NTL INC - 10-Q Quarterly Report

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

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-22616

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

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

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

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

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

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

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

The number of shares outstanding of the registrant's common stock as of May 6, 2005 was 84,704,868.

NTL INCORPORATED
FORM 10-Q
QUARTER ENDED MARCH 31, 2005

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
	Condensed Consolidated Balance Sheets—March 31, 2005 and December 31, 2004	4
	Condensed Consolidated Statements of Operations—Three Months Ended March 31, 2005 and 2004	5
	Condensed Consolidated Statements of Cash Flows—Three Months Ended March 31, 2005 and 2004	6
	Condensed Consolidated Statement of Shareholders' Equity—Three Months Ended March 31, 2005 and 2004	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures about Market Risk		36
Item 4. Controls and Procedures		38
PART II. OTHER INFORMATION		39
Item 1. Legal Proceedings		39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		40
Item 3. Defaults Upon Senior Securities		40
Item 4. Submission of Matters to a Vote of Security Holders		40
Item 5. Other Information		40
Item 6. Exhibits		41
SIGNATURES		42

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

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

•: potential adverse developments with respect to our liquidity or results of operations;
•: our significant debt payments and other contractual commitments;
•: our ability to fund and execute our business plan;
•: our ability to generate cash sufficient to service our debt;
•: interest rate and currency exchange rate fluctuations;
•: our ability to complete the integration of our billing systems;
•: the impact of new business opportunities requiring significant up-front investments;
•: our ability to attract and retain customers and increase our overall market penetration;
•: our ability to compete against other communications and content distribution businesses;
•: our ability to maintain contracts that are critical to our operations;
•: our ability to respond adequately to technological developments;
•: our ability to develop and maintain back-up for our critical systems;
•: our ability to continue to design networks, install facilities, obtain and maintain any required governmental licenses or approvals and finance construction and development, in a timely manner at reasonable costs and on satisfactory terms and conditions; and
•: our ability to have an impact upon, or to respond effectively to, new or modified laws or regulations.

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

Exchange Rates

The following tables set forth, for the periods indicated, the period end, period average, high and low noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York expressed as U.S. dollars per £1.00 and U.S. dollars per €1.00. The noon buying rate of the pound sterling on March 31, 2005 was $1.8888 per £1.00 and the noon buying rate of the euro on March 31, 2005 was $1.2969 per €1.00.

	U.S. Dollars per £1.00
Three Months Ended March 31,	Period End	Average(1)	High	Low
2004	1.84	1.84	1.90	1.79
2005	1.89	1.90	1.93	1.86

	U.S. Dollars per €1.00
Three Months Ended March 31,	Period End	Average(1)	High	Low
2004	1.23	1.24	1.29	1.21
2005	1.30	1.31	1.35	1.28

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

The above rates may differ from the actual rates used in the preparation of the condensed consolidated financial statements and other financial information appearing in this quarterly report. Our inclusion of these exchange rates is not meant to suggest that the pound sterling amounts actually represent these U.S. dollar amounts or that these amounts could have been converted into U.S. dollars at any particular rate, if at all.

Unless we otherwise indicate, all amounts in U.S. dollars as of March 31, 2005 are based on an exchange rate of $1.8888 to £1.00, all amounts disclosed for the three months ended March 31, 2005 are based on an average exchange rate of $1.8904 to £1.00, and all amounts disclosed for the three months ended March 31, 2004 are based on an average exchange rate of $1.8396 to £1.00. All amounts in U.S. dollars as of December 31, 2004 are based on an exchange rate of $1.9160 to £1.00. Unless we otherwise indicate, all euro amounts as of March 31, 2005 are based on an exchange rate of $1.2969 to €1.00 and all amounts disclosed for the three months ended March 31, 2005 are based on an average rate of $1.3107 to €1.00 and all amounts disclosed for the three months ended March 31, 2004 are based on an average rate of $1.2513 to €1.00. All amounts in euros as of December 31, 2004 are based on an exchange rate of $1.3538 to €1.00. All rates are based on the noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York. The variation between the 2004 and 2005 exchange rates has impacted the dollar comparisons.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NTL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)

			March 31, 2005			December 31, 2004
			(Unaudited)			(See Note)
Assets
Current assets
	Cash and cash equivalents		$	1,591.8		$	240.0
	Restricted cash			33.6			31.4
	Marketable securities			16.8			22.1
	Accounts receivable—trade, less allowances for doubtful accounts of $99.6 (2005) and $90.7 (2004)			424.7			410.4
	Prepaid expenses and other current assets			98.8			93.0
	Current assets held for sale			—			80.5

		Total current assets		2,165.7			877.4
Fixed assets, net				6,708.5			6,933.8
Reorganization value in excess of amounts allocable to identifiable assets				374.9			383.6
Customer lists, net				636.4			698.1
Other intangible assets, net				8.7			10.4
Investments in and loans to affiliates, net				1.3			1.3
Other assets, net of accumulated amortization of $40.6 (2005) and $15.2 (2004)				208.0			236.4
Other assets held for sale				—			1,384.2

Total assets			$	10,103.5		$	10,525.2

Liabilities and shareholders' equity
Current liabilities
	Accounts payable		$	260.5		$	230.6
	Accrued expenses and other current liabilities			575.2			602.9
	Interest payable			176.6			99.4
	Deferred revenue			222.8			224.2
	Current liabilities of discontinued operations			—			144.1
	Current portion of long-term debt			73.5			116.8

		Total current liabilities		1,308.6			1,418.0
Long-term debt, net of current portion				4,672.5			5,657.1
Deferred revenue and other long-term liabilities				390.5			420.9
Deferred income taxes				—			—
Long term liabilities of discontinued operations				—			3.5
Commitments and contingent liabilities
Shareholders' equity
	Preferred stock—$.01 par value; authorized 5.0 (2005 and 2004) shares; issued and outstanding none			—			—
	Common stock—$.01 par value; authorized 400.0 (2005 and 2004) shares; issued 87.8 and outstanding 85.9 (2005) and issued and outstanding 87.7 (2004) shares			0.9			0.9
	Additional paid-in capital			4,382.3			4,376.9
	Treasury stock			(129.7	)		—
	Unearned stock-based compensation			(27.0	)		(29.8	)
	Accumulated other comprehensive income			271.7			512.0
	Accumulated (deficit)			(766.3	)		(1,834.3	)

		Total shareholders' equity		3,731.9			3,025.7

Total liabilities and shareholders' equity			$	10,103.5		$	10,525.2

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

See accompanying notes.

NTL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in millions, except per share data)

		Three Months Ended March 31,
		2005			2004
Revenue		$	977.8		$	944.8
Costs and expenses
	Operating costs (exclusive of depreciation shown separately below)		(405.9	)		(398.8	)
	Selling, general and administrative expenses		(236.4	)		(240.4	)
	Other charges		(0.7	)		(0.9	)
	Depreciation		(250.3	)		(269.6	)
	Amortization		(53.4	)		(48.6	)

	Total costs and expenses		(946.7	)		(958.3	)

Operating income (loss)			31.1			(13.5	)
Other income (expense)
	Interest income and other, net		12.4			3.0
	Interest expense		(132.6	)		(137.9	)
	Share of income from equity investments		—			0.2
	Foreign currency transaction (losses) gains		(7.4	)		12.9

(Loss) from continuing operations before income taxes			(96.5	)		(135.3	)
Income tax (expense)			(21.7	)		(3.5	)

(Loss) from continuing operations		$	(118.2	)	$	(138.8	)

Discontinued operations
Income from discontinued operations before income taxes		$	7.8		$	18.5
Gain on disposal of assets			1,178.4			—
Income tax (expense)			—			—

	Income from discontinued operations	$	1,186.2		$	18.5

Net income (loss)		$	1,068.0		$	(120.3	)

Basic and diluted loss from continuing operations per share		$	(1.36	)	$	(1.60	)
Basic and diluted income from discontinued operations per share		$	13.70		$	0.21
Basic and diluted net income (loss) per share		$	12.33		$	(1.39	)
Average number of shares outstanding			86.6			86.8

See accompanying notes.

