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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

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

FORM 10-K

Commission file number 000-50886

TELEWEST GLOBAL, INC.
(Exact name of registrant as specified in its charter)

        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 amendment to this Form 10-K Yes ý    No o

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

        The number of shares outstanding of the registrant's common stock as of March 21, 2005 was 245,080,629.

DOCUMENTS INCORPORATED BY REFERENCE

Telewest Global, Inc.

TABLE OF CONTENTS

        In this Annual Report, the terms "we," "us," "our company," "our" and "Telewest" refer to Telewest Global, Inc. and its subsidiaries as a combined entity, except where the context requires otherwise, for instance where we refer to the operations of our predecessor company, Telewest Communications plc, and its subsidiaries prior to the completion of its financial restructuring on July 15, 2004. The terms "Telewest Communications" and "our predecessor" refer to Telewest Communications plc and its subsidiaries as a combined entity, except where the context requires otherwise. "Telewest Jersey" refers to Telewest Finance (Jersey) Limited, a wholly owned subsidiary of Telewest Communications. "Telewest UK" refers to Telewest UK Limited, a wholly owned subsidiary of Telewest. "TCN" refers to Telewest Communications Networks Limited, an indirectly wholly owned subsidiary of Telewest.

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FORWARD-LOOKING STATEMENTS

        Some of the statements in this Form 10-K constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, potential growth (including penetration of developed markets and opportunities in emerging markets), product introductions and innovation, meeting customer expectations, planned operational changes (including product improvements), expected capital expenditures, future cash sources and requirements, liquidity, customer care improvements, cost savings and other benefits of acquisitions or joint ventures—potential and/or completed—that involve known and unknown risks, uncertainties and other factors that may cause our or our businesses' actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," or "continue," or the negative of those terms or other comparable terminology.

        There are a number of important factors that could cause our actual results and future development to differ materially from those expressed or implied by those forward-looking statements, including, but not limited to:

•

the extent to which we are able to compete with other providers of broadband internet services, including BT Group plc, or BT;



•

the extent to which consumers regard cable telephony as an attractive alternative to telephony services provided by BT, other fixed-line network operators and mobile network operators;



•

the impact of voice-over-internet-protocol or other new technologies as viable alternatives to cable telephony;



•

the extent to which we are able to retain our current customers and attract new customers;



•

the extent to which we are able to migrate customers to additional products or services or to high-margin products or services;



•

the extent to which regulatory and competitive pressures in the UK telephony market continue to reduce prices;



•

the extent to which UK and European Union ("EU") merger control laws restrict our ability to expand through mergers or acquisitions;



•

our ability to develop and introduce competitive interactive and high-speed data services in a business services market that is highly competitive and subject to rapid technological change;



•

our ability to penetrate markets and respond to changes or increases in competition;



•

our ability to compete against digital television service providers, including British Sky Broadcasting Group plc ("BSkyB") and Freeview, by increasing our digital customer base;



•

our ability to achieve, or realize benefits from, any further consolidation in the UK cable industry;



•

our ability to influence, or respond to, new or changed government regulations;



•

our ability to improve operating efficiencies through cost reductions;



•

our ability to maintain and upgrade our network in a cost-efficient and timely manner;

3

•

adverse changes in the price of telephony interconnection and the price or availability of cable television programming; and



•

disruption in the supply of programming, services, equipment and software to us.

        Additional risks and factors that could cause our results to differ materially are discussed under the caption "Risk Factors" on page 32 of this Annual Report. Those risk factors may not be exhaustive. Other sections of this Annual Report may describe additional factors that could adversely impact our business and financial performance.

        Unless otherwise required by applicable securities laws, we assume no obligation to publicly update or revise any of the forward-looking statements after the date of this Annual Report to conform them to actual results, whether as a result of new information, future events or otherwise.

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PART I

ITEM 1.    BUSINESS

Background

        Our legal name is Telewest Global, Inc. and our commercial names are Telewest Broadband, Telewest Business and Flextech. We were incorporated in the State of Delaware on November 12, 2003, as a wholly owned subsidiary of our predecessor company, Telewest Communications, as part of its financial restructuring. On July 13, 2004, we entered into an agreement to acquire substantially all of the assets of Telewest Communications and on July 15, 2004, upon completion of the financial restructuring, we became the ultimate holding company for the operating companies of Telewest Communications.

        As a result of the financial restructuring, all of our predecessor's outstanding notes and debentures were cancelled in exchange for the distribution of 98.5% of our common stock to its note and debenture holders, substantially reducing our indebtedness. The remaining 1.5% of our common stock was distributed to the shareholders of Telewest Communications.

        Following completion of the financial restructuring, Telewest Communications no longer has any of the assets of, or a relationship to, its former operating companies. In addition, Telewest Communications and its wholly owned finance subsidiary Telewest Finance (Jersey) Limited ("Telewest Jersey") are expected to be placed in solvent liquidation by their respective shareholders as soon as practicable.

        The following diagrams set out our corporate structure before and after completion of Telewest Communications' financial restructuring:

Group Structure
before Financial Restructuring

5

Group Structure
after Financial Restructuring, but before Liquidation of
Telewest Communications and Telewest Jersey

        We conduct our operations through direct and indirect wholly owned subsidiaries. Our principal executive office is located at 160 Great Portland Street, London, W1W 5QA, United Kingdom, and our telephone number is +44 (20) 7299 5000. Our World Wide Web site is www.telewest.co.uk and the investor relations section of our web site can be accessed under the heading "Investor Information" where we make available free of charge annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments thereto, as soon as reasonably practical after they are filed with the Securities and Exchange Commission.

Informational Requirements

        We are subject to the informational requirements of the Exchange Act and accordingly file reports, proxy statements and other information with the SEC. You may read and copy any document filed by us or by our predecessor, Telewest Communications, with the SEC without charge at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of documents may be obtained by mail from the Public Reference Branch of the SEC at such address, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains an internet website that contains reports, proxy statements and other information about issuers, including us, who file electronically with the SEC. The address of that site is http://www.sec.gov.

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Our Business

        We are a leading broadband communications and media group in the UK. Our business is divided into two segments: cable and content. The cable segment is further subdivided into a consumer sales division and a business sales division. The consumer sales division provides consumer television, telephony and internet access services to residential customers. Our business sales division focuses on a wide range of voice, data, and managed solutions services for businesses. Our content segment supplies basic television channels and related services to the UK pay-television broadcasting market.

        Our cable segment includes a broadband, local access broadcasting network covering approximately 4.7 million homes and consists of local distribution networks, our "national network" and an internet protocol, or IP, services platform, which allow us to handle the voice, video and data needs of our customers. Our broadband, local access network and architecture provide us with high-speed interconnection and two-way interactivity with directly connected residential and business customers. We had approximately 1.8 million residential customer relationships as at December 31, 2004, comprised of consumer television, telephony and internet services customers.

        A growing and strategically significant part of our business is "blueyonder broadband," a high-speed consumer internet service which we launched in March 2000. As at December 31, 2004, we had approximately 698,000 blueyonder subscribers, approximately 71% of whom also subscribed to both our consumer telephony and consumer television services and 93% of whom subscribed to at least one of our consumer telephony or consumer television services.

        Our content segment is operated through a wholly owned subsidiary named Flextech. Flextech has four pay-television channels and one free-to-air channel and owns 50% of the companies that comprise UKTV. UKTV is comprised of joint ventures formed with BBC Worldwide (the commercial arm of the British Broadcasting Corporation ("BBC")) and offers a portfolio of television channels based on the BBC's program library. Flextech, together with UKTV, is the largest provider of basic (i.e. non-premium) thematic channels to the UK multi- channel television broadcasting market, measured by viewing share, reaching approximately 10.7 million pay multi-channel television subscriber homes ("multi-channel" refers to the UK's television platforms other than terrestrial broadcast television, each of which offers more than one channel).

Strategy

        Following completion of the financial restructuring of our predecessor, we have adopted a new long-range plan for the restructured business. The new plan builds on and strengthens our predecessor's long-range plan and includes an emphasis on product innovation, with the introduction of video-on-demand ("VOD"), in January 2005 and the roll-out of digital video recorder ("DVR") enabled set-top boxes expected in the second half of 2005. The new plan includes:

•

a continued, intensive focus on customer care and churn control;



•

the differentiation of our business proposition from that of our competitors;



•

leveraging the capacity of our network; and



•

product and channel innovation across our cable and content segments, respectively.

        The critical features of the plan for each business segment are described below:

Cable Segment

Consumer Sales Division

        Our intention is to focus on providing core bundled products (consumer television, telephony and broadband internet) to drive the number of "dual" and "triple play" customers. "Dual play" customers

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are customers who subscribe to two of our three residential services (consumer television, telephony and broadband internet services) and "triple play" customers are customers who subscribe to all three.

        As part of this strategy we:

•

leverage our broadband internet leadership to further growth across our consumer division;



•

use pricing and bundling promotions to drive the "dual" and "triple play" penetration of high-speed internet bundled with television and telephony, while ensuring that these product combinations are cost effective;



•

leverage the capacity of our broadband network to deliver new and differentiating products and services, such as VOD, DVR and uncapped broadband internet services;



•

apply discipline in our intake of new subscribers to protect the credit quality of our customer base; and



•

emphasize our customer care and customer relationship management to manage churn and increase upselling opportunities.

Business Sales Division

        Our intention is to focus on further penetration of managed data services to our existing customer base and an expansion of our presence in the public sector market, through the provision of reliable, competitively priced services to business and public sector users.

Content Segment

        To have Flextech become a significant force in multi-channel television by targeting niche markets with its wholly owned channels and UKTV channels, and by leveraging its UKTV relationship with the BBC.

Selected Operating Data-Unaudited

        The following table sets out certain of our operating data for the years ended December 31, 2004, 2003 and 2002, respectively.

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Notes:

(1)

The number of homes within our service area that can potentially be served by our network with minimal connection costs. Information concerning the number of homes "passed" (homes for which we have completed network construction) or homes "passed and marketed" is based on physical counts made by us during network construction or marketing phases.

(2)

The number of customers who receive at least one of our television, telephony and broadband internet services.

(3)

Revenue Generating Units ("RGUs"), refer to subscriptions to each of our analog television, digital television, telephony and broadband internet services on an individual basis. For example, when we provide one customer

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with digital television and broadband internet services, we record two RGUs. Dial-up internet services, second telephone lines and additional TV outlets are not recorded as RGUs although they generate revenue for us.

(4)

Average monthly revenue per customer (often referred to as "ARPU" or "Average Revenue per User") represents the Consumer sales division's total annual revenue of residential customers, including installation revenues, divided by the average number of residential customers in the year, divided by twelve. The same methodology is used for television, telephony and broadband internet ARPU.

(5)

Average monthly churn represents the total number of customers who disconnected during the year divided by the average number of customers in the year, divided by twelve. Subscribers who move premises within our addressable areas (known as "Moves and Transfers") and retain our services are excluded from these churn calculations.

Cable Segment

Consumer Sales Division

        Our consumer sales division encompasses residential cable television, telephony and consumer internet services. We market all of our consumer sales division services under the "Telewest Broadband" name. In line with our long-range plan, the focus of the consumer sales division is to acquire and retain profitable customers, increase average revenue per user and reduce churn.

        As at December 31, 2004, we had approximately 493,000 "triple play" customers subscribing to television, telephony and broadband internet services. These "triple play" customers accounted for approximately 27.4% of our customer base at December 31, 2004 compared to 16.8% at December 31, 2003. Recent growth in our "triple play" base, which represents our most profitable customer segment, is a result of growth in our broadband internet services and promotions for our bundled service offerings.

Consumer Television

        Our consumer television services provide a wide range of programming over our digital and analog television platforms, including news and information, general interest, business, children's, international, music and sports programming. We obtain our programming content through Flextech, UKTV and other programming suppliers, such as BSkyB.

        We offer multi-channel analog and digital television services in all of the areas in which we operate, except for certain of the areas covered by Eurobell Southeast and Cabletime, where we currently offer only our analog services. We completed the digital upgrade of our Birmingham and Chorley Cabletime networks in May and December 2004, respectively, enabling the delivery of digital television services to approximately 77,000 additional homes. We currently deliver digital services to approximately 94.3% of our network. We are currently upgrading our Preston Cabletime network and plan to upgrade Liverpool Cabletime later in 2005. We expect to phase out our analog services when most of our existing customers have migrated from analog to digital services.

        Consumer television is our service with the highest up-front investment, principally because we supply set-top boxes to new subscribers at no additional cost. The set-top box remains our property and is collected at the end of a customer relationship. Consumer television is also the service with the lowest margins. As a result of these two factors, we focus on acquiring profitable, higher margin television customers—i.e. customers who subscribe to our "Essential" and "Supreme" packages or who subscribe to more than one of our services, thereby increasing overall consumer sales division margins and average revenue per user. In line with this strategy, when we raised prices in 2004, the largest percentage increases were on our entry-level cable television package, "Starter."

        We have an up-front payment system for most new customers whereby we charge up-front payments which are offset against installation and/or subscription fees. This billing practice has reduced

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the percentage of new customers who receive our services but fail to pay for them. New customers who subscribe to our services on-line, where we have our highest quality of customer acquisition, are not required to make up-front payments. In addition, a substantial majority of our customers pay for their services on a direct debit basis which reduces late payments and non-payments.

