TLWT Telewest Global (MM)

Telewest Global, Inc. ("Telewest" or the "Reorganized Company") (NASDAQ: TLWT) today announces second quarter financial results for 2005. Highlights -- Adjusted EBITDA growth of 30% over Q2 04 * -- Operating income increased 140% over Q2 04 * -- Consumer sales division revenue growth of 5% (before VAT recovery) over Q2 04 -- Triple play penetration increased by 11 percentage points over Q2 04 to 32.8% -- Revenue Generating Units grew by 89,000 in the quarter; RGUs per customer grew from 1.97 at Q2 04 to 2.11 at Q2 05 -0- *T Financial highlights ---------------------------------------------------------------------- Telewest Telewest Global, Inc.(a) Global, Inc. Predecessor ---------------------------------------------------------------------- (unaudited in GBP m) Q2 2005 Q1 2005 Q2 2004 Revenue 381 338 326 Operating income 48 24 20 Adjusted EBITDA 158 134 122 Net income/(loss) 19 1 (126) Free cash flow 64 63 37 ---------------------------------------------------------------------- Operational highlights ---------------------------------------------------------------------- Q2 2005 Q1 2005 Q2 2004 Customer net adds 15,000 23,000 10,000 Broadband net adds 66,000 88,000 72,000 RGU net adds 89,000 113,000 84,000 Triple play percentage 32.8% 30.3% 21.8% ---------------------------------------------------------------------- (a) Includes GBP 40m of Revenue, GBP 20m of Operating income, GBP 20m of Adjusted EBITDA, GBP 22m of Net income, and GBP 20m of Free cash flow resulting from (a) the consolidation of sit-up Limited from May 12, 2005, (b) a GBP 16m VAT recovery and (c) a GBP 4m rates (local government tax) rebate. *T Barry Elson, Acting Chief Executive Officer of Telewest Global, Inc., commented: "Telewest has delivered strong financial results and good subscriber growth in television, telephony and broadband internet. Our focus on marketing the bundle has led to increased triple play penetration, now at 33%. Our business sales division has returned to top-line revenue growth and our Content assets, Flextech and UKTV along with sit-up are performing well and continue to increase their market share. We continue to focus upon free cash flow in all of our divisions and remain confident of profitable growth." -0- *T ENQUIRIES Richard Williams Head of investor relations +44 (0) 20 7299 5479 Vani Gupta Investor relations manager +44 (0) 20 7299 5353 Kirstine Cox Head of media +44 (0) 20 7299 5115 Brunswick Diana Drobiner US +212 333 3810 Sarah Tovey UK +44 (0) 20 7396 5388 *T OPERATIONAL REVIEW Cable segment Consumer sales division The consumer sales division had a good quarter with a net increase of 15,000 customer relationships, up 41% on the same quarter in 2004. This was lower than in the previous quarter primarily due to seasonally higher churn. As expected, churn at 1.2%, was higher than the previous quarter. It was affected by a higher level of movers due to a seasonal increase in people moving house and students finishing college and an increase in non-pay churn. Non-pay churn is up as a result of higher acquisition levels in recent periods together with the impact of a tightened credit policy under which we have reduced the time period before we disconnect newly acquired customers who do not adhere to our payment terms. This change is in line with our focus on maintaining profitable growth and managing credit risk. It is likely that these factors will continue to have an impact in the third quarter. Household ARPU (excluding the revenue impact of the GBP 16 million VAT recovery, described below) was GBP 44.86 in the quarter, down from GBP 45.34 in the previous quarter. This reduction was principally attributable to lower telephony usage due to the start of the summer and the continued impact of fixed-to-mobile substitution. A reduction in premium and pay-per-view revenue after the end of the football season also negatively impacted ARPU. Partially offsetting these impacts was the continued growth in RGUs per customer, which grew to 2.11, and triple play penetration, which grew to 32.8%. This reflects our successful focus on profitable growth and on selling bundled products. We remain on target to achieve 40% triple play penetration during 2007. Consumer internet We experienced good growth in the number of broadband subscribers, with 66,000 net additions in the quarter. Growth was slower than in the previous quarter, partly due to the factors indicated above. We believe that we have continued to maintain market share at around 67% in our addressable areas. Growth continued to be strongest in our lowest broadband tier. This impacted the mix of broadband subscribers and broadband ARPU, which fell GBP 0.50 to GBP 19.39 as compared to the previous quarter. Broadband continued to be successful in attracting new customers to Telewest - 49% of broadband installations in the quarter were for customers who were not existing customers. Multi-service penetration remained high in broadband, with 71% of all broadband internet subscribers subscribing to the full "triple play" and 93% subscribing to at least one other product. In September 2005, we will commence the increase of our broadband speeds, which we expect to complete by early 2006. This will be at no additional charge to our customers. The 512Kb tier speed will be increased to 2Mb. The 1Mb tier speed will be increased to 4Mb. The currently existing 2Mb and 4Mb tier speeds will be increased to 10Mb. Consumer television The number of TV subscribers grew by 11,000 in the quarter compared to 8,000 in the previous quarter. This represents the best second quarter performance for four years. TV ARPU (excluding the revenue impact of the GBP 16 million VAT recovery, described below) of GBP 20.78 fell GBP 0.34 compared to the previous quarter, primarily due to reduced premium and pay-per-view revenue at the end of the football season. On July 1, 2005, we increased the price of our two lowest digital TV tiers by GBP 1 each. We expect this to have a positive impact on TV ARPU in the third quarter. The number of digital TV subscribers rose by 40,000 compared to 27,000 in the previous quarter. 89% of our TV subscribers now take our digital service. We estimate that we will be fully digital by the end of 2006. Once complete, this will free up significant amounts of bandwidth in our network, which will allow extra capacity for Video-On-Demand (VOD), High Definition TV, broadband speed increases and other services. Our VOD roll-out is continuing and is now available to approximately 120,000 subscribers in the South West. We branded this service "Teleport" and have expanded the content available. In addition to the "Teleport Movies" service, we launched "Teleport Replay" which gives access to some of the best television from the BBC and others from the preceding seven days. Subscribers to our top tier "Supreme" pack will also receive free access to "Teleport TV", which makes available a range of library content from the BBC, Flextech, Discovery and others. This service costs GBP 5 per month for non-Supreme customers, therefore encouraging upward migration to higher digital tiers. We plan to continue our region-by-region roll-out during the second half of this year and to complete the national roll-out by early 2006. We expect to launch DVR (Digital Video Recorder) services towards the end of this year. Consumer telephony The number of telephony subscribers increased by 12,000 in the quarter. This represents the best second quarter performance for four years. Telephony ARPU was GBP 