant competition from established and new competitors in the areas of residential telephone services, business telecommunications services, Internet and cable television.

ntl: home

        We compete primarily with BT in providing telephone services to residential customers in the UK. BT occupies an established market position and manages fully built networks and has resources substantially greater than ours. In addition to BT, other telecommunications companies, like Alpha Telecom, One.Tel, Tesco and Carphone Warehouse, compete with us in the residential telecommunications market. In particular, carrier pre-selection may increase the appeal of indirect access operators. These carriers offer discounted call charges that may undercut our prices. BSkyB

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currently markets residential telecommunications services on an indirect access basis. Indirect access typically requires the customer to dial additional digits before entering the primary telephone number. This diverts calls onto another operator's network.

        We also compete with mobile telephone networks that may threaten the competitive position of our networks, particularly if call charges are reduced further on the mobile networks. However, we expect that any decrease in demand for telephone services as a result of competition from mobile telephone networks may be at least partially offset by increased demand for our services to mobile telecommunications operators, which are provided by ntl: carriers and ntl: broadcast.

        Our cable television service competes with digital terrestrial television services like Freeview, a service provided by DTV Services Limited, a joint venture between BSkyB, Crown Castle International Corp. and the BBC, digital satellite television services offered by BSkyB and satellite master antenna systems. In addition, pay television and pay per view services offered by us compete to varying degrees with other communications and entertainment media, including home video, cinema exhibition of feature films, live theater and newly emerging multimedia services. We expect that, in the future, we may face competition from programming provided by video-on-demand services.

        Our Internet services compete with BT and resellers of BT's Internet services. Competition in the Internet services market has been increasing. For example, the launch by Freeserve of aggressive retail price discounts may, if successful, encourage other ISPs to also introduce discounted prices and other similar offers. We expect that the level of competition in the Internet service market to increase significantly.

        We believe that we have a competitive advantage in the residential market because we offer integrated telephone, cable television, telecommunications services, including Internet, interactive television and online services, as well as multi-product packages designed to encourage customers to subscribe to multiple services. The packages we currently offer to the majority of our UK residential customers comprise telephone service, narrowband Internet access service, broadband Internet access services, all of the current terrestrial television channels and access to multi-channel television, including pay per view and interactive television services. Our packaging and pricing are designed to encourage our customers to use multiple services from us like dual telephone and broadband, dual telephone and narrowband, dual telephone and television, or triple telephone, television and Internet access. Of our peers, only Telewest, which does not offer its services in our service areas, is able to directly offer the full range of services we provide.

ntl: business

        We face a wide range of competitors in the UK market. The nature of this competition varies depending on geography, service offerings and size of the marketable area. Only BT and Telewest have both extensive local access networks and a national backbone network. However, as Telewest's local networks do not overlap with our own networks, we do not compete with Telewest to any material extent. BT is a major competitor in almost all of our opportunities. Cable and Wireless plc, or C&W, and Energis own national backbone networks and they tend to focus on the large enterprise/corporate markets. However, these companies do not own local networks to any material extent and rely on wholesale arrangements to supply their customers.

        Colt Telecom Group plc has an extensive network particularly in London and also focuses on large enterprise and corporate accounts. Thus Group plc has its network in Scotland, principally in Edinburgh and Glasgow, and United Utilities plc has its network in Manchester. We face these competitors on a local basis mainly in the medium to large end of the SME market and in the market for larger corporate accounts and public sector organizations. In addition, for voice services we compete with a number of resellers who purchase wholesale minutes from BT and others and compete aggressively in the retail market.

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        Although many customers have a dual supplier sourcing policy, competition remains based on price and quality of service. We expect price competition to intensify as existing and other new entrants compete aggressively. Most of these competitors have substantial resources and we cannot assure you that these or other competitors will not expand their businesses in our existing markets or that we will be able to continue to compete successfully with these competitors in the business telecommunications market.

ntl: broadcast

        Crown is our primary competitor in the terrestrial broadcast transmission market in the UK. Crown provides analog and digital transmission services primarily to the BBC. Crown has diversified from its core broadcast transmission business by using its transmission infrastructure to enter into the wireless site leasing business and telecommunications sectors.

        Although Crown is our direct competitor, Crown and we have reciprocal rights under a site-sharing arrangement to use each other's sites for broadcast transmission in order to enable each of us to achieve countrywide coverage. For a description of our site sharing arrangements see "—Properties."

        Crown also offers site rental on a significant number of its sites, some of which are managed on behalf of third parties. Like us, Crown offers a full range of site-related services to its customers, including installation and maintenance. We believe our towers to be at least as well situated as Crown's towers and that we will be able to continue expanding our own third-party site-sharing penetration.

        All four 2G UK mobile operators own site infrastructure and lease space to other users. Their openness to sharing with direct competitors varies by operator. T-Mobile and O₂ (UK) Limited have announced joint deployment on some sites in the UK. BT and C&W are both major site-sharing customers but also compete by leasing their own sites to third parties.

        Several other companies compete in the market for site rental. These include Gridcom UK, which is part of the merged National Grid Lattice plc, the Automobile Association and the Royal Automobile Club. Some companies own sites initially developed for their own networks, while others are developing sites specifically to exploit this market.

        Airwave, a division of MMO₂ plc, and Vivista Ltd. compete with ntl: broadcast in bidding for managed services in the digital public safety market in the UK. Airwave uses our towers as part of its network. BT, Kingston Communications (Hull) Plc, or Kingston Communications, the BBC and Globecast, the broadcast service division of France Telecom, compete in the provision of satellite and media services.

ntl: carriers

        BT and C&W are our principal competitors across the carrier services and mobile markets. Competition is based on price, range and quality of services. BT has a local access network across the UK that puts BT in a strong competitive position. Competition is most intense on key city-to-city routes where new entrants have increased the number of suppliers and had a significant negative impact on prices. Where opportunities are more closely aligned to the geographic areas we serve, the number of our competitors is significantly reduced.

ntl: Ireland

        Since 1998, BSkyB has had a presence in the Irish pay-television market. In the past three years, BSkyB has aggressively marketed its digital television service to Irish consumers. We estimate that BSkyB is the second largest pay television operator in the Irish market, based on the number of subscribers, after ntl: Ireland. BSkyB completed a deal in April 2002 with Radio Telefís Éireann and TV3 Television Network Limited, the Irish free to air broadcasters, to carry the television stations RTE1, Network 2, TV3 and TG4 on its second tier package.

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        The other principal competitors to our business operations in the Republic of Ireland are Eircom Limited and ESAT BT, a subsidiary of BT.

Government Regulation

Regulation by the European Union

        The European Union, or EU, regulates our business through various legislative means. In February 2002, the EU adopted a package of legislative measures, which set out a new framework for electronic communication to ensure that the legislation is more technology neutral. The new regulatory framework, or NRF, consists of:

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five harmonization directives, including a framework directive and four specific directives on authorization, access and interconnection, universal service and users' rights, and data protection in telecommunications services;



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a regulation on unbundling the local loop;



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a draft liberalization directive; and



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a decision on EU radio spectrum policy.

        The UK and Irish governments implemented these directives into law by the enactment of the Communications Act 2003 and the Communications Regulations Act 2002. See "—Regulation in the UK" and "—Regulation in the Republic of Ireland."

Regulation in the UK

        We are subject to statutory regulation under the Communications Act 2003 and the Broadcasting Acts 1990 and 1996.

        Under the Communications Act 2003, companies intending to provide designated electronic communications networks, or ECNs, or designated electronic communications services, or ECSs, are required to give prior notification of their intention to do so to the Office of Communications, or OFCOM, in accordance with various conditions. This notification procedure replaces the previous regime of individual licenses required by the Telecommunications Act 1984. As a prior holder of a public telecommunications operator license under the Telecommunications Act 1984, we are automatically deemed to operate under the new regime. Our entitlement to provide services extends throughout the UK. The UK regulatory regime was supervised and enforced by the UK Office of the Director General of Telecommunications, or OFTEL, until January 1, 2004, when enforcement powers were transferred to OFCOM. A breach of any conditions, which apply to us, can lead to fines and ultimately to revocation of the right to provide a designated ECN or a designated ECS.

        We also hold a number of television licensable content service licenses to provide television content services under the Communications Act 2003. These licenses are also supervised and enforced by OFCOM. Any breach of the conditions of these licenses, which apply to us, can lead to fines and ultimately to revocation of the right to provide the service.

SMP and market reviews

        The notification procedure contains certain conditions, which apply only where a service provider has been found to have significant market power, or SMP, in a relevant market. SMP is similar to the competition law concept of market dominance.

        In 2003, OFTEL began a series of market reviews intended to identify which operators have SMP in a range of telecommunications and broadcasting markets. OFTEL's provisional finding was that all fixed operators would have SMP in relation to the termination of voice calls on their own network. This finding is consistent with earlier findings that all mobile companies similarly enjoy SMP in relation

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to the termination of calls on their networks. The OFTEL finding was based upon OFTEL's determination that the charges related to the termination of voice calls were not subject to competitive pressures because these charges are reflected on the bills of the calling parties who are not the operators' own customers.

        In August 2003, OFTEL issued a statement confirming this finding. OFTEL set out the obligations that we and others would be expected to adhere to in light of this finding. A condition of the notification procedure will require us to offer a fair and reasonable rate to interconnecting operators for the termination of calls on our network. OFTEL indicated that it would consider a fair and reasonable rate to be one that was no higher than the regulated rate that BT must offer to terminate calls on its network. As we already offered and received voice calls to BT and to other operators at a rate equivalent to the regulatory rate imposed on BT, it does not appear that this ruling has had a material effect on us.

        With respect to all of our other voice, data and Internet markets, OFTEL's conclusions, adopted by OFCOM, have been that we do not have SMP.

SMP and the broadcast transmission market

        During 2003, ntl: broadcast's transmission business has continued to be subject to price regulation by OFTEL of some of its services under Communications Act 2003 regulatory regime. Our price-regulated business consists of the analog terrestrial television transmission services provided to the ITV companies and Channel 4/S4C, including the operation and maintenance of transmission equipment.

        The price controls imposed on us are based on the allowable revenues we generated in 1997 of £53.4 million. For each subsequent year of the control, we are required to reduce our revenues by 4% per year, after allowing for consumer price inflation. These controls were extended through December 31, 2003, while the market review was being conducted. In the interim, OFTEL issued a Statutory Notice extending the previous regulatory requirements of the Telecommunications Act 1984 until the new market review is completed.

        On September 9, 2003, OFTEL published its initial review of the markets for terrestrial television and radio broadcast transmission, setting out its provisional findings on market definition, market power and possible remedies.

        In its provisional findings, OFTEL concluded that we and Crown have SMP in the market for access to our respective masts and sites for the purposes of analog and digital terrestrial television broadcast transmission services to end users. No party has SMP in the equivalent markets for radio transmission. The net effect of this finding, if implemented, would be to extend the scope of regulation to cover digital as well as analog terrestrial broadcast transmission.

        However, OFTEL also indicated in its provisional findings that it did not favor maintaining the existing analog terrestrial price control regime, or introducing a new digital terrestrial price control regime, for either us or Crown. OFTEL stated that it would, in lieu of a price control, impose requirements on us and Crown to grant access to our masts and sites on reasonable terms to each other and third parties for the purposes of both analog and digital terrestrial television broadcast transmission to end users. OFTEL also stated that it would require that charges for this access be reasonably derived from the cost of provision, and to require that there be no undue discrimination in the terms offered for this access. Crown and we would in addition be required to publish a reference offer setting out prices, terms and conditions. Comments have now been published on this proposal but no final decision has yet been made by OFCOM.

Regulation of BT

        The regulation of BT is also key to our business in a number of ways. Because BT is the dominant provider of voice telephone services and our major rival in broadband services with a continued

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monopoly of the DSL local loop, it is important to us that BT is subject to strict controls regarding anti-competitive behavior. However, regulation in the form of retail price controls can also reduce pricing to unsustainable levels. Finally, "open access" regulation in either voice telephone services or data markets could facilitate entry by other providers, including service providers that do not own and run their own access infrastructure, intensifying the competitive threat to us.

        BT is subject to the same notification procedures as us and also to the same process of market reviews to determine whether there is SMP. The reviews completed to date have all concluded that BT has SMP in several markets. The remaining reviews have made similar provisional findings. The effect of these reviews has been to subject BT to a large number of regulatory requirements at both the retail and wholesale levels.

        BT will also be subject to a general presumption of market dominance in relation to its commercial behavior in relevant markets where it holds SMP, which is likely to lead to restrictions on its ability to price and bundle services.

        OFTEL has stated that it intends to avoid retail price regulation wherever possible in favor of behavioral remedies, like fines for abusive conduct, and measures that stimulate competitive entry, like unbundling broadband services and carrier pre-selection for voice telephone services. Regulation is unlikely to reduce prices directly but we could face an increase in the number of competitors using BT's access infrastructure.

Other conditions of the General Authorization

        As an ECN, we must satisfy a number of conditions, including:

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requirements to offer outbound number portability to customers wishing to switch to another network, and to support inbound number portability when we acquire a customer from another network on reasonable terms, including charges. The number portability requirements are specified in detail in a functional specification that is subject to periodic review and modification. As a result, number portability requirements could become more onerous over time;



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requirements to offer directory inquiry services to subscribers of all networks. In September 2001, OFTEL announced that the existing "192" directory inquiry number would be withdrawn and replaced with a new structure in which customers would have access to a range of service providers using different six-digit codes. The "192" directory inquiry number was withdrawn on August 24, 2003. Our new directory inquiry number is 118 878;



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requirements to provide directory inquiry information to third parties. This necessitates systems development costs to develop intra-industry transfers of data;



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requirements to publish up-to-date price information;



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powers to require operators to report and publish quality of service data; and



•

powers to enforce compliance with a recognized standard for auditing metering and billing systems.

Rights of way

        Under the Communications Act 2003, service providers are eligible for enhanced legal rights in respect of access to private land, exemption from certain requirements of general planning law and, under the Electronic Communications Code, the right to install equipment in the public highway. The Electronic Communications Code therefore creates a legal framework for the installation and maintenance of a telecommunications network. These rights are subject to certain conditions relating to the use of powers which may be specified from time to time by the UK Department of Trade &

26

Industry, or the DTI. Failure to adhere to these conditions could lead to fines or ultimately to the revocation of rights under the Electronic Communications Code.