        As at December 31, 2004, we had approximately 1.3 million consumer television subscribers.

Digital Television Services

        Our digital television services consist of a wide array of television and radio channels, pay-per-view films, interactive services, including enhanced "red-button" functionality and television e-mail. "Red-button" functionality allows customers to access interactive and enhanced television services using the red button on their remote control. As at December 31, 2004, we had an installed base of approximately 1.1 million digital television subscribers representing approximately 85.5% of our total consumer television subscriber base. Our digital television services provide greater customer choice than our analog services and include interactive services and an electronic program guide.

        In 2002, we installed Liberate 1.2 set-top box software across our digital television platform. The software provides an operating platform for delivery of a wide range of applications and interactive services for our digital cable customers, including "red-button" functionality, TV listings, a mini-guide, additional program information, TV e-mail, shopping and games.

        Our digital television subscribers can also subscribe to one or more premium channels (e.g., movie and sports channels) which may be added for an additional monthly fee. All of our digital television customers can also purchase pay-per-view films provided by Front Row Television Limited ("Front Row"), a joint venture that we own with ntl Incorporated ("ntl"). Digital television customers can also purchase pay-per-view Barclays FA Premier League football matches, Scottish Premier League football matches, "Sky Box Office" events and adult-content programming.

        In January 2005, we announced the launch of a VOD service that is initially available to approximately 2,000 digital television customers in our Bristol area and which will continue to be rolled out to our digital subscribers throughout 2005. Initially, subscribers to this service will be able to rent recently released films (generally available to us six months after their theater release) and view them for a 24-hour period. Subscribers to our VOD services will be able to use their existing set-top box and remote control to pause, rewind and fast-forward a rented film. We expect to increase the scope of our VOD services during 2005 to include selected television content. In 2005, we also entered into a contract with Scientific Atlanta for the provision of DVRs, which will be offered to our cable television subscribers in the second half of 2005.

        In order to enhance the attractiveness of our cable television packages, in 2004 we introduced new channels to our "Essential" and "Starter" packages which accounted for approximately 38.3% and 23.0%, respectively, of our digital television base at December 31, 2004. As part of our focus on more profitable cable television subscribers, our "Starter" package is only available if bundled with our cable telephony and/or broadband internet services and new stand-alone consumer television subscribers must now subscribe to our "Essential" or "Supreme" packages.

        During 2004, we launched nine new basic entertainment channels including Disney's ABC1, ITV3, UKTV Documentary, UKTV People and E4+1, which are available only to our digital subscribers.

        All of our digital television subscribers are subject to a 12-month minimum subscription period and are billed monthly in advance for their chosen cable television package. Any premium channels purchased are billed in advance on a monthly basis and "add-ons" such as pay-per-view movies purchased through our Front Row and VOD services are charged at the time of purchase with those charges appearing on the subscriber's next monthly bill. As with all of our customer relationships, those who do not pay for their services on a direct debit basis are charged a separate and additional fee.

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Analog Television Services

        We offer our customers more than 30 basic channels and nine premium channels as part of our stand-alone and combined analog television services offerings. Some of our analog channels operate throughout the day and others operate for only part of the day and share a channel position. As part of efforts to encourage digital migration in our areas where both digital and analog services are available, we intend to discontinue the availability of certain of our program content, and to offer digital television promotions to our analog television subscribers. When most of our existing customers have migrated from analog to digital services, we expect to phase out our analog services.

        All of our analog television subscribers are subject to a 12-month minimum subscription period and are billed monthly in advance for their chosen television package. Any premium channels purchased are billed in advance on a monthly basis.

Consumer Telephony

        We offer a wide range of high-quality telephony services to our residential customers. We enhance our basic consumer telephony service by offering additional services, such as call waiting, call barring (which prevents unauthorized outgoing calls), call diversion (call forwarding), three-way calling, advanced voicemail, caller line identification and fully itemized monthly billing. Our residential consumer telephony strategy is to leverage the capacity of our broadband network by migrating our telephony subscribers to our fixed-fee "Talk" services where subscribers generally generate higher revenues.

        All of our residential telephony subscribers are subject to a 12-month minimum subscription period and are billed monthly in advance for their line rental, which in the case of our "Talk" products includes charges for the unmetered portion of subscriber bills. Metered calls are charged when made with those charges appearing on the subscriber's next bill and "add-ons" such as call-waiting and caller line identification are billed monthly in advance.

        In addition to our basic consumer telephony service, we offer two unmetered "Talk" packages. Our unmetered services are intended to enable us to better leverage our network capabilities by encouraging telephony usage and increasing average telephony revenue per user, while providing the customer with increased value for money. "Talk Unlimited" is a fixed-fee residential telephony package with unlimited local and national calls, excluding calls to non-geographic, premium rate and mobile telephone numbers. "Talk Unlimited" is offered as a stand-alone product or combined with pay-television packages. As at December 31, 2004, we had approximately 375,000 standard "Talk Unlimited" subscribers accounting for approximately 22.6% of all of our consumer telephony subscribers.

        "Talk Evenings and Weekends" permits unlimited local and national evening and weekend calls to anywhere in the UK for a flat monthly rate (including line rental). As at December 31, 2004, we had approximately 204,000 "Talk Evenings and Weekends" subscribers. Total subscribers to our "Talk" packages at December 31, 2004, therefore, amounted to approximately 579,000, or approximately 35% of our total telephony subscribers at that date. In addition to our "Talk" packages, we also offer three "Talk" "add-on" products, "Talk International," "Talk Mobile" and "Talk Weekends," which offer reduced rate, or in the case of "Talk Weekends," free, calls on international, mobile and weekend calls, respectively, for a flat monthly fee. Throughout 2004, we also improved the value for money offered by our telephony services by offering free voicemail.

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Consumer Internet

High-speed Internet Service (Blueyonder Broadband)

        Blueyonder broadband internet, a high-speed consumer internet service launched in March 2000, is a growing and strategically significant part of our business. Using our national network and our interactive services platform, blueyonder broadband offers high-speed access to the internet. Customers access this service via cable modems linked to personal computers, via wired connections to modems in digital television set-top boxes or by a wireless connection and have unlimited and continuous access to internet content for a monthly subscription fee.

        Blueyonder broadband internet is also successful in attracting new customers to our services. For example, in the year ended December 31, 2004, approximately 40% of blueyonder broadband internet installations were new customer relationships.

        As at December 31, 2004, we had approximately 698,000 blueyonder broadband internet subscribers, approximately 71% of whom also subscribed to both our consumer telephony and consumer television services and 93% of whom subscribed to at least one of our consumer telephony or consumer television services. Following the introduction of free upgrades of our 512Kb and faster services in May and December 2004, effectively doubling the speeds of our 512Kb, 1Mb and 2Mb services, and the introduction of a lower-tier 256Kb service, we now have blueyonder broadband internet services at speeds of 256Kb, 1Mb, 2Mb and 4Mb. Our enhanced-speed services allow for the faster downloading of software, the sharing of large files and enhanced full-screen video and audio streaming. The 4Mb service is approximately 80 times faster than traditional dial-up internet services and two times faster than the fastest consumer services offered by AOL, Wanadoo and BT (each 2Mb). Our 256Kb service was launched early in 2004 to strengthen our current position in the broadband internet market by broadening the range of customers we attract. We currently intend to introduce a free upgrade of our 256Kb service to 512Kb during the second quarter of 2005.

        Blueyonder broadband internet service is now available to all of our subscribers, except those in certain parts of our Eurobell Southeast and Cabletime coverage areas which are yet to be upgraded. We have recently upgraded approximately 77,000 Cabletime homes in Birmingham and Chorley to receive broadband internet services. We currently deliver blueyonder broadband internet services to approximately 94.3% of our network.

        Our blueyonder broadband internet subscribers are subject to a 12-month minimum subscription period and are billed monthly in advance for their chosen service.

        Together with our dial-up internet services, described below, we had approximately 839,000 consumer internet subscribers as at December 31, 2004.

Dial-up Internet Services

        We also provide unmetered internet access for a flat fee under the brand name "SurfUnlimited." As at December 31, 2004, we provided consumer internet access to approximately 141,000 residential customers through our "SurfUnlimited" and pay-as-you-go internet services. "SurfUnlimited" introduces subscribers to a reliable fixed-fee unmetered service from which we generally try to migrate subscribers to our blueyonder broadband internet services.

        Our "SurfUnlimited" dial-up internet subscribers are billed monthly in advance and our pay-as-you-go dial-up internet subscribers are billed for actual usage in their next bill.

Sales and Marketing

        We market all of our residential services under the "Telewest Broadband" brand name. In the consumer sales division, our marketing strategy is designed to acquire higher-margin customers and increase average revenue per user while lowering selling costs. In furtherance of this strategy we target prospective customers using customer profiling tools and demographic data. In addition, we rely on integrated marketing campaigns, which combine radio, newspaper and poster advertising with telemarketing, direct mail and retail sales.

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Customer Care

        We believe that customer care is a key factor in all efforts to control churn and that our current levels of household churn (which generally compare favorably to the household churn levels of other cable companies in Europe and in the US) reflect our continuing strong focus on customer care.

        As at December 31, 2004, we employed approximately 1,600 full-time equivalent staff in various call center/customer care roles after consolidating twelve customer care centers into six main sites (shortly to be five) and two smaller satellite centers. These sites are connected virtually and the activity in these centers has been engineered around three key activities:

•

the diagnosis and handling of faults and technical issues across all three consumer services at our national technical center;



•

the handling of all customer relationship inquiries, including non-move related disconnect requests, at our customer enquiry center; and



•

the handling of all customer moves and all written and electronic customer contact at our national customer support function.

        Supporting this strategy are two outsourced contact centers which handle approximately 15% of customer care calls.

        In addition to the above we also have a dedicated national billing and collections center with approximately 230 full time equivalent employees.

Business Sales Division

Markets and Products

        Our business sales division, which operates under the "Telewest Business" brand, is focused on the delivery of business communications solutions through an effective combination of voice, data and managed solutions services. Our local network infrastructure and our national network allow us to offer a wide range of advanced communications services to businesses. Our main customers range from small to medium-sized enterprises ("SMEs") to targeted larger corporations and public sector organizations.

        In the business market, we particularly target multi-site organizations in the private and public sectors. These organizations have complex requirements for communications services and the core capabilities of our network enable us to provide an array of managed voice and data services, such as advanced telephony, private networks and virtual private networks, to meet those requirements. In particular, these organizations:

•

have an increasing demand for bandwidth;



•

account for a significant percentage of the total UK business telecommunications spending; and



•

make local buying decisions and need local technical support.

        Our business services range from simple voice and point-to-point private circuits to more specialized products including hybrid managed Centrex, our "IP Virtual Private Networks" and our emerging data products such as "Evolved Ethernet." These advanced products enable customers to integrate voice, data and video transmission over a single network.

        The market for business services, and in particular business voice services, remains intensely competitive and includes a large number of service providers. In 2004, voice revenues in the business marketplace were impacted by price cutting by our competitors, the substitution of data for voice (e.g. the use of e-mail instead of telephony) and increased competition from mobile operators. As a result, we believe that growth opportunities in the business marketplace are primarily in the areas of Special

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Rate Services and managed data. In 2004 we launched our "Evolved Ethernet" managed data product as part of efforts to capitalize on these growth opportunities.

        Our carrier services unit offers managed services to telecommunications operators and internet service providers, as well as the use of our fiber-optic national network for the handling of voice and data communications. This exploits our fixed network investment by providing additional revenues from the operations of other carriers. The carrier services unit also focuses on strategic partnerships with larger carriers, such as UK mobile telephone operators.

Sales and Marketing

        Telewest Business is positioned as a high-quality, price-competitive solutions provider and employs direct sales forces with specialist knowledge and experience within each of our target customer areas (i.e., SMEs, larger corporations, travel and public sector) and an understanding of the particular challenges and needs of each target area.

        In 2004, we re-organized the business sales division to reflect what we consider to be our two principal customer types in the business market, business customers which have "complex" business needs and require localized account management and those which have "standard" business needs and can be managed centrally. This re-organization has resulted in a streamlining of management in the business services division and a consolidation of back-office functions.

        We use professional business account managers to identify opportunities and requirements for our existing complex customer client base and for prospective new business customers. Once an opportunity is assessed and an appropriate business solution is identified, our account managers engage our specialist "Business Solutions Consultants" to design scaleable network solutions specific to our clients' requirements and matching the changing demands of our clients' business environment.

        Our standard accounts are managed centrally by our telesales team which focuses on up-sell and cross-sell activity to our existing SME account base. We also employ our own telemarketing team to provide follow-up calls to our marketing campaigns.

        Our business account managers and service managers contact each major customer regularly to ensure service satisfaction and to market additional services appropriate for that customer.

Customer Care

        Recognizing that most individual business accounts produce significantly more revenue than individual consumer accounts, a consistently high quality of service is central to the provision of services by Telewest Business from initial consultancy and advice to sales support and aftercare. Business customers require specialized customer care which is provided through two dedicated call centers that provide specialized fault-handling and resolution services.

Content Segment

        Our content segment is operated through a wholly owned subsidiary named Flextech. Flextech is primarily engaged in the supply of basic television channels and related services to the UK pay-television broadcasting market.