22.42 in the quarter, down from GBP 23.00 in the previous quarter. This reduction was principally attributable to lower telephony usage due to the start of the summer and the continued impact of fixed-to-mobile substitution. We have continued our strategy of migrating subscribers to flat rate packages to reduce the impact of declining telephony usage. As a result, 38% of all telephony subscribers now subscribe to one of our two main "Talk" packages - "Talk Unlimited" or "Talk Evenings and Weekends". On July 1, 2005 we migrated all of our existing "3-2-1" subscribers to "Talk Weekends" which gives subscribers free local and national calls at weekends. This package is charged at GBP 10.50 per month compared to GBP 10 for the "3-2-1" service. Business sales division Our business sales division had an improved quarter with revenues up GBP 2 million on the previous quarter to GBP 63 million, driven by growth in new business acquired. The division is operating in challenging market conditions and we are encouraged that this is the first growth in quarterly revenues for seven quarters. In particular, data revenues are up 12% compared to the same quarter last year. Content segment Overall revenue in Flextech was GBP 32 million in the quarter, up 14% on the second quarter of 2004, and up GBP 1 million on the previous quarter. Advertising revenue was up 14% on the same quarter last year at GBP 16 million, resulting primarily from an increase in market share, driven by improved viewing share of Flextech's channels. Advertising revenue was down GBP 1 million from the previous quarter after an exceptionally strong first quarter in the UK television advertising market. Subscription revenue remained flat at GBP 11 million compared to both the previous quarter and the same quarter last year. During the quarter we signed a new carriage agreement with NTL for Flextech and UKTV channels to be carried on its platform for three years. Other revenue increased by GBP 2 million compared to both the previous quarter and the same quarter last year principally due to sales of international programming rights and increased commercial revenue. sit-up segment On May 12, 2005, Telewest acquired a controlling interest in sit-up Limited ("sit-up") for an aggregate purchase price of approximately GBP 103 million including fees. Telewest completed the acquisition of 100% of the ordinary shares of sit-up on July 7, 2005. sit-up markets and retails a wide variety of consumer products primarily by means of televised shopping programs using an auction-based format. sit-up's financial results were consolidated into the Group's results from May 12, 2005. As a result, Group revenues of GBP 24 million and Adjusted EBITDA of GBP 0 have been recognized in respect of sit-up in the second quarter. On a pro forma basis, assuming that sit-up was acquired on January 1, 2005, revenues would have been GBP 46 million in the second quarter. Revenues in the same quarter last year were GBP 36 million on a pro forma basis, assuming that sit-up was acquired on January 1, 2004, thus implying pro forma revenue growth of 28%. On the same pro forma basis, Adjusted EBITDA in the quarter would have been GBP 0, flat compared to the same quarter last year. sit-up's revenues increased due to growth in multi-channel penetration and the continued success of its innovative auction-based home shopping channels. sit-up recently launched a third live-auction channel, speed auction tv, on Sky, NTL and Telewest. -0- *T FINANCIAL RESULTS GAAP Financial Measures 3 months ended June 30, ------------------------- (unaudited in GBP millions) 2005 2004 Reorganized Predecessor Company Company ---------------------------------------------------------------------- Operating income 48 20 Net income/(loss) 19 (126) Net cash provided by operating activities 123 88 ---------------------------------------------------------------------- *T Total revenue and consumer sales division revenue include a credit of GBP 16 million resulting from the recovery of Value Added Tax (VAT) from HM Customs and Excise, which had been the subject of a court case and subsequent appeals since 2002. A GBP 16 million charge was taken against revenue in 2002 when the case commenced. This recovery has not been included in any ARPU calculations. Operating income for the second quarter of 2005 was GBP 48 million, up from GBP 20 million for the second quarter of 2004, due principally to the recovery of VAT, revenue growth in our consumer sales division and content segment, and lower SG&A, partially offset by increased depreciation and amortization. SG&A in the second quarter of 2004 was impacted by GBP 12 million of financial restructuring charges compared to GBP 0 in the second quarter of 2005. The second quarter of 2005 was impacted by GBP 7 million of expense relating to sit-up and GBP 3 million of stock-based compensation expense, neither of which arose in the second quarter of 2004. Additionally GBP 4 million of rates (local government tax) rebate was received in the second quarter of 2005 compared with GBP 0 in the second quarter of 2004. The improvement from net loss of GBP 126 million for the second quarter of 2004 to net income of GBP 19 million for the second quarter of 2005 was due principally to significantly reduced interest costs and decreased foreign exchange losses following our predecessor's financial restructuring, and enhanced operating income. Net cash provided by operating activities increased from GBP 88 million for the second quarter of 2004 to GBP 123 million for the second quarter of 2005. This increase arose principally as a result of improvements in operating income. -0- *T Non-GAAP Financial Measures 3 months ended June 30, ------------------------- (unaudited in GBP millions) 2005 2004 Reorganized Predecessor Company Company ---------------------------------------------------------------------- Adjusted EBITDA 158 122 Free cash flow 64 37 ---------------------------------------------------------------------- *T Adjusted EBITDA (earnings before interest, taxation, depreciation, amortization and financial restructuring expenses) for the second quarter of 2005 was GBP 158 million, up 30% as compared to the second quarter of 2004. This increase reflects the recovery of VAT, the rates rebate and increased revenues in the consumer sales division and content segment, and lower operating costs and expenses in the cable segment, partially offset by higher operating costs and expenses in the content segment. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of revenue) has increased from 37.4% to 41.5%. Excluding the VAT recovery and rates rebate, Adjusted EBITDA margin would have been 37.8% for the second quarter of 2005. Stock-based compensation expense ("SBCE") of GBP 3 million was incurred in the second quarter of 2005. SBCE arises as a result of options and restricted stock granted to our employees. SBCE will similarly affect future periods. This is a non-cash item and no such expense was incurred in the second quarter of 2004. Adjusted EBITDA before the deduction of SBCE was GBP 161 million in the second quarter of 2005, an increase of GBP 39 million, or 32%, over the second quarter of 2004 on the same basis. Free cash flow (cash flow from operating activities excluding financial restructuring expenses less capital expenditure) for the three months ended June 30, 2005 was GBP 64 million, compared with GBP 37 million for the three months ended June 30, 2004. The increase was primarily due to increased Adjusted EBITDA. Reconciliations of these and other non-GAAP financial measures to the most directly comparable GAAP financial measures are explained and shown on pages 16 to 19. Costs Total gross margin (excluding the credit of GBP 16 million VAT recovery), was flat for the quarter as compared to 72% for the same quarter last year due primarily to the growing number of high margin broadband subscribers, television price increases and reduced cable segment expenses partially offset by the consolidation of sit-up, which is comparatively a much lower gross margin business. Total gross margin was 73%, including the credit of GBP 16 million VAT recovery. Gross margin was down from 74% in the previous quarter due to the consolidation of the comparatively lower margin sit-up segment. Selling, general and administrative expenses (SG&A) SG&A of GBP 119 million was up GBP 4 million from the previous quarter primarily due to the consolidation of GBP 7 million of sit-up SG&A, partially offset by a rates rebate received of GBP 4 million. This relates to rates charged on our core network. The rebate was for the period April 1, 2001 to March 31, 2005 and is not expected to recur in future quarters. Debt and Capital Resources Capital expenditure was GBP 59 million for the quarter. Capital expenditure has been lower than expected in the first half of the year due to further savings on consumer contract installation costs and the phasing of capital project spend. As a result, capital expenditure for the full year is now expected to be in the range of GBP 220 million to GBP 230 million. During the quarter, certain of Telewest's Flextech subsidiaries entered into a new bank facility related to the acquisition of sit-up. GBP 110 million of the facility has been fully drawn with a GBP 20 million revolver facility, currently undrawn. Interest rates on the facility start at 1.75 percentage points above LIBOR with leverage ratchets down to 1% above LIBOR. The facility matures in June 2009 repayable semi-annually over the life of the facility from December 2005. The facility is secured on the assets of certain Flextech subsidiaries and sit-up along with Telewest's 50% share of the issued equity of UKTV. As at June 30, 2005, net debt was GBP 1,712 million. This consisted of GBP 1,809 million drawn down on our credit facilities and GBP 116 million of leases and other loans, offset by cash balances of GBP 213 million. The GBP 1,809 million drawn amount includes US$150 million and Euro100 million. -0- *T Principal affiliate UKTV (unaudited in GBP millions) 3 months ended June 30, ------------------------- 2005 2004 ---------------------------------------------------------------------- Share of net income of UKTV 7 5 Cash inflow from UKTV, being interest received, repayment of loans made, net, and dividends received 10 6 ---------------------------------------------------------------------- *T Telewest owns 50% of the companies that comprise UKTV, a group of joint ventures formed with BBC Worldwide. UKTV offers a portfolio of multi-channel television channels based on the BBC's program library. Telewest accounts for its interest in UKTV under the equity method and recognized its share of net income of GBP 7 million for the three months ended June 30, 2005. This compares with GBP 5 million share of net income for the three months ended June 30, 2004. UKTV is funded by a loan from Telewest, the balance of which was GBP 178 million at June 30, 2005. Total cash interest and repayments received in respect of this loan by Telewest were GBP 8 million in the second quarter of 2005. Telewest's cash interest receipts from UKTV are recorded in free cash flow but not in Telewest's Adjusted EBITDA. During the three months ended June 30, 2005, we received GBP 2 million of dividends from UKTV. We expect to continue to receive dividends from UKTV as it continues to generate cash. -0- *T Telewest Global, Inc. Consolidated Statements of Operations (amounts in GBP millions, except share and per share data) (unaudited) ---------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, ------------------------- ------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Reorganized Predecessor Reorganized Predecessor Company Company Company Company ---------------------------------------------------------------------- Revenue Consumer Sales Division 262 235 508 470 Business Sales Division 63 63 124 130 ---------------------------------------------------------------------- Total Cable Segment 325 298 632 600 Content Segment 32 28 63 54 sit-up Segment 24 - 24 - ---------------------------------------------------------------------- Total revenue 381 326 719 654 ---------------------------------------------------------------------- Operating costs and expenses Cable segment expenses 70 74 139 153 Content segment expenses 17 18 37 34 sit-up segment expenses 17 - 17 - Depreciation 101 90 202 184 Amortization 9 - 18 - Selling, general and administrative expenses 119 124 234 244 ---------------------------------------------------------------------- 333 306 647 615 ---------------------------------------------------------------------- Operating income 48 20 72 39 Other income/(expense) Interest income 7 8 11 15 Interest expense (including amortization of debt discount) (41) (121) (70) (230) Foreign exchange (losses)/gains, net (3) (37) (7) 40 Share of net income of affiliates 7 5 13 8 Other, net 1 - 1 (1) ---------------------------------------------------------------------- Income/(loss) before income taxes 19 (125) 20 (129) Income tax charge - (1) - (1) ---------------------------------------------------------------------- Net income/(loss) 19 (126) 20 (130) ---------------------------------------------------------------------- Basic and diluted earnings per share of common stock GBP 0.08 GBP 0.08 Weighted average number of shares of common stock - (millions) 245 245 ---------------------------------------------------------------------- Telewest Global, Inc. Consolidated Balance Sheets (amounts in GBP millions, except share and per share data) (unaudited) ---------------------------------------------------------------------- June 30, December 31, 2005 2004 ------------ ------------ Reorganized Reorganized Company Company ---------------------------------------------------------------------- Assets Cash and cash equivalents 213 68 Restricted cash 16 26 Trade receivables 118 108 Other receivables 32 33 Prepaid expenses 38 17 Inventory for re-sale, net 15 - Other assets 4 - ---------------------------------------------------------------------- Total current assets 436 252 Investments accounted for under the equity method 286 304 Property and equipment, net 2,888 2,974 Intangible assets, net 296 314 Reorganization value in excess of amounts allocable to identifiable assets 425 425 Goodwill 142 - Programming inventory 30 24 Deferred financing costs (net of amortization of GBP 3 million; 2004: GBP 0 million) 52 51 ---------------------------------------------------------------------- Total assets 4,555 4,344 ---------------------------------------------------------------------- Liabilities and shareholders' equity Accounts payable 153 93 Other liabilities 446 424 Debt repayable within one year 55 21 Capital lease obligations repayable within one year 45 38 ---------------------------------------------------------------------- Total current liabilities 699 576 Other liabilities 6 - Deferred taxes 105 105 Debt repayable after more than one year 1,760 1,686 Capital lease obligations repayable after more than one year 