Universal service obligations

        The Communications Act 2003 introduced powers relating to universal service obligations. Following a direction by OFTEL, BT and Kingston Communications continue to be the only operators to be affected by universal service obligations, except the obligations to provide:

•

a text relay service for the hard of hearing at reasonable cost;



•

braille bills to the blind; and



•

priority fault repair to customers with disabilities.

        However, OFTEL recommended that OFCOM should conduct a full review of universal service in 2004, including a review of the funding of the provision of universal services. This will form part of the strategic review of telecommunications (see below). It is possible that this might recommend universal service obligations be imposed on service providers including us. Although BT and (in the city of Hull) Kingston Communications would be the primary obligated parties, other service providers could be required to contribute to a universal service fund that would in part compensate BT and Kingston Communications for the execution of their own universal service obligations.

Strategic review of telecommunications

        OFCOM has decided that one of its first key tasks will be to review the UK telecommunications sector. The terms of reference are very wide and its conclusions will shape the strategy through which OFCOM promotes competition in the sector. The review is expected to be concluded by the fall of 2004. However, OFCOM's subsequent actions will still need to fit within the New Regulatory Framework of the EU (see "Regulation by the European Union" above). Within those parameters, it is possible that OFCOM's conclusions might lead to the further relaxation of regulation on BT; alternatively, they might recommend tighter regulation or even structural reorganization of BT which could potentially benefit us.

Competition Act 1998

        The Competition Act 1998, which came into force in March 2000, introduced a prohibition on the abuse of a dominant position and on anti-competitive agreements. It also introduced third party rights, stronger investigative powers, interim measures and enforcement powers. These enforcement powers include fines of up to 10% of annual UK revenues for each year of a breach, up to a maximum of three years. The Competition Act 1998 is enforced by the Office of Fair Trading, or OFT, and gives concurrent enforcement powers to the sector regulator, OFCOM, and previously OFTEL. The Act also enables third parties to bring enforcement actions directly against persons, including telecommunications operators, who are in breach of the prohibitions and seek damages, rather than have to wait for OFCOM to undertake enforcement action.

        In February 2000, OFTEL issued specific guidance on the application of the Competition Act 1998 in the telecommunications sector. This guidance stated that OFTEL would follow closely the general principles set out in the OFT's guidance on the application of the Competition Act 1998 in its application of those prohibitions. In addition, the regulators are not permitted to reach decisions that are inconsistent with European Community, or EC law.

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        The Competition Act 1998 limits the types of agreements and arrangements we can enter into. For example, we may be prohibited from establishing pricing arrangements or purchasing arrangements which have the effect of reducing competition in the market or forcing companies to behave in a certain way dictated by us.

Enterprise Act 2002

        The competition and consumer protection provisions of the Enterprise Act 2002 came into force on June 20, 2003. These provisions introduced a range of measures to enhance business by strengthening the UK's competition law framework. The main reforms in the Enterprise Act are:

        Competition.    To a large extent, independent competition bodies rather than the DTI will now make decisions on merger and market investigations using competition-based tests. In the case of merger control, a competition-based test replaces the existing public interest test and will assess whether relevant mergers may lead to a "substantial lessening of competition." In addition, a new jurisdictional threshold on revenues replaces the previous gross assets test. The acquisition of a business with annual sales in the UK of £70 million or more will constitute a merger that the OFT has a general duty, subject to certain exceptions, to refer for investigation by the Competition Commission if OFT believes the merger may be expected to result in a substantial lessening of competition in the UK.

        Under the new regime, the competition authorities are obliged to consult on and give reasons for all significant decisions. There is a new right of appeal to the Competition Appeal Tribunal, or CAT, in merger and market inquiries. Inquiries have to be completed within statutory maximum timetables. Reforms to the Competition Commission's procedures allow for a more transparent and better-informed remedy-setting phase following the publication of provisional competition findings.

        Individuals who cause or encourage the making of agreements between competitors designed to fix prices, share markets, limit supply or production and rig bids within the UK, can be prosecuted and punished by imprisonment for up to 5 years and unlimited fines. The courts may also order the disqualification for up to 15 years of directors whose companies have committed a breach of UK or EC competition law. Victims of anti-competitive behavior will have greater opportunities to gain redress, and will now find it easier to bring claims for damages for losses suffered owing to anti-competitive behavior. Where infringement has already been established by the OFT, CAT or the European Commission, the CAT can award damages for that infringement. Where there have been no such prior findings of infringement, claims may still be pursued in the High Court, although the claimant itself will in these circumstances need to establish that there has been an infringement.

        Consumer Protection.    Stop now orders will now be available to protect consumers from traders who do not meet their legal obligations. The new enforcement regime will apply to infringements of a wide range of legislation protecting the economic interests of consumers, like failing to carry out a service to a reasonable standard. This will also ensure that honest traders, especially small businesses, do not face unfair competition from those who engage in unlawful conduct.

        Designated consumer bodies will be empowered to make "super-complaints" to the OFT about features of a market that are harming consumers. The aim is to address situations where markets have failed to work for consumers, rather than the conduct of particular companies. The OFT will be required to specify what action it intends to take within 90 days of receiving a complaint.

Regulation in the Republic of Ireland

Relevant Authority

        The Commission for Communications Regulation, or ComReg, is the body responsible for regulation of the communications industry in Ireland. The Communications Regulations Act 2002 replaced the Office of the Director of Telecommunications Regulation with ComReg.

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Legislation and Licensing

        Until July 25, 2003, ntl: Ireland had a general telecommunications license under the Telecommunications Act 1983 and separate cable television and MMDS licenses for its franchises in Dublin, Galway and Waterford under the Wireless Telegraphy Acts 1926 to 1988. In addition, the cable television industry in the Republic of Ireland was governed by the Wireless Telegraphy (Program Service Distribution) Regulations 1999.

        On July 25, 2003, these licenses and regulations were repealed as part of the transposition of Directives enacted under the NRF. See "—Regulation by the European Union." All operators of ECNs were required to notify ComReg of their services by September 5, 2003. We have been duly authorized.

        The authorizations regime will also apply to our MMDS services, but it will exist in parallel to our existing MMDS licenses. Conditions attached to our licenses will continue without change since there will continue to be different rules for services that involve usage of radio spectrum allocated to specific uses under the Republic of Ireland's national spectrum plan.

        In relation to the provision of telephone services, the conditions attaching to the authorization will be identical to those applicable in the UK. The only condition attaching to our authorization to operate a cable network will be a requirement to adhere to the technical conditions specified by ComReg. Following the introduction of the NRF, our cable business in Ireland is now effectively in a similar regulatory position to that of BSkyB, except that BSkyB's satellite network does not fall within the definition of an ECN and will accordingly not require authorization.

        The introduction of this new regulatory regime means that all previous regulatory obligations arising out of our 1999 license and the Wireless Telegraphy (Program Service Distribution) Regulations 1999 are suspended. Under the new regulatory scheme, there are:

•

no further digital roll-out obligations on cable;



•

no price controls or investigations of any type;



•

no restrictions on content of our basic analog package;



•

no consumer protection regulations that are administered by ComReg; and



•

no quality of service reporting requirements.

        The Irish government has indicated that it will introduce new legislation to address the regulatory gap between retail broadcast services, including cable, satellite, digital terrestrial television and other electronic communications services. However, it is unclear whether this legislation will introduce equivalent consumer protection and quality of service obligations for broadcast as now apply under the NRF for other electronic communications services.

Levy

        As our cable business does not require an authorization as an ECS, it will not be subject to an ECS authorization fee or levy. This means that the existing 3.5% license fee on our cable revenues has ceased being charged since July 25, 2003.

        As our cable network falls within the definition of an ECN, it will require an authorization and there will be a requirement on ntl: Ireland to pay an associated authorization fee. ComReg imposes a fee of €0.50 per customer per annum for cable and, as satellite does not fall within the definition of an ECN, a "voluntary" fee of €0.50 per dish for BSkyB. This new fee structure took effect from July 25, 2003.

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MMDS

        Our MMDS business in the Republic of Ireland provides analog and digital television to approximately 17,095 residential customers in our Dublin, Galway and Waterford network areas. We were obligated under our MMDS licenses to provide MMDS services in a digital format by January 1, 2001, with a grace period until June 30, 2001. Failure to meet these milestones could have resulted in revocation of our MMDS licenses.

        In December 2000, we informed ComReg that we did not intend to provide television services in a digital format on our MMDS networks and accordingly undertook to transfer the licenses and the customer base to a third party. However, a sale was not completed during the period from December 2000 to November 2002. After November 2002, we reached an agreement with ComReg to implement a revised digital rollout schedule. As part of this agreement, we undertook to make DTV services available to 95% of customers within our MMDS franchise areas by June 1, 2003 and lodged a €100,000 bond with ComReg that would be forfeited in the event we did not comply. On May 1, 2003 we notified ComReg that we had met the revised rollout schedule and, following a technical audit, ComReg authorized our recovery of the bond.

        We will continue to operate under our existing license issued in 1999 under the Wireless Telegraphy Act. In practice, this means that we are guaranteed the allocation of spectrum we received when the 1999 license was granted, but with fewer restrictions than the 1999 license and amended to reflect the provisions of the NRF. This means that the following provisions will be removed:

•

no further price control of any type;



•

no consumer protection regulation by ComReg; and



•

no quality of service reporting requirements.

        ComReg has decided to impose a new levy on MMDS operators that contains two elements—a per subscriber fee of €0.50 per year and a fee for spectrum usage of €1,905 per MHz of spectrum per annum with a scaling mechanism based on the number of homes subject to the regulation. We have an MMDS allocation of 22 8MHz channels. ComReg has recently indicated that it believes 11 8MHz channels are sufficient for MMDS operators to provide a full digital service. Accordingly, it has requested that we present a plan by June 30, 2004 detailing our requirements for radio spectrum in the MMDS band. ComReg is consulting on the matter in advance of an EU decision on the future allocation of services in the MMDS band. There is a risk that our existing allocation in this band will be reduced as a result of the EU decision.

Analysis of SMP

        Under the NRF, ComReg is required to undertake an analysis of the entire communications market in order to assess the level of competition in the various sectors and whether there is a need for regulatory intervention. In markets that are not deemed to be competitive, like fixed voice, one or more operators will be designated as having significant market power. Significant market power operators will be subject to particularly intrusive regulation like price control, open access and regulatory accounting.

        The market analysis is particularly focused on eighteen relevant markets identified by the European Commission. The retail broadcast market is not one of these markets. However, ComReg can go beyond or deviate from the European Commission's guidance and request that additional markets be deemed not sufficiently competitive. For the past year ComReg has indicated that it considers the retail broadcast market not sufficiently competitive. The European Commission has confirmed that there is no economic basis for this conclusion. Furthermore, the Commission has recently vetoed a decision of the Finnish Regulator, FICORA, which deviated from the Commission's

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guidance on the grounds that FICORA did not provide sufficient evidence to support the conclusion of its market analysis and therefore that it was not compatible with EU law.

Research and Development

        Our research and development activities involve the analysis of technological developments affecting our cable television, telephone and telecommunications business, the evaluation of existing services and sales and marketing techniques and the development of new services and techniques.

Patents, Trademarks, Copyrights and Licenses

        We do not have any material patents or copyrights nor do we believe that patents play a material role in our business. We own and have the right to use registered trademarks, which in some cases are, and in others may be, of material importance to our business, including the "ntl:" logo. In addition, we are substantially dependent on the authorizations granted by the legislative agencies which regulate our various businesses. The loss of any one or more of those authorizations could have a material adverse effect on our business and financial condition.

Customers

        The following customers provide a significant portion of our revenues:

•

approximately 33.4% of the revenues of ntl: broadcast for the year ended December 31, 2003, was derived from contracts with the ITV companies, Channel 4/S4C and Channel 5 in the UK;



•

approximately 40.7% of the revenues of ntl: carriers for the year ended December 31, 2003, was derived from contracts with Orange; and



•

approximately 6.1% of the revenues of ntl: home for the year ended December 31, 2003, was derived from contracts with AOL and Virgin.net.

        Except for our ntl: broadcast and ntl: carriers reportable segments, we do not believe that the loss of any one customer would have a materially adverse effect on our results of operations. In the case of each of our ntl: broadcast and ntl: carriers reportable segments, the loss of the customer identified above for that segment would have a materially adverse effect on that segment.

Employees

        At December 31, 2003, we had approximately 13,650 employees, approximately 13,100 of whom are permanent and approximately 550 of whom are temporary or contract employees. We believe that our relationship with our employees is generally good.

        In 2002 we implemented a program to introduce a new set of contractual terms and conditions with our employees. This program generally has been successful. However, of our employees who are members of the Broadcasting Entertainment Cinematograph and Theatre Union, or BECTU, 368 have rejected this effort to introduce a new set of terms and conditions, and wish to remain on their existing contractual terms. The majority of these employees support ntl: broadcast's operations group, which looks after matters such as network maintenance and fault repair. They represent approximately 28% of the total number of employees in ntl: broadcast. BECTU has recently decided to ballot its members to demand us to withdraw the program, the results of which to our knowledge will not be known until the end of March 2004. We have prepared contingency plans to deal with any adverse outcome.

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Risk Factors

Risks Related to Our Company

We have historically incurred losses and may not be profitable in the future.

        We have incurred substantial losses historically and expect to continue to incur substantial losses. We had net losses for the year ended December 31, 2003 of $954.2 million, and net losses for the years ended December 31:

•

2002 of $2,375.8 million;



•

2001 of $11,837.0 million, which includes an asset impairment charge of $8,160.6 million; and



•

2000 of $2,388.1 million.

        As of December 31, 2002, our accumulated deficit was $18.6 billion. On January 10, 2003, we emerged from reorganization under Chapter 11 of the US Bankruptcy Code and adopted fresh-start reporting. At that time, our assets and liabilities were revalued. See "Management's Discussion and Analysis of Financial Condition and Results of Operation." As of December 31, 2003, our accumulated deficit was $954.2 million.

        We cannot be certain that we will achieve or sustain profitability in the future. Failure to achieve profitability could diminish our ability to sustain operations, meet financial covenants, obtain additional required funds and make required payments on our present or future indebtedness.

We have only recently begun to generate positive cash flow

        Pursuant to US GAAP, we measure cash flow as all changes affecting cash in the activities of operations, investments and financing. Historically, construction costs, operating expenditures and interest costs have contributed to our negative cash flow. This financial situation has only recently changed. We had positive cash flow of $155.2 million for the year ended December 31, 2003 principally due to the net proceeds of $1,367 million from our rights offering. We had positive cash flow of $250.9 million for the year ended December 31, 2002, principally due to our non-payment of $566.8 million of interest on some of our debt incurred prior to our reorganization. We had negative cash flow of $172.4 million for the year ended December 31, 2001 and negative cash flow of $650.7 million for the year ended December 31, 2000. We cannot be certain that we will continue to sustain positive cash flow in the future, which could adversely affect our ability to match our business plan.