NTL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in millions)

			Three Months Ended March 31,
			2005			2004
Net cash provided by operating activities			$	262.5		$	81.2
Investing activities
	Purchase of fixed assets			(145.3	)		(104.7	)
	Investments in and loans to affiliates			—			0.9
	Purchase of marketable securities			(11.3	)		—
	Proceeds from sale of marketable securities			16.4			—
	Proceeds from sale of broadcast operations, net			2,302.3			—

		Net cash provided by (used in) investing activities		2,162.1			(103.8	)
Financing activities
	Proceeds from employee stock option exercises			0.8			1.2
	Purchase of shares			(129.7	)		—
	Principal payments on long-term debt			(942.9	)		(432.8	)

		Net cash (used in) financing activities		(1,071.8	)		(431.6	)
Effect of exchange rate changes on cash and cash equivalents				(1.0	)		24.8

Increase (decrease) in cash and cash equivalents				1,351.8		$	(429.4	)
Cash and cash equivalents, beginning of period				240.0			795.9

Cash and cash equivalents, end of period			$	1,591.8		$	366.5

Supplemental disclosure of cash flow information
	Cash paid during the period for interest, exclusive of amounts capitalized		$	25.8		$	211.9
	Income taxes paid			—			—

See accompanying notes.

NTL INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(unaudited) (in millions, except per share data)

			Preferred Stock $.01 Par Value			Common Stock $.01 Par Value
			Preferred Stock $.01 Par Value			Common Stock $.01 Par Value			Additional Paid-In Capital		Treasury Stock			Unearned Stock-Based Compensation
			Shares	Par		Shares	Par		Additional Paid-In Capital		Treasury Stock			Unearned Stock-Based Compensation
Balance, December 31, 2004			—		—	87.7	$	0.9	$	4,376.9	$	—		$	(29.8	)
Exercise of stock options and tax effect			—		—	0.1		—		2.8		—			—
Purchase of shares			—		—	—		—		—		(129.7	)		—
Stock option grants at fair value			—		—	—		—		2.6		—			(2.6	)
Restricted stock amortized to operations			—		—	—		—		—		—			0.4
Stock options amortized to operations			—		—	—		—		—		—			4.2
Performance related stock awards amortized to operations			—		—	—		—		—		—			0.8
Comprehensive loss:
	Net income for the three months ended March 31, 2005		—		—	—		—		—		—			—
	Currency translation adjustment		—		—	—		—		—		—			—
	Net unrealized gains on derivatives		—		—	—		—		—		—			—
		Total

Balance March 31, 2005			—	$	—	87.8	$	0.9	$	4,382.3	$	(129.7	)	$	(27.0	)

See accompanying notes.

						Accumulated Other Comprehensive Income (Loss)
			Comprehensive Income (Loss)			Foreign Currency Translation			Pension Liability Adjustments			Net Unrealized Income (Loss) on Derivatives			Accumulated (Deficit)			Total
Balance, December 31, 2004						$	562.0		$	(4.1	)	$	(45.9	)	$	(1,834.3	)	$	3,025.7
Exercise of stock options and tax effect							—			—			—			—			2.8
Purchase of shares							—			—			—			—			(129.7	)
Stock option grants at fair value							—			—			—			—			—
Restricted stock amortized to operations							—			—			—			—			0.4
Stock options amortized to operations							—			—			—			—			4.2
Performance related stock awards amortized to operations							—			—			—			—			0.8
Comprehensive loss:
	Net income for the three months ended March 31, 2005		$	1,068.0			—			—			—			1,068.0			1,068.0
	Currency translation adjustment			(254.6	)		(255.2	)		—			0.6			—			(254.6	)
	Net unrealized gains on derivatives			14.3			—			—			14.3			—			14.3

		Total	$	827.7

Balance, March 31, 2005						$	306.8		$	(4.1	)	$	(31.0	)	$	(766.3	)	$	3,731.9

See accompanying notes.

NTL INCORPORATED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1—Basis of Presentation

Basis of Presentation

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

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

Basic and diluted earnings per share is computed by respectively dividing the loss from continuing operations, income from discontinued operations and the net income (loss) by the average number of shares outstanding during the three months ended March 31, 2005 and 2004. Outstanding warrants, options to purchase 3.2 million shares and 0.1 million shares of restricted stock at March 31, 2005 are excluded from the calculation of diluted earnings per share, since the inclusion of such warrants, options and shares is anti-dilutive. The average number of shares outstanding is computed as follows (in millions):

	Three Months Ended March 31,
	2005		2004
Number of shares outstanding at start of period(1)	87.6		86.8
Issues of common stock	—		—
Repurchase of stock	(1.0	)	—

Average number of shares outstanding	86.6		86.8

(1): Excludes 0.1 million shares of restricted stock.

Note 2—Discontinued Operations

On January 31, 2005, we sold our broadcast operations, a provider of commercial television and radio transmission services, to a consortium led by Macquarie Communications Infrastructure Group. Accordingly, we have accounted for the broadcast operations as discontinued operations. Revenue of the broadcast operations, reported in discontinued operations, for the three months ended March 31, 2005 and 2004 was $40.5 million and $131.3 million, respectively. Broadcast's pre-tax income, reported within discontinued operations, for the three months March 31, 2005 and 2004 was $7.8 million and $18.5 million, respectively.

The assets and liabilities of the broadcast operations reported as held-for-sale as of December 31, 2004 include (in millions):

Current assets held for sale
	Accounts receivable, net		$	47.8
	Prepaid expenses			32.7
	Other current assets			—

		Current assets held for sale	$	80.5

Other assets held for sale
	Fixed assets, net		$	838.8
	Reorganization value in excess of amounts allocable to identifiable assets			188.2
	Customer lists, net			366.2
	Investments in and loans to affiliates, net			(10.2	)
	Other assets			1.2

		Other assets held for sale	$	1,384.2

Current liabilities of discontinued operations
	Accounts payable		$	29.0
	Accrued expenses			66.7
	Deferred revenue			48.4

			$	144.1

Long-term liabilities of discontinued operations
	Deferred income taxes		$	0.2
	Other long-term liabilities			3.3

			$	3.5

Note 3—Acquisitions and Disposals

In November 2004, we acquired Virgin Media Group's remaining ownership interests in Virgin Net Limited together with the remaining interests held by existing and former management for £23.9 million, or $43.8 million. The acquisition increased our ownership in Virgin Net Limited from 49% to 100%. Virgin Net Limited provides internet services through the virgin.net ISP.

On May 9, 2005, we sold our operations in the Republic of Ireland, comprising all of the ordinary shares of ntl Communications (Ireland) Limited and ntl Irish Networks Limited and certain additional assets, to MS Irish Cable Holdings B.V., an affiliate of Morgan Stanley & Co. International Limited, for an aggregate purchase price of €325 million, subject to a post-closing adjustment.

Other than in respect of the sale of our operations in the Republic of Ireland, there is no material relationship between us, MS Irish Cable Holdings B.V., Morgan Stanley & Co. International Limited or any of our affiliates, directors or officers.

The Share Sale Agreement relating to ntl Communications (Ireland) Limited and ntl Irish Networks Limited, among NTL Group Limited, ntl Communications (Ireland) Limited, ntl Irish Networks Limited and MS Irish Cable Holdings B.V., and some related agreements are attached as Exhibits 2.1-2.3 to this Form 10-Q.

Note 4—Fixed Assets

Fixed assets consist of (in millions):

			Estimated Useful Life	March 31, 2005			December 31, 2004
				(unaudited)
Operating equipment
	Cable distribution plant		8 – 30 years	$	6,117.8		$	6,171.8
	Switches and headends		8 – 10 years		601.9			610.6
	Customer premises equipment		5 – 10 years		1,577.7			1,524.1
	Other operating equipment		8 – 20 years		124.7			126.5

		Total operating equipment			8,422.1			8,433.0
Other equipment
	Land		—		8.4			8.6
	Buildings		30 years		123.4			125.2
	Leasehold improvements		20 years or, if less, the lease term		129.3			131.2
	Computer infrastructure		3 – 5 years		440.3			438.4
	Other equipment		5 – 12 years		113.3			109.6

		Total other equipment			814.7			813.0

					9,236.8			9,246.0
Accumulated depreciation					(2,624.0	)		(2,409.9	)

					6,612.8			6,836.1
Construction in progress					95.7			97.7

				$	6,708.5		$	6,933.8

Note 5—Intangible Assets

Intangible assets consist of (millions):

			Estimated Useful Life	March 31, 2005		December 31, 2004
				(unaudited)
Intangible assets not subject to amortization:
	Reorganization value in excess of amounts allocable to identifiable assets			$	374.9	$	383.6

Intangible assets subject to amortization:
	Costs
		Non-compete agreements	1 year	$	5.3	$	5.4
		Trademark license	5 years		6.1		6.1
		Customer lists	3 – 5 years		1,089.7		1,105.4

					1,101.1		1,116.9

	Accumulated amortization
		Non-compete agreements			2.2		0.9
		Trademark license			0.5		0.2
		Customer lists			453.3		407.3

					456.0		408.4

				$	645.1	$	708.5

Estimated aggregate amortization expense for each of the five succeeding fiscal years from December 31, 2004 is as follows: $212.6 million in 2005, $206.5 million in 2006, $205.3 million in 2007, $67.2 million in 2008 and $6.5 million in 2009.