65 69 ---------------------------------------------------------------------- Total liabilities 2,635 2,436 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Minority interest (1) (1) ---------------------------------------------------------------------- Shareholders' equity Preferred stock - US$0.01 par value; authorized 5,000,000 shares, issued none (2005 and 2004) - - Common stock - US$0.01 par value; authorized 1,000,000,000 shares, issued 245,171,054 (2005) and 245,080,629 (2004) 1 1 Additional paid-in capital 1,960 1,954 Accumulated other comprehensive loss (14) - Accumulated deficit (26) (46) ---------------------------------------------------------------------- Total shareholders' equity 1,921 1,909 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Total liabilities and shareholders' equity 4,555 4,344 ---------------------------------------------------------------------- Telewest Global, Inc. Consolidated Statements of Cash Flows (amounts in GBP millions) (unaudited) ---------------------------------------------------------------------- Six months ended June 30, ------------------------- 2005 2004 ------------ ------------ Reorganized Predecessor Company Company ---------------------------------------------------------------------- Cash flows from operating activities Net income/(loss) 20 (130) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation 202 184 Amortization 18 - Amortization of deferred financing costs and debt discount 3 30 Deferred tax charge - 1 Fair value adjustment of interest rate swaps (10) - Accretion expense 1 - Unrealized losses/(gains) on foreign currency translation 7 (40) Stock-based compensation expense 6 - Share of net income of affiliates (9) (8) Profit on disposal of assets (1) - Amounts written off investments - 1 Changes in operating assets and liabilities, net of effect of acquisition of subsidiaries: Change in receivables (9) 9 Change in prepaid expenses (19) (25) Change in other assets (11) (3) Change in accounts payable 35 27 Change in other liabilities 6 124 ---------------------------------------------------------------------- Net cash provided by operating activities 239 170 ---------------------------------------------------------------------- Cash flows from investing activities Capital expenditure (113) (127) Proceeds from disposal of fixed assets 2 - Cash paid for acquisition of subsidiaries, net of cash acquired (107) - Repayment/(advance) of loans made to affiliates, net 9 (4) Disposal of affiliate - 7 Proceeds from sale and leaseback 12 - ---------------------------------------------------------------------- Net cash used in investing activities (197) (124) ---------------------------------------------------------------------- Cash flows from financing activities Release of restricted cash 10 2 Proceeds from new debt 110 - Repayment of debt (6) - Cash paid for financing costs (4) - Principal element of capital lease repayments (19) (23) Proceeds from the issue of redeemable preferred stock 12 - ---------------------------------------------------------------------- Net cash provided by/ (used in) financing activities 103 (21) ---------------------------------------------------------------------- Net increase in cash and cash equivalents 145 25 Cash and cash equivalents at beginning of period 68 427 ---------------------------------------------------------------------- Cash and cash equivalents at end of period 213 452 ---------------------------------------------------------------------- Supplementary cash flow information: Cash paid for interest, net 41 61 Cash received for income taxes - (2) Telewest Global, Inc. Selected Quarterly Operating Data - unaudited The following table sets out certain operating data for the three-month periods shown. The information represents combined operating statistics for all of our franchises. ---------------------------------------------------------------------- Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 2005 2005 2004 2004 2004 Predecessor Reorganized Company Company -------------------------------------------- ----------- Customer Data ------------- Homes passed and marketed (1) 4,698,510 4,694,480 4,686,794 4,686,799 4,682,777 Total customer relationships (2) 1,837,191 1,822,530 1,799,556 1,769,263 1,752,553 Customer penetration 39.1% 38.8% 38.4% 37.7% 37.4% Customer additions 79,365 78,695 89,452 78,707 67,118 Customer disconnections (64,704) (55,721) (59,159) (61,997) (56,709) Net customer additions 14,661 22,974 30,293 16,710 10,409 Revenue Generating Units ("RGUs")(3) 3,873,792 3,784,835 3,671,402 3,539,185 3,447,254 RGUs per customer 2.11 2.08 2.04 2.00 1.97 Net RGU additions 88,957 113,433 132,217 91,931 84,014 Average monthly revenue per customer(4) GBP 44.86 GBP 45.34 GBP 45.13 GBP 45.05 GBP 44.98 Average monthly churn(5) 1.2% 1.0% 1.1% 1.2% 1.1% ---------------------------------------------------------- ----------- Bundled customers ----------------- Customers subscribing to two or more services 1,434,161 1,409,998 1,379,057 1,338,632 1,312,842 Customers subscribing to three services ("triple play") 602,430 552,307 492,789 431,290 381,859 Percentage of dual or triple play customers 78.1% 77.4% 76.6% 75.7% 74.9% Percentage of triple play customers 32.8% 30.3% 27.4% 24.4% 21.8% ---------------------------------------------------------- ----------- Consumer Television ------------------- Television ready homes passed and marketed 4,698,510 4,694,480 4,686,794 4,686,799 4,682,777 Total subscribers 1,331,742 1,320,487 1,312,825 1,297,304 1,288,272 Quarterly net additions 11,255 7,662 15,521 9,032 2,475 Television penetration 28.3% 28.1% 28.0% 27.7% 27.5% Digital ready homes passed and marketed 4,501,169 4,451,420 4,420,388 4,405,162 4,401,860 Digital subscribers 1,189,521 1,149,641 1,122,301 1,078,623 1,052,855 Quarterly net digital additions 39,880 27,340 43,678 25,768 23,096 Penetration of digital subscribers to total subscribers 89.3% 87.1% 85.5% 83.1% 81.7% Average monthly churn (5) 1.5% 1.4% 1.5% 1.4% 1.3% Average monthly revenue per subscriber (4) GBP 20.78 GBP 21.12 GBP 20.88 GBP 20.72 GBP 20.53 ---------------------------------------------------------- ----------- Consumer Telephony ------------------ Telephony ready homes passed and marketed 4,694,030 4,691,704 4,683,153 4,682,002 4,677,861 "3-2-1" and "Talk Weekends" telephony subscribers 1,045,139 1,053,226 1,080,893 1,082,125 1,105,056 "Talk Unlimited" and "Talk Evenings and Weekends" subscribers 644,073 624,417 579,448 552,534 516,313 Total subscribers 1,689,212 1,677,643 1,660,341 1,634,659 1,621,369 Quarterly net additions 11,569 17,302 25,682 13,290 9,222 Telephony penetration 36.0% 35.8% 35.5% 34.9% 34.7% Average monthly churn(5) 1.2% 1.0% 1.1% 1.2% 1.1% Average monthly revenue per subscriber(4) GBP 22.42 GBP 23.00 GBP 23.18 GBP 23.53 GBP 23.70 Telewest Global, Inc. Selected Quarterly Operating Data - unaudited (continued) ---------------------------------------------------------------------- Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 2005 2005 2004 2004 2004 Predecessor Reorganized Company Company -------------------------------------------- ----------- Consumer Internet ----------------- Broadband ready homes passed and marketed 4,501,169 4,451,420 4,420,388 4,405,162 4,401,860 Total metered dial-up internet subscribers 25,048 29,376 33,417 39,196 47,884 Total unmetered dial-up internet subscribers 65,516 85,909 107,220 127,745 151,457 Total broadband internet subscribers 852,838 786,705 698,236 607,222 537,613 Quarterly net broadband internet