We are required to make significant principal payments commencing in 2005 and have other contractual commitments coming due over the next several years.

        As of December 31, 2003, we have over $5.4 billion of principal payments and other contractual commitments coming due over the next three years, including £2.6 billion, or $4.6 billion, due under our senior credit facility on September 30, 2005. Beginning in 2005, a series of principal payments will come due on our other existing debt as they approach their maturity dates, unless we are able to refinance this debt or renegotiate the terms of these commitments. We are currently seeking to effect a refinancing transaction that would repay in full this senior credit facility. See "Recent Developments."

        As we cannot be certain that we will be able to refinance this debt, renegotiate the terms or make these principal payments and other contractual commitments, on suitable terms or at all, our ability to make these payments and other commitments is dependent upon a number of factors, including our existing cash balances, the cash flow generated by our operating subsidiaries and our 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 our ability to sustain operations, meet

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financial covenants, obtain additional funds and make required payments on our present or future indebtedness.

Our business is capital intensive and we may not have access to cash to fund our future capital expenditures.

        Our business requires substantial capital expenditures on a continuing basis for various purposes, including:

•

expanding, maintaining and upgrading our network;



•

investing in new customer acquisitions; and



•

offering new services.

        From time to time, we also need to make capital expenditures for particular projects like integrating our billing and customer service systems. For the period of January 1, 2004 through March 31, 2005, we expect to spend between £420 million and £460 million, or between $750 million and $820 million, on acquiring fixed assets. We believe that our cash on hand, together with cash from operations, will be sufficient for our cash requirements through March 2005. However, our cash requirements after these periods may exceed, perhaps significantly, these sources of cash. In addition, we have significant principal payments of our indebtedness coming due beginning in 2005 unless our proposed refinancing is consummated. See "Recent Developments" above. Nevertheless, we may not be able to obtain financing at all, or on favorable terms, or we may be contractually prevented by the terms of our current indebtedness from incurring additional indebtedness.

Our substantial amount of debt could adversely affect our financial health and diminish stockholder value.

        As of December 31, 2003, our long-term indebtedness, net of unamortized discount, was $5,728.4 million.

        Our substantial indebtedness, coupled with the relatively high interest rate on our indebtedness, could adversely affect us by:

•

limiting our ability to borrow money for working capital, capital expenditures, acquisitions or other purposes, if needed;



•

requiring us to dedicate a substantial portion of our cash flow from operations to service our debt, which reduces the funds available for operations and future business opportunities;



•

increasing our vulnerability to adverse changes in general economic conditions or increases in prevailing interest rates since 86.7% of our long-term indebtedness, net of unamortized discount, as of December 31, 2003, accrues interest at variable interest rates;



•

limiting our flexibility in responding to changing business and economic conditions, including increased competition and demand for new services; and



•

placing us at a disadvantage when compared with our competitors that have less debt.

        In addition, the significant cash payments required as a result of our indebtedness could negatively impact stockholder value. Any inability to repay our indebtedness or obtain additional financing, as needed, could adversely affect our business, financial condition and results of operations.

The restrictive covenants under our indebtedness may limit our operations.

        The agreements governing our outstanding indebtedness significantly restrict and, in some cases, prohibit our ability and the ability of most of our subsidiaries to:

•

incur additional indebtedness;



•

create liens or other encumbrances;

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•

pay dividends or make specified other payments, investments, loans and guarantees;



•

engage in transactions with affiliates;



•

purchase or redeem share capital;



•

make capital expenditures;



•

sell or otherwise dispose of assets;



•

issue or sell share capital of certain subsidiaries;



•

prepay or redeem various indebtedness or equity; and



•

merge or consolidate with another entity.

        Our subsidiaries and we must also comply with various financial covenants requiring specified financial performance levels to be met and maintained. In the event that we fail to meet any of these covenants and are unable to cure the failure or otherwise renegotiate the covenant, the lenders under those agreements would have significant rights to seize control of most of our assets because these agreements are secured by substantially all of our assets. A default under one debt agreement could trigger a default under our other debt agreements.

        Furthermore, upon the occurrence of any default under these agreements, the lenders could elect to declare all amounts outstanding under these agreements, to be immediately due and payable. If those lenders accelerate the payment of those amounts, we cannot assure you that our assets and the assets of our subsidiaries will be sufficient to repay in full those amounts.

Failure to control customer churn may adversely affect our financial performance.

        The successful implementation of our business plan depends upon us controlling our customer churn. Customer churn is a measure of customers who stop taking our services. An increase in customer churn can lead to increased costs and reduced revenues. In order to control customer churn, we aim to improve our customer service. If we fail to deliver a satisfactory level of customer service, this could contribute to an increase in customer churn. It will be difficult to improve customer service without an integrated billing system and customer database across our entire network, which we do not presently have. Although we are in the process of integrating our billing systems and customer databases, there can be no assurance that we will be successful in achieving our goal. The change over to a new customer database system may cause billing errors which can lead to customer churn. If we are not successful in integrating these systems, we could experience an adverse effect on customer service and, in turn, an increase in our customer churn rate. In addition, our customer churn rate may also increase if we are unable to deliver our services over our network without interruption.

        Our ability to control customer churn could also be adversely affected by the availability of competing services in the UK, like the digital satellite services offered by BSkyB, and digital terrestrial television services like Freeview, a joint venture owned by the BBC, Crown Castle International and BSkyB. Competing services also include telephone, dial-up Internet and broadband Internet services offered by BT. BT and BSkyB have regularly launched joint campaigns to entice our customers to move to these competing services. As we attempt to migrate customers to our digital television, or DTV, services, it is possible that some of our customers may move to our competitors. In addition, as our ATV, or dial-up Internet customers choose to migrate to DTV or broadband Internet services in areas where we do not have an adequate network, we may lose these customers to competitors that can provide these services. For example, of the approximately 1.4 million homes passed by our network in London, we are not able to offer broadband Internet to approximately 800,000 homes. However, broadband Internet is being offered in this area by some of our competitors. Some of our customers in this area currently use our dial-up Internet services, and may also use our telephone or television

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services. These customers may discontinue some or all our services if they decide to use the broadband Internet services provided by our competitors.

We could experience an adverse effect on our customer service, customer acquisitions, customer churn rate and operating costs if we do not successfully integrate our various billing and operation platforms in a timely manner.

        As a result of our growth through acquisitions we inherited numerous billing and customer service systems. We are in the process of integrating our various billing systems and customer databases to improve our customer service and our collections. It is possible that billing errors and other customer service problems will occur during this integration, potentially resulting in increased customer churn. In addition, we cannot be certain that this integration project will be successful. If the full integration of our billing and customer service systems is not successful, we could experience an adverse effect on our customer service, customer acquisitions, churn rate and costs of maintaining these systems going forward. We have attempted to integrate our billing systems in the past, but previous integration projects were not completed.

Failure to market broadband Internet services successfully will adversely impact our revenue and results of operations.

        A significant component of our strategy is to market broadband Internet services successfully to residential customers. We believe that our "triple play" offering of telephone service, broadband access to the Internet and digital television will prove attractive to our existing customer base and allow us to increase our average revenue per user, or ARPU. However, broadband Internet usage by residential customers remains a relatively new and underdeveloped market. As of December 31, 2003, out of approximately 6.8 million homes currently able to receive broadband Internet service from us, we had approximately 949,200 residential customers receiving this service. In addition, we face significant competition in these markets through alternative Internet access media, including digital subscriber line, or DSL, services offered by companies like BT and Freeserve and dial-up services offered by many companies, including America Online. If customers are not prepared to pay a premium for broadband Internet access, compared with less expensive slower speed services like dial-up Internet access, we may not be able to market broadband Internet services successfully. If we are unable to charge prices for broadband Internet services that are anticipated in our business plan in response to competition or if our competition delivers better services to our customers, our results of operations will be adversely affected.

We are a holding company and are dependent upon cash flow from our subsidiaries to meet our obligations.

        We are a holding company with no independent operations or significant assets other than our investments in and advances to our subsidiaries. We depend upon the receipt of sufficient funds from our subsidiaries to meet our obligations. The terms of our senior credit facility and the notes of our subsidiaries Diamond Holdings and NTL Triangle limit the payment of dividends, loan repayments and other distributions to or from us under many circumstances. In particular, the various agreements governing the debt of our subsidiaries restrict and, in some cases, prohibit the ability of these subsidiaries to move cash among our operating subsidiaries or to us to enable our subsidiaries or us to meet our cash flow needs. Even if we consummate the proposed refinancing and repay our existing senior credit facility and the Diamond and Triangle notes, we will continue to depend upon the receipt of sufficient funds from our operating subsidiaries to meet our obligations, including our obligations under any new credit facilities. Any future indebtedness of our subsidiaries and us raised in any refinancing is likely to contain similar terms. Some of our subsidiaries are also dependent on funding from us. The inability to transfer cash among entities within our group may mean that even though we may have sufficient resources to meet our obligations, we may not be permitted to make the necessary transfers from one entity in our group to another in order to make payments to the entity which has

35

the obligations. The laws of the jurisdictions under which our subsidiaries are organized also have restrictions on the payment of dividends.

We are subject to taxation in multiple jurisdictions.

        We are subject to taxation in the United States, the UK and the Republic of Ireland. Our effective tax rate and tax liability will be affected by a number of factors, like the amount of taxable income in particular jurisdictions, the tax rates in these jurisdictions, tax treaties between jurisdictions, the extent to which we transfer funds to and repatriate funds from our subsidiaries, and future changes in the law. Our tax liability will be dependent upon our operating results and the manner in which our operations are funded. Generally, the tax liability for each legal entity is determined either on a non-consolidated basis or on a consolidated basis only with other entities incorporated in the same jurisdiction. In either case, our tax liability is determined without regard to the taxable losses of non-consolidated affiliated entities. As a result, we may pay income taxes in one jurisdiction for a particular period even though on an overall basis we incur a net loss for that period.

We have historically had a deficiency of earnings to fixed charges and our earnings in the future may not be sufficient to cover those fixed charges.

        For the years ended December 31, 2003, 2002, 2001, 2000 and 1999, our earnings were insufficient to cover fixed charges. The deficiency was approximately $959.6 million for the year ended December 31, 2003, $2,447.8 million for the year ended December 31, 2002, $11,786.6 million for the year ended December 31, 2001, $2,563.1 million for the year ended December 31, 2000, and $785.2 million for the year ended December 31, 1999. Fixed charges consist of interest expense, including capitalized interest, amortization of fees related to debt financing and rent expense deemed to be interest. Our earnings in the future may not be sufficient to cover those fixed charges.

Our internal controls need to be improved.

        Following our emergence from Chapter 11 reorganization, we undertook an examination of a number of our internal controls and procedures. From that examination, we determined that some of our controls and procedures should be improved. For example, as a result of our historical growth through acquisitions, our internal control systems are derived from disparate businesses. We identified the need to improve the documentation of our detailed accounting policies and procedures to ensure that they are consistently applied throughout our business. We also identified the need to improve our procedures for reconciling between our telephone call data records and billing systems and the need for a comprehensive corporate business and disaster recovery plan.

        In addition, we are examining methods for improving management's control of operations by developing consistent policies for the procurement and management of contracts with third party vendors. Furthermore, we are working to improve our operating practice and procedures relating to budgeting, authorizing, monitoring and appraising major projects. Although we have policies in place, we are working to ensure that they are consistently applied.

        Pursuant to the Sarbanes-Oxley Act of 2002, we will be required to include in our Form 10-K filings, beginning with our Form 10-K for the year ending December 31, 2004, a report by our management as to the effectiveness of our internal controls and procedures for financial reporting and our independent auditors will be required to attest to and report on this evaluation by management. We have set up a project team that is working to document, evaluate and test our internal controls to enable our management to report that we have effective internal controls over financial reporting at December 31, 2004. There can be no assurance that we will achieve this objective. In particular, if we are unable to complete the integration of our billing systems and customer databases by December 31, 2004, it may impact our ability to fully document, evaluate and test the effectiveness of the internal controls relating to these systems and databases prior to that date.

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We are subject to significant competition in each of our reportable segments and we expect that competition will intensify.

        BT and BSkyB dominate some of the markets in which we operate our telephone and television services. These competitors each have very large market shares and generally have fewer financial and operating constraints than we have. As existing technology develops and new technologies emerge, we believe that competition will intensify in each of our business areas. For example, mobile telephone services are becoming increasingly popular as an alternative to fixed line services like ours. In the digital television market, Freeview is expected to launch a low-cost pay-TV service that may compete for digital television customers. Also, BT or a third party to whom BT resells capacity may provide program content like video on demand over the BT DSL network. Some of our competitors have substantially greater financial and technical resources than we have. Moreover, we may be required to reduce prices if our competitors reduce prices or as a result of any other downward pressure on prices for telecommunications services. Any reduction in our prices could have an adverse effect on our results of operations and financial condition.

        In addition, BSkyB has access to various movie and sports programming content that is used to create some of the most popular pay TV channels in the UK. While we carry several of those channels on our systems, we are dependent upon BSkyB to provide us with this content. The OFT has determined that BSkyB was dominant in some wholesale premium pay TV markets in the UK, specifically in its offering of various sports content and premium pay-TV movie channels. Although this determination of dominance could constrain BSkyB in its pricing of these channels, the current pricing for this content remains unfavorable to us. We and BSkyB have reached agreement on the main principles of a marketing incentive scheme that will provide us with improved economic terms based on increased sales of BSkyB's premium movie and sports channels. Conclusion of this deal is subject to various matters, including the negotiation of a long form carriage agreement. There can be no assurance that we will enter into a definitive agreement with BSkyB, that any changes to the existing pricing arrangements will be made or if made, that any changes will prove beneficial to us.

        Our contract with BSkyB for the supply of its basic channels expires in 2006. If it is not renewed, this could result in a loss of present customers or make it more difficult for us to attract new customers and this could have a material adverse effect on our business and financial condition.

We have experienced significant changes in our senior management and our management team has been together for a limited time.