        Flextech, together with the companies that comprise UKTV, our joint ventures with BBC Worldwide, is the largest supplier of basic (i.e., non-premium) thematic channels to the UK pay-television broadcasting market, supplying approximately 19.7% of the UK's basic viewing in multi-channel television homes in the year ended December 31, 2004, based on data supplied by Broadcaster's Audience Research Board Limited. Flextech has four wholly owned pay channels: Living TV, Bravo, Trouble and Challenge TV, three of which—Living TV, Bravo and Trouble—also have

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multiplexed versions. Flextech is also BBC Worldwide's 50% partner in UKTV. UKTV currently has eight pay channels and five associated multiplexed channels. Multiplexed channels generally air programming one hour later than that otherwise available on the channel from which they are derived (e.g., Living TV + 1 is derived from Living TV). Flextech also owns approximately 30% of Sit-Up Limited, which has two auction-style shopping channels and an informercial channel.

        Depending upon the distribution agreement with the platform operator and the package chosen by the customer, our wholly owned and UKTV channels are available on our own analog and digital platforms, BSkyB's digital platform and ntl's analog and digital platforms. These channels generate revenue based on the number of customers subscribing to programming packages carried by the relevant platform operators. Further revenues are generated by the sale of airtime and sponsorship to advertisers and advertising agencies by Flextech's advertising sales department, IDS. Flextech and UKTV are also represented on Freeview, with UKTV History, UKTV Bright Ideas and Ftn, available to Freeview viewers as well as subscribers to all multi-channel platforms. Ftn and UKTV Bright Ideas are separate channels with distinct offerings that operate within one of the twenty-four hour general entertainment slots available on Freeview. UKTV History, UKTV Bright Ideas and Ftn are solely reliant on advertising revenues.

        Flextech intends to become a significant force in multi-channel television by leveraging its UKTV relationship with the BBC and by targeting niche markets with its wholly owned channels and UKTV channels.

Sources of Supply

Television Programming

        Our focus is on careful management of programming costs while offering subscribers excellent content at competitive prices.

        We obtain our programming content through Flextech, UKTV and other programming suppliers, such as BSkyB. Our contracts with programming suppliers generally run from twelve months to four years. In general, we pay for our basic programming based on the number of customers subscribing to a particular channel. Some of our programming contracts also provide volume discounts that reduce per-subscriber charges as the number of customers subscribing to a channel increases.

        We obtain a significant amount of our premium programming and some of our basic programming under various arrangements with BSkyB, the exclusive supplier of most significant premium programming in the UK. BSkyB's general entertainment, premium sports and movie programming is generally popular in the UK and is important in terms of attracting and retaining consumer television customers. We currently purchase premium programming from BSkyB pursuant to an industry rate card. The industry rate card sets out the pricing for the supply of programming by BSkyB to UK cable operators that do not have separate agreements with BSkyB.

        Our other significant suppliers include Viacom, Discovery and Turner (Time Warner).

        We acquire movie content for our recently launched VOD service from FilmFlex, a joint venture between Sony Pictures Television International, Walt Disney Television International and the On Demand Group. In addition, we are in discussions with key suppliers including the BBC for additional television content to be made available on a VOD basis.

Services, Equipment and Software

        We obtain services, equipment and software for the construction and operation of our cable systems from numerous independent suppliers. We believe that we can purchase most of the services, equipment and software we need to operate our business from more than one source. However, we

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obtain some of the equipment and software used in providing our services, in particular software with regard to our cable television set-top boxes, from a single source. If we are forced to use alternative software or if the supplier of a product that involves significant lead-time for production and delivery were unwilling or unable to supply it, we could suffer disruptions in the operation of our business, which could have an adverse effect on our results. We own almost all of the cable network equipment utilized on our network other than our digital telephony switches, which are leased under capital leases from, among others, Export Development Canada and subsidiaries of The Royal Bank of Scotland plc.

Our Networks

        Our networks, which consist of approximately 65,000 kilometers (41,000 miles) of fiber and coaxial cable, as well as high-capacity electronics equipment, are comprised of three parts:

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local distribution networks located in each area in which we operate;



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a national network, which links all of our local distribution networks; and



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a broadband IP services platform, which overlays the national network and provides the backbone for our interactive digital and high-speed internet services.

Local Distribution Networks

        Our local distribution networks are vital to the provision of our broadband and cable telephony services.

Broadband

        We provide broadband services using hybrid fiber-coaxial network architecture. Analog television signals are received either from satellite or terrestrial antennas, and digital television signals are received from our national digital headend. Both are then transmitted via the local distribution networks. Our networks use multiple fiber-optic cables to transmit signals from the regional headends to fiber nodes dedicated to small clusters of about 500 homes, at which point we use high-bandwidth coaxial cable to distribute the signals to individual residential subscribers. Our network has a high bandwidth (typically 750MHz) and is capable of two-way, high-speed data transfer.

        In the UK, cable operators generally have been required to install cable underground. Our network architecture is particularly suited to this environment because it essentially allows future service upgrades to be implemented (within current bandwidth constraints) primarily at the headend and/or customer premises, without the need for extensive, expensive and time-consuming upgrading of the underground network. For example, our digital television and high-speed internet services were introduced primarily through changes to headend and customer premises equipment, rather than changes to the underground network.

Cable Telephony

        We provide telephony services using an "overlay" distribution network, which shares the same physical underground infrastructure as the broadband hybrid fiber-coaxial network and is connected to digital switches that have been installed in each of the areas in which we operate. The switches enable us to complete, within our own networks, local calls between our customers. They also provide us with flexibility in selecting interconnection carriers for calls that terminate outside our networks. The digital switches also enable us to gather information about customer calling patterns, which can be used to structure customized call pricing plans and discount programs, and to monitor fraud by identifying unusual or excessive call activity at an early stage. As well as offering basic telephony services, the switches support enhanced calling features and complex services for businesses, including Centrex and Integrated Services Digital Network ("ISDN") services.

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        Digital telephony signals typically are transmitted using plesiochronous digital hierarchy ("PDH") or synchronous digital hierarchy ("SDH") over fiber-optic cable to a 500-home node, at which point the signal is converted to a conventional telephony signal and distributed to customers over twisted copper pairs. In addition, direct fiber connections can be made to businesses to deliver a wide range of higher-capacity data services.

        Throughout most of the areas in which we operate, both the hybrid fiber-coaxial and overlay networks have been built to enable delivery of both broadband and telephony services to customers.

        Our overlay distribution network also enables us to provide businesses with a variety of data services ranging from private circuits to managed-fiber networks.

Our National Network

        Our national network links all of our areas of operation and consists of approximately 6,700 kilometers (4,200 miles) of high-capacity, multi-fiber-optic cable, as well as fully resilient state-of-the-art SDH which allows for the efficient delivery of data across fiber-optic networks.

        We use our national network in a number of ways. Each of our telephony switches is linked through the network, allowing a greater proportion of calls to remain solely within our network, thereby saving on interconnection costs. The network is also used to distribute all of our digital and analog television channels from our national headend in Knowsley to each of our areas of operation.

        In common with all other UK telecommunications operators, some of the fiber-optic cable used in our national network is owned by other licensed operators and is leased to us on an "indefeasible rights of use" basis. These indefeasible rights of use typically have unexpired terms of 20 years before we are able to acquire ownership of the fiber or duct outright, although in some cases the rights are granted in perpetuity.

IP Network

        Our national network includes a national Internet Protocol, or IP, network. The IP network consists of 64 high-capacity IP routers located in our existing facilities. This network provides the backbone for our interactive digital television services as well as our high-speed internet services. The network is also used to deliver a range of IP virtual private network based data services to business customers.

        The broadband IP services platform has been deployed in parallel with our digital television and high-speed internet services. This platform consists of a range of application servers, application software and customer premises equipment such as our digital set-top boxes and cable modems.

Intellectual Property

        We do not own any material copyrights, patents or trademarks, other than the Telewest Broadband and Blueyonder brand names, certain television channel brand names and certain programming content. We do not believe that the ownership of copyrights, patents or trademarks, other than the Telewest Broadband and Blueyonder brand names and these television channel brand names, is material to our business. We rely on a number of third-party copyrights, patents and trademarks for applications relating to billing, customer management and the delivery of services over our networks, including new services such as VOD and DVR. The loss of certain third-party intellectual property could have a material adverse impact on our business.

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Research and Development

        Our research and development is focused on evaluating changes in technology that could affect our television, telephony and internet services. Our research and development expenditures, however, do not represent a material cost.

Employees

        The weighted-average number of our employees during the financial years ended December 31, 2004, 2003 and 2002 was 8,613, 9,111, and 9,926, respectively. The weighted-average number of persons employed during a year is calculated by averaging the number of persons employed at the end of each of the twelve months within that year.

        Approximately 1,200 field operations staff are covered by a collective bargaining agreement with the Communication Workers Union, or CWU, which is terminable by either CWU or ourselves with three months' written notice. Except for this arrangement, none of our employees is covered by collective bargaining agreements. We believe that our relationship with the CWU and our employees is good.

Seasonality

        Although there is limited seasonal fluctuation in the overall demand for our services, some services are subject to seasonal fluctuation. We generally experience some increased consumer subscriptions in the fourth quarter, due to students returning from vacation and the Christmas season. Similarly, telephone usage generally decreases during the summer due to the summer vacations and as a result of customer home moves.

Competition

Cable Segment

        Our cable television, telephony and broadband internet products and services compete with those of a wide range of companies that use a variety of sophisticated and rapidly changing technologies. We face strong competition in all of the markets in which we operate.

Consumer Sales Division

        In 2004, BT significantly reduced the prices it charges third parties that install digital subscriber line ("DSL") infrastructure in its local exchanges. As a result of this "local loop unbundling," third parties are able to deliver voice, data, and video services over BT's network and this will increase competition across all of our consumer product groups. The scale of the price cuts means that wholesale local loop unbundling costs in the UK now compare favorably with many other European markets. As a result of this change, it is expected that there will be an increase in the number of operators supplying voice, data, and video services in the areas in which we operate. Some of these operators are likely to offer bundled service offerings, including the "triple play" of television, telephony and broadband internet services using DSL technology.

Consumer Television

        Traditionally, as a television distribution platform, we compete directly with analog terrestrial television services, digital satellite services (notably BSkyB) and digital terrestrial television ("DTT") services (most recently, Freeview). BT's reduction in local loop unbundling charges, however, will encourage new competitors to provide video services through telephone lines which will result in increased competition for our television services (see "—New Technologies" below).

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        Our television programming, particularly our movie pay-per-view programming, also competes with other forms of purchased and rented home entertainment, including video and DVD.

Analog Terrestrial Television Services

        There are five main terrestrial channels that provide analog television services in the UK. BBC1 and BBC2 are owned by the public service broadcaster, the BBC, and funded by a compulsory household license fee. The other three channels (ITV, Channel 4 and Five) are all commercial channels, although Channel 4 is owned by the UK Government.

        Although the five analog terrestrial television channels in the UK are generally perceived as providing high-quality programming across a range of genres, many analog television consumers have shown a desire for the increased range of channels available from digital satellite, digital cable and digital terrestrial services (together the "multi-channel" market). This trend has been partially fuelled by a migration of sports rights from analog terrestrial to digital services.

        The UK Government has indicated that it intends to turn off analog terrestrial television. Although a specific schedule for termination has not been announced, analog termination is expected to commence on a regional basis beginning in 2008 with completion on a nationwide basis in about 2012.

Digital Television Services

        Competition in the digital television market is dominated by three platforms; satellite, cable and terrestrial, or DTT. The market has shown strong growth since the launch of these platforms (all originally launched as analog services) in the late 1990s. In aggregate, digital television penetration now exceeds 50% of UK households.

        Digital Satellite Services

        BSkyB is the sole consumer satellite platform in the UK and is our principal competitor in the UK multi-channel television market. BSkyB is also a content distributor and one of our most important sources of programming including the dominant sports channels, movie channels and many general entertainment channels. As at December 31, 2004, BSkyB stated that it had approximately 7.3 million digital television subscribers in the UK.

        BSkyB subscribers can also purchase a personal video recorder ("PVR") that allows television viewers to record programming from an electronic program guide. BSkyB's standard PVR is capable of storing approximately 20 hours of programming. BSkyB has also announced the introduction of a PVR with a hard-drive capable of storing up to approximately 80 hours of programming.

        We expect BSkyB to increase the marketing behind its near video-on-demand service ("Sky Box Office") with which our VOD service will compete.

        In October 2004, BSkyB introduced a free-to-air satellite service as a response to Freeview's free-to-air terrestrial service. The service includes a large number of free television channels, including the five terrestrial channels and allows users to purchase BSkyB's near video-on-demand and interactive services at the same rates as its subscription customers.

        The size of BSkyB's customer base gives it advantages in the purchase of programming from third parties, notably sports and movie rights. As a result of UK regulatory requirements relating to market dominance and its share of the UK pay-television market, BSkyB is obliged to offer some of its key channels to other multi-channel platforms, including us.

        We currently have no contractual agreement with BSkyB for the provision of its wholesale premium content and continue to buy that content on the basis of an industry ratecard.

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        Digital Terrestrial Television

        Freeview, a free-to-air digital television service, was launched in October 2002 by a consortium including the BBC, BSkyB and Crown Castle. Freeview is generally available to consumers who have an enabled set-top box (currently available from less than £40) or a television with a digital tuner and offers approximately 30 digital television channels and a number of radio channels. In November 2004, the Independent Television Commission estimated that Freeview had reached approximately 3.9 million homes, although many households use Freeview to supplement pay-television services (e.g. for use on a second television).