additions 66,133 88,469 91,014 69,609 72,317 Broadband internet penetration 18.9% 17.7% 15.8% 13.8% 12.2% Average monthly broadband internet churn (5) 1.3% 1.0% 1.0% 1.3% 1.2% Average monthly revenue per broadband internet subscriber (4) GBP19.39 GBP19.89 GBP20.23 GBP21.50(a) GBP22.45(a) ---------------------------------------------------------- ----------- NCTA Capital expenditure(6) GBP m GBP m GBP m GBP m GBP m ------------ ------------------------------------------ ----------- Customer premise equipment ("CPE") 18 16 25 19 23 Scaleable infrastructure 12 7 14 8 7 Commercial 11 8 8 12 9 Line extensions 1 2 1 1 1 Upgrade/rebuild 3 6 10 1 4 Support capital 12 13 7 10 9 ------------------------------------------ ----------- Total NCTA Capital expenditure 57 52 65 51 53 Non NCTA Capital expenditure: Content Segment 1 - 1 - 1 sit-up Segment 1 - - - - Change in capital accruals - 2 (2) (1) 7 ---------------------------------------------------------- ----------- Total Capital expenditure 59 54 64 50 61 ---------------------------------------------------------- ----------- (a) The product ARPUs for broadband internet in these quarters have been adjusted to reflect the full value of promotional discounts offered. (1) The number of homes within our service area that can potentially be served by our network with minimal connection costs. Information concerning the number of homes "passed and marketed" is based on physical counts made by us during network construction or marketing phases. (2) The number of customers who receive at least one of our television, telephony or broadband internet services. (3) Revenue Generating Units ("RGUs"), refer to subscriptions to each of our analog television, digital television, telephony and broadband internet services on an individual basis. For example, when we provide one customer with digital television and broadband internet services, we record two RGUs. Dial-up internet services, second telephone lines and additional TV outlets are not recorded as RGUs although they generate revenue for us. (4) Average monthly revenue per customer (often referred to as "ARPU" or "Average Revenue per User") represents the consumer sales division's total quarterly revenue of residential customers, including installation revenues, but excluding the recovery of GBP 16 million VAT, divided by the average number of residential customers in the quarter, divided by three. The same methodology is used for television, telephony and broadband internet ARPU. (5) Average monthly churn represents the total number of customers who disconnected during the quarter divided by the average number of customers in the quarter, divided by three. Subscribers who move premises within our addressable areas (known as "Moves and Transfers") and retain our services are excluded from this churn calculation. (6) In order to provide comparable data to the US and UK cable industry, and in accordance with NCTA (National Cable & Telecommunications Association) reporting guidelines, Telewest has allocated capital expenditure to the standard reporting categories as per below. Telewest is not a member of the NCTA and is providing this information solely for comparative purposes. CPE - costs incurred at the customer's house to secure new customers, revenue units and additional bandwidth revenues. Includes connections to previously unserved houses in accordance with SFAS 51 and customer premise equipment. Scaleable infrastructure - costs, not CPE or network related, to secure growth of new customers, revenue units and additional bandwidth revenues or provide service enhancements. Commercial - costs to provide high-speed data and telephony services to businesses and institutions. Includes network and infrastructure expenditures. Line extensions - network costs associated with entering new service areas including costs of fiber, coaxial cable, amplifiers, electronic equipment, make-ready and design/engineering. Upgrade/rebuild - costs to modify or replace existing coax and fiber networks. Includes materials, contract labor, in-house labor, make-ready, design engineering and other miscellaneous costs associated with all aspects of the construction of the plant miles along an existing route. Benefits include added bandwidth and/or reliability/extended life to the existing plant. Support capital - costs associated with the replacement or enhancement of non-network assets due to obsolescence and wear-out, replacement of network assets unrelated to line extensions, rebuild/upgrade or customer growth. *T Telewest Global, Inc. Supplemental Analysis -- Forward-Looking Statements -- Fresh-Start Reporting -- Pro forma Consolidated Statements of Operations -- Quarterly Historical Information -- Segmental Information -- Use of Non-GAAP Financial Measures Forward-Looking Statements Some of the statements in this earnings release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, potential growth (including customer net additions and average monthly revenue per customer), product introductions and innovation, meeting customer expectations, planned operational changes (including product improvements and the impact of price increases), expected capital expenditures, future cash sources and requirements, liquidity, customer service improvements, cost savings and the benefits of acquisitions or joint ventures - potential and/or completed - that involve known and unknown risks, uncertainties and other factors that may cause our or our businesses' actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," or "continue," or the negative of those terms or other comparable terminology. There are a number of important factors that could cause our actual results and future development to differ materially from those expressed or implied by those forward-looking statements. These factors include those discussed under the caption "Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2004 (No. 000-50886) filed by Telewest Global, Inc. on March 22, 2005 with the United States Securities and Exchange Commission, although those risk factors may not be exhaustive. Other sections of this earnings release may describe additional factors that could adversely impact our business and financial performance. We operate in a continually changing business environment, and new risk factors may emerge from time to time. Management cannot anticipate all of these new risk factors, nor can they definitively assess the impact, if any, of new risk factors on us or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Unless otherwise required by applicable securities laws, we assume no obligation to publicly update or revise any of the forward-looking statements after the date of this earnings release to reflect actual results, whether as a result of new information, future events or otherwise. Fresh-Start Reporting As a result of the completion of the financial restructuring of Telewest Communications plc, our predecessor, on July 15, 2004, Telewest adopted fresh-start reporting in accordance with Statement of Position 90-7, "Reporting by Entities in Reorganization under the Bankruptcy Code", ("SOP 90-7"), with effect from July 1, 2004. Under SOP 90-7, Telewest established a new accounting basis, recording our predecessor's assets at their fair value and liabilities at the present value of amounts to be paid. A reconciliation of our predecessor's balance sheet at June 30, 2004 to the fresh-start balance sheet at July 1, 2004, is included in Telewest's Annual Report on Form 10-K for the year ended