        A small number of key executive officers manage our businesses. Since completion of the Plan, there have been a number of changes in our senior management team. In March 2003, James F. Mooney, our chairman, and Scott E. Schubert, our chief financial officer, joined us. In April 2003, Simon P. Duffy joined us as our chief operating officer. In August 2003, Barclay Knapp resigned as our president and chief executive officer and was replaced by Mr. Duffy. The loss of one or more of our executive officers could have a material adverse effect on us. A number of other executive officers, who were based in New York, also resigned in 2003. The responsibilities of these persons were delegated to existing and new employees.

        Because of these management departures, additions and changes in roles, our current management team has not worked together in their current positions for a significant length of time and may not be able to work together effectively in these new positions to successfully develop and implement our business strategies. In addition, as a result of these management changes, management may need to devote significant attention and resources to preserve and strengthen relationships with employees and customers. All members of our management team will need to overcome the challenges created by any vacancies in our senior management positions that remain unfilled. We believe that our future success will depend in large part on our continued ability to attract and retain highly skilled and qualified personnel. Although we have entered into employment contracts with most of our executive officers,

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those contracts cannot prevent these individuals from resigning. In most cases, if an individual does resign, he is bound by non-compete clauses that may or may not discourage the individual from leaving.

        If our new management team is unable to develop successful business strategies, achieve our business objectives or maintain effective relationships with employees and customers, our ability to grow our business and successfully meet operational challenges could be impaired.

A catastrophe at one or more of the locations where our critical cable network systems are housed could have a material adverse effect on our business.

        Our business is dependent on many sophisticated critical systems, which support all of the various aspects of our cable network operations. The hardware supporting a large number of critical systems for our cable network 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 including electronic sabotage, power loss or other catastrophe, we would not be able to pass transmission signals over our cable network. This would cause serious harm to our business. Although we have disaster recovery plans in respect of our ntl: networks and the network of ntl: broadcast which are designed to prevent or mitigate a potential failure, we cannot assure you that any disaster recovery, security and service continuity protection measures we have, or may take, in the future will be sufficient. In addition, although we build our cable network in resilient rings to ensure the continuity of network availability in the event of any damage to our underground fibers, it is likely that no transmission signals will be able to pass if any ring is cut twice. In particular, a portion of our Irish operation is dependent upon our Sirius undersea ring connecting the Republic of Ireland to the UK.

Failure in our technology or telecommunications systems could significantly disrupt our operations, which could reduce our customer base and result in lost revenues.

        Our success depends, in part, on the continued and uninterrupted performance of our IT systems as well as our customer service centers. Our computer systems are vulnerable to damage from a variety of sources, including telecommunications failures, malicious human acts and natural disasters. Moreover, despite security measures, our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautions we have taken, unanticipated problems affecting our systems could cause failures in our IT systems, including systems that are critical for timely and accurate customer billing, or our customer service centers. Sustained or repeated system failures that interrupt our ability to provide service to our customers or otherwise meet our business obligations in a timely manner would adversely affect our reputation and result in a loss of customers and net revenue. Although some of our IT systems are covered by a disaster recovery plan, we are currently developing a comprehensive disaster recovery plan for all our IT systems in conjunction with the integration of our customer and billing databases. We cannot assure you that any existing disaster recovery plan will be sufficient, nor whether any changes to that plan can be implemented on a timely basis, or at all, and if implemented will be sufficient.

We do not insure the underground portion of our cable network and various pavement-based electronics associated with our cable network.

        We obtain insurance of the type and in the amounts that we believe are customary for similar companies. Consistent with this practice, we do not insure the underground portion of our cable network or various pavement-based electronics associated with our cable network. Substantially all of our cable network is constructed underground. As a result, any catastrophe that affects our underground cable network or our pavement-based electronics could prevent us from providing services to our customers and result in substantial uninsured losses.

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

        The services we provide our customers may become outdated owing to technological breakthroughs rendering our services out of date. In addition, our business plan contemplates the introduction of services using new technologies. Our investments in those new services, like those related to the third generation, or 3G, mobile network, may prove premature. We may not realize anticipated returns on these new products. The cost of implementation for emerging and future technologies could be significant. Our ability to fund this implementation may depend on our ability to obtain additional financing.

Our prospects will depend in part on our ability to control our costs while maintaining and improving our service levels.

        As a result of capital constraints imposed on our business during our restructuring, we reduced expenditures in a variety of areas, including a substantial reduction in capital expenditures, a reduction in the number of our employees and the outsourcing of some functions. Some of these expenditures, particularly capital expenditures and employee costs, may increase in future periods in order to accommodate growth in our business. Our prospects will depend in part on our ability to continue to control costs and operate more efficiently, while maintaining and improving our 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 these negotiations will conclude successfully.

ntl: broadcast and ntl: carriers are dependent upon ITV and other contracts.

        ntl: broadcast has contracts for the provision of television broadcasting transmission services across the UK to 15 regional commercial television stations, collectively known as ITV, Channel 4/S4C and Five, formerly Channel 5. Although the ITV companies and Channel 4/S4C have renewed their contracts with us in the past, we cannot assure you that they will do so upon expiration of their current contracts in 2012. Our contract with Five is up for renewal in 2007. Even if the current contracts are renewed, the terms of renewal may be on a basis less favorable to us or may not cover all of the transmission services that we currently provide to them. The UK government may decide to reallocate the analog spectrum currently used by these broadcasters, forcing them to migrate to digital spectrums before the expiration of these contracts. This would result in the termination of our analog contracts prior to their expiration dates, which would have an adverse effect on our results of operations.

        Other contracts important to ntl: broadcast include a contract for the provision of communications services to the Metropolitan Police in London. This contract is subject to renewal in October 2004. We cannot assure you that the renewal will be on the same basis as the existing contract or that the Metropolitan Police will not seek other parties to provide some or all of the services we currently provide for them. The Metropolitan Police in London is our largest public safety customer.

        ntl: carriers has a contract with Orange for the design, construction and operation of elements of Orange's mobile network in the UK. The minimum term of this contract is scheduled to expire in 2006 and we cannot assure you that it will be renewed.

        In addition, ntl: carriers currently has a contract with Vodafone for the supply of mobile transmission services, including core inter-switch and backhaul network capacity in the UK. This contract is scheduled to terminate in October 2004, and we do not expect that this contract will be renewed.

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ntl: broadcast is dependent upon site sharing arrangements with its principal competitor.

        As a result of various factors, including a natural shortage of potential transmission sites and the difficulties in obtaining local planning permission for erection of further masts, we made arrangements with Crown to share a large number of analog tower sites that are owned by either us or Crown. We cannot assure you that these site-sharing arrangements will remain in place. Termination of the site-sharing arrangements would have a material adverse effect on us, particularly if we no longer have the use of transmission sites owned by Crown.

        Crown and we are negotiating a formal arrangement pending finalization of a digital site-sharing agreement that is expected to be on terms similar to our existing analog site-sharing agreement. We currently have an informal arrangement with Crown with respect to sharing digital sites. We cannot assure you that Crown and we will reach a formal arrangement with respect to digital site-sharing.

Our reportable segments are subject to government regulation and changes in current regulations may adversely affect us.

        Our principal business activities are regulated and supervised by various governmental bodies. For example, the majority of the prices that our ntl: broadcast segment may charge the ITV companies and Channel 4/S4C for transmission services are subject to regulation by our primary regulator, OFCOM. In addition, OFCOM launches regulatory initiatives from time to time. Some of these initiatives may require significant expenditures by us. For example, OFCOM recently increased the amount of the funds which it requires communications providers to hold to cover any liabilities which they may incur in installing infrastructure on public land.

        Changes in laws, regulations or governmental policy or the interpretations of those laws or regulations affecting our activities, like licensing requirements, changes in price or cost regulation and deregulation of interconnection arrangements, could have a material adverse effect on us. For example, in the past, OFTEL has reserved the right to impose universal service obligations on communication service providers.

        We are also subject to regulatory initiatives of the European Union. Changes in the European Union, or the EU, directives may reduce our range of programming and increase the costs of purchasing television programming or require us to provide access to our cable network infrastructure to other service providers. Any of these changes could have a material adverse effect on our results of operations. In addition, EU regulators are proposing the adoption of a common European standard for set-top boxes used in customer premises equipment that is not compatible with our set-top boxes. If this change is adopted, we could incur substantial costs to modify our equipment.

Our completed Chapter 11 reorganization 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. We may find it difficult to convince customers to subscribe for our services and any negative publicity or news coverage may be used by our competition to convince customers to discontinue our service, increasing customer churn. Although we have completed the Plan, it is possible that this negative publicity will have a long-term effect on us and our brand name. For example, our recent reorganization has had an adverse impact on our credit standing with our suppliers and other trade creditors. This increases our costs of doing business and hinders our negotiating power with our suppliers and other trade creditors. Similarly, negative press about the financial condition of other cable and pay television operations and alternative telecom carriers in general may affect our reputation.

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Fresh-start reporting may make future financial statements difficult to compare.

        As a result of the completion of the Plan, we are operating our business under a new capital structure. In addition, we adopted fresh-start reporting in accordance with SOP 90-7 as of January 1, 2003. Because SOP 90-7 required us to reset our assets and liabilities to current fair values, our financial condition and results of operations after our reorganization will not be comparable in some material respects to the financial condition or results of operations reflected in our historical financial statements for periods prior to January 1, 2003. This may make it difficult to assess our future prospects based on historical performance.

We are subject to currency and interest rate risks.

        We encounter currency exchange rate risks because substantially all of our revenues and operating expenses are earned and paid primarily in pounds and, to a lesser extent, euros, but we pay interest and principal obligations with respect to a portion of our existing indebtedness in US dollars. To the extent that the pound declines in value against the US dollar, the effective cost of servicing our US dollar debt will be higher. Changes in the exchange rate result in foreign currency transaction gains or losses. As of December 31, 2003, $485.3 million (net of unamortized discount of $141.9 million), or 8.5% of our long-term debt was in U.S. dollars.

        Because the revenues and expenses from our principal operations are denominated primarily in pounds but we report our financial results in US dollars, our financial results are also impacted by currency fluctuations which are unrelated to our underlying results of operations.

        We are also subject to interest rate risk because we have substantial indebtedness at variable interest rates. As of December 31, 2003, interest is determined on a variable basis on $4,968.6 million, or 86.7%, of our long-term debt, net of unamortized discount. An increase in interest rates of 0.25% would increase our interest expense by approximately $12.4 million per year. We currently do not hedge our currency or interest rate risks. To the extent that we enter into hedging transactions in the future, we cannot assure you that any hedging transactions we might enter into will be successful or that shifts in the currency exchange rates or interest rates will not have a material adverse effect on us.

Provisions of our debt agreements, our stockholder rights plan, our certificate of incorporation and Delaware law could prevent or delay a change of control of our company.

        We may, under some circumstances involving a change of control of our company, be obligated to offer to repurchase substantially all of our outstanding notes and repay our outstanding indebtedness. We cannot assure you that we will have available financial resources necessary to repurchase those notes or repay that indebtedness in those circumstances.

        If we cannot repurchase those notes or repay that indebtedness in the event of a change of control of our company, the failure to do so would constitute an event of default under the agreements under which that indebtedness was incurred and could result in a cross-default under other indebtedness that does not have similar provisions. The threat of this could have the effect of delaying or preventing transactions involving a change of control of our company, including transactions in which our stockholders would receive a substantial premium for their shares over then current market prices, or otherwise which they may deem to be in their best interest.

        Our stockholder rights plan, some provisions of our amended and restated certificate of incorporation and our ability to issue additional shares of common stock or preferred stock to third parties without stockholder approval may have the effect, alone or in combination with each other, of preventing or making more difficult transactions involving a change of control of our company. In addition, we are subject to the Delaware anti-takeover law that prohibits some Delaware corporations from engaging in business combinations or other transactions with any stockholder who owns 15% or

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more of the corporation's outstanding voting stock, for three years following the date that the stockholder acquired that interest.

Risks Related to Our Common Stock

We do not expect to pay dividends on our common stock in the foreseeable future.

        We have never paid cash dividends on our common stock and do not expect to pay cash dividends on our common stock in the foreseeable future. Our payment of any dividends in the future will be at the discretion of our board of directors and will depend upon various factors, including future earnings, operations, capital requirements, our general financial condition and the general financial condition of our subsidiaries. In addition, under Delaware law, unless a corporation has available surplus it cannot declare or pay dividends on its capital stock.

        Furthermore, our various debt agreements impose limitations on the payment of dividends, the distribution of earnings and the making of other payments to us by our subsidiaries. These restrictions limit amounts available for us to pay dividends on our common stock. The terms of any future indebtedness may contain similar limitations.

The market price of our common stock is subject to volatility as well as trends in the telecommunications industry in general.

        The current market price of our common stock may not be indicative of prices that will prevail in the trading markets in the future. The market price of our common stock could be subject to wide fluctuations in response to numerous factors, many of which are beyond our control. These factors include actual or anticipated variations in our operational results and cash flow, our earnings releases and our competitors' earnings releases, announcements of technological innovations, changes in financial estimates by securities analysts, trading volume, market conditions in the industry and the general state of the securities markets and the market for telecommunications stocks, changes in capital markets that affect the perceived availability of capital to communications companies, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, like recessions. In particular, valuations of telecommunications companies have generally fallen over the past few years. Trends in this industry are likely to have a corresponding impact on the price of our common stock.

Sales of large amounts of our common stock or the perception that sales could occur may depress our stock price.

        As of March 10, 2004, there were 86,999,281 shares of common stock outstanding. At the time of our emergence from Chapter 11, we granted to some of our stockholders rights to cause us, at our expense, to file one or more registration statements under the Securities Act of 1933, as amended, or the Securities Act, covering resales of shares of our common stock held by them, including upon exercise of the Series A warrants. In addition, we have granted to certain affiliates and managed accounts for which W.R. Huff Asset Management Co., L.L.C., or W.R. Huff Asset Management, acts as investment adviser, certain funds for which Franklin Mutual Advisers acts as agent or investment adviser, and managed funds and third party accounts for which Oaktree Capital Management, L.L.C. acts as the general partner or investment manager, similar registration rights covering resales of shares of common stock acquired by them upon exercise of rights in the rights offering. These shares may also be sold under Rule 144 under the Securities Act, depending on their holding period and subject to significant restrictions in the case of shares held by persons deemed to be our affiliates.

        Sales of large blocks of shares of our common stock in the public market could lower our stock price and impair our ability to raise funds in future stock offerings.

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We may in the future seek to raise funds through equity offerings, which could have a dilutive effect on our common stock.