        On March 31, 2004, several former BSkyB executives launched "Top Up TV," a pay-television "add-on" to the free-to-air channels offered by Freeview. Top Up TV currently provides its subscribers with 10 channels, including Discovery, E4, UK Gold and Bloomberg, for a fee of £7.99 per month plus installation.

New Technologies

        There are a number of new and emerging technologies which can be used to provide video services that are likely to compete with our digital cable television services. These include DSL services and third generation, or 3G, mobile telephony.

        DSL

        There is now a range of service providers (such as internet service providers ("ISPs") which purchase DSL bandwidth on BT's local loop on a wholesale basis and/or use unbundled BT local loop network to provide broadband services to retail customers. These services include the provision of television and VOD services.

        3G

        Five mobile telephone networks have been awarded third generation, or 3G, licenses in the UK. Of these, "3," operated by Hutchinson 3G Limited, Orange, MMO2 and Vodafone have commercially launched their broadband/3G services. The content most suited to 3G networks is short form material, such as news clips or music videos. Although the provision of video services over 3G handsets is still limited in nature, it is likely to increase competition as the 3G operators expand their services.

Consumer Telephony

        Competition in the residential telephony market is intense and is likely to increase, principally as a result of price competition, the continued growth of mobile telephony as a substitute for fixed-line telephony, the introduction of carrier pre-selection and wholesale line rental, and number portability. There is also the relatively new threat posed from voice-over-internet-protocol ("VoIP") services, which is starting to emerge in the UK.

BT

        BT, our principal competitor in the residential telephony market, has an established market presence, a fully built network and resources substantially greater than ours. By its own estimates, BT provided approximately 65% of all UK fixed voice minutes as of September 30, 2004. Our ability to convince consumers to choose our services over those of BT will largely determine our success in the residential telephony market.

        We believe that price is an important factor influencing UK customers to choose a telephony provider. BT has continued to modify its telephony rate structure by increasing line rental charges, decreasing the costs of its calls and generally moving towards fixed-price, bundled tariffs. Although we

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intend to remain competitive, changes in BT's price structure may adversely affect our financial condition and results of operations.

Mobile

        The UK has a well developed mobile telephony market with five established mobile operators, each of which has a fully developed network. In addition, four of the five main mobile operators have recently rolled out 3G services. As a result, competition from mobile operators is increasing, principally due to fixed to mobile substitution, the complete substitution of a mobile telephone for a fixed-line telephone by consumers, and call substitution, the use of a mobile telephone instead of a fixed-line by consumers with both types of telephones.

        Competition from these operators could increase further, particularly if their call charges are reduced or their service offerings are expanded or improved. The continued expansion of 3G services by the five main network operators in 2005 will increase competition as 3G services enhance the attractiveness of mobile telephony generally with services such as video calling/messaging and video downloads. If we are unable to compete successfully with mobile telephone operators on price, quality of service and telephone features, competition resulting from fixed to mobile substitution and call substitution is likely to increase.

        See "Regulatory Matters—UK Telecommunications Regulation—Calls to Mobiles" for a discussion of the UK Office of Communications', or Ofcom's, conclusion that four of the UK's mobile networks have been required to reduce the call termination rates that they charge us and other telephony operators.

Wholesale Line Rental and Carrier Pre-Select

        As a result of regulatory obligations imposed by Ofcom, BT Wholesale is obliged to provide third-party telephony operators with wholesale line rental, which enables those operators to offer both line rental and calls to end-users over BT's local network. BT is also required to offer carrier pre-select to third-party telephony operators, which means that a consumers' choice of telephony operator is programmed in the local BT exchange.

        In 2004, competition from third parties offering telephony services via carrier pre-select intensified and there were a number of new entrants in the market. There are currently over 10 major carrier pre-select resellers in the UK, including those of well known companies such as Tesco (a major UK supermarket), One-Tel (a specialist telephony reseller) and "Talk Talk," a fixed-line service offered by The Carphone Warehouse. Some of these companies also resell broadband services using the BT Wholesale network (e.g. One-Tel and "Talk Talk").

        The introduction of wholesale line rental bundled with carrier pre-select services may intensify the extent of competition faced by us from telephony service providers using BT's network.

Voice over Internet Protocol Providers

        There is also emerging competition from companies offering VoIP services. These include services offered by independent providers, such as Vonage and Skype, as well as those affiliated with established competitors such as BT's "Communicator." It is also expected that during 2005, ISPs will be able to use local loop unbundling to deliver consumer VoIP services via DSL.

Consumer Internet

        Blueyonder broadband, "SurfUnlimited," our unmetered dial-up internet product, and our blueyonder pay-as-you-go dial-up internet product all compete in a rapidly evolving marketplace and with products and services provided by companies in the telecommunications, information, media, entertainment and advertising fields. These products compete for usage, subscribers, advertising and e-commerce with a variety of companies offering dial-up and high-speed internet services.

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        In 2004, competition in the internet market increased with the introduction of entry-level broadband internet services priced at below £20 per month, reflecting significant changes in BT's wholesale tariff structure, the introduction of monthly usage limits by many competitors, which allowed for product differentiation and increased competition in the entry-level end of the broadband internet market, and the increase in the speed of existing services.

        According to Ofcom, the total number of broadband internet subscribers in the UK stood at 4.4 million in June 2004, of which approximately 60% were comprised of DSL services provided to our competitors by BT Wholesale.

Wholesale DSL Services

        BT Wholesale is the principal supplier of wholesale DSL services to other retail operators offering broadband internet services to consumers in the UK.

        In 2004, BT Wholesale made significant changes to the tariff structure for its wholesale DSL products. These changes lowered the minimum level of monthly rental charges per customer payable by ISPs which led to the introduction of entry-level retail broadband internet services by a number of major ISPs priced at below £20 per month. Following BT Wholesale's trial launch of a 1Mb service in the fourth quarter of 2003, a number of our competitors launched 1Mb services in early 2004. BT Wholesale also commenced trials of a 2Mb service in the fourth quarter of 2004 and subsequently announced that this service would be available with effect from February 17, 2005.

Consumer Internet Services

        There are over 50 retail ISPs in the UK, but our principal competition comes from DSL resellers AOL, Wanadoo, Tiscali and BT (which has two retail ISPs, "BT Broadband" and "BT Yahoo!"). These same companies also provide our most significant competition in respect of dial-up internet services. During 2004, we experienced an increase in competition based on increased speeds offered and bandwidth usage capping (which limits the amount of material that a consumer can download at a particular price point) in addition to pricing, as broadband internet consumers continued to develop in sophistication and broadband internet service providers attempted to differentiate their products.

        For example, BT Broadband and BT Yahoo! both introduced usage caps and reduced pricing several times during 2004. In addition, on February 10, 2005, BT announced that it was increasing the speeds of BT Broadband's broadband internet services "up to" 2Mb and BT Yahoo!'s broadband internet services to 2Mb.

New Technologies

        The emergence of new technologies, such as Wi-Fi (a wireless networking standard for transmitting high-speed video and multimedia information), WiMax (a new wireless broadband service) and Broadband Power Line ("BPL", which utilizes existing electricity networks to deliver broadband internet services) which can be used to deliver high-speed internet access are also likely to increase competition for our blueyonder broadband internet services.

Business Sales Division

        The market for business services, and in particular voice services, remains intensely competitive in the UK. The nature of the competition varies depending on the nature of the business sector, product/service offerings and geography.

        Our principal competitor is BT, which has both an extensive local access and national backbone network and is a major competitor in almost all of the areas in which we compete for business services.

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        We compete for voice services with BT, other fixed-line network operators, mobile operators and resellers. Increasingly these operators are also competing with us for the provision of broadband internet services to the business market. Competition in this crowded market is likely to increase, as operators continue to compete on price and as service offerings, notably those which can be delivered via DSL (e.g. VoIP), are expanded.

        We also face significant competition in the provision of complex communications services to larger SMEs, corporate and public sector accounts. Principal amongst these competitors are BT, Cable and Wireless, Energis and COLT.

        We generally compete based on price and quality of service. We expect price competition to intensify as existing and 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 compete successfully with them.

Content Segment

        Flextech, our wholly owned content subsidiary, supplies basic television programming to the UK multi-channel television market and generates revenues largely on subscription and advertising revenues from that television programming.

        Flextech's television programming competes with other broadcasters and may lose audience share, as a result of which its contracts with platform owners (which currently cover all UK digital and analog platforms) may not be renewed or may be renewed on less favorable subscription terms, and its advertising revenues may, as a result, decrease. Economic and market factors may also adversely influence subscription and advertising revenues apart from individual channel performance.

        Flextech competes for program rights with broadcasters transmitting similar channels to those owned by Flextech and those in which it has an interest by virtue of the companies comprising UKTV, Flextech's joint ventures with BBC Worldwide. As a result of this competition for a limited number of well-known program rights, it is possible that the price of these program rights could substantially increase, thereby limiting Flextech's ability to purchase that programming for transmission on its channels and those of UKTV, or adversely affecting the profitability of its channels.

        On February 2, 2004, Carlton Communications and Granada plc, two of the UK's leading producers and distributors of television programs and films completed their merger and ITV plc was created. The merger of Carlton and Granada is intended, in part, to increase the merged company's share of the UK television advertising market as cost synergies allow for greater investment in programming and ultimately higher viewing shares. ITV plc may also use "air-time bundling" contracts and pricing practices to increase advertising revenues that may adversely affect the business, results of operations and financial condition of Flextech and UKTV.

Regulatory Matters

Overview

        Our principal business activities are regulated and supervised by various governmental bodies in the UK and by the regulatory initiatives of the European Commission. The principal regulators of the UK cable television and telephony industry are Ofcom, the Office of Fair Trading, the Department of Trade and Industry, and the Department of Culture, Media and Sport.

        The Communications Act 2003 was enacted on June 17, 2003 and entered into force on December 29, 2003. This legislation has transferred to Ofcom the regulatory functions of the Director General of Telecommunications, the Office of Telecommunications, the Independent Television

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Commission, the Broadcasting Standards Commission, the Radio Authority and the Radiocommunications Agency (an executive agency of the Department of Trade and Industry).

UK Regulatory Authorities

Ofcom

        Ofcom licenses and regulates the provision of commercial television broadcasting under the Broadcasting Acts of 1990 and 1996. Its functions are, among other things, to grant licenses for television broadcasting activities (including cable television licenses) and to regulate the commercial television sector by issuing codes on programming, advertising and sponsorship, monitoring programming content and enforcing compliance with the Broadcasting Acts and license conditions. Ofcom has the power to vary licenses, impose fines and revoke licenses in the event of a breach of license conditions. It also enforces ownership restrictions on those who hold or may hold an interest in licenses issued under the Broadcasting Act 1990, and is overseeing the introduction of digital television in the UK.

        Ofcom's functions also include the issuance of market review statements and notifications pursuant to the new Electronic Communications EU Directives (see below Item 1—"Business—Regulatory Matters—European Directives and Ofcom Consultations,") and the Communications Act 2003, imposing regulatory conditions on specific providers, and the monitoring and extension of those conditions as necessary, advising the Secretary of State for Trade and Industry on telecommunications issues, investigating complaints and exercising concurrent jurisdiction with the Office of Fair Trading under the Competition Act 1998 in respect of telecommunications markets. In exercising its functions, Ofcom has duties to promote the interests of consumers and to maintain and promote effective competition. Ofcom is also required to advise the Secretary of State as to the media public interest considerations in merger cases where the Secretary of State has issued a public interest intervention notice. Any such media public interest issues identified by Ofcom can then be referred by the Secretary of State to the Competition Commission for detailed investigation before the Secretary of State decides to either permit or block the merger on public interest grounds.

The Office of Fair Trading

        Under the Competition Act 1998, Ofcom and the Office of Fair Trading share concurrent responsibility for enforcing UK competition law in the telecommunications sector in respect of anti-competitive agreements and abuses of a dominant market position. Ofcom and the Office of Fair Trading have issued a joint guideline ("The Application of the Competition Act in the Telecommunications Sector") explaining how this concurrent jurisdiction is exercised. That guideline explains how the Competition Act 1998 is enforced in the telecommunications sector, and the relationship between the Competition Act 1998 and the Telecommunications Act.

        The Enterprise Act 2002, which entered into force in 2003, established the Office of Fair Trading as a corporate body headed by a chairman, replacing the previous office of the Director General of Fair Trading.

The Department of Trade and Industry

        Under the Communications Act 2003, the Secretary of State for Trade and Industry is primarily responsible for overseeing telecommunications policy, such as implementing EU Directives, after consultation with Ofcom. In practice, however, it is the Department of Trade and Industry, as the relevant government department, which fulfills these functions.

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Department of Culture, Media and Sport

        The Department of Culture, Media and Sport is responsible for, among other things, determining the principles of broadcasting and media ownership policy.

Cable Television Regulation

Broadcast Licenses

        We hold Television Licensable Content Service ("TLCS") licenses that enable us to produce local programming, including local advertisements.