December 31, 2004. As a result of the adoption of fresh-start reporting, our balance sheets and results of operations subsequent to July 1, 2004 will not be comparable in many material respects to the balance sheets or results of operations reflected in our predecessor's historical financial statements for periods prior to July 1, 2004. -0- *T Telewest Global, Inc. Pro forma Consolidated Statements of Operations (a) (amounts in GBP millions, except share and per share data) (unaudited) ---------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, ------------------------- ------------------------- 2005 2004 2005 2004 ------------- ----------- ------------ ------------ Reorganized Predecessor Reorganized Predecessor Company (a) Company (a) Company (a) Company (a) ---------------------------------------------------------------------- Revenue Consumer Sales Division 262 235 508 470 Business Sales Division 63 63 124 130 ---------------------------------------------------------------------- Total Cable Segment 325 298 632 600 Content Segment 32 28 63 54 sit-up Segment 46 36 98 76 ---------------------------------------------------------------------- Total revenue 403 362 793 730 ---------------------------------------------------------------------- Operating costs and expenses Cable segment expenses 70 74 139 153 Content segment expenses 17 18 37 34 sit-up segment expenses 34 27 72 57 Depreciation 101 91 203 185 Amortization 9 - 18 - Selling, general and administrative expenses 124 133 251 262 ---------------------------------------------------------------------- 355 343 720 691 ---------------------------------------------------------------------- Operating income 48 19 73 39 Other income/(expense) Interest income 7 7 11 14 Interest expense (including amortization of debt discount) (41) (122) (72) (233) Foreign exchange (losses)/gains, net (3) (37) (7) 40 Share of net income of affiliates 7 4 12 7 Other, net 1 - 1 (1) ---------------------------------------------------------------------- Income/(loss) before income taxes 19 (129) 18 (134) Income tax charge - (1) - (1) ---------------------------------------------------------------------- Net income/(loss) 19 (130) 18 (135) ---------------------------------------------------------------------- Basic and diluted earnings per share of common stock GBP 0.08 GBP 0.07 Weighted average number of shares of common stock - (millions) 245 245 ---------------------------------------------------------------------- (a) To show pro forma effect as if sit-up Limited had been purchased on January 1, 2005 and 2004, for the periods ended June 30, 2005 and 2004, respectively. Pro forma adjustments reflect the revenue, segment expenses, depreciation and SG&A for sit-up for the periods January 1, 2005 to May 11, 2005 and January 1, 2004 to June 30, 2004. Interest income and expense have been adjusted to reflect the interest income earned by sit-up during the above periods and the additional interest expense that would have been incurred by Telewest to fund the acquisition at January 1, 2005 and 2004, respectively. Share of net income of affiliates has been adjusted to reverse the equity accounting of sit-up for the periods presented. Telewest Global, Inc. Quarterly Historical Information (amounts in GBP millions, except share and per share data) ---------------------------------------------------------------------- Three months ended ------------------------------------------------- Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, 2005 2005 2004 2004 2004 Predecessor Reorganized Company Company ---------------------------------------------------------- ----------- Revenue Consumer Sales Division 262 246 241 238 235 Business Sales Division 63 61 63 63 63 ---------------------------------------------------------- ----------- Total Cable Segment 325 307 304 301 298 Content Segment 32 31 32 27 28 sit-up Segment 24 - - - - ---------------------------------------------------------- ----------- Total revenue 381 338 336 328 326 ---------------------------------------------------------- ----------- Operating costs and expenses Cable segment expenses 70 69 69 72 74 Content segment expenses 17 20 25 17 18 sit-up segment expenses 17 - - - - Depreciation 101 101 101 103 90 Amortization 9 9 9 9 - ---------------------------------------------------------- ----------- Cost of revenue 214 199 204 201 182 Selling, general and administrative expenses 119 115 114 117 124 ---------------------------------------------------------- ----------- 333 314 318 318 306 ---------------------------------------------------------- ----------- Operating income 48 24 18 10 20 Other income/(expense) Interest income 7 4 5 6 8 Interest expense (including amortization of debt discount) (41) (29) (47) (49) (121) Foreign exchange (losses)/gains, net (3) (4) 3 - (37) Share of net income of affiliates 7 6 4 4 5 Other, net 1 - - - - ---------------------------------------------------------- ----------- Income/(loss) before income taxes 19 1 (17) (29) (125) Income tax charge - - - - (1) ---------------------------------------------------------- ----------- Net income/(loss) 19 1 (17) (29) (126) ---------------------------------------------------------- ----------- Basic and diluted earnings/(loss) per share of common stock GBP 0.08 - GBP(0.07) GBP(0.12) Weighted average number of shares of common stock - (millions) 245 245 245 245 ---------------------------------------------------------- ----------- Telewest Global, Inc. Segment Information (amounts in GBP millions) Three months ended Six months ended June 30, June 30, ------------------------- ------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Reorganized Predecessor Reorganized Predecessor Company Company Company Company ---------------------------------------------------------------------- CABLE SEGMENT Consumer Sales Division revenue 262 235 508 470 Business Sales Division revenue 63 63 124 130 ---------------------------------------------------------------------- Third party revenue 325 298 632 600 Operating costs and expenses (before financial restructuring charges) (174) (181) (353) (369) ---------------------------------------------------------------------- Adjusted EBITDA including inter- segment costs 151 117 279 231 Inter-segment costs (1) 2 2 5 5 ---------------------------------------------------------------------- Adjusted EBITDA 153 119 284 236 ---------------------------------------------------------------------- CONTENT SEGMENT Content Segment revenue 34 30 68 59 Operating costs and expenses (before financial restructuring charges) (27) (25) (55) (46) ---------------------------------------------------------------------- Adjusted EBITDA including inter- segment revenues 7 5 13 13 Inter-segment revenues (1) (2) (2) (5) (5) ---------------------------------------------------------------------- Adjusted EBITDA 5 3 8 8 ---------------------------------------------------------------------- SIT-UP SEGMENT sit-up Segment revenue 24 - 24 - Operating costs and expenses (before financial restructuring charges) (24) - (24) - ---------------------------------------------------------------------- Adjusted EBITDA - - - - ---------------------------------------------------------------------- Reconciliation to operating income Cable Segment Adjusted EBITDA 153 119 284 236 Content Segment Adjusted EBITDA 5 3 8 8 sit-up Segment Adjusted EBITDA - - - - ---------------------------------------------------------------------- Adjusted EBITDA 158 122 292 244 Financial restructuring charges - (12) - (21) Depreciation (101) (90) (202) (184) Amortization (9) - (18) - ---------------------------------------------------------------------- Operating income 48 20 72 39 ---------------------------------------------------------------------- (1) Inter-segment revenues are revenues of our Content Segment which are costs in our Cable Segment and which are eliminated on consolidation. *T Telewest Global, Inc. Use of Non-GAAP Financial Measures Adjusted EBITDA Telewest's primary measure of income or loss for each of our reportable segments is Adjusted EBITDA. Our management, including our chief operating decision-maker, considers Adjusted EBITDA an important indicator of the operational strength and performance of our reportable segments. Adjusted EBITDA for each segment and in total excludes the impact of costs and expenses that do not directly affect our cash flows or do not directly relate to the operating performance of that segment. These costs and expenses include depreciation, amortization, financial restructuring charges, interest expense, foreign exchange gains/(losses), share of net income/(loss) from affiliates and income taxes. It is the belief of management that the legal and professional costs relating to our financial restructuring are not characteristic of our underlying business operations. Furthermore management believes that some of the components of these charges are not directly related to the performance of a single reportable segment. Adjusted EBITDA is not a financial measure recognised under GAAP. This measure is most directly comparable to the GAAP financial measure net income/(loss). Some of the significant limitations associated with the use of Adjusted EBITDA as compared to net income/(loss) are that Adjusted EBITDA does not reflect the amount of required reinvestment in depreciable fixed assets, financial restructuring charges, interest expense, foreign exchange gains or losses, income taxes expense or benefit and similar items on our results of operations. We believe Adjusted EBITDA is helpful for understanding our performance and assessing our prospects for the future, and that it provides useful supplemental information to investors. In particular, this non-GAAP financial measure reflects an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the reconciliations to net income/(loss), shown below, provide a more complete understanding of factors and trends affecting our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare Adjusted EBITDA with other companies' non-GAAP financial measures that have the same or similar names. The presentation of this supplemental information is not meant to be considered in isolation or as a substitute for net cash provided by operating activities, operating income/(loss), net income/(loss), or other measures of financial performance reported in accordance with GAAP. Free cash flow Telewest's primary measure of cash flow is free cash flow. Free cash flow is defined as net cash provided by/(used in) operating activities excluding cash paid for financial restructuring charges, less capital expenditure. Our management, including our chief operating decision-maker, considers free cash flow an important indicator of the operational performance of our business. Free cash flow is not a financial measure recognized under GAAP. This measure is most directly comparable to the GAAP financial measure net cash provided by/(used in) operating activities. The significant limitation associated with the use of free cash flow as compared to net cash provided by/(used in) operating activities is that free cash flow does not consider the amount of cash required to pay financial restructuring charges. We believe free cash flow is helpful for understanding our performance and it provides useful supplemental information to investors. Because non-GAAP financial measures are not standardized, it may not be possible to compare free cash flow with other companies' non-GAAP financial measures that have the same or similar names. The presentation of this supplemental information is not meant to be considered in isolation or as a substitute for net cash provided by/(used in) operating activities, or other measures of financial performance reported in accordance with GAAP. Net debt Net debt is defined as the sum of debt repayable, capital lease obligations and accrued interest payable on notes and debentures less cash and cash equivalents. The Company's management, including its chief operating decision-maker, considers net debt an important measure of the financing obligations undertaken by the Company. Net debt is not a financial measure recognized under GAAP. This measure is most directly comparable to the GAAP financial measure, total liabilities. The significant limitation associated with the use of net debt as compared total liabilities is that net debt does not consider current liabilities due in respect of accounts payable and other liabilities. It also assumes that all of cash and cash equivalents is available to service debt. Telewest believes net debt is helpful for understanding its entire net debt funding obligations and it provides useful supplemental information to investors. Because non-GAAP financial measures are not standardized, it may not be possible to compare net debt with other companies' non-GAAP financial measures that have the same or similar names. The presentation of this supplemental information is not meant to be considered in isolation or as a substitute for total liabilities, or other measures of financial performance reported in accordance with GAAP. Telewest Global, Inc. Use of Non-GAAP Financial Measures (continued) Average monthly revenue per customer or "Household ARPU (excluding impact of the GBP 16 million VAT recovery)" For a three month period, Household ARPU (excluding impact of the GBP 16 million VAT recovery) represents the consumer sales division's total quarterly revenue of residential customers, including installation revenues, but excluding the recovery of GBP 16 million VAT, divided by the average number of residential customers in the quarter, divided by three. For a six month period, Household ARPU (excluding impact of the GBP 16 million VAT recovery) represents the consumer sales division's total half yearly revenue of residential customers, including installation revenues, but excluding the recovery of GBP 16 million VAT, divided by the average number of residential customers in the half year, divided by six. Household ARPU (excluding impact of the GBP 16 million VAT recovery) is not a financial measure recognized under GAAP. This measure is most directly comparable to the GAAP financial measure, Household ARPU. The significant limitation associated with the use of Household ARPU (excluding impact of the GBP 16 million VAT recovery) as compared to Household ARPU is that Household ARPU (excluding impact of the GBP 16 million VAT recovery) does not consider GBP 16 million of revenues received in respect of recovered VAT. Telewest believes Household ARPU (excluding impact of the GBP 16 million VAT recovery) is helpful for understanding the trend in respect of its residential revenues derived from customers during the periods and it provides useful supplemental information to investors. The VAT recovery is not expected to recur. Because non-GAAP financial measures are not standardized, it may not be possible to compare Household ARPU (excluding impact of the GBP 16 million VAT recovery) with other companies' non-GAAP financial measures that have the