        In the future we may determine to raise capital through offerings of our common stock, securities convertible into our common stock, or rights to acquire these securities or our common stock. In any case, the result would ultimately be dilutive to our common stock by increasing the number of shares outstanding. We cannot predict the effect this dilution may have on the price of our common stock.

A small number of our stockholders has an influence over our business and affairs.

        On March 10, 2004, W.R. Huff Asset Management owned approximately 12.9% of our outstanding common stock and Oaktree Capital owned approximately 7.1% of our outstanding common stock.

        William R. Huff is the principal and president of W.R. Huff Asset Management and serves on our board of directors. Edwin M. Banks is a portfolio manager for W.R. Huff Asset Management and serves on our board of directors. Brett G. Wyard is a managing director of Oaktree Capital and serves on our board of directors. As a result of these relationships, when conflicts between the interests of W.R. Huff Asset Management, Oaktree Capital and the interests of our other stockholders arise, these directors may not be disinterested. These stockholders may also from time to time make significant investments in other telecommunications companies, including their present investment in Telewest. A number of our significant stockholders and their affiliates, including W.R. Huff Asset Management, Oaktree Capital and Franklin Mutual Advisers, are creditors of Telewest. If Telewest effects the debt for equity swap for which it announced it had reached an agreement in principle on September 15, 2003, these entities and their affiliates are expected to be significant stockholders of Telewest. This may result in conflicts of interest. In addition, these stockholders may own debt securities of our subsidiaries. Actions these stockholders take relating to these investments may conflict with the interests of our other stockholders. Under Delaware law, although our directors and officers have a duty of loyalty to us, transactions that we enter into in which a director has a conflict of interest are generally permissible so long as the material facts as to the director's or officer's relationship or interest as to the transaction are disclosed to our board of directors and a majority of our disinterested directors approves the transaction, or the transaction is otherwise fair to us.

        Our seven largest stockholders, including W.R. Huff Asset Management and Oaktree Capital, own approximately 60.2% of our outstanding common stock as of March 10, 2004.

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Item 2.    Properties

        In the UK and Ireland, we own, lease or occupy under license 112 business unit and regional offices, and our corporate head offices in each of Hook and Dublin. We also maintain an office under lease in New York City. We do not currently occupy approximately 37% of our properties. We are seeking to renegotiate the leases for these properties or dispose of them.

        In addition, we own or lease approximately 640 switching centers/head-ends, operational hub-sites, and other types of network sites like points of presence, radio sites and repeater nodes. We also own or lease warehouses and other non-operational properties, as well as various cable television, telephone and telecommunications equipment housed on public and private sites.

        In addition, in the UK, for the purposes of our site leasing and broadcast transmission businesses, we own, lease, manage, license, share and have conditional options for or access to approximately 1,526 UK tower, rooftop and third party-owned sites and have limited rights to access or acquire approximately 696 undeveloped sites. Our broadcast transmission business also has access to approximately 550 broadcast transmitter sites which are owned by Crown. Crown also leases sites from us. Our co-leasing and mutual site-sharing relationship with Crown was formalized by the site-sharing agreement entered into in 1991 in respect of Crown's and our analog transmission businesses. Each site license granted pursuant to the site sharing agreement is for an initial period expiring on December 31, 2005. 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 five years' written notice until December 31, 2005, or at any date which is a date ten years or a multiple of ten years after December 31, 2005. With respect to digital broadcast services, we and Crown 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 we are operating under an informal arrangement pending finalization of the formal arrangement. Although we believe a formal arrangement will be concluded successfully, we cannot be certain of that conclusion.

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Item 3.    Legal Proceedings

        NTL Europe and some of its former officers, including Barclay Knapp, our former president and chief executive officer, have been named as defendants in a number of purported securities class action lawsuits and one individual action brought by former NTL Europe stockholders. The complaints in those cases generally allege that the defendants failed to disclose NTL Europe's financial condition, finances and future prospects accurately in press releases and other communications with investors prior to filing its Chapter 11 case in federal court. The defendants filed motions to dismiss the actions and, on July 31, 2003, the court entered an order dismissing the complaint in the individual action without prejudice to filing an amended complaint and deferred its decision on the complaint in the class action lawsuits. On August 20, 2003, the plaintiff in the individual action filed an amended complaint. The defendants filed motions to dismiss the amended complaint in the individual actions. Accordingly the motions to dismiss all actions are now currently pending. We do not know of any facts that would support these allegations, and the defendants have informed us that they intend to defend these lawsuits vigorously. While NTL Europe has been released from personal monetary liability in these actions as a result of the completion of the Plan, the case remains pending against NTL Europe and the individuals named as defendants. We have not been named as a defendant. The cases have been consolidated for all purposes before the US District Court for the Southern District of New York. We may be liable for indemnification claims from some of our officers and directors, including Mr. Knapp, to the extent our insurance coverage is insufficient.

        The two separate proceedings that were initiated in the US Bankruptcy Court for the Southern District of New York by Owl Creek Asset Management, L.P. and JMB Capital Partners, L.P. requesting that we be held liable for alleged damages attributable to each of their trading in our "when-issued" common stock prior to the completion of the Plan have been voluntarily dismissed by the plaintiffs in June 2003 without prejudice to recommencement in state court where related litigation against third parties is pending. The third parties are primarily the counterparties to the various trades made by Owl Creek Asset Management, L.P. and JMB Capital Partners, L.P. To date, neither Owl Creek Asset Management, L.P. nor JMB Capital Partners, L.P. has recommenced an action in state court against us.

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

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Item 4.    Submission of Matters to a Vote of Security Holders

        There were no matters that were submitted to a vote of our stockholders during the quarter ended December 31, 2003.

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PART II

Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters

(a)   Market Information

        Our shares are traded on the Nasdaq National Market under the symbol "NTLI". Until January 10, 2003, we were a wholly-owned subsidiary of NTL Europe, Inc. Accordingly, our shares were not publicly traded prior to that time. The following table sets forth the reported high low price per share of our common stock on the Nasdaq National Market for the periods indicated.

Holders

        As of March 10, 2004, our transfer agent informed us that there were approximately 46 record holders of our common stock, although there is a larger number of beneficial owners.

Dividends

        Since our inception, we have not declared or paid any cash dividends on our common stock. We currently intend to retain any earnings for use in the operation and expansion of our business and for debt service and, therefore, we do not anticipate paying cash dividends in the foreseeable future. Please refer to the section of this annual report titled "Risk Factors—We do not expect to pay dividends on our common stock in the foreseeable future" for a discussion of the legal and contractual restrictions on our ability to declare and pay cash dividends.

(b)

None.

(c)

None.

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Item 6.    Selected Financial Data

        The selected consolidated financial information of NTL Incorporated presented below under the captions income statement data for the years ended December 31, 2003, 2002, 2001, 2000 and 1999, and January 1, 2003, and balance sheet data as of December 31, 2003, 2002, 2001, 2000 and 1999 was derived from our consolidated financial statements audited by Ernst & Young LLP. This information should be read in conjunction with the consolidated financial statements and notes thereto and the information contained in our Management Discussion and Analysis appearing elsewhere in this annual report. Historical results are not necessarily indicative of future results.

        We operated our business as a debtor-in possession subject to the jurisdiction of the Bankruptcy Court beginning on May 8, 2002, the date that we, NTL Europe and certain of our and NTL Europe's subsidiaries filed the Plan under Chapter 11 of the US Bankruptcy Code, until January 10, 2003. Accordingly, we have prepared our consolidated financial statements 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" or SOP 90-7.

        Upon emergence from Chapter 11 reorganization and in accordance with the Plan, all of our outstanding public notes were canceled other than the notes issued by Diamond Holdings and NTL Triangle and we acquired all of the outstanding public notes of Diamond Cable Communications Limited. In connection with our emergence from Chapter 11 reorganization, certain of our subsidiaries and we issued $558.2 million aggregate principal amount at maturity of 19% Senior Secured Notes due 2010, or Exit Notes, on January 10, 2003. Initial purchasers of our Exit Notes also purchased 500,000 shares of our common stock on that date. The gross proceeds from the sale of the Exit Notes and such shares totaled $500.0 million.

        We adopted fresh-start reporting upon our emergence from Chapter 11 reorganization in accordance with SOP 90-7. For financial reporting purposes, the effects of the completion of the Plan as well as adjustments for fresh-start reporting have been recorded as of January 1, 2003. Pursuant to fresh-start reporting, a new entity was deemed created for financial reporting purposes. The carrying values of our assets were adjusted to their reorganization values, which are equivalent to their estimated fair values at January 1, 2003. The carrying values of our liabilities were adjusted to their present values at January 1, 2003. The term "Predecessor Company" refers to our subsidiaries and us for periods prior to and including December 31, 2002. The term "Reorganized Company" refers to our subsidiaries and us for periods subsequent to January 1, 2003. The effects of the completion of the Plan as well as adjustments for fresh-start reporting recorded as of January 1, 2003 are Predecessor Company transactions. All other results of operations on January 1, 2003 are Reorganized Company transactions.

        On November 17, 2003, we completed a rights offering, pursuant to which 35,853,465 shares of our common stock were issued. In connection with the Rights Offering, we received gross proceeds of $1,434 million. From the net proceeds of approximately $1,367 million, we repaid in full all obligations under our Exit Notes and, together with cash on hand, our working capital facility. In addition, we used part of the net proceeds as inter-company funding to one of our subsidiaries and the balance for general corporate expenses.

        We have one stock-based employee compensation plan. Effective January 1, 2003, we adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). We selected the prospective method of adoption allowed by FASB Statement No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure (SFAS No. 148). Accordingly, the recognition provisions will be applied to all employee awards granted, modified or settled after January 1, 2003. In the year ended December 31, 2003, we recognized $13.0 million of stock- based compensation.

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        Pursuant to SOP 90-7, beginning on May 8, 2002 we ceased accruing interest expense on certain of our pre-petition obligations. Our reported interest expense in 2002 excludes $645.2 million of contractual interest for the period from May 8, 2002 to December 31, 2002. Also in 2002, recapitalization expenses were $152.9 million. Recapitalization expenses include all transactions incurred as a result of our Chapter 11 reorganization. Recapitalization expenses include $36.2 million for employee retention related to substantially all of our UK employees and $116.7 million for financial advisory, legal, accounting and consulting costs.

        In addition, in 2002 we recorded asset impairment charges of $445.1 million consisting of non-cash charges to write down certain fixed assets of $56.0 million, license acquisition costs of $29.0 million and goodwill of $360.1 million. We also recorded restructuring charges of $104.8 million and non-cash charges of $284.4 million primarily for allowances for the cancellation of receivables from NTL Europe in accordance with the Plan. Amortization expense in 2002 decreased from amounts in prior periods owing to the adoption of Statement of Financial Accounting Standards (referred to as SFAS) No. 142 on January 1, 2002 which ended the amortization of goodwill and other indefinite lived intangible assets.

        As of December 31, 2001, $14,203.0 million of our long-term debt was classified as current owing to the uncertainties about compliance with the terms and conditions of the instruments and agreements governing our debt that would give the holders of the debt the right to accelerate payment. In the fourth quarter of 2001, we recorded asset impairment charges totaling $8,161.6 million including goodwill of $8,077.8 million, license acquisition costs of $58.8 million, customer lists of $9.1 million, other intangibles of $14.9 million and investments in affiliates of $1.0 million. In addition, in 2001 we recorded restructuring costs of $202.8 million, integration and consulting costs of $95.1 million and a loss on the sale of the ConsumerCo off-net indirect access customers of $88.5 million.

        In May 2000, NTL Europe purchased ConsumerCo for an aggregate purchase price of approximately $13.1 billion, including intangibles of approximately $8.9 billion. We subsequently acquired ConsumerCo from NTL Europe. The net assets and results of operations of ConsumerCo are included in the consolidated financial statements beginning in May 2000. Also in 2000, we recorded restructuring charges of $65.9 million and costs of $26.8 million primarily to integrate acquired companies, mostly related to information technology integration as well as costs incurred for business rationalization consulting.

        In March 1999, we purchased Diamond Cable Communications Limited, referred to as Diamond in this annual report, for an aggregate purchase price of approximately $984.6 million, including intangibles of approximately $1.3 billion. In July 1999, we purchased Cablelink Limited, referred to as Cablelink, for an aggregate purchase price of approximately $700.5 million, including intangibles of approximately $669.6 million. In September 1999, NTL Delaware purchased NTL Business for an aggregate purchase price of $175.0 million, including intangibles of approximately $176.9 million. We subsequently acquired NTL Business from NTL Delaware. The net assets and results of operations of Diamond, Cablelink and NTL Business are included in the consolidated financial statements from March 1999, July 1999 and September 1999, their respective dates of acquisition. In August 1999, Telewest Communications plc exercised its right to purchase all of our shares of Cable London PLC

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and all of our related rights and interests for a purchase price of approximately £428.0 million. We recorded a gain of $493.1 million on this sale.

(1)

Pro forma basic and diluted net loss per share for the years prior to 2003 is computed assuming the following shares were outstanding for these years: 50.0 million shares issued in connection with the Plan, 0.5 million shares issued in connection with the issuance of the 19% Senior Secured Notes due 2010 and 9.0 million shares as an adjustment to give effect to the impact of the rights offering.

(1)

As of December 31, 2002, long-term debt of $5,952.3 million was classified as current and $9,814.2 million was classified as liabilities subject to compromise. As of December 31, 2001, there was $14,203.0 million of long-term debt classified as current.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation

Overview

        On January 10, 2003, we emerged from reorganization under Chapter 11 of the US Bankruptcy Code. As part of the Plan, we reduced our indebtedness significantly and changed our name from NTL Communications Corp. to NTL Incorporated.

        We are a leading broadband and communications services company in the UK and the Republic of Ireland based on total residential subscriber numbers. We provide our services to our customers through five reportable segments.

•

ntl: home provides residential telephone, cable television and Internet services, as well as wholesale Internet access solutions to ISPs in the UK.



•

ntl: business provides data, voice and Internet services to large businesses, public sector organizations and SMEs located near our existing residential broadband network in the UK.



•

ntl: broadcast provides DTV, ATV and radio broadcast transmission services, network management, tower site rental and satellite and media services as well as radio communications to public safety organizations in the UK.



•

ntl: carriers provides national and international communications transport services for communications companies in the UK and the Republic of Ireland.



•

ntl: Ireland provides primarily cable television services, as well as telephone and Internet services, to residential customers and television, data, voice and Internet services to business customers in the Republic of Ireland.