        The television channels provided by Flextech are regulated under the Communications Act 2003. Flextech provides all of its television channels by telecommunications satellite and by licensable telecommunications networks. Each television channel provided by satellite has its own TLCS license granted by Ofcom. These television licenses are granted on demand, subject to certain restrictions set out in the Communications Act 2003. There are no positive program obligations in terms of quality or diversity, but it is a condition of each license that the licensed service conforms to the consumer protection requirements and provisions of the Ofcom codes on programming, advertising, sponsorship and advertising breaks.

        Ofcom has the power to vary the terms of TLCS licenses but only after the licensee has been given a reasonable opportunity of making representations about any proposed variation and, where the proposal is to vary the license period, only where the licensee has consented to that variation.

        Holders of TLCS licenses are required to pay an annual license fee. The fees of the TLCS licenses are related to the scale, scope and revenue-earning capacity of each television service and are based upon revenues from advertising, sponsorship and subscriptions. The tariffs for these licenses have yet to be agreed with Ofcom, and may exceed previous license fee tariffs. Communications, network and services administrative charges are payable by all operators such as us with a relevant revenue greater than £5 million. Administrative charges are calculated by applying tariffs to the relevant revenue. These charges are recalculated each year by Ofcom.

Revocation of Television Licensable Content Service Licenses

        Ofcom is empowered to revoke TLCS licenses where the licensee fails to comply with its conditions or a direction from Ofcom, in some circumstances on a change of control of a licensee, and to enforce ownership restrictions in the applicable broadcasting law.

        TLCS licenses are transferable only with the prior written consent of Ofcom.

Ownership Restrictions

        The Communications Act 2003, as amended, also contains specific restrictions on the types of entities that may hold TLCS licenses or interests therein or control the holders of those licenses. That legislation has, however, removed foreign ownership restrictions in the UK media market.

Price Regulation of Cable Television

        Cable television pricing in the UK is not subject to retail pricing restrictions, including price limitations, rate of return assumptions or similar mechanisms of the kind imposed under US cable regulations. Ofcom does not impose retail price regulation on UK cable operators. However, all pay-television services are subject to a "fair and effective competition" condition found in each license issued by Ofcom and the application of general competition law and, at the wholesale and retail levels, examination by the Office of Fair Trading.

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Regulation of Digital Broadcasting

        As well as establishing the Independent Television Commission's role (now transferred to Ofcom) in licensing and regulating commercial broadcast television services, the Broadcasting Act 1996 introduced provisions for the licensing of digital terrestrial broadcasting (currently provided by Freeview (see above Item 1—"Business—Competition—Consumer Television—Digital Television Services")).

Inter-operability

        We currently comply with mandatory Ofcom and EU standards for digital television transmission, but we cannot assure you that future EU Directives or Ofcom requirements on uniform standards will not adversely affect our digital television systems.

        In December 2001, the European Parliament and the European Council adopted a new Framework Directive, which included an obligation on the Member States, including the UK, to encourage the use of standards and/or specifications identified by the European Commission needed to encourage the harmonized provision of electronic communications networks and services and associated facilities. The scope of the obligation may extend to inter-operability within the digital television services market, including the area of open standards and applications programming interfaces, and, in particular, digital video broadcasting on a multi-media highway platform which relates to the applications programming interfaces used in digital television apparatus and infrastructure supporting the same. The European Commission has already stated that digital video broadcasting on a multi-media highway platform will be included in the list of standards to be published under the Framework Directive. While our digital apparatus and network are not currently compliant with the digital video broadcasting on a multi-media highway platform standard, compliance with those standards is not currently compulsory at either the UK or EU level. However, the European Commission has the right under the Framework Directive to make the list of standards compulsory where it has not been adequately implemented and the list of standards is necessary to ensure inter-operability and freedom of choice for users. The European Commission reviewed this position during 2004 and decided against an amendment to the same. We anticipate that the European Commission will continually review this area with a view to considering whether any standards in this area should become mandatory.

UK Switch-Over to Digital Terrestrial Transmission

        In February 2005, Ofcom issued a proposed schedule on the regional switch-off of analog terrestrial free-to-air television. In addition, the UK Government has initiated the creation of a project management entity to handle such switch-over. We expect both initiatives to affect our business in terms of potential take-up of digital TV services. We anticipate playing a full industry role in preparation for the regional switch-off of analog free-to-air television.

UK Telecommunications Regulation

General Authorizations

        All existing Telecommunications Act licenses were revoked on July 25, 2003 in accordance with the EU Communications Directive. Licenses granted pursuant to the Telecommunications Act were replaced as of that date by a general authorization regime that requires advance notification, the payment of an administration charge and adherence to certain general and specific conditions that replace the obligations in the previous licenses. Under this regime any company can, in principle, operate or provide communications services.

        Under the general authorizations regime, we are subject to various conditions and regulations including the provision of emergency services (the UK equivalent of 911 services in the US). The conditions also contain a number of detailed provisions relating to the technical aspects of our system

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(for example, numbering, metering and the use of technical interfaces) and the manner in which we conduct our business. We are also subject to the Competition Act 1998 and various terms reflecting the provisions of the European Directive on Access to and Interconnection of Electronic Communications Networks and Services (described below). We are also required to comply with certain codes of practice and to provide information that Ofcom may require to carry out its statutory functions. Furthermore, we have an obligation to provide number portability.

        The fees payable to Ofcom are charged annually and are calculated on a proportion of Ofcom's costs in exercising its duties under the Communications Act 2003. Telecommunications operators such as us must now pay annual fees based on total revenue. If Ofcom's costs are estimated to be greater than all the fees collected, an extra fee may be levied on all operators. Electronic Communications Code administrative charges are payable as a one-off charge. All the above tariffs are subject to current consultation by Ofcom.

Service Obligations

        A cable operator has no obligation under its various authorizations to provide voice telephony services. Obligations concerning interconnection and price publication may be triggered at any point for the former and for the latter if it is deemed to have "significant market power" and/or is deemed to have "dominance." We have not received any directions from Ofcom stating that we are considered to have significant market power or dominance, except in the area of wholesale call termination. We, like all operators in the UK, have been determined to have significant market power in wholesale call termination. The effect of this is that we have to offer wholesale call termination rates that are reciprocal to BT's, as defined by Ofcom.

Installation and Maintenance Obligations

        The general authorizations that we operate under provide various rights and obligations with respect to installing and maintaining equipment such as ducts, cables and cabinets on public or private land, including the installation of equipment on public highways. Cable operators also have the benefit of the New Roads and Street Works Act 1991, which provides them with the same rights and responsibilities with respect to construction on public highways as other public utilities. The UK Government is implementing changes to the legislation that surrounds street works activities and equipment. Those changes may have an adverse effect on us.

Business Rates

        In January 2005, the European Commission initiated an investigation into the business rates paid by BT and Kingston Communications. The UK Government had, in parallel, also instigated a review. The business rates that we pay to the UK Government may be adversely affected by the investigation and/or review.

Strategic Review of the UK Telecommunications Market

        In April 2004, Ofcom launched its initial consultation on the Strategic Telecommunications Review. The three main areas of focus within the paper are: (1) where can regulation be withdrawn, if appropriate, (2) under what regulatory conditions should broadband services and network be developed and continually rolled out, and (3) should there be a structural separation of BT. Ofcom requested the industry respond in June 2004. Ofcom launched a second stage (Phase II) of consultation in November 2004. While supportive of the need to ensure continued investment in network, Ofcom has proposed a change in regulation in those geographic areas where there is competition. This may mean an increase in the regulation applicable to us dependent on the final Ofcom decision.

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        In addition, Ofcom has proposed that unless BT accepts the principle of "equivalence" in relation to its treatment of third-party users of its wholesale products then it may use an Enterprise Act investigation into BT as a means of pursuing a structural separation of the same. Such a development may have an adverse impact on us.

Re-valuation of BT Copper Loop

        In association with the Phase II stage of the Strategic Telecommunications Review, Ofcom has also launched (in December 2004) a review on the financial re-valuation of the BT copper loop. Ofcom is proposing to reduce the regulatory and accounting value of the BT copper loop via a change in the accounting methodology used to value the same. The implementation of any such proposal could have an adverse affect on us.

Review of the BT Weighted Average Cost of Capital

        Also, in relation to the re-valuation of the BT copper loop and the Phase II stage of the Strategic Telecommunications Review, in January 2005, Ofcom launched a consultation on a review of the BT weighted average cost of capital ("WACC"). The Ofcom proposal is to de-aggregate BT's WACC, with a review to reducing the WACC as applied to the BT access business. Any such implementation of this proposal could have an adverse affect on our business.

Wholesale Broadband Regulation

        In May 2004, BT announced significant reductions in its wholesale unbundled local loop ("LLU") charges. In parallel, during 2004, Ofcom and BT announced significant reductions to LLU charges.

        In addition, Ofcom is reviewing a claim of margin squeeze made against BT in the provision of its wholesale broadband service. In September 2004, Ofcom submitted a case to BT claiming margin squeeze via the wholesaling of BT broadband services. In general terms, BT has to comply with a retail -x% price cap on specific wholesale broadband products.

        Ofcom has indicated its intention that in 2005, it will initiate a market review of the wholesale broadband market. We currently have no obligation to provide wholesale broadband access. There can be no guarantee that this position will be maintained, particularly if Ofcom completes such a market review. Dependent on the independent and/or combined market share of UK cable companies, Ofcom may impose a wholesale broadband supply obligation on us.

        All of the above changes to the regulation of broadband and us in particular could have an adverse affect.

Universal Service Obligation

        In January 2005, Ofcom initiated a review of BT's universal service obligations and costs. Any change by Ofcom to the treatment of universal service in the UK could have an adverse affect on the Company.

Public Service Broadcasting Review

        Ofcom has conducted a 12-month review of public service broadcasting ("PSB"). This included a detailed analysis of all the UK public service broadcasters (the BBC, ITV1, Channel 4, Five and S4C) and all related television services taken together.

        In November 2004, Ofcom published its Phase II stage of the PSB review. This proposed a reduction in the public service obligations of the current public service broadcasters and the creation of a Public Service Publisher ("PSP"). It is unclear how a PSP would be funded.

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        In February 2005, Ofcom published its Phase III stage. Key proposals included a reduction in some of the public service obligations relevant to ITV, with an acknowledgement that digital switchover will reduce the viability of such obligations on a gradual basis. Ofcom also proposed that it should be responsible for the competition-based regulation of the BBC's activities. Finally, in order to remedy what it believes will be a deficit in public service broadcasting at the point that ITV relinquishes all such public service obligations, Ofcom proposes the concept of a UK Government funded PSP. These proposals are tentative and provisional. Any actual decision to adopt these proposals would be made by the UK Government.

Calls to Mobiles

        In June 2004, Ofcom concluded that the wholesale call termination/interconnect rates for four UK mobile networks; Vodafone, O2, Orange and T-Mobile should be reduced. Specifically, Ofcom decided that: (a) Vodafone and O2's call termination rates should reduce from around 8 pence per minute to 5.63 pence per minute, and (b) Orange and T-Mobile's call termination rates should be reduced from around 9.5 pence per minute to 6.31 pence per minute. All four operators will be required to ensure their average charges in the period between the beginning of September 2004 and March 2005 reflect these deductions. Average charges must then remain at that level until March 2006. As at present, mobile operators will be permitted to vary the charges by time of day.

        In July 2004, the mobile networks announced call termination rate changes in response to Ofcom's June statement.

        Mobile interconnection costs are significant to our business. We will explore options to provide new telephone packages in the light of any changes to the charges we incur in respect of interconnection/call termination rates that are imposed on the mobile networks.

        In March 2005, Ofcom launched a consultation on the legality of "GSM gateways." Such gateways are a form of interconnect by-pass for operators to send their calls to mobile networks. Typically, such gateways allow for lower levels of mobile call termination rates. Ofcom is consulting on whether the use of such gateways should be prohibited or liberalized. The outcome of the consultation could have a material impact on the operations and costs of our business.

Our Call Termination and Origination Rates

        Since October 2001, we have had a disagreement with BT on the level of call termination payments relevant for inbound geographic calls to our network. This matter was referred to Ofcom in December 2003. On April 16, 2004, Ofcom issued its final decision that we should comply with the industry-wide agreement for such payments. Any amounts due from us to BT will be paid in line with normal interconnect processes. The same amounts have been provided for in our accounts since October 2001.

        In addition, Ofcom determined in August 2002 that we could set our own call origination rate for non-geographic calls (such as 0800 numbers). In October 2004, Ofcom initiated market reviews in the area of non-geographic calls. The wholesale rates we earn and pay for non-geographic calls may be adversely affected by the market review.

Carrier Pre-Select Services and Wholesale Line Rental

        BT is already offering both wholesale carrier pre-select services and wholesale line rental. Re-sellers use both these wholesale services to serve customers on the BT network.

        Both these wholesale services are subject to consultation in the context of their delivery via BT's proposed 21^st century network. Both BT and Ofcom are consulting on BT's 21^st century network. We purchase wholesale line rental and carrier pre-select services from BT.

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Next Generation Network (NGN) Access and Interconnection

        In November 2004, Ofcom launched a consultation on NGN access and interconnection. This includes the context of BT 21^st Century network as well as other UK network operators. The outcome of the consultation may have an adverse affect on the Company. Ofcom has not yet published its conclusions.

European Directives and Ofcom Consultations

        The UK is a Member State of the EU. As such, it is required to enact national legislation that implements EU Directives. As a result, we are subject to regulation initiated at the EU level.