The change in the carrying amount of reorganization value in excess of amounts allocable to identifiable assets during the three months ended March 31, 2005 is as follows (in millions) (unaudited):

Reorganization value in excess of amounts allocable to identifiable assets—December 31, 2004	$	383.6
Foreign currency translation adjustments		(5.4	)
Adjustments to deferred tax accounts		(3.3	)

Reorganization value in excess of amounts allocable to identifiable assets—March 31, 2005	$	374.9

The movement in reorganization value in excess of amounts allocable to identifiable assets during the three months ended March 31, 2005 includes a tax benefit of approximately $3.3 million that is attributable to the use of tax attributes that existed as of January 10, 2003, the date that we emerged from Chapter 11 reorganization. The deferred tax asset attributable to these tax attributes had previously been offset by a valuation allowance.

Note 6—Long-Term Debt

Long-term debt consists of (in millions):

		March 31, 2005			December 31, 2004
		(unaudited)
	8.75% Senior Notes due 2014	$	425.0		$	425.0
	9.75% Sterling Senior Notes due 2014		708.3			718.5
	8.75% Euro Senior Notes due 2014		291.8			304.6
	Floating Rate Senior Notes due 2012		100.0			100.0
	Senior Credit Facility		3,144.7			4,148.1
	Capital leases		73.2			74.6
	Other		3.0			3.1

			4,746.0			5,773.9
Less: current portion			(73.5	)		(116.8	)

		$	4,672.5		$	5,657.1

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

		March 31, 2005		December 31, 2004
Floating Rate Senior Notes due 2012		7.66	%	7.07	%
Senior Credit Facility
	Revolving Facility	—		—
	Term Facility	7.10	%	7.13	%

On February 4, 2005, we prepaid £500.0 million, or $942.5 million, of the Term Facility of our Senior Credit Facility.

Note 7—Derivative Instruments and Hedging Activities

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

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

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

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

		March 31, 2005		December 31, 2004
		(unaudited)
Included within other assets:
	Foreign currency forward rate contracts	$	3.2	$	—
	Interest rate swaps		0.1		2.3

		$	3.3	$	2.3

Included within other current liabilities:
	Foreign currency forward rate contracts	$	—	$	3.9

Included within deferred revenue and other long-term liabilities:
	Foreign currency forward rate contracts	$	76.3	$	64.6
	Interest rate swaps		31.1		48.2

		$	107.4	$	112.8

Interest Rate Swaps—Hedging of Interest Rate Sensitive Obligations

As of March 31, 2005 we have entered into interest rate swap agreements to manage the exposure to variability in future cash flows on the interest payments associated with £1,250 million of our outstanding Senior Credit Facility, which accrues at variable rates based on LIBOR. The interest rate swaps allow us to receive interest based on LIBOR in exchange for payments of interest at fixed rates of 5.30% and 5.10%. The interest rate swaps became effective on October 14, 2004 and mature on April 14, 2007. The net settlement of $1.9 million under the hedges is included within interest expense for the three months ended March 31, 2005.

We have designated these interest rate swaps as cash flow hedges under FAS 133, because they hedge against changes in the amount of future cash flows attributable to changes in LIBOR. As of March 31, 2005, we recorded $9.7 million of unrealized gains in accumulated other comprehensive income (loss) as a result of the increase in fair market value of these interest rate hedges. There was no realized gain or loss arising from any ineffectiveness of the hedges.

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

At March 31, 2005, we have entered into cross-currency interest rate swaps with principal amounts of $920.2 million and €151.0 million. We currently hedge the pound sterling value of interest payments on the U.S. dollar denominated 8.75% Senior Notes due 2014, interest payments on our U.S. dollar denominated Floating Rate Notes due 2012, interest payments on the U.S. dollar denominated portion of our Senior Credit Facility, and the interest payments on the euro denominated portion of our Senior Credit Facility. Under these cross-currency swaps, we receive interest in U.S. dollars at a fixed rate of 8.75% and variable rate based on LIBOR, and in euros at variable rate based on LIBOR, in exchange for payments of interest in pound sterling at a fixed rate of 9.42%, and variable rate LIBOR based on the pound sterling equivalent of $920.2 million and €151.0 million. The net settlement of $3.8 million under the hedges is included within interest expense for the three months ended March 31, 2005.

We have designated these cross-currency swaps as cash flow hedges under FAS 133 because they hedge the changes in the pound sterling value of the interest payments on our U.S. dollar denominated Senior Notes and the U.S. dollar and euro denominated portion of our Senior Credit Facility, that result from changes in the U.S. dollar, euro and pound sterling exchange rates. As of March 31, 2005, we recorded $3.2 million of unrealized losses and $7.8 million of unrealized gains in accumulated other comprehensive income (loss) as a result of the changes in fair market value of these cross currency interest rate hedges. There was no realized gain or loss arising from any ineffectiveness of the hedges.

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

As of March 31, 2005, we have entered into foreign currency forward rate contracts to purchase $820.2 million and €151.0 million, maturing in April 2009. These contracts hedge changes in the pound sterling, U.S. dollar and euro value of the principal obligation of the 8.75% Senior Note due 2014, and variable rate LIBOR Senior Credit Facility, caused by changes in the U.S. dollar, euro and pound sterling exchange rates.

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

Net changes in the fair value of the forward rate contracts recognized in (loss) from continuing operations for the three months ended March 31, 2005 and 2004 were as follows (in millions) (unaudited):

		2005			2004
Net change in fair value of forward rate contracts		$	(5.5	)	$	—

Note 8—Fair Values of Financial Instruments

In estimating the fair value disclosures for financial instruments we have used the following methods and assumptions:

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

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

Long-term debt: The carrying amounts of the Senior Credit Facility approximate their fair values. The fair values of our other debt in the following table are based on the quoted market prices.

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

		March 31, 2005				December 31, 2004
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(unaudited)
Cash and cash equivalents		$	1,591.8	$	1,591.8	$	240.0	$	240.0
Restricted cash			33.6		33.6		31.4		31.4
Marketable securities			16.8		16.8		22.1		22.1
Long-term debt:
	8.75% Senior Notes due 2014	$	425.0	$	461.1	$	425.0	$	482.4
	9.75% Sterling Senior Notes due 2014		708.3		722.5		718.5		774.3
	8.75% Euro Senior Notes due 2014		291.8		309.3		304.6		340.3
	Floating Rate Senior Notes Due 2012		100.0		103.3		100.0		103.5
	Senior Credit Facility		3,144.7		3,144.7		4,148.1		4,148.1

Note 9—Stock Based Compensation

Our stock-based employee compensation plans are described more fully in Note 13 of our Annual Report on Form 10-K for the year ended December 31, 2004. Effective as of January 1, 2003, we adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, prospectively for all stock options granted after December 31, 2002. The fair value of each option is estimated on the date of grant using a Black-Scholes option-pricing model. For the three months ended March 31, 2005 and 2004 we expensed $5.4 million and $3.8 million, respectively, related to stock-based compensation.

The following weighted-average assumptions have been used in the Black-Scholes option pricing model for the three months ended March 31, 2005 and 2004:

	2005		2004
Risk-free Interest Rate	3.98	%	3.91	%
Expected Dividend Yield	0	%	0	%
Expected Volatility	0.82		0.86
Expected Lives	3.4		3.5

A summary of the activity and related information for stock options for the three months ended March 31, 2005 and 2004 is as follows:

	2005				2004
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
	(unaudited)
Outstanding—beginning of period	3,140,977		$	22.84	3,229,967		$	13.85
Granted	190,000			66.99	223,500			70.20
Exercised	(50,133	)		14.00	(83,467	)		14.40
Expired	—			—	—			—
Forfeited	(94,400	)		12.88	(17,400	)		12.00

Outstanding—end of period	3,186,444		$	25.95	3,352,600		$	17.60

Exercisable at end of the period	479,810		$	19.03	185,800		$	12.83

Weighted-average grant date fair value of options granted during the period			$	55.77			$	36.12

Exercise prices for options outstanding as of March 31, 2005 are as follows:

Range of Exercise Prices	Number of Options Outstanding	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life	Number of Shares Currently Exercisable	Weighted Average Exercise Price
$0.01	200,000	0.01	9.1	66,666	0.01
$9.00 to $15.00	2,100,544	13.45	8.0	341,544	14.15
$40.00 to $50.00	160,000	45.46	8.9	25,000	42.00
$50.01 to $60.00	128,900	59.09	9.1	6,600	58.32
$60.01 to $70.00	397,000	63.55	9.6	—	—
$70.01 to $80.00	200,000	71.60	8.8	40,000	71.60

	3,186,444	25.95	8.4	479,810	19.03

Note 10—Employee Benefit Plans

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

Components of Net Periodic Benefit Costs

	Three Months Ended
	March 31, 2005			March 31, 2004
	(unaudited)(in millions)
Service costs	$	2.1		$	3.1
Interest costs		7.1			6.4
Expected return on plan assets		(6.6	)		(6.4	)
Amortization of transition obligation		—			—
Amortization of prior service costs		—			—
Recognized actuarial loss		—			—

Net periodic benefit costs	$	2.6		$	3.1

Employer Contributions

We previously disclosed in our financial statements for the year ended December 31, 2004, that we expected to contribute $115.6 million to our pension plans in 2005. For the three months ended March 31, 2005 we contributed $7.9 million to our pension plans. We anticipate contributing an additional $106.2 million to fund our pension plans in 2005 for a total of $114.1 million. On April 1, 2005, in accordance with commitments made in connection with the disposal of our broadcast operations, we made a single contribution of $102.0 million relating primarily to the earned pension and other post-retirement benefits liabilities related to the broadcast operations.

Note 11—Other Charges Including Restructuring Charges

Other charges of $0.7 million for the three months ended March 31, 2005, relate to our announcement to consolidate call centers and include recruitment and training costs. On April 7, 2004, we announced the consolidation over the next eighteen months of our thirteen UK customer service call centers into three equipped to handle anticipated expansion of our customer base. Following an internal review, we decided to retain and develop three specialist call centers, to be supported by four sales and customer support sites, located throughout the UK. As part of the consolidation, we intend to make additional investments in technology and training in order to streamline processes and generate efficiencies. As of March 31, 2005, we have incurred $44.4 million, and we expect to incur a total of approximately $54.8 million, of costs to fully execute this program.

The following table summarizes the restructuring charges incurred and utilized in 2005 (in millions):

	Involuntary Employee Termination and Related Costs			Lease Exit Costs			Agreement Modifications		Other			Total
Balance, December 31, 2004	$	3.3		$	57.7		$	0.3	$	—		$	61.3
Foreign currency exchange translation adjustments		—			(1.0	)		—		—			(1.0	)
Released		—			—			—		—			—
Charged to expense		—			—			—		0.7			0.7
Utilized		(2.3	)		(3.8	)		—		(0.7	)		(6.8	)

Balance, March 31, 2005	$	1.0		$	52.9		$	0.3	$	—		$	54.2

Note 12—Related Party Transactions

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

Refinancing Transactions

In November 2003, we effected an approximately $1.4 billion rights offering in which we distributed to each of our stockholders proportionate rights to purchase shares of our common stock. The rights were transferable, subject to various exceptions. The proceeds from the rights offering were used in part to prepay in full an outstanding principal amount of approximately $599.7 million under our 19% Senior Secured Notes due 2010 and to repay in full a working capital facility with an outstanding principal amount of approximately $616.2 million.

In connection with our rights offering, on September 26, 2003, we entered into two separate participating purchaser agreements with each of W.R. Huff Asset Management Co., L.L.C., on behalf of certain of its affiliates and managed accounts, and Franklin Mutual Advisers LLC, as agent and investment advisor for certain funds. Each participating purchaser held shares of our common stock or was the general partner or investment manager of managed funds and third party accounts that directly held shares of our common stock.

Pursuant to these agreements, W.R. Huff Asset Management Co., L.LC., on behalf of managed accounts and affiliates, and Franklin Mutual Advisers LLC, on behalf of funds for which it acts as an agent or investment advisor, each agreed in advance of the rights offering to exercise the basic subscription privilege for all of the rights distributed to their respective managed accounts, affiliates and funds in the rights offering. The rights offering prospectus indicated to our stockholders that these parties had made advance commitments. Other stockholders did not have to commit to exercise their subscription privileges in advance.

W.R. Huff Asset Management Co., L.L.C., on behalf of managed accounts and affiliates, purchased 4,582,594 shares of our common stock for $40.00 and Franklin Mutual Advisers LLC, on behalf of funds for which it acts as an agent or investment advisor, purchased 2,974,908 shares of our common stock for $40.00 per share. This was the same price offered to all recipients of rights in the offering. W.R. Huff Asset Management Co., L.L.C., on behalf of managed accounts and affiliates, also purchased approximately 25,000 shares of our common stock for $40.00 per share pursuant to the

over-subscription privilege available to all rights holders in the offering. Franklin Mutual Advisers LLC, on behalf of funds for which it acts as an agent or investment advisor, also purchased 35,752 shares of our common stock for $40.00 per share pursuant to the over-subscription privilege available to all rights holders in the offering.

The shares of our common stock that each participating purchaser received upon the exercise of the rights that the participating purchaser had committed to exercise constituted restricted stock for the purposes of the Securities Act of 1933. Accordingly, we entered into a registration rights agreement with each participating purchaser. We filed a registration statement on February 13, 2004 to fulfill our obligations under these agreements.

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

Pursuant to the participating purchaser agreements, and in consideration for their advance commitments in the rights offering, managed accounts and affiliates for which W.R. Huff Asset Management Co., L.L.C. acts as an investment adviser were paid fees totaling $5.3 million on March 24, 2004 and funds for which Franklin Mutual Advisers LLC acts as an agent or investment adviser were paid fees totaling $3.1 million on November 24, 2003 and $0.3 million on March 17, 2004, In consideration for financial and business services, subject to the successful completion of the refinancing, a related entity of W.R. Huff Asset Management Co., L.L.C. was paid $7.5 million on April 27, 2004.

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

Note 13—Comprehensive Income (Loss)

Comprehensive income for the three months ended March 31, 2005 was $827.7 million and comprehensive loss for the three months ended March 31, 2004 was $13.1 million.

Comprehensive income (loss) comprises (in millions) (unaudited):

	Three Months Ended March 31,
	2005			2004
Net income (loss) for period	$	1,068.0		$	(120.3	)
Currency translation adjustment		(254.6	)		107.2
Net unrealized gains on derivatives		14.3			—
Pension liability adjustment		—			—

Comprehensive income (loss)	$	827.7		$	(13.1	)

Note 14—Commitments and Contingent Liabilities

At March 31, 2005, we were committed to pay approximately $327.9 million for equipment and services and for investments in and loans to affiliates. This amount includes approximately $49.7 million for operations and maintenance contracts and other commitments from April 1, 2006 to 2013. The aggregate amount of the fixed and determinable portion of these obligations for the succeeding five fiscal years is as follows (in millions) (unaudited):

Year ended March 31
	2006	$	278.2
	2007		49.7
	2008		—
	2009		—
	2010		—
Thereafter			—

		$	327.9

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

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

Year ended March 31
	2006	$	22.6
	2007		—
	2008		—
	2009		—
	2010		—
Thereafter			15.6

		$	38.2

Note 15—Recent Account Pronouncements

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

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment. Under a rule issued by the Securities and Exchange Commission (SEC) in April 2005, SFAS No. 123(R) was amended and is now effective for public companies for annual, rather than interim, periods that begin after June 15, 2005. SFAS No. 123(R) requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. We adopted, in January 2003, the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, prospectively for all stock options granted after December 31, 2002. In March 2005, the SEC also issued Staff Accounting Bulletin No. 107 (SAB No. 107), which summarizes the staff's views regarding share-based payment arrangements for public companies. We have evaluated the impact of SFAS No. 123(R) and SAB 107 on our results of operations and financial position and do not expect that the impact will be material.

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

Overview

We are one of the leading communications and content distribution companies in the U.K. and the Republic of Ireland, providing broadband internet access, telephone and television services to over 3 million residential customers as of March 31, 2005, including more than 1.4 million broadband customers. We also provide internet and telephone services to our residential customers who are not connected to our cable network via access to other companies' telecommunications networks and via an internet service provider operated by our subsidiary, Virgin Net Limited. We offer what we refer to as a "triple play" bundle of internet, telephone and television services through competitively-priced bundled packages. We also provide a range of voice services to business and public sector organizations, as well as a variety of data communications solutions from high speed internet access to fully managed business communications networks and communication transport services.