        Our reportable segments are supported by various central shared services including ntl: networks, which manages our UK national network. Other shared services include finance, IT and human resources. ntl: Ireland relies upon these central shared services to a lesser extent than our other reportable segments.

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        Our revenues and segment profit (loss) in dollars and UK pounds as well as segment profit as a percentage of revenues for each of our reportable segments and shared services division for the years ended December 31, 2003, 2002, and 2001 were as follows:

Revenues

        The principal sources of revenues within each reportable segment are:

•

ntl: home: monthly fees and usage charges for telephone service, cable television service and Internet access as well as fees and charges for wholesale Internet access solutions in the UK;



•

ntl: business: monthly fees and usage charges for inbound and outbound voice, data and Internet services in the UK;



•

ntl: broadcast: charges for site leasing services, television and radio broadcasting and satellite up-linking for program and content distribution in the UK. We also derive revenues from various communications services provided to public safety organizations;



•

ntl: carriers: charges for transmission, fiber and voice services provided to other telecommunications service providers over our national network in the UK and the Republic of Ireland; and

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•

ntl: Ireland: charges for cable television services and, to a lesser extent, telephone and Internet services in the Republic of Ireland.

Expenses

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

•

payroll and other employee related costs;



•

interconnection costs paid to other carriers related to telephone services;



•

television programming costs primarily incurred by ntl: home and ntl: Ireland;



•

marketing and selling costs;



•

repairs and maintenance;



•

facility related costs, like rent, utilities and rates; and



•

allowances for doubtful accounts.

Segment Profit (Loss)

        Our primary measure of profit or loss for each of our reportable segments is segment profit (loss). Our management, including our chief executive officer who is our chief operating decision maker, considers segment profit (loss) an important indicator of the operational strength and performance of our reportable segments. Segment profit (loss) for each reportable segment and the shared services division excludes the impact of costs and expenses that either do not directly affect our cash flows or do not directly relate to the operating performance of that segment or division. These costs and expenses include:

•

depreciation;



•

amortization;



•

interest expense;



•

foreign currency transaction gains (losses);



•

share of income (losses) from equity investments; and



•

taxation.

        Other charges, including restructuring charges, recapitalization expenses and other losses are also excluded from segment profit (loss) as management believes they are not characteristic of our underlying business operations. Furthermore management believes that some of the components of these charges are not directly related to the performance of a single reportable segment.

        We also measure combined segment profit, which represents the combined measure of the segment profit (loss) from each of our reportable segments and our shared services division. Combined segment profit is not a financial measure under United States generally accepted accounting principles, or GAAP. A discussion relating to use of this measure is set forth below under "—Use of Non-GAAP Financial Measures."

        Combined segment profit (loss) should be considered in addition to, not as a substitute for, operating profit (loss), net income (loss) and other measures of financial performance reported in accordance with GAAP.

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        Segment Reorganization.    During 2003, we implemented a reorganization of our reportable segments by moving some operations between reportable segments. The segmental structure described above represents the results of our realignment. In accordance with generally accepted accounting principles, amounts in prior periods have been reclassified to conform to the current reportable segments reflecting this reorganization.

Factors Affecting Our Business

        ntl: home.    Our ntl: home segment accounts for the majority of our total revenues. The revenues of ntl: home are driven by the number of customers, the number and types of services which each customer uses and the prices we charge for these services. Our segment profit is driven by the relative margins on the types of services we provide to customers. For example, broadband Internet is more profitable than ATV. Our packaging of services and pricing are designed to encourage our customers to use multiple services like dual telephone and broadband. The factors impacting our ntl: home segment include customer churn, average revenue per user, or ARPU, and competition.

Summary customer statistics

        Selected statistics in respect of customers connected directly to our network for ntl: home for the three months ended December 31, 2003 as well as the four prior quarters are set forth in the table below.

(1)

Our customer churn rate is calculated by dividing the number of customers lost in the most recent quarter, multiplied by four, by the average total number of customers we serviced during that quarter. There is generally a seasonal impact on customer churn rate over the summer holiday and student vacation months.

(2)

Each telephone, television and broadband Internet subscriber directly connected to our network counts as one revenue generating unit, or RGU. Accordingly, a subscriber who receives both telephone and television service counts as two RGUs. RGUs may include subscribers receiving some services for free or at a reduced rate in connection with incentive offers. The National Cable & Telecommunications Association reporting guidelines for the US cable industry do not recognize dial-up Internet customers as RGUs, although they are revenue generating for us.

(3)

At December 31, 2003 Internet dial-up customers included approximately 96,400 metered customers who have not dialed up within the last 30 days.

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(4)

Average revenue per user, or ARPU, is calculated on a monthly basis by dividing total revenues generated from the provision of telephone, cable television and Internet services to customers who are directly connected to our network that month, exclusive of VAT, by the average number of customers in that month. We compute the ARPU for any quarter by averaging the ARPU for each month in that quarter.

        Customer Churn.    An increase in our customer churn can lead to increased costs and reduced revenues. We continue to focus on improving our customer service and enhancing and expanding our service offerings to existing customers in an effort to manage our customer churn rate. Customer churn is a measure of the number of customers who stop using our services. Our annualized customer churn rate is calculated by dividing the number of customers lost in the most recent quarter, multiplied by four, by the average total number of customers we serviced during that quarter. Although our ability to reduce our customer churn rate beyond a base level is limited by factors like customers moving outside our network service area, in particular during the summer season, managing our customer churn rate is a significant component of our business plan. To help meet these objectives, we need to integrate our billing systems and customer databases across our entire network. Although we are in the process of integrating our billing systems and customer databases, there can be no assurance that we will be successful in reaching this goal. In addition, our customer churn rate may also increase if we are unable to deliver our services over our network without interruption.

        ARPU.    ARPU is a measure we use to evaluate how effectively we are realizing potential revenues from customers. ARPU is calculated on a monthly basis by dividing total revenues generated from the provision of telephone, cable television and Internet services to customers who are directly connected to our network in that month, exclusive of value added tax, by the average number of customers in that month. We compute the ARPU for any quarter by averaging the ARPU for each month in that quarter. We believe that our "triple play" offering of telephone service, broadband access to the Internet and DTV will prove attractive to our existing customer base and allow us to increase our ARPU by facilitating the sale of multiple services to each customer.

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

        Capital Expenditures.    Our business requires substantial capital expenditures on a continuing basis for various purposes, including expanding and upgrading our network, investing in new customer acquisitions, and offering new services. If we do not continue to invest in our network, our ability to retain and acquire customers may be hindered. Therefore, our liquidity and the availability of cash to fund capital projects are important drivers of our revenues. When our liquidity is restricted, so is our ability to meet our capital expenditure requirements. We believe that our cash on hand, together with cash from operations, will be sufficient for our cash requirements through March 2005. However, our cash requirements after that time may exceed, perhaps significantly, these sources of cash.

        Currency Movements.    We encounter currency exchange rate risks because substantially all of our revenues and operating costs are earned and paid primarily in pounds and, to a lesser extent, euros, but we pay interest and principal obligations with respect to a portion of our existing indebtedness in US dollars. To the extent that the pound declines in value against the US dollar, the effective cost of servicing our US dollar debt will be higher. Changes in the exchange rate result in foreign currency gains or losses. As of December 31, 2003, $485.3 million (net of unamortized discount of $141.9 million), or 8.5% of our long-term debt, net of unamortized discount, was in US dollars.

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        Because revenues and expenses from our principal operations are denominated primarily in pounds but we report our financial results in US dollars, our financial results are also impacted by currency fluctuations, which are unrelated to our underlying results of operations.

        Seasonality.    Certain revenue streams are subject to seasonal factors. For example, telephone usage revenues in ntl: home and ntl: business tend to be slightly lower during summer holiday months. Our customer churn rates include persons who disconnect service owing to moves, resulting in a seasonal increase in our churn rates during the summer months when higher levels of UK house moves occur and students leave their accommodations between school years.

        Integration of Billing Systems.    We are in the process of integrating our various billing systems and customer databases in an effort to improve one of the main tools we use to provide customer service. We have numerous billing systems and customer databases owing to the many acquisitions we have made. We are seeking to complete this integration by late 2004. The total project cost is estimated to be approximately £75 million, or $134 million, of which we incurred approximately £55 million, or $98 million, through December 31, 2003. Approximately £33 million, or $59 million, of this amount was incurred in 2003. If the integration is not successful, we could experience an adverse effect on our customer service, customer churn rate and costs of maintaining these systems going forward. We could also experience operational failures related to billing and collecting revenues from our customers which, depending upon on the severity of the failure, could have a material adverse effect on our business.

        Acquisitions and Dispositions.    In the fourth quarter of 2001, we sold the ConsumerCo off-net indirect access business, which served customers not directly connected to our network. As a result, the consolidated results of operations for the year ended December 31, 2001 include the results for this business for ten months.

Critical Accounting Policies

        Our consolidated financial statements and related financial information are based on the application of accounting principles generally accepted in the United States, or GAAP. GAAP requires the use of estimates, assumptions, judgements and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported, as well as disclosures about contingencies, risks and financial condition. The following critical accounting policies have the potential to have a more significant impact on our financial statements. An impact could occur because of the significance of the financial statement item to which these policies relate, or because these policies require more judgement and estimation than other matters owing to the uncertainty related to measuring, at a specific point in time, transactions that are continuous in nature.

Foreign Currency Translation:

        Our principal operating functional currencies are the UK pound and the euro, while our reporting currency is the US dollar. The assets and liabilities of our UK and Ireland subsidiaries have been translated using the exchange rates in effect at the balance sheet dates, and revenues and expenses have been translated at the weighted average rates for the respective years. Exchange gains and losses on translation of our net equity investments in our subsidiaries are reported as a separate component of accumulated other comprehensive income (loss) in shareholders' equity. Foreign currency transaction gains and losses are recorded in the statements of operations.

Fixed Assets:

•

Fixed assets, net, totaled $7,880.5 million and $11,088.9 million, representing 70.5% and 85.0% of total assets at December 31, 2003 and 2002, respectively. Fixed assets, net at December 31, 2002, are stated at cost less accumulated depreciation. In accordance with SOP 90-7, upon our

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emergence from Chapter 11 reorganization, we adopted fresh-start reporting as of January 1, 2003. Pursuant to fresh-start reporting, the carrying values of our fixed assets were adjusted to their reorganization values, which were equivalent to their estimated fair values. These adjusted carrying values became the revised cost basis of our fixed assets at January 1, 2003. Fixed assets, net were written down by $3,194.9 million to reflect this adjustment. Fixed assets acquired since January 1, 2003, are stated at cost less accumulated depreciation.

•

The cost of fixed assets includes amounts capitalized for labor and overhead expended in connection with the design and installation of our operating network equipment and facilities. Costs associated with initial customer installations, additions of network equipment necessary to enable advanced services, acquisition of additional fixed assets and replacement of existing fixed assets are capitalized. The costs of reconnecting the same service to a previously installed premise are charged to expense in the period incurred. Costs for repairs and maintenance are charged to expense as incurred.



•

We assign fixed assets and intangible assets useful lives that impact the annual depreciation and amortization expense. The assignment of useful lives involves significant judgements and the use of estimates. Our managers use their experience and expertise in applying judgements about appropriate estimates. Changes in technology or changes in intended use of these assets may cause the estimated useful life to change, resulting in higher or lower depreciation charges or asset impairment charges.



•

Labor and overhead costs directly related to the construction and installation of fixed assets, including payroll and related costs of some employees and related rent and other occupancy costs, are capitalized. The payroll and related costs of some employees that are directly related to construction and installation activities are capitalized based on specific time devoted to these activities where identifiable. In cases where the time devoted to these activities is not specifically identifiable, costs are capitalized based upon estimated allocations. We are continuing to enhance our processes to reduce reliance upon these estimates in determining amounts capitalized. The labor and overhead costs capitalized in the year ended December 31, 2003 was approximately £76.1 million, or $124.4 million, in the year ended December 31, 2002 was approximately £115.0 million, or $185.1 million, and in the year ended December 31, 2001 was approximately £251.0 million, or $365.1 million.



•

The American Institute of Certified Public Accountants, or AICPA, issued an Exposure Draft of a Proposed Statement of Position on Accounting for Certain Costs and Activities related to Property, Plant and Equipment dated June 29, 2001. This Exposure Draft has not yet been adopted. However, if this Exposure Draft were adopted, it would require that all rent and other occupancy costs, including those related to construction and installation of fixed assets, be charged to expense as incurred. In the years ended December 31, 2003 and 2002, we capitalized approximately £6.5 million, or $10.6 million, and approximately £9.0 million, or $14.5 million, respectively, of rent and other occupancy costs.

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

Impairment of Long-lived Assets:

        We review the carrying values of our long-lived assets, including fixed assets and amortizable definite lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying values may not be recoverable. We assess the recoverability of the carrying value of long-lived assets, by first grouping our long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the asset group) and, secondly, estimating the undiscounted future cash flows that are directly associated with and expected to arise from the use of and eventual disposition of such asset group. We estimate the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the carrying value of the asset group exceeds the estimated undiscounted cash flows, we record an impairment charge to the extent the carrying value of the long-lived asset exceeds its fair value. We determine fair value through quoted market prices in active markets or, if quoted market prices are unavailable, through the performance of internal analysis of discounted cash flows or external appraisals. The undiscounted and discounted cash flow analyses are based on a number of estimates and assumptions, including the expected period over which the asset will be utilized, projected future operating results of the asset group, discount rate and long-term growth rate.

        Reorganization value in excess of amounts allocable to identifiable assets, goodwill, license acquisition costs and other intangible assets that are not amortized are reviewed for impairment each year.

        As of December 31, 2003, we reviewed our long-lived assets for impairment. We engaged an independent financial adviser to assist in the impairment review. The independent financial adviser and we determined that there was no impairment of our long-lived assets as of December 31, 2003. This determination was based upon various valuation methods, including discounted cash flow analysis, selected comparable market multiples of publicly traded companies and other applicable ratios and economic information relevant to our operations. Certain factors that were incorporated into the impairment review included the following:

•

Reporting unit 10 year cash flow projections.



•

Corporate income tax rates of 30% in the UK and 12.5% in Ireland.



•

Present value discount factors of between 12.5% and 15.0% depending upon the reporting unit.

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•

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

        Our assessments of impairment of long-lived assets and our periodic review of the remaining useful lives of our long-lived assets are an integral part of our ongoing strategic review of the business and operations. Future changes in our strategy and other changes in our operations could impact the projected future operating results that are inherent in our estimates of fair value, resulting in impairments in the future. Additionally, other changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the valuation techniques employed to estimate the fair value of long-lived assets could change and, therefore, impact the assessments of impairment in the future.