        A series of Directives has revised the regulatory regime concerning communications services across the EU. They include the following:

•

Directive 02/21/EC for a New Regulatory Framework for Electronic Communications Networks and Services (referred to as the Framework Directive);



•

Directive 02/20/EC on the Authorization of Electronic Communications Networks and Services;



•

Directive 02/19/EC on Access to and Interconnection of Electronic Communications Networks and Services (referred to as the Access Directive); and



•

Directive 02/22/EC on Universal Services and Users' Rights relating to Electronic Networks and Services (referred to as the Universal Services Directive).

        These new Directives were implemented in the UK as of July 25, 2003, primarily by the Communications Act 2003. As part of the implementation of the new Directives, the UK Office of Telecommunications, (whose functions are now carried out by Ofcom) has, among other reviews and consultations, undertaken and concluded several market reviews.

Environmental Regulations and Equipment

        We are subject to environmental regulations and legislation with respect to energy, emissions and waste in the ordinary course of our business.

        We are committed to developing and maintaining good environmental standards across all facets of our business. Our Environmental Management Committee, which was established in late 2001, meets on a regular basis and is responsible for monitoring our environmental performance and for setting targets for improvement.

        The committee's primary objective is to identify initiatives that will improve our environmental performance and to ensure that we have adequate data to be able to measure our year-on-year performance. As a business, we will continue to target a reduction in our overall adverse environmental impacts through 2005. Specifically, fewer staff, fewer buildings, reduced fault rates favorably impacting the number of engineer call-outs, web-based self-service ordering and exciting new product innovations such as "self-install" broadband internet continue to positively drive our environmental performance.

        The costs associated with complying with environmental regulations and legislation are not material to the business, capital expenditures, earnings or competitive position of us or our subsidiaries.

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Risk Factors

        Investments in our common stock involve risks. Investors should carefully consider the following discussion of risks and the other information in this Annual Report before deciding to invest in our shares of common stock. The risks and uncertainties described below are not the only ones we face.

Risks Related to Our Operations

We may not be able to compete successfully in the highly competitive telephony, multi-channel television, broadband internet and content markets

        The level of competition is intense in all of the markets in which we compete. In particular, our key cable telephony and consumer television businesses compete in markets dominated by our competitors, BT in telephony and BSkyB in multi-channel television, and our cable telephony and broadband internet businesses are increasingly subject to new market entrants in each of those markets. In addition, technology changes may permit more competitors to offer bundled services, including the "triple play" of digital television, residential telephony and broadband internet services, that are competitive with our own bundled cable television, residential telephony, and broadband internet services.

        Each of BT and BSkyB have significantly greater economies of scale and resources than we have and are therefore in a better position to invest in developing and acquiring proprietary technology, to expand into new business fields, to take advantage of economies of scale with suppliers and to increase their market shares. These advantages are also increasingly important in the broadband internet market where BT has demonstrated a strong interest in developing and marketing broadband internet products. In addition, during 2004, BT significantly reduced the wholesale broadband fees it charges third parties to access its broadband network. As a result of the reduction in these costs, we expect increasing price competition from existing and new broadband service providers, who use BT's network to deliver digital subscriber line ("DSL") broadband internet services.

        In the digital television market, competition has been increased as a result of the launch of Freeview in October 2002, which provides a free 30-channel digital terrestrial service to consumers who have purchased a Freeview-enabled set-top box or a television with a digital tuner, and the launch in March 2004 by Top Up TV of a pay- television service offering approximately 10 pay-television channels for a fixed fee to subscribers who otherwise receive Freeview and have purchased Top Up TV software.

        In the telecommunications market, in addition to competition from fixed-line telephony providers such as BT and new entrants to the fixed-line telephony market, falling mobile phone tariffs have resulted in increased competition for our fixed-line telephony products. Lower mobile phone tariffs negatively impact both the volume of telephony traffic we carry among consumers who use both fixed-line and mobile phones, as well as the number of subscribers to our telephony services, as consumers choose to substitute mobile phones for fixed-line phones. In addition, we expect increased competition from voice-over-internet-protocol ("VoIP") services as the penetration of broadband internet services increases in the UK.

        In order to compete, we may have to reduce the fees that we charge for our telephony services and this may negatively impact our telephony revenues. If we are unable to compete successfully, even following price reductions, we may not be able to attract new customers or retain our existing customers, particularly for higher-margin services.

Failure to successfully market broadband internet services may adversely impact our results of operations

        Blueyonder broadband, our high-speed consumer internet service is a significant contributor to our revenue and subscriber growth and the fastest growing part of our business. The contribution to

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revenue results both from growing numbers of blueyonder broadband internet customers as well as consumer television and consumer telephony customer growth resulting from blueyonder broadband internet subscribers who elect to take one or both of our other key services. However, residential use of broadband internet services is a relatively new and undeveloped market, in which we face significant competition from alternative internet access media such as DSL, and dial-up services offered by a number of our competitors. The primary advantage of cable broadband internet services over DSL is higher connection speeds. However, DSL service providers are continually improving the speeds of their services and the higher connection speed offered by cable broadband internet is only advantageous with regard to certain premium content features. If no market develops for these features, consumers might not be prepared to pay a premium for faster broadband internet services. If we are unable to charge prices for broadband internet services that are anticipated in our strategic plan as a result of competition, or if our competitors deliver better services, we are likely to experience reduced revenue and subscriber growth.

High customer churn could result in a failure to achieve anticipated revenue levels

        We currently have levels of household churn that generally compare favorably to household churn for most cable television companies in Europe and the United States. Nevertheless, we face strong competition in the markets in which we compete and our customers can readily purchase products and services substantially similar to our own from other providers. We also intend to introduce new products and services to better compete in our markets, (e.g. our VOD and DVR services) and the introduction of these products and services may challenge our ability to provide uniform customer care across our customer base and to integrate training and operations support systems, such as billing and accounts receivable functions, across our business. Customer churn is a measure of the percentage of customers disconnecting from our services in a given period and is considered to be an indicator of the level of customer satisfaction or dissatisfaction with our products and services, including customer care.

        We increased the prices for a number of our products and services in 2004 and our current long-range plan anticipates some additional price increases. Price rises generally lead to higher customer churn among customers who are sensitive to price fluctuations.

The sectors in which we compete are subject to rapid and significant changes in technology, and the effect of technological changes on our businesses cannot be predicted

        The internet, cable and telecommunications sectors are characterized by rapid and significant changes in technology. The effect of future technological changes on our businesses cannot be predicted. It is possible that products or other technological breakthroughs, such as VoIP or wireless fidelity ("Wi-Fi"), may result in our core offerings becoming outdated and less competitive. We may not be able to develop new products and services at the same rate as our competitors or keep up with trends in the technology market as well as our competitors.

        The cost of implementing emerging and future technologies could be significant, and our ability to fund that implementation may depend on our ability to obtain additional financing. We cannot be certain that we would be successful in obtaining any additional financing required.

There is no assurance that new products that we may introduce will achieve full functionality or market acceptance

        Our long-range plan includes VOD and DVR products. Despite testing prior to release, we cannot guarantee that these new products, or any other new products that we may develop in the future, will perform as expected when first introduced in the market. Should these new products and services fail to perform as expected or should they fail to gain market acceptance, our results of operations may be negatively impacted.

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If we do not maintain and upgrade our networks in a cost-effective and timely manner, we could lose customers and revenues

        Maintaining an uninterrupted and high quality service over our network infrastructure is critical to our ability to attract and retain customers. Providing a competitive service level depends in part on our ability to maintain and upgrade our networks in a cost-effective and timely manner. The maintenance and upgrade of our networks will depend upon, among other things, our ability to:

•

modify network infrastructure for new products and services;



•

install and maintain cable and equipment; and



•

finance maintenance and upgrades.

        Our bank facilities limit the level of total capital expenditure that we can incur. If this affects our ability to replace network assets at the end of their useful lives or if there is any reduction in our ability to perform necessary maintenance on network assets, our networks may have an increased failure rate, which is likely to lead to increased customer churn and the effects described above.

We rely on single-source suppliers for some equipment and software

        We obtain some of the equipment and software used to provide our services from a single source. In particular the software used in our cable television set-top boxes is obtained from a single provider, which has been working with us to develop enhanced functionality that supports our VOD and DVR services. If we are forced to use alternative software we may experience delays in the roll-out of our VOD and DVR services and this could negatively affect our operations.

Our operations depend on critical systems housed in a relatively small number of locations, which could result in significant network outages in the event of a natural disaster, terrorist attack, war or other catastrophic event

        Our operations depend on many sophisticated, critical systems, which support all of the various aspects of our operations from network to billing and customer care systems. The hardware supporting a large number of those critical systems is housed in a relatively small number of locations. In particular, we have only a single originating point for our digital television services, known as a "headend," located in Knowsley. On December 31, 2003, the Knowsley headend was flooded resulting in an outage of our digital television services. If the Knowsley headend or one or more other locations were to be subject to fire, flooding, natural disaster, terrorism, power loss, break-in or other catastrophe in the future, it could result in network-wide or local outages in our network services. Our backup structure would only allow us to provide some restricted services, offering a limited amount of channels for a limited amount of time. Any outages would result in lost revenues, potential loss of customers and/or adverse publicity. In addition, the transmission of material that contains any viruses over our networks, or other electronic devices, intended to damage, or otherwise cause harm to or interfere with, our networks, could also result in a loss of revenues.

The market for business voice services is very price competitive and we may not be able to continue to compete successfully

        The market for business services, and in particular voice services, remains intensely competitive in the UK. We compete for business voice services with BT, mobile operators, other fixed-line network operators and resellers. Competition in this crowded market is likely to increase, as operators continue to compete on price and as other telephony-based service offerings, notably those which can be delivered via DSL (eg VoIP), are expanded in this price-sensitive market. If we are not able to compete on price, even if the quality of our services is superior to those of our competitors, we may not be as successful in attracting new customers or retaining existing customers.

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We depend on key information systems for billing, customer management and service delivery over our networks, the failure of which could result in a loss of customers or failure to collect payments due from customers

        We rely on a number of software applications for billing, customer management and the delivery of services over our networks. Our ability to maintain accurate customer records for billing and marketing purposes is critical to our ability to collect revenue and market to our existing customer base. If we are unable to maintain, upgrade or expand these systems to meet future operational needs, maintain adequate back-up facilities or adequately protect our systems through firewalls and access controls, we may lose customers or fail to collect payments from them.

Regulation of the markets in which we provide our services has been changing rapidly; unpredictable changes in UK and EU regulations affecting the conduct of our business, including price regulations, may have an adverse impact on our ability to raise prices, enter new markets or control our costs

        Our principal business activities are regulated and supervised by various governmental bodies in the UK and by the regulatory initiatives of the European Commission. Regulatory changes have recently occurred, and may in the future occur, at the UK or EU level with respect to licensing requirements, price regulation, interconnection arrangements, number portability, carrier pre-selection, the ability to provide digital services, ownership of media companies, programming, local loop unbundling, the provision of open access by UK cable operators to other telecommunications operators, and the adoption of uniform digital technology standards or the bundling of services. Regulatory changes relating to our activities and those of our competitors, such as changes relating to third-party access to cable networks, the costs of interconnection with other networks or the prices of competing products and services, could adversely affect our ability to raise prices, enter new markets or control our costs.

The UK and EU merger control regimes may affect our ability to enter into a merger or acquisition that we otherwise believe will benefit us and our stockholders

        Our participation in any substantial merger or acquisition with another company in our industry may lead to significant increases in market share. A merger of this sort may be investigated by either the Office of Fair Trading or, depending on jurisdiction issues, the Merger Task Force of the European Commission. The Office of Fair Trading is likely to investigate any substantial merger involving us, which would lead to the creation of a company supplying more than 25% of the pay-television market in the UK or enhancing the market share of a company supplying more than 25% of the pay-television market in the UK.

        It is likely that any proposed merger or acquisition between us and another company in our industry would also be subject to consideration by Ofcom. Ofcom would then provide advice to the regulatory body considering the proposed merger or acquisition.

        In the UK, mergers that appear to raise significant competition (antitrust) issues or in the case of media mergers, public interest issues, may be referred to the UK Competition Commission for an in-depth investigation. Similarly, any merger being reviewed by the European Commission could, if significant competition issues were revealed, involve an in-depth "Phase II" investigation. Given that there has been considerable consolidation in the UK cable sector, the merger control process could limit the possibilities for any future consolidation.

We may not be able to achieve, or realize benefits from, any further consolidation in the UK cable industry

        We and other cable companies in the UK have historically grown through consolidation. The UK cable industry now consists of two principal participants, ntl and ourselves. As a result, the opportunities for us to grow through acquisitions are limited. We cannot assure you that any attempt to

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consolidate would be successful or that any anticipated benefits of consolidation would be realized on a timely basis or at all. In addition, we have provisions in our bank facilities that may impede our ability to consolidate. Risks associated with business combinations include the loss of contractual rights by virtue of change of control provisions, difficulties in integrating accounting policies and systems and loss of key employees.

Our dependence on BSkyB and other suppliers for television programming could have a material adverse effect on our ability to provide attractive programming at a reasonable cost

        We obtain a significant amount of our premium programming, some of our basic programming and pay-per-view sporting events from BSkyB, or a BSkyB joint venture. BSkyB is a leading supplier of programming to cable television operators and is the exclusive supplier of some programming including the Sky Sports channels and the most popular premium subscription film channels available in the UK.