Our services are delivered through our wholly-owned local access communications network passing approximately 7.9 million homes in the U.K. and 466,000 homes in the Republic of Ireland. The design and capability of our network provides us with the ability to offer "triple play" bundled services and a broad portfolio of reliable, competitive communications solutions to business customers.

We provide services to three categories of customers: residential customers, business customers and customers in the Republic of Ireland, as follows:

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

Our consolidated revenue for the three months ended March 31, 2005, was $977.8 million. Our revenues by sales channel as a percentage of total revenue for the three months ended March 31, 2005 and 2004 are set forth in the table below:

		Three Months Ended March 31,
		2005		2004
Revenue:
	Consumer	74.3	%	72.0	%
	Business	22.0	%	24.6	%
	Ireland	3.7	%	3.4	%

Total revenue		100.0	%	100.0	%

Revenue

The principal sources of revenue within each sales channel are:

•: Consumer—monthly fees and usage charges for telephone service, cable television service and internet access;

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

Expenses

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

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

Acquisitions and Disposals

In November, 2004, we acquired Virgin Media Group's remaining ownership interests in Virgin Net Limited together with the remaining interests held by existing and former management for £23.9 million, or $43.8 million. The acquisition increased our ownership in Virgin Net Limited from 49% to 100%. Virgin Net Limited provides internet services through the virgin.net ISP.

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

Discontinued Operations

As a result of the sale of our broadcast operations, we are accounting for the broadcast operations as a discontinued operation. Financial information for all prior periods presented in this report is restated accordingly. Accordingly, the results of operations for the broadcast operations have been

excluded from the components of loss from continuing operations and shown in a separate caption, titled income from discontinued operations, and the assets and liabilities of the broadcast operations are reported as held for sale as at December 31, 2004. Revenue from the broadcast operations reported in discontinued operations for the three months ended March 31, 2005 and 2004 was $40.5 million and $131.3 million respectively. Pre-tax income from broadcast operations, reported as pre-tax income from discontinued operations, for the three months ended March 31, 2005 and 2004, was $7.8 million and $18.5 million respectively.

Factors Affecting Our Business

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

Summary Statistics

Selected statistics for U.K. residential customers for the three months ended March 31, 2005, as well as the four prior quarters are set forth in the table below.

			For the Three Months Ended
			March 31, 2005		December 31, 2004		September 30, 2004		June 30, 2004		March 31, 2004
Opening customers(1)			3,136,800		3,164,600		3,082,100		3,070,600		3,007,100
	Data cleanse(2)		—		(20,000	)	2,700		(6,100	)	(6,200	)
Adjusted opening customers			3,136,800		3,144,600		3,084,800		3,064,500		3,000,900
	Customer additions		195,100		185,200		190,700		169,700		191,600
	Customer disconnects		(137,000	)	(151,000	)	(148,900	)	(116,600	)	(121,900	)
		Net customer movement	58,100		34,200		41,700		53,100		69,700
	Reduction in customer count		—		(42,000	)	(23,800	)	(35,500	)	—
Closing customers(1)			3,194,900		3,136,800		3,102,800		3,082,100		3,070,600
Churn(3)			1.4	%	1.6	%	1.6	%	1.2	%	1.3	%
Revenue generating units(2,4)			—
	Television		1,960,000		1,979,600		2,056,100		2,070,600		2,048,900
		DTV	1,387,900		1,382,500		1,414,700		1,408,700		1,371,000
	Telephone		2,646,700		2,638,500		2,681,400		2,693,700		2,705,700
	Broadband		1,443,200		1,330,300		1,174,400		1,094,200		1,028,800
Total Revenue Generating Units			6,049,900		5,948,400		5,911,900		5,858,500		5,783,400
RGU/Customers			1.89x		1.90x		1.91x		1.90x		1.88x
Internet dial-up and DTV access(5)			695,400		754,800		346,900		393,900		468,400
Average revenue per user(6)			£39.58		£41.44		£40.80		£40.10		£40.66

(1): Customer numbers have been updated to include customers off our network and virgin.net customers.
(2): Data cleanse activity, as part of the harmonization of billing systems, resulted in adjustments to the number of recorded customers.

(3): Customer churn is calculated by taking the total disconnects during the month and dividing them by the average number of customers during the month. Average monthly churn during a quarter is the average of the three monthly churn calculations within the quarter.
(4): Each telephone, television and broadband internet subscriber directly connected to our network counts as one RGU. Accordingly, a subscriber who receives both telephone and television service counts as two RGUs. RGUs may include subscribers receiving some services for free or at a reduced rate in connection with incentive offers.
(5): Dial-up internet customers have been adjusted to exclude metered customers who have not used the service within the last 30 days and have been updated to include the ISP, virgin.net.
(6): Average Revenue Per User, or ARPU, is calculated on a monthly basis by dividing total revenue generated from the provision of telephone, cable television and internet services to customers who are directly connected to our network in that month, exclusive of VAT, by the average number of customers in that month. Quarterly ARPU is the average of the three months in that quarter.

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

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

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

Capital Expenditures. Our business requires substantial capital expenditures on a continuing basis for various purposes, including expanding, maintaining and upgrading our network, investing in new customer acquisitions, and offering new services. If we do not continue to invest in our network, our ability to retain and acquire customers may be hindered. Therefore, our liquidity and the availability of cash to fund capital projects are important drivers of our revenue. When our liquidity is restricted, so is our ability to meet our capital expenditure requirements. We believe that our cash on hand, together with cash from operations, and if required, drawdowns under the £250 million revolving tranche of our senior credit facility, will be sufficient for our cash requirements through March 31, 2006.

Labor and overhead costs directly related to the construction and installation of fixed assets, including payroll and related costs of some employees and related rent and other occupancy costs, are

capitalized. The payroll and related costs of some employees that are directly related to construction and installation activities are capitalized based on specific time devoted to these activities where identifiable. In cases where the time devoted to these activities is not specifically identifiable, we capitalized costs based upon estimated allocations. We are continuing to enhance our processes to reduce reliance upon these estimates in determining amounts capitalized. The labor and overhead costs capitalized for the three months ended March 31, 2005 were approximately £8.3 million, or $15.7 million, and for March 31, 2004, approximately £14.8 million, or $27.3 million.

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

	For the Three Months Ended March 31,
	2005			2004
	(in millions, except percentage data)
Labor and overhead costs capitalized	$	15.7		$	27.3
Total operating costs and selling, general and administrative expenses		642.3			639.2
Labor and overhead costs capitalized as a percentage of total operating costs and selling, general and administrative expenses		2.4	%		4.3	%
Purchase of fixed assets		143.2			98.9
Labor and overhead costs capitalized as a percentage of purchase of fixed assets		11.0	%		27.6	%

Currency Movements. We encounter currency exchange rate risks because substantially all of our revenue and operating costs are earned and paid primarily in pounds and, to a lesser extent, euros, but we pay interest and principal obligations with respect to a portion of our existing indebtedness in U.S. dollars. To the extent that the pound declines in value against the U.S. dollar, the effective cost of servicing our U.S. dollar debt will be higher. As of March 31, 2005, $920.2 million, or 19.4% of our long-term debt, was denominated in U.S. dollars. To mitigate the risk from these exposures, we have implemented a cash flow hedging program. The objective of this program is to reduce the volatility of our cash flows and earnings caused by changes in underlying rates.

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

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

Integration of Billing Systems. Our historical growth through acquisitions resulted in our inheriting numerous billing systems, which had many differences in functionality, resulting in inefficiencies in our customer service processes. As a result of our billing systems integration program, we have consolidated the number of billing systems for our residential customers from eleven at the beginning of 2003 to three currently. We continue to evaluate how many billing systems we will utilize for residential and business customers, taking into account the prospects for improved efficiencies and better customer service as well as the impact on the business of additional migration of data. Accordingly, the timing and extent of further integration efforts remain under review. The total cost of the integration program is estimated to be approximately £100 million, or $190 million, of which we have incurred approximately £94 million, or $178 million, through March 31, 2005.

Call Center Consolidation. On April 7, 2004, we announced the consolidation over the next eighteen months of our thirteen U.K. customer service call centers into three equipped to handle anticipated expansion of our customer base. Following an internal review, we decided to retain and develop three specialist call centers, to be supported by four sales and customer support sites, located throughout the U.K. As part of the consolidation, we intend to make additional investments in technology and training in order to streamline processes and generate efficiencies. As of March 31, 2005, we have incurred £24.1 million, or $44.4 million of costs, and we expect to incur a total approximately £29.0 million, or $54.8 million, of costs to execute this program including property costs that will be expensed as the properties are vacated.