Revenue:

        We recognize revenue only when it is realized or realizable and earned. We recognize revenue when all of the following are present:

•

Persuasive evidence of an arrangement exists between us and our customers;



•

Delivery has occurred or the services have been rendered;



•

The price for the service is fixed or determinable; and



•

Collectibility is reasonably assured.

        Revenues are invoiced and recorded as part of a periodic billing cycle, and are recognized as the services are provided. At the end of each period, adjustments are recorded to defer revenue relating to services billed in advance and to accrue for earned but unbilled services.

•

Telephone service and cable television revenues are recognized as the services are provided to customers.



•

Rental revenue in respect of line rentals and rental of equipment provided to customers is recognized on a straight-line basis over the term of the rental agreement.



•

Internet revenue in respect of broadband services provided to customers is recognized as the service is provided.



•

Bundled services revenue is recognized at the time the services are provided to the customer or the performance of all of the services have been completed. We apply the provisions of EITF No. 00-21 "Accounting for Revenue Arrangements with Multiple Deliverables" to assess whether the components of the bundled services should be recognized separately.



•

Transmission and other ntl: broadcast revenues are recognized as the service is provided over the life of the contract.



•

Carrier revenues in respect of national and international communication transport services are recognized as the service is provided.



•

Installation revenues are recognized at the time the installation has been completed to the extent that those fees are less than direct selling costs. Installation fees in excess of direct selling costs are deferred and amortized over the expected life of the customer's connection. We apply the provisions of SFAS No. 51 "Financial Reporting by Cable Television Companies" in relation to connection and activation fees for telephone service and internet services, as well as cable television services, on the basis that we market and maintain a unified fiber network through which we provide all of these services.

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Pensions:

        We account for our defined benefit pension plans using Statement of Financial Accounting Standards, SFAS No. 87, Employers' Accounting for Pensions and the disclosure rules under SFAS No. 132 (Revised) Employers' Disclosures about Pensions and Other Postretirement Benefits, an Amendment of FASB Statements 87, 88 and 106. Under SFAS No. 87, pension expense is recognized on an accrual basis over employees' approximate service periods. Pension expense calculated under SFAS No. 87 is generally independent of funding decisions or requirements. We recognized expense for our defined benefit pension plans of $15.4 million and $10.4 million in 2003 and 2002, respectively. We expect our pension expense to be approximately $11.9 million in 2004.

        The calculation of pension expense and our pension liability requires the use of a number of assumptions. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from the assumptions. We believe that the two most critical assumptions are the expected long-term rate of return on plan assets and the assumed discount rate.

        When calculating pension expense for 2003, we assumed that plan assets would generate a long-term rate of return of between 6.6% and 7.9%. This range is lower than the assumed rates of between 7.0% and 7.9% used to calculate the 2002 expense. We determine our expected long-term rate of return assumption based on historical experience and by evaluating input from the trustee managing the plans' assets, including the trustee's review of asset class return expectations by several consultants and economists as well as long-term inflation assumptions. Our expected long-term rate of return on plan assets is based on a target allocation of assets, which is based on our goal of earning the highest rate of return while maintaining risk at acceptable levels. The plan strives to have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio.

        We discounted our future pension obligations using rates of between 5.5% and 6.0% at December 31, 2003 and rates of between 5.9% and 6.0% for 2002. We determined the appropriate discount rate based on the current rates earned on long-term bonds that receive one of the two highest ratings given by a recognized rating agency. The pension liability and future pension expense both increase as the discount rate is reduced. Lowering the discount rate by 0.5% would increase our pension liability at December 31, 2003 by approximately $16.4 million and increase our estimated 2004 pension expense by approximately $3.6 million.

        Future changes in plan asset returns, assumed discount rates and various other factors related to the participants in our pension plans will impact our future pension expense and liabilities. We cannot predict with certainty what these factors will be in the future.

        At December 31, 2003, projected benefit obligations of all of our pension plans exceed plan assets by $156.9 million. We will need to fund these deficits in accordance with the laws and regulations of the United Kingdom and the Republic of Ireland. We expect to contribute a total of approximately £14.9 million ($26.6 million) during 2004, of which £13.0 million ($23.2 million) relates to the largest of our defined benefit pension plans.

Other Policies:

•

We maintain allowances for doubtful accounts and other receivables to reflect estimated losses resulting from the potential inability of our customers to make payments. These allowances are estimated based on the current aging of receivables, prior collection experience and future expectations of conditions that might impact the collectibility. If the financial condition of our customers were to deteriorate resulting in an impairment in their ability to make payments, additions to the allowances may be required.

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•

Our determination of the treatment of contingent liabilities in the financial statements is based on a view of the expected outcome of the applicable contingency. We consult legal counsel on matters related to litigation. We consult both internal and external experts with respect to other matters that arise in the ordinary course of business. Examples of these matters that are based on assumptions, judgments and estimates include amounts to be paid to terminate some agreements included in restructuring charges and the amounts to be paid to settle some other liabilities. A liability is accrued if the likelihood of occurrence of an adverse outcome is probable and the amount is capable of estimation.



•

We incur interconnection and related costs from other carriers relating to the provision of telephone services. These carriers can make retrospective adjustments to charges for these services which requires us to estimate certain charges for a particular period. Actual charges may differ from those estimated.

        These policies may need to be revised in the future in the event that changes to our business occur.

Consolidated Results of Operations

Years Ended December 31, 2003 and 2002

Revenues

        For the year ended December 31, 2003, consolidated revenues increased by 11.6% to $3,645.2 million from $3,265.1 million in 2002. Revenues expressed in UK pounds increased by 2.6% to £2,229.7 million from £2,173.2 million. Revenues in our ntl: home segment increased by £70.4 million driven by an increase in broadband Internet services and additional customers. Revenues in ntl: Ireland rose by £12.6 million owing primarily to price increases, more DTV customers and higher business sector revenues. Revenues in our ntl: broadcast segment increased by £11.3 million owing primarily to higher revenues from radio communications services to the public safety sector. These increases were offset by a decline of £30.6 million in revenues in our ntl: business segment, primarily owing to fewer customers, and a decline of £7.2 million in revenues in our ntl: carriers segment, primarily because of the downturn in the market for wholesale telecommunications services.

Expenses

        Operating Costs.    For the year ended December 31, 2003, operating costs, including network expenses, increased by 2.9% to $1,545.9 million from $1,502.5 million in 2002, and operating costs expressed in UK pounds decreased by 5.4% to £945.6 million from £1,000.1 million. Operating costs as a percentage of revenues declined to 42.4% for the year ended December 31, 2003, from 46.0% for 2002. The decrease in operating costs as a percentage of revenue was primarily a result of reductions in television programming costs because of renegotiated contracts, which included expanded channel line ups, and in telephone interconnection costs as a result of our effort to route our outbound traffic more effectively and the recent OFTEL ruling related to mobile interconnect cost reductions. These savings were principally attributable to our ntl: home segment. In addition, we have experienced lower costs within our ntl: business segment as we continue to focus on a smaller but more profitable customer base. We have also benefited from a release of certain accruals in respect of the favorable resolution of billing matters with certain providers of interconnect related services in ntl:home and ntl:business. Finally, we benefited from a reduction in charges from local authorities in respect of rates payable on our network principally in ntl: home.

        These reductions have been partly offset by the expensing of costs that are no longer applicable to capital activities and therefore no longer capitalized, together with the impact of the release of certain balance sheet provisions in 2002 which were not repeated in 2003.

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        Selling, general and administrative expenses.    For the year ended December 31, 2003, selling, general and administrative expenses increased by 14.2% to $900.2 million from $788.5 million in 2002, and selling, general and administrative expenses expressed in UK pounds increased by 4.9% to £550.7 million from £524.8 million. Selling, general and administrative expenses as a percentage of revenues increased to 24.7% for the year ended December 31, 2003, from 24.1% for 2002. The increase in these expenses was primarily due to higher marketing and selling activities in 2003, principally within ntl: home, which were curtailed in 2002 as a result of our reorganization. In addition, employee costs associated with incentive compensation plans increased in 2003 compared with 2002. These include increased bonus costs as a result of performance achievements above target, introduction of a long term incentive plan, and the adoption of SFAS No. 123 "Accounting for Stock Based Compensation." Also, contributing are increased pension costs in respect of our defined benefit schemes. Finally, as set forth above, selling, general and administrative costs have increased because of the expensing of costs that are no longer applicable to capital activities and therefore no longer capitalized, and the release of certain balance sheet provisions in 2002 as discussed below which were not repeated in 2003.

        These increases have been offset by savings arising from our successful renegotiation of our contract with IBM for outsourced IT services, together with reduced employee costs in ntl: business as a result of the restructuring at the end of 2002 and during 2003. In addition, we have also benefited from reduced ntl: home costs through lower allowances for doubtful accounts and other operational savings, together with reduced property and facility costs in our shared services division.

Other Charges

        Other charges of $40.7 million for the year ended December 31, 2003, include $36.7 million relating to restructuring charges for employee severance and related costs and $4.0 million in respect of professional fees. Restructuring charges of $36.7 million comprised new charges of $43.2 million less releases of $6.5 million in respect of provisions no longer required. The net charges were incurred in respect of approximately 960 employees who were made redundant or terminated in the year ended December 31, 2003, all of whom ceased employment by December 31, 2003.

        Other charges of $389.2 million in the year ended December 31, 2002 include restructuring charges of $104.8 million and non-cash charges of $284.4 million, primarily for allowances for the cancellation of receivables from our former parent company and some of its subsidiaries in accordance with our restructuring under Chapter 11. Restructuring charges of $104.8 million in 2002 relate to our actions to reorganize, re-size and reduce operating costs and create greater efficiency in various areas. An aggregate of $7.5 million of the 2002 restructuring charges were for the write-off of equipment and other assets that are not in use and will not require any future cash outlays. Employee severance and related costs in 2002 were related to approximately 740 employees to be terminated, of which approximately 350 employees were still employed by us as of December 31, 2002, but who were

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terminated by December 31, 2003. The following table summarizes the restructuring charges incurred and utilized in 2002 and 2003 (in millions):

Depreciation expense

        For the year ended December 31, 2003, depreciation expense decreased to $1,233.2 million from $1,477.9 million in 2002, primarily as a result of the $2,498.0 million decrease in the carrying value of fixed assets subject to depreciation effective January 1, 2003. This decrease in carrying value of fixed assets was because of the adoption of fresh-start reporting, which included a reassessment of the remaining useful lives of these assets.

Amortization expense

        For the year ended December 31, 2003, amortization expense increased to $203.4 million from $63.7 million in 2002. This increase in amortization expense was as a result of the $1,222.6 million increase in the carrying value of our customer lists as of January 1, 2003 because of the adoption of fresh-start reporting, and which are being amortized over 3 to 12 years.

Interest expense

        For the year ended December 31, 2003, interest expense decreased to $746.4 million from $780.2 million in 2002, primarily as a result of the cancellation of $9,486.9 million of debt on January 10, 2003 in connection with our emergence from Chapter 11 reorganization. In the year ended December 31, 2002, interest expense included interest on this debt only through to May 8, 2002. Pursuant to SOP 90-7, in the period from May 8, 2002 to December 31, 2002, interest expense was included in the results of operations only to the extent that it would be paid during the bankruptcy proceeding or that it was probable that it would be an allowed priority, secured or unsecured claim. Accordingly, interest expense for the year ended December 31, 2002 excluded $645.2 million of contractual interest. The saving in interest from the cancellation of debt on January 10, 2003 was partly offset by:

•

interest on the Exit Notes issued in January 2003 through to November 2003 when they were repaid;



•

accretion charges in respect of fresh-start adjustments to the carrying values of Diamond Holdings and NTL Triangle notes;

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•

adverse movements in exchange rates causing the US dollar equivalent of our UK pound interest expense to increase;



•

the amendment and restatement of our Senior and Working Capital Credit Facilities in January 2003, that increased the rate of interest payable on these facilities;



•

the amortization of certain costs incurred in connection with this amendment to the Senior and Working Credit Facilities; and



•

a reduction in the amount of interest capitalized in 2003.

        We paid interest in cash of $588.9 million for the year ended December 31, 2003, and $456.3 million for the year ended December 31, 2002. With respect to the interest payment of $50.4 million on the Exit Notes due on July 1, 2003, we elected to pay the interest through the issuance of additional "pay-in-kind" notes. We issued $56.1 million aggregate principal amount at maturity of Exit Notes with primarily the same terms as the original Exit Notes for the interest payment.

Recapitalization expense

        For the year ended December 31, 2003 we had no recapitalization expense. For the year ended December 31, 2002, recapitalization expense was $152.9 million. Recapitalization expense included all transactions incurred as a result of our Chapter 11 reorganization. This expense included $36.2 million for employee retention related to substantially all of our UK employees and $116.7 million for financial advisory, legal, accounting and consulting costs.

Foreign currency transaction gains (losses)

        Our principal operating functional currencies are the UK pound and the euro, while our reporting currency is the US dollar. The assets and liabilities of our UK and Ireland subsidiaries have been translated using the exchange rates in effect at the balance sheet dates, and revenues and expenses have been translated at the weighted average rates for the respective years. Exchange gains and losses on translation of our net equity investment in our subsidiaries are reported as a separate component of accumulated other comprehensive income (loss) in shareholders' equity. Foreign currency transaction gains and losses are recorded in the statement of operations.

        For the year ended December 31, 2003, foreign currency transaction gains were $54.0 million as compared with losses of $94.1 million for 2002. These gains in 2003 were primarily because of the effect of changes in exchange rates on US dollar denominated debt of our subsidiaries, Diamond Holdings and NTL Triangle, whose functional currency is the UK pound. Our results of operations will continue to be affected by foreign exchange rate fluctuations.

Income tax benefit (expense)

        For the year ended December 31, 2003, income tax expense was $0.1 million as compared with income tax benefit of $25.7 million in 2002. The 2003 expense is composed of $1.6 million in US state and local income tax expense less $1.5 million of deferred non-US income tax benefit. None of the 2003 income tax, except a portion of the state and local tax, is expected to be payable in the next year.