        We continue to buy BSkyB wholesale premium content on the basis of an industry ratecard. There is no contractual agreement with BSkyB for the provision of such content.

        There is also programming carried by competing digital service providers that may not be available to our digital television subscribers. Our inability to obtain this programming, or any other popular programming, or to obtain it at a reasonable cost, could materially adversely affect the number of subscribers to our consumer television service.

We may not be able to offer our television subscribers certain of BSkyB's programming or may have to do so on terms that are not profitable for us

        In addition to providing programming to cable operators, BSkyB competes with us by offering its programming directly to its digital satellite customers. As a result of BSkyB's ownership of this content, it is able to offer this content to its subscribers at a price that will be challenging for us to match and still maintain a profit margin on the sale of that premium programming. BSkyB may also offer content exclusively to its digital satellite customers and not to us.

We rely on key suppliers to provide programming, which may increase our content acquisition costs

        In addition to BSkyB, our significant programming suppliers include Viacom, Discovery and Turner, a division of Time Warner. Suppliers of popular programming may decide to introduce new channels to be packaged with their existing programming options or otherwise increase our costs of purchasing existing and new programming. Our dependence on these suppliers for television programming could have a material adverse effect on our ability to provide attractive programming at a reasonable cost.

Disruptions in our satellite transmissions could materially adversely affect our content segment operations

        Flextech currently broadcasts its digital services with an Astra satellite transponder leased from Société Européene des Satellites. The operation of the Astra satellite is beyond Flextech's control. Disruption to the satellite would result in disruption to Flextech's content services and, depending upon the nature of that disruption, could result in a loss of revenues, a loss of customers and/or adverse publicity. The satellite transponder may fail before the expiration, in December 2013, of our contractual right to utilize it, which may result in additional costs as alternative arrangements are made for satellite transmission.

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The development of technology that enables unauthorized access to our networks could result in a loss of revenue

        We rely on the integrity of our networks to ensure that our services are provided only to identifiable paying customers. We have experienced piracy of our television services by individuals who have circumvented the security features.

        We may not be able to maintain the integrity of our network. The development of new technology facilitating unauthorized access to our network could result in a loss of revenue.

We may not be granted rights to transmit our programming content over the internet

        All of the contracts governing our acquired television programming grant us the right to broadcast that programming over analog and/or digital television platforms. We may not be granted any rights to transmit that programming content over the internet. Failure to obtain internet transmission rights could prevent us from utilizing this content in connection with internet technologies and could result in competitors providing some of the content we broadcast over our analog and/or digital television platforms through the internet in competition with us.

Insolvency or non-performance by parties from whom we lease fiber-optic cable could result in the loss of cable service in some coverage areas

        Approximately nine percent of our fiber-optic cable is owned by other licensed operators and is leased to us on an "indefeasible rights of use" basis. In the event of insolvency or non-performance by the counterparties to these indefeasible rights of use, there is a risk that cable service could be lost in parts of the areas in which we operate.

We are modifying certain business practices and controls at our IDS subsidiary in connection with an Audit Committee review, which may negatively affect our advertising sales business

        On December 15, 2004, we announced that our Audit Committee was commencing an independent review of certain business practices of a subsidiary in our content division, IDS, which sells advertising time on television channels in which we have an ownership interest. Their review has now been completed. In connection with the review, management has made and will continue to make modifications to these business practices in a manner consistent with the Audit Committee's conclusions and will be taking steps to further strengthen internal controls at IDS and to improve the integration and alignment of IDS controls and procedures with those of the rest of the group. These measures may negatively affect the operations of IDS, including its ability to compete for television advertising sales.

We depend on the ability to attract and retain key personnel without whom we may not be able to manage our business lines effectively

        We operate in a number of rapidly changing technologically advanced markets that will continue to challenge our senior management. There is significant competition in attracting and retaining qualified personnel. Our future success is likely to depend in large part on our continued ability to attract and retain highly skilled and qualified personnel. Speculation in the marketplace regarding possible mergers or other significant transactions could make it difficult for us to attract and retain these personnel.

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Risks Related to Indebtedness and Financing

Our obligations to service our substantial indebtedness could significantly reduce available cash flow, impact our ability to obtain additional financing and limit our flexibility in reacting to competitive and technological changes

        We have substantial indebtedness and may incur additional indebtedness in the future. Our substantial consolidated level of indebtedness, and associated interest payment obligations:

•

limit cash flow available for general corporate purposes, including any acquisitions;



•

limit our ability to obtain necessary financing for working capital, capital expenditure or business opportunities and to implement our business strategies;



•

limit our flexibility in reacting to competitive, technological and other changes;



•

expose us to a risk that a decrease in net cash flows due to economic developments or adverse developments in our business could make it difficult or impossible to meet senior debt payment obligations; and



•

expose us to risks inherent in interest rate fluctuations.

We may not be able to fund our operations, capital expenditures and debt service obligations through operating cash flow in the future

        It is possible that we may not achieve or sustain sufficient cash flow in the future for the payment of interest, the meeting of capital expenditure needs and/or other operational purposes. If our operating cash flow is not sufficient to meet our operating expenses, capital expenditures and debt payment obligations, we may be forced to raise cash or reduce expenses by doing one or more of the following:

•

increasing, to the extent permitted, the amount of borrowings under our bank facilities;



•

restructuring or refinancing our indebtedness prior to maturity, or on unfavorable terms;



•

delaying or reducing capital expenditures necessary to maintain our network and respond to technological developments and increased competition;



•

selling or disposing of some of our assets, possibly on unfavorable terms;



•

revising or delaying the implementation of our strategic plans; or



•

foregoing business opportunities, including the introduction of new products and services, acquisitions and joint ventures.

        We could also be forced to seek additional equity capital, which could dilute the interests of the holders of our common stock.

        We cannot be sure that any of the above actions would be sufficient to fund our operations.

Our operations and financing activities are restricted by covenants in our bank facilities

        The bank facilities entered into by our subsidiary, Telewest Communications Networks Limited, ("TCN") and certain of TCN's direct and indirect subsidiaries contain a number of significant restrictions and covenants that limit our ability to:

•

acquire businesses or assets;



•

engage in mergers, consolidations and asset dispositions;



•

make capital expenditures and investments;

38

•

enter into debt and preferred equity financings;



•

use the proceeds of debt issuances, equity issuances and disposals except to repay outstandings under these facilities;



•

pay dividends or redeem or repurchase capital stock;



•

amend debt and other material agreements; and



•

sell equity of, or receive distributions from, subsidiaries.

        In addition, TCN is required to comply with specified financial ratios and performance covenants. These restrictions could affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.

If we are unable to comply with the financial and performance covenants in our bank facilities, our senior lenders could impose additional restrictions on us or accelerate repayment of all amounts due under the bank facilities

        Our ability to comply with the financial and performance covenants in our bank facilities will depend on a number of factors, including our operating performance, the level of interest rates and cash flow, as well as other factors that we may have failed to anticipate or that are beyond our control.

        If we, TCN or our other subsidiaries that are a party to the bank facilities do not comply with these or other covenants and restrictions contained therein, we could be in default under the bank facilities. As a result of a default, our senior lenders could cause all of the outstanding indebtedness under the bank facilities to become due and payable, require us to apply all of our cash to repay the indebtedness or prevent us from making debt service payments on any other indebtedness we owe. If our indebtedness is accelerated, we may not be able to repay our debt or borrow sufficient funds to refinance that debt. In addition, any default under the bank facilities, or agreements governing our other existing or future indebtedness, is likely to lead to an acceleration of indebtedness under any other debt instruments that contain cross-acceleration or cross-default provisions. If the indebtedness under our bank facilities is accelerated as a result of a default, we are unlikely to have sufficient assets to repay that debt, and/or other indebtedness then outstanding.

        Our bank facilities also include specific financial covenants that may impact our ability to engage in a merger, including as part of any further consolidation in the UK cable industry.

We may not be able to meet our debt service obligations under our bank facilities or under any other indebtedness that we may incur

        Our predecessor was historically unable to service its financial indebtedness. Following its financial restructuring, we have reduced but still substantial borrowings and our ability to make scheduled repayments on our bank facilities will depend on our future operating performance. General economic, financial, competitive, legislative, regulatory, business and other factors beyond our control will affect future operating performance. This is likely to also be true of any further indebtedness we may incur in the future.

        If we are unable to meet our debt service obligations, we could attempt to restructure or refinance our existing indebtedness or to seek additional funding. We cannot assure you, however, that we would be able to do so on satisfactory terms, if at all. In addition, subject to restrictions on further indebtedness in our bank facilities, we may choose to incur additional indebtedness in the future. This could adversely affect our operating cash flows and our ability to service our existing indebtedness.

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Telewest Global, Inc. and Telewest UK are holding companies and depend upon cash from their subsidiaries to meet their obligations

        Telewest Global, Inc. is a holding company with no independent operations or significant assets other than its investment in Telewest UK. Telewest UK is a holding company with no independent operations or significant assets other than its investments in and advances to subsidiaries. In order to meet its obligations, Telewest Global, Inc. relies on receiving sufficient cash from Telewest UK and its subsidiaries. Our subsidiaries are restricted by the covenants in the bank facilities from paying dividends, repaying loans and making other distributions to Telewest Global, Inc. and Telewest UK. In particular, the bank facilities currently restrict the funds available to us from TCN to £20 million a year and limit the use of such funds. Future debt instruments may contain similar restrictions that may prevent us from meeting our obligations.

        Telewest UK has indemnified Telewest Communications and Telewest Jersey for any of their obligations not compromised in connection with Telewest Communications' financial restructuring, except for, among other things, certain expenses of Telewest Communications' shareholders and its former noteholders arising as a result of the financial restructuring, and will rely on funds provided by its subsidiaries in meeting its obligations under that indemnity.

Telewest Global, Inc. may be subject to income taxation in multiple jurisdictions

        Telewest Global, Inc. as a Delaware corporation, is subject to income taxation in the US. If Telewest Global, Inc. were deemed to have its place of central management and control in the UK, it would also be subject to taxation in the UK. If that were the case, its effective tax rate and aggregate tax liability would be affected by a number of factors, including differences in tax rates in the US and the UK, tax treaties between the US and the UK, and future changes in the law. As a result, it may be required to pay income taxes in one jurisdiction for a particular period even though on an overall basis it incurred a net loss for that period or may otherwise have a higher aggregate tax liability.

It may be difficult to compare our current and future financial statements as a result of fresh-start reporting

        As a result of the completion of the financial restructuring of our predecessor, Telewest Communications, on July 15, 2004, we adopted fresh-start reporting in accordance with SOP 90-7, with effect from July 1, 2004, (see Item 6—"Selected Historical Consolidated Financial Data"). Under SOP 90-7, we established a new accounting basis, and recorded our existing assets and liabilities at their respective fair values. As a result of the application of fresh-start reporting, our balance sheet and results of operations for the year ended December 31, 2004 and for each reporting period thereafter will not be comparable in many material respects to the balance sheets or results of operations reflected in our predecessor's historical financial statements for periods prior to July 1, 2004 included elsewhere in this Annual Report.

A significant percentage of the outstanding shares of our common stock are held by a small number of stockholders, who may have conflicts of interest

        As a result of the financial restructuring of our predecessor, Telewest Communications, some of its former bondholders, including some of the former bondholders who designated one or more members of our initial board of directors, became significant stockholders of us. As a result of these relationships, when conflicts arise between the interests of significant stockholders and the interests of our other stockholders, directors designated by the affected stockholders may not be disinterested. These stockholders may also have or make significant investments in other telecommunications companies, including ntl. This may result in conflicts of interest. Actions these stockholders take relating to these investments may conflict with the interests of our other stockholders. Under Delaware law, transactions that we enter into in which a director has a conflict of interest are generally

40

permissible as long as the material facts as to the director's or officer's relationship to or interest in 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.

Risks Related to Our Common Stock

The sale of a large number of the shares held by the former creditors of our predecessor could cause our stock price to decline, or otherwise depress its trading price, and make it difficult for us to sell equity or equity-related securities

        As a result of the financial restructuring, Telewest Communications' and Telewest Jersey's scheme creditors received 98.5% of our outstanding common stock. Some of these former creditors are not in the business of holding equity on a long-term basis. Some of these stockholders also have rights, subject to various conditions, to require us to file one or more registration statements, including the "shelf" registration statement filed on July 16, 2004 and subsequently amended, covering their shares, or to include their shares in registration statements that we may file for ourselves or on behalf of other stockholders. Subsequent sales by these stockholders of a substantial number of shares may significantly reduce the market price of our common stock. Moreover, the perception that these stockholders might sell significant amounts of common stock could depress the trading price of the common stock for a considerable period. Sales of these shares, and the possibility of these sales, could make it more difficult for us to sell equity, or equity-related securities, in the future at a time, and price, that we consider appropriate.