same or similar names. The presentation of this supplemental information is not meant to be considered in isolation or as a substitute for Household ARPU, or other measures of financial performance reported in accordance with GAAP. Average monthly revenue per television subscriber or "Television ARPU (excluding impact of the GBP 16 million VAT recovery)" For a three month period, Television ARPU (excluding impact of the GBP 16 million VAT recovery) represents the sum of the consumer sales division's total quarterly revenue of television subscribers, including installation revenues, but excluding the recovery of GBP 16 million VAT, divided by the average number of television subscribers in the quarter, divided by three. For a six month period, Television ARPU (excluding impact of the GBP 16 million VAT recovery) represents the sum of the consumer sales division's total half yearly revenue of television subscribers, including installation revenues, but excluding the recovery of GBP 16 million VAT, divided by the average number of television subscribers in the half year, divided by six. Television ARPU (excluding impact of the GBP 16 million VAT recovery) is not a financial measure recognized under GAAP. This measure is most directly comparable to the GAAP financial measure, Television ARPU. The significant limitation associated with the use of Television ARPU (excluding impact of the GBP 16 million VAT recovery) as compared to Television ARPU is that Television ARPU (excluding impact of the GBP 16 million VAT recovery) does not consider GBP 16 million of revenues received in respect of recovered VAT. Telewest believes Television ARPU (excluding impact of the GBP 16 million VAT recovery) is helpful for understanding the trend in respect of its television revenues derived from subscribers during the periods and it provides useful supplemental information to investors. The VAT recovery is not expected to recur. Because non-GAAP financial measures are not standardized, it may not be possible to compare Television ARPU (excluding impact of the GBP 16 million VAT recovery) with other companies' non-GAAP financial measures that have the same or similar names. The presentation of this supplemental information is not meant to be considered in isolation or as a substitute for Television ARPU, or other measures of financial performance reported in accordance with GAAP. -0- *T Telewest Global, Inc. Use of Non-GAAP Financial Measures (continued) ---------------------------------------------------------------------- Reconciliations of Non-GAAP Financial Measures (amounts in GBP millions) ---------------------------------------------------------------------- Three months ended Six months ended Three months June 30, June 30, ended March 31, ----------------------- ----------------------- ------------ 2005 2004 2005 2004 2005 ----------- ----------- ----------- ----------- ------------ Reorganized Predecessor Reorganized Predecessor Reorganized Company Company Company Company Company ---------------------------------------------------------------------- Reconciliation of Adjusted EBITDA to net income/(loss) ---------------------------------------------------------------------- Adjusted EBITDA 158 122 292 244 134 Financial restructuring charges - (12) - (21) - Depreciation (101) (90) (202) (184) (101) Amortization (9) - (18) - (9) ---------------------------------------------------------------------- Operating income 48 20 72 39 24 Interest income 7 8 11 15 4 Interest expense (including amortization of debt discount) (41) (121) (70) (230) (29) Foreign exchange (losses)/gains, net (3) (37) (7) 40 (4) Share of net income of affiliates 7 5 13 8 6 Other, net 1 - 1 (1) - Income tax charge - (1) - (1) - ---------------------------------------------------------------------- Net income/(loss) 19 (126) 20 (130) 1 ---------------------------------------------------------------------- Reconciliation of free cash flow to net cash provided by operating activities ---------------------------------------------------------------------- Free cash flow 64 37 127 62 63 Deduct cash paid for financial restructuring charges - (10) (1) (19) (1) Add capital expenditure 59 61 113 127 54 ---------------------------------------------------------------------- Net cash provided by operating activities 123 88 239 170 116 ---------------------------------------------------------------------- Free cash flow is reported after cash paid for interest, net, and cash received for income taxes. Supplementary cash flow information: Cash paid for interest, net 29 29 41 61 12 Cash received for income taxes - - - (2) - ---------------------------------------------------------------------- Jun. 30, Dec. 31, 2005 2004 ------------ ------------ Reorganized Reorganized Company Company ---------------------------------------------------------------------- Reconciliation of net debt to total liabilities Net debt 1,712 1,746 Cash and cash equivalents 213 68 ---------------------------------------------------------------------- Total debt 1,925 1,814 Accounts payable 153 93 Other liabilities 452 424 Deferred taxes 105 105 ---------------------------------------------------------------------- Total liabilities 2,635 2,436 ---------------------------------------------------------------------- Telewest Global, Inc. Use of Non-GAAP Financial Measures (continued) ---------------------------------------------------------------------- Three months Six months ended ended June 30, 2005 June 30, 2005 ---------------------------------------------------------------------- Reconciliation of Household ARPU to Household ARPU (excluding impact of the GBP 16 million VAT recovery) ---------------------------------------------------------------------- Consumer sales division revenue in the period GBP 262 million GBP 508 million Average number of residential customers in the period 1,830,895 1,820,654 --------------------------------- Household ARPU GBP 47.72 GBP 46.54 --------------------------------- Consumer sales division revenue in the period GBP 262 million GBP 508 million VAT recovery GBP(16) million GBP(16) million --------------------------------- Consumer sales division revenue (excluding GBP 16 million VAT recovery) GBP 246 million GBP 492 million Average number of residential customers in the period 1,830,895 1,820,654 --------------------------------- Household ARPU (excluding impact of the GBP 16 million VAT recovery) GBP 44.86 GBP 45.11 --------------------------------- ---------------------------------------------------------------------- Reconciliation of Television ARPU to Television ARPU (excluding impact of the GBP 16 million VAT recovery) ---------------------------------------------------------------------- Consumer television revenue in the period GBP 98 million GBP 182 million Average number of television subscribers in the period 1,326,317 1,321,291 --------------------------------- Television ARPU GBP 24.72 GBP 22.93 --------------------------------- Consumer television revenue in the period GBP 98 million GBP 182 million VAT recovery GBP(16)million GBP(16) million --------------------------------- Consumer television revenue (excluding GBP 16 million VAT recovery) GBP 82 million GBP 166 million Average number of television subscribers in the period 1,326,317 1,321,291 --------------------------------- Television ARPU (excluding impact of the GBP 16 million VAT recovery) GBP 20.78 GBP 20.95 --------------------------------- ---------------------------------------------------------------------- *T