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Optical/IP

Telewest Outperforms NTL in Q4

U.K. cable operators ntl group ltd. (Nasdaq: NTLI) and Telewest Global Inc. (Nasdaq: TWSTY) reported contrasting fourth-quarter results today, ahead of a shareholder vote on their merger set for this Thursday. (See NTL, Telewest Report Q4 and NTL, Telewest Move Closer.)

NTL reported a net loss of £56.2 million (US$97.86 million) on revenues of £485 million ($844.51 million). That compares with a net loss of £73.6 million ($128.16 million) on 5.4 percent higher revenues of £512 million ($891.53 million) in the fourth quarter last year.

Telewest, which has been the better performer of the two, had a net loss of £14 million ($24.38 million) on revenues of £435 million ($757.45 million), compared with a net loss of £17 million ($29.6 million) on revenues of £336 million ($585.06 million).

On a conference call with analysts, NTL executives said that aside from some unexpected charges related to bad debt and vacant leasehold property, NTL’s results were in line with expectations, while Telewest experienced its best quarter in four years.

Both operators added just over 20,000 net subscribers during the quarter, but NTL said its revenues were affected by falling telephone usage. Average revenue per user (ARPU) slipped from £39.08 ($68.05) to £38.98 ($67.87), while Telewest's ARPU remained flat at £45.17 ($78.65).

“As we look to integrate both companies… we’re mirroring Telewest’s approach,” said NTL chairman James Mooney, adding that Telewest has done a better job at promoting its triple-play packages and is further along in rolling out services like video on demand, PVR, and HDTV.

Telewest also has a better reputation for customer service, and CEO Stephen Burch said NTL will be moving to Telewest’s billing platform sooner than planned. The combination of three billing systems it uses now “doesn’t give the customer care and information that we need.” Telewest will be on a single billing platform by mid-2006, and Burch expects both networks to be on the same system in 14 to 15 months instead of three years.

As part of the integration process, NTL and Telewest said they’ve almost finished putting together a new management team. Burch was recently brought in from Comcast Corp. (Nasdaq: CMCSA, CMCSK) to head up the merged company. (See NTL Names New CEO.) For the newly created positions of senior vice president of strategy and CEO for the content division, they have appointed Ernie Cormier, previously a VP at Nextel Communications, and former UBM COO Malcom Wall. The position of marketing MD is the only one yet to be filled.

"Our branding strategy will become clear in the next three months," Mooney said. If NTL’s proposed acquisition of Virgin Mobile USA Inc. (NYSE: VM) goes through, the combined entity will take on the Virgin brand. (See Source: NTL Sweetens Virgin Offer.) Media reports had Virgin accepting the deal last week, with negotiations perhaps spilling over into this week. (See NTL Poised to Acquire Virgin Mobile .) Executives declined to provide an update on the deal for legal reasons.

The Virgin buy would give the cable company a wireless offering for bundled and converged services, but Mooney also indicated on the call that it's looking into “other applications we’ve yet to discuss, like portable devices,” including iPods.

In its business division NTL reported flat sequential revenues, which have stabilized in large part due to demand for its Ethernet services. (See NTL Wins £10M Ethernet Deal.) Telewest has been able to keep its business revenues stable with new offerings like the IP CCTV-over-Ethernet service it launched today. The merged operator also stands to benefit from today’s news that Cable and Wireless plc (NYSE: CWP) is shedding its SME customers. (See C&W Updates on UK.) Mooney said the operator has been reviewing possible business it could capture from C&W, and “the strategic options the business group has are being looked at.”

Shares in NTL were up $2.27 (3.59%) to $65.45 in early afternoon on the Nasdaq, and Telewest shares were up $0.24 (1.02%) to $23.71.

— Nicole Willing, Reporter, Light Reading

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