Due to our predecessor's financial history and the historical volatility of the shares of cable, telecommunications and internet companies, the market price of our common stock is likely to be volatile

        As a result of a number of factors, including the recent financial condition of our predecessor and our participation in markets that have experienced historical price volatility, the market price for our common stock is likely to be volatile, perhaps even more so than the stock market in general, and the market for cable, telecommunications and internet companies in particular. Factors that could cause volatility in the market price for our common stock in the future may include, among other things:

•

actual or anticipated variations in our operating results;



•

new products or services, whether ours or those of our competitors;



•

changes in financial estimates by securities analysts covering us;



•

changes in the market valuations of other cable, telecommunications and internet companies;



•

large increases or decreases in capital commitments;



•

additions or departures of key personnel; and



•

issuances of common stock by us.

        Due to our predecessor's troubled financial history and our participation in historically volatile markets, these factors may negatively affect the market price for our common stock to a greater extent than they would other companies, in some cases regardless of our operating performance.

Shares may be issued to our directors and employees under stock option plans, which could dilute the value of our common stock

        We set aside a portion of our common stock to be used in our 2004 Stock Incentive Plan, which is designed to incentivize our employees, senior executives and directors. Our board of directors reserved 24,500,000 shares for issuance pursuant to the 2004 Stock Incentive Plan. At December 31, 2004 an

41

aggregate of 9,803,054 shares were subject to outstanding options and restricted share grants. The issuance of additional common stock pursuant to the plan could dilute existing stockholders.

Some provisions of our certificate of incorporation, by-laws and bank facilities may discourage or prevent attempts to acquire or merge with us, even if such a consolidation might be beneficial to our stockholders

        Provisions of our certificate of incorporation and by-laws may have the effect of delaying or preventing an acquisition or merger in which we are acquired or a transaction that changes our board of directors. Our board of directors has also authorized the adoption of a stockholder rights plan, which is triggered when certain conditions are met, including the acquisition of (i) 25% or more of our shares by any person or (ii) 10% or more of our shares by any person where that acquisition has been determined by our board of directors to be adverse to the long-term interest of our stockholders. If triggered, the stockholder rights plan will result in the acquisition of us being uneconomic for a potential acquiror. In addition, the bank facilities contain terms that could restrict our ability to merge with, or be acquired by, a third-party, including financial covenants to be applied on an aggregated basis to us and the third-party which may wish to merge with or acquire us. We are also subject to Section 203 of the Delaware General Corporation law, which limits the ability of any party that acquires more than 15% of our common stock to take certain actions.

        The Delaware law provisions, certain terms in our bank facilities, and/or the stockholder rights plan, could make it more difficult for a third-party to acquire us, even if doing so might be beneficial to our stockholders. The Delaware law provisions, or the stockholder rights plan, could likewise limit the prices that investors might be willing to pay in the future for our common stock.

ITEM 2. PROPERTIES

        We utilize numerous offices, technical facilities, warehouses and customer care centers throughout the UK. As of December 31, 2004, we owned or leased and occupied an aggregate of approximately 1,664,000 square feet (approximately 1,477,000 square feet of which was owned or occupied pursuant to long-term leases, and approximately 187,000 square feet of which was otherwise leased and occupied) showing a further decline in our overall property holdings. In November 2002, a property rationalization program was commenced following a reduction in headcount during that year. Since December 31, 2002, 47 properties have been closed of which 41 have been disposed of or surrendered. The program will continue to evaluate the optimum level of property holdings for us. We believe that our current properties are adequate for our current needs and additional space can be obtained on reasonable terms to accommodate future growth, if needed.

        Details of our principal premises, all of which are located in the UK, are summarized below:

        Freehold Properties, all of which are used in connection with our cable segment.

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        Leasehold Properties, all of which are used in connection with our cable segment, except the Great Portland Street and Stephen Street offices in London, which are also used in the content segment.

(1)

The Plymouth call center is in the process of being closed.

ITEM 3. LEGAL PROCEEDINGS

        Other than as set forth below, neither we nor any of our subsidiaries is or has been engaged in any legal or arbitration proceedings, nor are any such proceedings pending or threatened by or against them that may have, or have had during the past twelve months, a significant effect on our and our subsidiaries' financial position.

VAT Proceeding

        A proceeding relating to the VAT status of Cable Guide and Zap magazines was instituted on June 29, 2001 by the Commissioners of Customs and Excise against Telewest Communications Group Limited and Telewest Communications (Publications) Limited. This proceeding was heard between October 21 and October 25, 2002 before the VAT and Duties Tribunal and as a result a judgment was passed down on January 21, 2003, which resulted in the provision of £16 million against revenue in the consolidated financial statements of our predecessor, Telewest Communications. The item arose in respect of VAT payable in the period from January 2000 to July 2002. The magazines have since ceased publication. Therefore, the item represented the full extent of our predecessor's VAT liability in respect of its magazine operations. The VAT tribunal held that our predecessor's arrangements to protect the zero-rated VAT status of Cable Guide and Zap magazines could, in principle, be effective in creating a separate supply by Telewest Communications (Publications) Limited, which was not ancillary to the supply of pay-television services. However, in practice, the steps taken by our predecessor were held to be insufficient to make the arrangements effective. Our predecessor appealed this decision in the High Court in November 2003. The appeal was unsuccessful and our predecessor submitted a further appeal against the High Court's decision, which was heard by the Court of Appeal in the week commencing November 8, 2004. The Court of Appeal's judgment was received on February 10, 2005 and found in our favor on all points. The Commissioners of Customs and Excise have applied for leave to make a further appeal to the House of Lords. We continue to progress the recovery of the tax paid and interest on this sum pending the resolution of such appeal.

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, 2004.

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

        Our shares are traded on the Nasdaq National Market under the symbol "TLWT." Our shares were not publicly traded prior to the financial restructuring of our predecessor, Telewest Communications, and commenced trading on July 19, 2004. The following table sets forth the reported high and low price per share of our common stock on the Nasdaq National Market for the periods indicated.

Holders

        As of March 18, 2005, our transfer agents informed us that there were approximately 399 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.

        Our subsidiaries are restricted by the covenants in our bank facilities from paying dividends, repaying loans and making other distributions to us or Telewest UK. In particular, our bank facilities generally restrict the funds available to us from TCN to £20 million per year and limit the use of such funds. For a further discussion of the legal and contractual restrictions on our ability to declare and pay cash dividends please refer to Item 1—"Business—Risk Factors—Risks Related to Indebtedness and Financing—Our operations and financing activities are restricted by covenants in our bank facilities/Telewest Global, Inc. and Telewest UK are holding companies and depend upon cash from their subsidiaries to meet their obligations" and Item 7—"Management's Discussion and Analysis of Financial Conditions and Results of Operations—New Bank Facilities."

Recent Sales of Unregistered Securities

        We were incorporated in the State of Delaware on November 12, 2003. In connection with our incorporation, one share of our common stock, par value $0.01 per share, was issued to our predecessor, Telewest Communications, at a price of $10. No underwriters were involved in the issuance and sale of this security and we relied on the exemption from registration provided by Section 4(2) of the Securities Act.

        An escrow agent distributed 241,325,000 shares of our common stock to certain creditors of Telewest Communications and its wholly owned finance subsidiary, Telewest Jersey. These creditors received the shares of our common stock pursuant to an English-court sanctioned scheme of arrangement in a transaction exempt from the registration requirements of the Securities Act, pursuant to Section 3(a)(10) of the Securities Act. No underwriters were involved in the issuance and sale of these securities.

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ITEM 6.    SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following table presents selected historical consolidated financial data for our predecessor for each of the fiscal years 2000, 2001, 2002 and 2003, the six months ended June 30, 2004 and as of the fresh-start date, July 1, 2004 and for us for the year ended December 31, 2004. The consolidated financial statements for the five fiscal years ended December 31, 2004 have been audited by KPMG Audit plc, an independent registered public accounting firm, and have been presented in accordance with United States generally accepted accounting principles ("US GAAP"). The selected historical financial data should be read in conjunction with, and are qualified in their entirety by reference to Item 7—"Management's Discussion and Analysis of Financial Condition and Results of Operations" and our and our predecessor's historical consolidated financial statements and notes thereto, each of which is included elsewhere in this Annual Report.

        Beginning with our unaudited consolidated financial statements for the three months ended September 30, 2004, our financial statements reflect our acquisition of the businesses of our predecessor and the application of fresh-start reporting as described in Statement of Position 90-7, "Reporting by Entities in Reorganization under the Bankruptcy Code," ("SOP 90-7"), issued by the American Institute of Certified Public Accountants. The adoption of fresh-start reporting resulted in the determination of our reorganization value and the allocation to assets in conformity with the procedures specified by Financial Accounting Standards Board, ("FASB"), Statement No. 141, Business Combinations, ("SFAS 141") and each liability generally was stated at the then fair value of the amount to be repaid. Fresh-start reporting changed the book value of our tangible and intangible assets with an associated change in our depreciation and amortization expense as compared to the financial statements for periods prior to the effective date of the financial restructuring included elsewhere in this Annual Report.

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        The financial statements with respect to us and our predecessor included in this Annual Report are presented in pounds sterling, our and their operating currency.

(1)

We did not carry on any business and incurred insignificant expenses prior to the completion of our predecessor's financial restructuring. For that reason, our consolidated results of operations for the year ended December 31, 2004 and the six months ended December 31, 2004 are in all material respects identical.

(2)

We adopted fresh-start reporting in accordance with SOP 90-7 with effect from July 1, 2004. Under SOP 90-7, we have established a new accounting basis, and recorded our existing assets and liabilities at their respective fair values.

(3)

Includes results of operations of Flextech from April 19, 2000 (the date our predecessor acquired Flextech) and the results of Eurobell (Holdings) PLC from November 1, 2000 (the date our predecessor acquired Eurobell).

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(4)

In 2002, our predecessor recorded a fixed asset impairment charge of £841 million, a goodwill impairment charge of £1,445 million and wrote down the value of its investments in affiliates by £130 million. In 2001, it recorded a goodwill impairment charge of £766 million and wrote down the value of its investments in affiliates by £202 million.

(5)

Includes trade and other receivables, prepaid expenses and inventory less accounts payable, other liabilities inclusive of capital accruals and deferred revenue.

(6)

Represents cash paid for property and equipment, net of cash received upon dispositions of property and equipment, of £5 million, zero, £1 million, £2 million and £2 million, respectively, for the years 2004, 2003, 2002, 2001 and 2000; and zero for the six-month period presented.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

        We were incorporated in Delaware on November 12, 2003. On November 26, 2003, we acquired the entire issued share capital of Telewest UK, a newly formed subsidiary under the laws of England and Wales.

        On July 13, 2004, as part of the financial restructuring of our predecessor, Telewest Communications, we entered into a transfer agreement to acquire substantially all of the assets of Telewest Communications. The financial restructuring of Telewest Communications was declared effective on July 15, 2004 and we became the ultimate holding company for the reorganized business.

        The presentation of our financial results of operations for the year ended December 31, 2004 and all subsequent reporting periods will differ from that of our predecessor due to the financial restructuring, and it may be difficult to compare our future performance to our predecessor's historical performance. In particular, as a result of the completion of our predecessor's financial restructuring:

•

£3,282 million of notes and debentures and £479 million of unpaid accrued interest reflected on our predecessor's balance sheet, were extinguished. In addition, as part of the financial restructuring, our then existing senior secured credit facility was amended. As part of the amendment process, £160 million of our outstanding senior debt was repaid. The final results of operations of our predecessor include a gain on the extinguishment of its outstanding notes and debentures. As a result of the completion of the financial restructuring, our indebtedness and related interest expense have been substantially reduced; and



•

we adopted fresh-start reporting in accordance with SOP 90-7 with effect from July 1, 2004. Under SOP 90-7 we established a new accounting basis, and recorded our then existing assets at their fair values and liabilities at the then present value of amounts to be paid. As a result of the application of fresh-start reporting, our balance sheets and results of operations for the year ended December 31, 2004 and for each reporting period thereafter will not be comparable in many material respects to the balance sheets and results of operations reflected in our predecessor's historical financial statements for periods prior to July 1, 2004.

        We have the same segments (cable and content) as our predecessor.

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Combined Companies

        In the following tables, for the convenience of the reader for comparison purposes, our results of operations and cash flows for the year ended December 31, 2004 have been combined with the results and cash flows of our predecessor for the six months ended June 30, 2004, to give results and cash flows of the combined group for the year ended December 31, 2004. We and Telewest UK, our wholly owned subsidiary and the group's UK holding company, did not carry on any business and incurred insignificant expenses prior to the completion of our predecessor's financial restructuring. For that reason our consolidated statements of operations for the year ended December 31, 2004 and the six months ended December 31, 2004 are in all material respects identical. We believe this combined presentation is helpful for the understanding of our performance, and that it provides useful supplemental information to our investors. The presentation does not include any adjustments to give pro forma effect to the financial restructuring as of an earlier date and is not intended to be indicative of the results that would have been obtained had the restructuring been completed at the beginning of the period. In addition, it is not indicative of results to be expected in future periods.

Statements of Operations
(amounts in £millions)
(unaudited)

        The Statement of Operations for the combined companies for the year ended December 31, 2004 excludes our predecessor's Statement of Operations for July 1, 2004.

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Segment Information
(amounts in £millions)
(unaudited)

(1)

Inter-segment revenues are revenues of our content segment which are costs in our cable segment and which are eliminated on consolidation.

        The segment information for the combined companies for the year ended December 31, 2004 excludes the segment information of our predecessor for July 1, 2004.

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Statements of Cash Flows
(amounts in £millions)
(unaudited)