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

Consolidated Results of Operations from Continuing Operations

Three months ended March 31, 2005 and 2004

Revenue

For the three months ended March 31, 2005, consolidated revenue increased by 3.5% to $977.8 million from $944.8 million for the three months ended March 31, 2004, and revenue expressed in pounds sterling increased by 0.7% to £517.3 million from £513.6 million during the same period. Our revenue expressed in U.S. dollars and pounds sterling by customer type for the three months ended March 31, 2005 and 2004 are as follows (in millions):

		2005		2004		Increase		2005	2004	Increase
		$		$		%		£	£	%
Revenue:
	Consumer	$	726.8	$	680.3	6.8	%	£384.5	£369.8	4.0	%
	Business		214.8		232.4	(7.6	)%	113.6	126.3	(10.1	)%
	Ireland		36.2		32.1	12.8	%	19.2	17.5	9.7	%

Total revenue		$	977.8	$	944.8	3.5	%	£517.3	£513.6	0.7	%

Consumer: For the three months ended March 31, 2005, revenue from residential customers increased by 6.8% to $726.8 million from $680.3 million for the three months ended March 31, 2004, and revenue from residential customers expressed in pounds sterling increased by 4.0% to £384.5 million from £369.8 million during the same period. This increase is driven largely by growth in the number of broadband internet subscribers as well as the inclusion of revenue from our subsidiary Virgin Net following its acquisition in November 2004. These increases have been offset by lower telephony usage revenue, lower television revenue because of the decline in the number of ATV subscribers exceeding the growth in the number of DTV subscribers and lower take up of premium TV content, and lower revenue from subscribers who are not directly connected to our network.

Business: For the three months ended March 31, 2005, revenue from business customers decreased by 7.6% to $214.8 million from $232.4 million for the three months ended March 31, 2004, and revenue from business customers expressed in pounds sterling decreased by 10.1% to £113.6 million from £126.3 million during the same period. This decrease is caused mainly by the loss of wholesale revenue from Virgin Net which ceased to be a business customer as a consequence of its acquisition by us in November 2004. Growth in wholesale install, new product and project revenue has

been offset by a decline in telephony revenue because of lower access and usage revenue and the loss of revenue following the conclusion of a significant customer contract.

Ireland: For the three months ended March 31, 2005, revenue from Ireland customers increased by 12.8% to $36.2 million from $32.1 million for the three months ended March 31, 2004, and revenue from Ireland customers expressed in pounds sterling increased by 9.7% to £19.2 million from £17.5 million during the same period, and revenue from Ireland customers expressed in euros increased by 7.8% to €27.7 million from €25.7 million during the same period. This increase is because of price rises and growth in the number of subscribers.

Expenses

Operating Costs. For the three months ended March 31, 2005 and 2004, operating costs, including network expenses, increased by 1.8% to $405.9 million from $398.8 million, but operating costs expressed in pounds sterling decreased by 1.0% to £214.7 million from £216.7 million during the same period in 2004. Operating costs as a percentage of revenue decreased to 41.5% for the three months ended March 31, 2005, from 42.2% for the same period in 2004 primarily because of a more favourable mix of consumer revenues, a reduction in telephony interconnect costs driven by lower mobile call rates and lower television content costs.

Selling, general and administrative expenses. For the three months ended March 31, 2005, selling, general and administrative expenses decreased by 1.7% to $236.4 million from $240.4 million for the three months ended March 31, 2004, and selling, general and administrative expenses expressed in pounds sterling decreased by 4.4% to £125.0 million from £130.7 million for the same period in 2004. Selling, general and administrative expenses as a percentage of revenue decreased to 24.2% for the three months ended March 31, 2005, from 25.4% for the same period in 2004. Maintenance costs savings through renegotiated contracts, and reduced levels of set-top box repair and recycling costs have been partly offset by the impact of installs in pre-wired consumer homes where the cost to install is expensed, together with increased allowances for doubtful accounts.

Other charges

Other charges of $0.7 million in the three months ended March 31, 2005 relate to restructuring charges incurred in connection with our call center consolidation program. The costs of $0.7 million relates to the recruitment and training of new employees at the new sites. Other charges of $0.9 million for the three months ended March 31, 2004 relate to initial costs incurred in connection with our call center consolidation program.

The following table summaries the restructuring charges incurred and utilized in the three months ended March 31, 2005 (in millions):

	Involuntary Employee Termination and Related Costs			Lease Exit Costs			Agreement Modifications		Other			Total
Balance, December 31, 2004	$	3.3		$	57.7		$	0.3	$	—		$	61.3
Foreign currency exchange translation adjustments		—			(1.0	)		—		—			(1.0	)
Released		—			—			—		—			—
Charged to expense		—			—			—		0.7			0.7
Utilized		(2.3	)		(3.8	)		—		(0.7	)		(6.8	)

Balance, March 31, 2005	$	1.0		$	52.9		$	0.3	$	—		$	54.2

Depreciation expense

For the three months ended March 31, 2005, depreciation expense decreased to $250.3 million from $269.6 million for the three months ended March 31, 2004. Depreciation expense expressed in pounds sterling decreased to £132.4 million for the three months ended March 31, 2005 from £146.5 million for the same period in 2004. This reduction in depreciation expense is because of the absence of depreciation on some assets that became fully depreciated in 2004.

Amortization expense

For the three months ended March 31, 2005, amortization expense increased to $53.4 million from $48.6 million for the three months ended March 31, 2004. Amortization expense expressed in pounds sterling increased slightly to £28.2 million for the three months ended March 31 2005 from £26.4 million for the same period in 2004. The increase in amortization expense relates to additional intangible assets arising from the acquisition of Virgin Net Limited during the fourth quarter of 2004.

Interest expense

For the three months ended March 31, 2005, interest expense decreased to $132.6 million from $137.9 million for the three months ended March 31, 2004, primarily as a result of the prepayment of $942.5 million of our Senior Credit Facility on February 4, 2005 and the effects of the refinancing transaction in April 2004 that lowered our weighted average interest expense, offset by the accelerated amortization of deferred financing costs resulting from the prepayment on February 4, 2005.

We paid interest in cash of $25.8 million for the three months ended March 31, 2005, and $211.9 million for the three months ended March 31, 2004. The decrease in cash interest payments resulted from the effects of the refinancing transaction in April 2004 that lowered our weighted average interest expense and rescheduled some interest payments.

Foreign currency transaction (losses) gains

Our functional currencies are the pound sterling and, to a significantly lesser extent, the euro, while our reporting currency is the U.S. dollar. The assets and liabilities of our U.K. and Ireland subsidiaries have been translated using the exchange rates in effect at the balance sheet dates, and revenue and expenses have been translated at the average rates for the respective years. Exchange gains and losses on our net equity investment in our subsidiaries are reported as a separate component of other comprehensive income (loss) in shareholders' equity. Foreign currency transaction gains and losses are recorded in the statement of operations.

For the three months ended March 31, 2005, foreign currency transaction losses were $7.4 million as compared with gains of $12.9 million for the three months ended March 31, 2004. These losses for the three months ended March 31, 2005 were primarily because of the effect of changes in the exchange rate on the U.S. dollar and euro denominated debt and unrealized losses of $5.5 million arising from changes in the fair value of our foreign currency forward contracts. Our results of operations will continue to be affected by foreign exchange rate fluctuations since $920.2 million of our indebtedness is denominated in U.S. dollars and €376.0 million is denominated in euros.

Income tax expense

For the three months ended March 31, 2005, income tax expense was $21.7 million as compared with $3.5 million for the same period in 2004.

The tax provision of $21.7 million is primarily comprised of federal taxes of $21.3 million which mainly relate to the use of proceeds arising from the sale of our broadcast operations, including the distribution of funds to NTL Incorporated.

Loss from continuing operations

For the three months ended March 31, 2005, loss from continuing operations was $118.2 million as compared with a loss of $138.8 million for the same period in 2004. The reduction in loss from continuing operations is attributable to our improved operating performance.

Loss from continuing operations per share

Basic and diluted loss from continuing operations per common share for the three months ended March 31, 2005 was $1.36 and for the three months ended March 31, 2004 was $1.60. Basic and diluted loss from continuing operations per share is computed using an average of 86.6 million shares issued in the three months ended March 31, 2005 and an average of 86.8 million shares issued for the same period in 2004. Outstanding warrants, options to purchase 3.2 million shares and 0.1 million shares of restricted stock at March 31, 2005, are excluded from the calculation of diluted loss from continuing operations per share, since the inclusion of such warrants, options and shares is anti-dilutive.

Statement of Cash Flows

Cash flow information provided below includes continuing and discontinued operations.