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Net (loss)

        For the year ended December 31, 2003, net loss was $954.2 million as compared with a net loss of $2,375.8 million in 2002 The reduction in net loss is attributable to:

•

our improved operating performance;



•

a reduction in depreciation expense because of our lower tangible fixed asset cost;



•

a reduction in restructuring charges for employee severance;



•

foreign currency gains in 2003 but losses in 2002; and



•

the occurrence in 2002 of items that were not repeated in 2003, including long-lived asset impairments, an allowance for the cancellation of receivables from our former parent company and some of its subsidiaries and recapitalization expense relating to our reorganization under Chapter 11.

Net (loss) per share

        Basic and diluted net loss per common share for the year ended December 31, 2003 was $15.10 and for the year ended December 31, 2002 was $39.93. Basic and diluted net loss per common share for the year ended December 31, 2002 is computed assuming the following shares were outstanding for these years: 50.0 million shares issued in connection with the Plan, 0.5 million shares issued in connection with the issuance of the Exit Notes and 9.0 million shares as an adjustment to give effect to the impact of the rights offering.

Segment profit (loss)

        ntl: home.    For the year ended December 31, 2003, ntl: home revenues increased by 14.2% to $2,442.5 million from $2,139.0 million for 2002, and revenues expressed in UK pounds increased by 4.9% to £1,494.1 million from £1,423.7 million. This was primarily a result of more customers subscribing to our broadband Internet services, an increase in our customer base, and the impact of price increases for our broadband Internet services and our cable television services. We also increased our revenues from our wholesale Internet access services through arrangements with other UK ISPs. These increases were partly offset by a reduction in our off-net revenues, primarily due to the cessation in the fourth quarter of 2002 of transition billing and other related services provided to the purchaser of the ConsumerCo off-net indirect access business which we sold in November 2001.

        For the year ended December 31, 2003, ntl: home segment profit increased by 24.2% to $1,101.6 million from $886.6 million for 2002, and segment profit expressed in UK pounds increased by 14.2% to £673.8 million from £590.1million. This increase is primarily associated with higher revenues together with reductions in our cable television program costs as a result of renegotiated contracts with content providers, which included expanded channel line ups, and in our telephone interconnect costs. Interconnect cost reductions resulted from our effort to route our outbound telephony traffic more effectively and from OFTEL mandated reductions in mobile interconnect rates. In addition further operational efficiencies and cost cutting including lower allowances for doubtful accounts owing to improved collection procedures, together with a reduction in amounts previously charged by local authorities in respect of rates payable on our network, have increased ntl: home segment profit in the year ended December 31, 2003. In the fourth quarter of 2003 we also benefited from a release of certain accruals in respect of the favorable resolution of billing matters with certain providers of interconnect related services.

        These cost reductions have been partly offset by the expensing of costs that are no longer applicable to capital activities and therefore no longer capitalized. In addition increased sales and marketing costs, including related employee costs, have further reduced segment profit. These sales and

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marketing activities had been curtailed in 2002 as a result of our Chapter 11 reorganization. Other employee costs have also increased, partly because of increased bonus costs due to performance achievements above target, and partly because of the introduction of a long-term incentive plan in 2003.

        ntl: business.    For the year ended December 31, 2003, ntl: business revenues decreased by 1.8% to $461.2 million from $469.8 million in 2002, and revenues expressed in UK pounds decreased by 9.8% to £282.1 million from £312.7 million. This decrease was primarily because of fewer customers, major installations and orders as we executed our strategy of focusing on a smaller but more profitable customer base. This decrease in revenues was offset to some extent by our selling of additional services to our existing customers. We expect to return our focus towards targeted profitable customer acquisitions in 2004. Initiatives are expected to include the recruitment of a new sales team which will focus on winning new medium and large customers, and investigation and implementation of new indirect sales channels.

        For the year ended December 31, 2003, ntl: business segment profit increased by 62.3% to $170.4 million from $105.0 million in 2002, and segment profit expressed in UK pounds increased by 49.2% to £104.3 million from £69.9 million. This increase was primarily a result of reduced employee costs following a substantial organizational restructuring of ntl: business at the end of 2002 and during 2003, together with the impact of further operational efficiencies and cost cutting. In addition we benefited from a release of certain accruals in respect of the favorable resolution of billing matters with certain providers of interconnect related services, together with a reduction in amounts charged by BT in respect of other interconnect services. The reductions in revenue described above did not have a material impact on segment profit because of the low profitability of these revenue streams.

        These increases in segment profit have been partially offset by the expensing of costs that are no longer applicable to capital activities and therefore no longer capitalized.

        ntl: broadcast.    For the year ended December 31, 2003, ntl: broadcast revenues increased by 13.6% to $439.2 million from $386.6 million in 2002, and revenues expressed in UK pounds increased by 4.4% to £268.6 million from £257.3 million. This was primarily a result of higher revenues from delivery of radio communications services to the public safety sector. These arose principally from managed service contracts with six UK county police forces for the migration from analog to digital communication systems together with the supply of radio equipment and associated project and technical labor to the Metropolitan Police. We also generated additional revenues from the continued rollout of digital radio services and increases in site sharing, together with termination payments from two satellite distribution services contracts amounting to approximately £2 million.

        These increases in revenues were partly offset by reduced media revenues because of a downturn in this market especially in the satellite distribution services sector, the slowing down of installation services for cellular network rollouts, the termination of a contract to provide television program scheduling and transmission services, and the slowing down of public safety maintenance services.

        For the year ended December 31, 2003, ntl: broadcast segment profit increased by 13.8% to $188.7 million from $165.8 million in 2002, and segment profit expressed in UK pounds increased by 4.7% to £115.5 million from £110.3 million. This was primarily as a result of the increased revenues described above together with savings in employee costs following the reorganization of certain activities within the broadcast services and public safety business units.

        ntl: carriers.    For the year ended December 31, 2003, ntl: carriers revenues increased by 2.3% to $183.8 million from $179.7 million in 2002, and revenues expressed in UK pounds decreased by 6.0% to £112.4 million from £119.6 million. The primary reason for this decline in revenues as expressed in UK pounds is excess capacity in the carriers market that adversely affected pricing during 2003 and hampered our ability to obtain new business. In addition, during the year ended December 31, 2002,

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ntl: carriers was able to recognize some revenues, which had previously been deferred, as a result of the insolvency of certain customers which released us from our obligations under our contracts with them. These revenues were not repeated for the year ended December 31, 2003. The decline in revenues as expressed in UK pounds from carrier services has been partially offset by increased revenues from mobile telecommunications operators.

        For the year ended December 31, 2003, ntl: carriers segment profit increased by 1.5% to $150.8 million from $148.6 million in 2002, and segment profit expressed in UK pounds decreased by 6.8% to £92.2 million from £98.9 million. This decrease in segment profit as expressed in UK pounds was primarily owing to the decline in revenues as expressed in UK pounds.

        ntl: Ireland.    For the year ended December 31, 2003, ntl: Ireland revenues increased by 31.7% to $118.5 million from $90.0 million in 2002, revenues expressed in UK pounds increased 21.0% to £72.5 million from £59.9 million, and revenues expressed in euros increased by 10.1% to €104.8 million from €95.2 million. The primary reasons for the increase were more sales of premium services, including digital television, to existing customers, a price increase that became effective in January 2003, and higher business sector revenues.

        For the year ended December 31, 2003, ntl: Ireland segment profit increased by 87.4% to $41.6 million from $22.2 million in 2002, segment profit expressed in UK pounds increased by 71.6% to £25.4 million from £14.8 million, and segment profit expressed in euros increased by 56.6% to €36.8 million from €23.5 million. This was primarily owing to revenue growth together with a reduction in our bad debt charge as a result of our more rigorous credit policy. In addition during the year ended December 31, 2003, we continued to focus on reducing our operating costs and also successfully renegotiated our contract with IBM for outsourced IT services, which resulted in a reduction in rates charged. These costs reductions have been partly offset by increased employee costs including bonuses and the expensing of costs that are no longer applicable to capital activities and therefore no longer capitalized.

        ntl: shared services.    For the year ended December 31, 2003, ntl: shared services loss increased by 28.2% to $454.0 million from $354.1 million in 2002, and the loss expressed in UK pounds increased by 17.8% to £277.7 million from £235.7 million. This is primarily owing to increases in our pension fund charges arising from the annual actuarial valuation of our defined benefit pension plans during the fourth quarter of 2002 together with increased employee related costs. Additional employee related costs include increased bonus charges due to performance achievements above target, introduction of a long-term incentive scheme, stock option compensation arising from our adoption of SFAS No. 123, and other stock compensation expense. Finally, releases of certain balance sheet provisions in 2002 as discussed below were not repeated in 2003.

        These increases in shared services loss have been partly offset by savings resulting from the re-negotiation of our contract with IBM for outsourced IT services in the third quarter of 2003. In addition, for the year ended December 31, 2003, we reduced our property and related facility costs through further property rationalization and negotiated savings on our facility contracts compared with 2002. We reduced network maintenance and related costs, and we reduced our healthcare costs from the higher levels experienced during the year ended December 31, 2002 which were a result of increased claims following the significant employee redundancies announced during the fourth quarter of 2001.

Years Ended December 31, 2002 and 2001

Revenues

        For the year ended December 31, 2002, consolidated revenues increased by 2.4% to $3,265.1 million from $3,189.6 million for 2001, and revenues expressed in UK pounds decreased by

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1.9% to £2,173.2 million from £2,216.1 million during the same period. This was primarily a result of the negative impact that uncertainties arising from our Chapter 11 reorganization had on our revenues in ntl: business, together with a reduction in revenue following the sale of the ConsumerCo off-net indirect access telephone business in ntl: home in the fourth quarter of 2001. These decreases were partially offset by increases in revenues in ntl: broadcast and ntl: Ireland.

Expenses

        A review of a number of our balance sheet accounts during 2002 found that some provisions that were being held against anticipated liabilities were no longer necessary. The release of these provisions resulted in a decrease in operating costs of $34.7 million, or £23.1 million, and a decrease in selling, general and administrative expense of $34.6 million, or £23.0 million.

        In addition, in 2002 we engaged in a process of reducing our expenditures in a variety of areas including customer acquisitions and expenditures relating to certain capital improvements. These measures, as well as the restructuring of our operations in 2001, which resulted in significant headcount reductions and departmental reorganizations, caused us to reassess whether for certain 2002 expenditures, assumptions related to the allocation of those costs between capital and operating expenses needed to be revised. This review was completed in the fourth quarter, resulting in a £16.3 million ($24.5 million) increase in operating expenses and a £24.9 million ($37.4 million) increase in selling, general and administrative expense and the corresponding reduction in fixed assets of £41.2 million ($61.9 million) in the three months ended December 31, 2002.

        There was no impact on cash in 2002 from either of these adjustments. These two adjustments relate principally to periods prior to the three months ended December 31, 2002. For the first, second and third quarters of 2002, operating expenses would increase by approximately £4 million per quarter and selling, general and administrative expense would increase by approximately £6 million per quarter if the reallocation of the £41.2 million from capitalized costs to expense was reflected in the appropriate periods. The £43.4 million net adjustment would not be reallocated to the first, second and third quarters of 2002 because these provisions related to periods prior to 2002.

        Operating expenses.    For the year ended December 31, 2002, operating expenses, including network expenses, decreased by 4.0% to $1,502.5 million from $1,564.3 million for 2001, and expenses expressed in UK pounds decreased 8.0% to £1,000.1 million from £1,086.9 million during the same period. Operating expenses as a percentage of revenues declined to 46.0% for the year ended December 31, 2002 from 49.0% for 2001. In addition to the release of provisions explained above, this decrease in operating expenses was primarily a result of decreases in telephone interconnection costs by improving the routing of our outbound traffic, and decreases in television programming costs due to renegotiated contracts which included expanded channel line ups.

        Selling, general and administrative expenses.    For the year ended December 31, 2002, selling, general and administrative expenses decreased by 21.0% to $788.5 million from $997.5 million for 2001, and expenses expressed in UK pounds decreased by 24.3% to £524.8 million from £693.0 million during the same period. Selling, general and administrative expenses as a percentage of revenues decreased to 24.1% for the year ended December 31, 2002 from 31.3% for 2001. This primarily reflects decreases in employee-related costs and sales and marketing expenses following various cost savings efforts, including restructurings that were announced in the third and fourth quarters of 2001, together with the release of provisions explained above.

Asset impairments

        Asset impairment charges were $445.1 million for the year ended December 31, 2002, and $8,160.6 million for the year ended December 31, 2001. Asset impairment charges of $445.1 million in 2002 are non-cash charges to write down some assets to their estimated fair values based on our

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assessment that their carrying value was not recoverable. These charges in 2002 included charges against fixed assets of $56.0 million, license acquisition costs of $29.0 million and goodwill of $360.1 million. The charge with respect to fixed assets was estimated based upon the technological obsolescence of some network and other equipment. The charge with respect to license acquisition costs and goodwill was determined in accordance with SFAS No. 142. Asset impairment charges of $8,160.6 million in 2001 included goodwill of $8,077.8 million, license acquisition costs of $58.8 million, customer lists of $9.1 million and other intangibles of $14.9 million.

Non-cash compensation

        Non-cash compensation of $30.6 million in the year ended December 31, 2001 was due to modifications to some stock options approved by the Compensation and Option Committee of the Board of Directors of our former parent company in July 2001. All options to purchase shares of our former parent company's common stock were cancelled on January 10, 2003 pursuant to the Plan.

Other charges

        Other charges of $389.2 million in the year ended December 31, 2002 include restructuring charges of $104.8 million and non-cash charges of $284.4 million, primarily for allowances for the cancellation of receivables from our former parent company and some of its subsidiaries in accordance with the Plan. Other charges of $297.9 million in the year ended December 31, 2001 include restructuring charges of $202.8 million and costs of $95.1 million incurred primarily to integrate acquired companies, mostly related to information technology integration as well as costs incurred for business rationalization consulting.

        Restructuring charges of $104.8 million for the year ended December 31, 2002 and $202.8 million for the year ended December 31, 2001 relate to our actions to reorganize, re-size and reduce operating costs and create greater efficiency in various areas. An aggregate of $7.5 million of the 2002 restructuring charges and $57.9 million of the 2001 restructuring charges were for the write-off of equipment and other assets that are not in use and will not require any future cash outlays. Employee severance and related costs in 2001 were related to approximately 5,200 employees to be terminated, of which approximately 20 employees were still employed by us as of December 31, 2002. These costs in 2002 were related to approximately 740 employees to be terminated, of which approximately 350 employees were still employed by us as of December 31, 2002, but who were all terminated by December 31, 2003.

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        The following table summarizes the restructuring charges incurred and utilized in 2001 and 2002 (in millions):