Three Months Ended March 31, 2005 and 2004

For the three months ended March 31, 2005, cash provided by operating activities increased to $262.5 million from $81.2 million for the three months ended March 31, 2004. This increase was a result of the improvement in operating results and lower interest payments partly offset by reduced cash flows from discontinued operations due to the sale of our broadcast operations on January 31, 2005. For the three months ended March 31, 2005, cash paid for interest, exclusive of amounts capitalized, decreased to $25.8 million from $211.9 million during the same period in 2004. This decrease resulted from lower level of debt, lower weighted average interest rates and re-scheduling of interest payments following our refinancing transaction.

For the three months ended March 31, 2005, cash provided by investing activities was $2,162.1 million compared with cash used in investing activities of $103.8 million for the three months ended March 31, 2004. The cash provided by investing activities in the three months ended March 31, 2005 includes $2.3 billion from the sale of our broadcast operations. Purchases of fixed assets increased to $145.3 million for the three months ended March 31, 2005 from $104.7 million for the same period in 2004 primarily because of the timing of cash payments.

Cash used in financing activities for the three months ended March 31, 2005 was $1,071.8 million and $431.6 million in the three months ended March 31, 2004. The principal components of cash used in financing activities for the three months ended March 31, 2005 were as follows:

•: $129.7 million (£68.7 million) relating to repurchases of our common stock in the open market in February 2005. On January 31, 2005 we announced that we intended to use up to £475 million of the proceeds from the sale of our broadcast operations to repurchase shares of our common stock; and
•: $942.5 million (£500 million) prepayment on our senior credit facility on February 4, 2005.

For the three months ended March 31, 2004, cash used in financing activities resulted primarily from a prepayment on our then-existing senior credit facility of $431.9 million (£234.8 million). In January 2004, we repaid £184.8 million of our then-existing senior credit facility, of which £11.0 million was a mandatory principal payment under the terms of our then-existing senior credit facility. The balance of £173.8 million was a voluntary prepayment of the revolving credit facility. On February 12, 2004, we made an additional £50.0 million voluntary prepayment on this facility.

Liquidity and Capital Resources

In the second quarter of 2004, we completed our refinancing transaction from which we raised approximately $5.9 billion of indebtedness. The refinancing transaction extended the maturities on substantially all of our debt and lowered our weighted average interest expense. In particular:

•: On April 13, 2004, our wholly owned, newly formed subsidiary, NTL Cable PLC, issued £375 million aggregate principal amount of 9.75% senior notes due 2014, $425 million aggregate principal amount of 8.75% senior notes due 2014, €225 million aggregate principal amount of 8.75% senior notes due 2014 and $100 million aggregate principal amount of floating rate senior notes due 2012, together referred to as the senior notes. The senior notes were offered and sold under Rule 144A and Regulation S.
•: Also, on April 13, 2004, we entered into a new fully underwritten £2,425 million senior secured credit facility, which includes a £250 million revolving tranche. On April 14, 2004 we drew down £2,175 million of our senior credit facility, which, together with some of the proceeds from the issuance of the new notes and cash on hand, we used to repay our then-existing senior credit facility.
•: The remaining proceeds from the notes offering, together with cash on hand, were used on May 13, 2004 to redeem the Diamond notes, redeem the Triangle debentures, and pay transaction costs.

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

On February 4, 2005, we repaid £500 million of principal outstanding under our senior credit facility using proceeds from the sale of our broadcast operations.

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

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

Our business is capital intensive, we are highly leveraged, and we have historically incurred operating losses and negative cash flow, partly as a result of our construction costs, operating expenditures and interest costs. We require significant amounts of capital to connect customers to our network, expand and upgrade our network, offer new services and integrate our billing systems and

customer databases. For the period of April 1, 2005 through March 31, 2006, we expect to spend between £280 million and £320 million, or between $530 million and $600 million, on acquiring fixed assets. We must also regularly service interest payments with cash flows from operations. Our ability to sustain operations, meet financial covenants under our indebtedness, and make required payments on our indebtedness could be impaired if we are unable to maintain or achieve various financial performance measures.

Our ability to service our capital needs, to service our obligations under our indebtedness and to fund our ongoing operations will depend upon our ability to generate cash. For the three months ended March 31, 2005, our cash increased by $1,351.8 million; however, this was principally because of the proceeds from the sale of our broadcast operations.

Although we expect to generate positive cash flow in the future, we cannot assure you that this will be the case. We believe that our cash on hand, together with cash from operations and, if required, drawdowns under the £250 million revolving tranche of our credit facility, will be sufficient for our cash requirements through at least March 31, 2006. However, our cash requirements after March 31, 2006 may exceed these sources of cash. This may require that we obtain additional financing in excess of the financing incurred in the refinancing transaction. We may not be able to obtain financing at all, or on favorable terms, or we may be contractually prevented by the terms of the senior notes or our senior credit facility from incurring additional indebtedness.

We are a holding company with no independent operations or significant assets other than our investments in our subsidiaries. As a result, we will depend upon the receipt of sufficient funds from our subsidiaries to meet our obligations. In addition, the terms of our and our subsidiaries' existing and future indebtedness and the laws of the jurisdictions under which those subsidiaries are organized limit the payment of dividends, loan repayments and other distributions to us under many circumstances.

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

Derivative Instruments and Hedging Activities

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

We have entered into a number of derivative instruments with a number of counter-parties to manage our exposures to changes in interest rates and foreign currency exchange rates. The derivative instruments consist of interest rate swaps, cross-currency interest rate swaps and foreign currency forward contracts.

Interest rate swaps

We have entered into a number of interest rate swaps to hedge the variability in future interest payments on the senior credit facility which accrues interest at variable rates based on LIBOR. The interest rate swaps allow us to receive interest based on LIBOR in exchange for payments of interest at fixed rates of 5.30% and 5.10%. The net settlement of $1.9 million under the interest rate swaps is included within interest expense for the three months ended March 31, 2005.

We have designated the interest rate swaps as cash flow hedges under FAS 133 because they hedge against changes in LIBOR. The interest rate swaps are recognized as either assets or liabilities and

measured at fair value. Changes in the fair value are recorded within other comprehensive income (loss).

Cross-currency interest rate swaps

We have entered into a number of cross-currency interest rate swaps to hedge the variability in the pound sterling value of interest payments on the 8.75% Senior Notes due 2014, the interest payments on the Floating Rate Senior Notes due 2012, and variable rate based on LIBOR interest payments on the senior credit facility due 2012, denominated in U.S. dollars and euros. Under the cross-currency interest rate swaps we receive interest in U.S. dollars at a rate of 8.75%, and U.S. dollar and euros at a variable rate based on LIBOR, and we pay interest in pound sterling at a rate of 9.42%, and at a variable rate based on LIBOR. The net settlement of $3.8 million under the cross-currency interest rate swap is included within interest expense for the three months ended March 31, 2005.

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

Foreign currency forward contracts

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

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

Description of Outstanding Indebtedness

The terms of the significant notes and credit facilities issued by our subsidiaries as at March 31, 2005 are summarized below.

Senior Credit Facility

•: The principal amount outstanding is £1,665.0 million or $3,144.7 million. Our senior credit facility comprises a term facility denominated in a combination of pound sterling, euros and U.S. dollars totaling £1,665.0 million or $3,144.7 million, and a revolving facility of £250 million, or $472.0 million. The term facility was fully drawn and the revolving facility was undrawn at December 31, 2004. On February 4, 2005, we voluntarily prepaid £500.0 million, or $942.5 million, of the term facility.
•: Our senior credit facility bears interest at LIBOR plus mandatory costs plus a margin rate. The term facility and the revolving facility have different margin rates. At March 31, 2005, the effective average annual interest rate on the term facility was 7.10%. Interest is payable at least semi-annually.

•: The principal amount outstanding under the term facility is repayable by semi-annual installments beginning September 2004. The voluntary prepayment of £500 million made on February 4, 2005 included the scheduled repayments due in 2005 and reduced the scheduled repayments thereafter.
•: Most of our assets are secured under the senior credit facility.
•: We are subject to financial maintenance tests under our senior credit facility, including a test of liquidity, coverage and leverage ratios applied to us and some of our subsidiaries. As at March 31, 2005, we were in compliance with these covenants.

Senior Notes

•: 9.75% Senior Notes due April 15, 2014—The principal amount at maturity is £375 million. Interest is payable semi-annually on April 15 and October 15 commencing October 15, 2004.
•: 8.75% Senior Notes due April 15, 2014—The principal amount at maturity is $425 million. Interest is payable semi-annually on April 15 and October 15 commencing October 15, 2004.
•: 8.75% Senior Notes due April 15, 2014—The principal amount at maturity is €225 million. Interest is payable semi-annually on April 15 and October 15 commencing October 15, 2004.
•: Floating Rate Senior Notes due October 15, 2012—The principal amount at maturity is $100 million. The interest rate on the floating rate senior notes is three-month LIBOR plus 5.00%. Interest is payable quarterly on January 15, April 15, July 15 and October 15, commencing July 15, 2004.

Contractual Obligations and Commercial Commitments

The following table includes aggregate information about our contractual obligations as of March 31, 2005, and the periods in which payments are due (in millions).

			Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-Term Debt	$	4,672.8	$	72.3	$	434.6	$	638.3	$	3,527.6
Capital Lease Obligations		225.1		8.5		16.3		15.3		185.0
Operating Leases		817.6		84.6		147.1		109.0		476.9
Unconditional Purchase Obligations		327.9		278.2		49.7		—		—
Other Long-Term Obligations		—		—		—		—		—

Total Contractual Cash Obligations	$	6,043.4	$	443.6	$	647.7	$	762.6	$	4,189.5

The following table includes information about our commercial commitments as of March 31, 2005. Commercial commitments are items that we could be obligated to pay in the future. They are not required to be included in the consolidated balance sheet (in millions).

			Amount of Commitment Expiration per Period
Other Commercial Commitments	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Guarantees	$	38.2	$	22.6	$	—	$	—	$	15.6
Lines of Credit		—		—		—		—		—
Standby Letters of Credit		—		—		—		—		—
Standby Repurchase Obligations		—		—		—		—		—
Other Commercial Commitments		—		—		—		—		—

Total Commercial Commitments	$	38.2	$	22.6	$	—	$	—	$	15.6

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, like foreign currency exchange and interest rates. We do not enter into derivative financial instruments for trading or speculative purposes.

We encounter currency exchange rate risks because substantially all of our revenues and operating costs are earned and paid primarily in pounds sterling and, to a lesser extent, euros, but we pay interest and principal obligations with respect to a portion of our existing indebtedness in U.S. dollars. To the extent that the pound declines in value against the U.S. dollar, the effective cost of servicing our U.S. dollar debt will be higher. Changes in the exchange rate result in foreign currency gains or losses. As of March 31, 2005, $920.2 million, or 19.4% of our long-term debt, was in U.S. dollars.

Because the revenues and expenses from our principal operations are denominated primarily in pounds sterling, but we report our financial results in U.S. dollars, our financial results also are impacted by currency fluctuations, which are unrelated to our underlying results of operations. The aggregate potential loss from a hypothetical one percent fall in the U.S. dollar/pound sterling exchange rate is $8.8 million for the three months ended March 31, 2005.

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

The following table provides information as of March 31, 2005 about our long-term fixed and variable interest rate debt that are sensitive to changes in interest rates and foreign currency exchange rates (in millions).

			Year Ended December 31,
		Nine Months Ended December 31, 2005
										Fair Value March 31, 2005
			2006	2007	2008	2009	Thereafter	Total		Fair Value March 31, 2005
Long-term debt including current portion
U.S. Dollars
	Fixed rate	—	—	—	—	—	$425.0	$	425.0	$461.1
	Average interest rate						8.75%
Pounds Sterling
	Fixed rate	—	—	—	—	—	£375.0		£375.0	£382.5
	Average interest rate						9.75%
	Average forward exchange rate						1.89
Euros
	Fixed rate	—	—	—	—	—	€225.0		€225.0	€238.5
	Average interest rate						8.75%
	Average forward exchange rate						1.47
U.S. Dollars
	Variable Rate	—	—	—	—	—	$100.0	$	100.0	$103.3
	Average interest rate						LIBOR plus 5%
Pounds Sterling
	Variable Rate	—	£76.0	£121.1	£164.9	£162.0	£243.0		£767.0	£767.0
	Average interest rate		LIBOR plus 2.25%	LIBOR plus 2.25%	LIBOR plus 2.25%	LIBOR plus 2.25%	LIBOR plus 2.25%
	Average forward exchange rate		1.86	1.86	1.86	1.86	1.86
Pounds Sterling
	Variable Rate	—	—	—	—	—	£585.0		£585.0	£585.0
	Average interest rate						LIBOR plus 3%
	Average forward exchange rate						1.86
Euros
	Variable Rate	—					€151.0		€151.0	€151.0
	Average interest rate						LIBOR plus 3%
	Average forward exchange rate						1.43
U.S. Dollars
	Variable Rate						$395.2	$	395.2	$395.2
	Average interest rate						LIBOR plus 3%

ITEM 4. CONTROLS AND PROCEDURES

(a): Disclosure Controls and Procedures. Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of such period, these controls and procedures are effective to ensure that information required to be disclosed by the registrant in the reports the registrant files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the registrant in the reports that it files or submits is accumulated and communicated to the registrant's management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b): Changes in Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

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

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

Purchases of Equity Securities by the Issuer

Period		(a) Total number of shares purchased	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum approximate dollar value of shares that may yet be purchased under the plans or programs(1)
January 1 – 31, 2005		—	$	—	—	$	898,700,000
February 1 – 28, 2005		1,891,255	$	68.5770	1,891,255		768,956,051
March 1 – 31, 2005		—	$	—	—		768,956,051
April 1 – 30, 2005		1,349,685	$	63.3997	1,349,685		681,832,645

	Total	3,240,940	$	66.4210	3,240,940	$	681,832,645

(1): On January 31, 2005 we announced our plans to repurchase up to an aggregate of £475 million of our common stock. These repurchases could be made in the open market or by another method determined by us. Based upon an exchange rate of $1.8920 to £1.00, the noon buying rate on May 6, 2005, this would mean that approximately $681,832,645 of repurchases could be made in the future. Repurchases would be effected using proceeds from the sale of our broadcast operations, which were paid to us in pounds sterling. Accordingly, the actual maximum amount may differ due to changes in prevailing exchange rates.

On January 31, 2005, we announced our plans to repurchase up to £475 million of our common stock through one or more of the following methods; an open market program, one or more tender offers, or one or more private transactions. We effected repurchases of an aggregate of 3,240,940 shares of our common stock in the open market in the months of February and April, 2005 for an aggregate consideration of approximately $215 million. Since the repurchase program is subject to market factors, our competitive environment, exchange rates and other factors, no assurances can be made as to the method of undertaking repurchases, the schedule of any repurchases or whether we will continue repurchasing shares of our common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

No matters were submitted for a vote to stockholders during the three months ended March 31, 2005.

ITEM 5. OTHER INFORMATION

Further repurchases of common stock

In April 2005, we repurchased 1,349,685 shares of our common stock on the open market for a total consideration of $85.6 million.

Sale of our operations in the Republic of Ireland

On May 9, 2005, we sold our operations in the Republic of Ireland, comprising all of the ordinary shares of ntl Communications (Ireland) Limited and ntl Irish Networks Limited and certain additional

assets, to MS Irish Cable Holdings B.V., an affiliate of Morgan Stanley & Co. International Limited, for an aggregate purchase price of €325 million, subject to a post-closing adjustment.

ITEM 6. EXHIBITS

2.1		Share Sale Agreement relating to ntl Communications (Ireland) Limited and ntl Irish Networks Limited, dated as of May 9, 2005, among ntl Group Limited, ntl Irish Holdings Limited, ntl (Chichester) Limited and MS Irish Cable Holdings B.V.
2.2		Deed of Tax Covenant relating to ntl Communications (Ireland) Limited, ntl Irish Networks Limited and their subsidiaries, dated as of May 9, 2005, among ntl Irish Holdings Limited, ntl (Chichester) Limited and MS Irish Cable Holdings B.V.
2.3		Asset Transfer Agreement, dated as of May 9, 2005, between ntl Group Limited and MS Irish Cable Holdings B.V.
31.1		Certification of Chief Executive Officer, pursuant to Rule 13(a)-14(a) and Rule 15d-14(a) of the Exchange Act.
31.2		Certification of Chief Financial Officer, pursuant to Rule 13(a)-14(a) and Rule 15d-14(a) of the Exchange Act.
32.1		Certifications of CEO and CFO Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
99.1		Press Release, dated May 9, 2005, issued by the Company.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NTL INCORPORATED
Date: May 10, 2005	By:	/s/ SIMON P. DUFFY Simon P. Duffy Chief Executive Officer, President and Director
Date: May 10, 2005	By:	/s/ JACQUES KERREST Jacques Kerrest Chief Financial Officer

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INDEX
PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

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

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

SIGNATURES