SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
NTL INCORPORATED
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[logo of NTL Incorporated]
110 East 59th Street
New York, New York 10022
[ ] [ ], 2000
Dear Stockholders:
On behalf of your board of directors and your management, I cordially
invite you to attend our special meeting of stockholders. The special
meeting will take place at 10:00 a.m., local time, on [ ] [ ], 2000 at the
Essex House Hotel, 160 Central Park South, New York, New York 10019.
At the special meeting you will be asked to consider and approve a
proposal that we refer to in the enclosed proxy statement as our "tracking
stock proposal." Under the tracking stock proposal, we would amend article
fourth of our current restated certificate of incorporation to:
o authorize the issuance of our common stock in multiple series,
o initially designate two new series of common stock, and
o increase the total authorized shares of common stock of NTL
from 800,000,000 to [ ].
One new series of common stock, our Broadcast Tracking Stock, is
intended to track the performance of our broadcast operations, including
the national broadcast transmission and tower network infrastructure
primarily in the U.K. and Australia that we refer to as the Broadcast
Group. Currently, the Broadcast Group does not represent a material part of
our total business operations. Your existing shares of NTL common stock
will be reclassified into the other new series of common stock, our NTL
Stock, that is intended to track our other businesses, including our
residential telecommunications services and national telecommunications
services that we refer to as the NTL Group. Also, as part of the tracking
stock proposal you will be asked to consider and approve the creation of a
stock-based compensation plan for the senior management and employees of
the Broadcast Group.
The board of directors unanimously recommends that you adopt the
tracking stock proposal. The board of directors adopted the tracking stock
proposal following its review of various alternatives to support our
strategic objectives and to increase the overall return to stockholders.
The board of directors believes that the recent historical price
performance of our existing common stock has failed to adequately reflect
the value of the various businesses of NTL, including our broadcast
operations. The board of directors believes that the tracking stock
proposal will, among other things:
o enable investors to review separate financial information about the
Broadcast Group and separately value Broadcast Tracking Stock. This
should encourage investors and analysts to focus more attention on
our Broadcast Group and its contribution to the value of NTL;
o enable us to issue Broadcast Tracking Stock in one or more private or
public financings, thus raising capital for the NTL Group and/or the
Broadcast Group;
o provide us with greater flexibility in responding to strategic
opportunities, such as acquisitions, by allowing us to issue either
NTL Stock or Broadcast Tracking Stock, as appropriate under the
circumstances;
o enable us to attract, retain and motivate the senior management and
employees of the Broadcast Group through the issuance of stock-based
compensation tied to the performance of Broadcast Tracking Stock; and
o preserve the financial, tax, strategic and operational benefits of
being a single enterprise.
If you approve the tracking stock proposal and it is implemented by
the board of directors, we currently plan to distribute shares of Broadcast
Tracking Stock representing approximately 10% of the initial equity value
of the Broadcast Group to holders of NTL Common Stock.
We expect that we will first issue Broadcast Tracking Stock in our
fiscal year 2000. NTL Group initially will hold the remaining equity value
of the Broadcast Group that is not represented by issued Broadcast Tracking
Stock.
We have included for your convenience, in "Q and A" format, a summary
of certain questions you may have about the special meeting and the
tracking stock proposal and our answers to these questions beginning on
page 1 of the enclosed proxy statement.
Please also see page [ ] for a discussion of the material risk factors
you should consider before voting on the tracking stock proposal and
related matters.
The vote of each and every stockholder is most important to us. We are
grateful that so many of you have in the past exercised your right to vote
your shares.
Approval of each part of the tracking stock proposal requires the
affirmative vote of the holders of a majority of the outstanding shares of
NTL common stock. Only stockholders of record at the close of business on [
] [ ], 2000 may vote at the special meeting.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF NTL HAS
APPROVED THE TRACKING PROPOSAL AND THE AMENDMENT OF ARTICLE FOURTH OF THE
CURRENT RESTATED CERTIFICATE OF INCORPORATION OF NTL.
If you have any questions prior to the special meeting or need further
assistance, please call our proxy solicitor, D.F. King & Co., Inc. at (800)
207-3155.
Thank you for your cooperation and continued support and interest in
NTL.
Very truly yours,
George S. Blumenthal
Chairman of the Board
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
THIS PROXY STATEMENT IS DATED [ ] [ ], 2000,
AND IS FIRST BEING MAILED TO NTL STOCKHOLDERS ON OR ABOUT [ ] [ ], 2000.
NTL Incorporated
110 East 59th Street
New York, New York 10022
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ],[ ], 2000
------------------------
To the Stockholders of NTL Incorporated,
We will hold a special meeting of stockholders of NTL Incorporated, a
Delaware corporation, at the Essex House Hotel, 160 Central Park South, New
York, New York 10019 on [ ],[ ], 2000, beginning at 10:00 a.m. local
time.
The special meeting will be held to consider and vote upon the
following proposals that would authorize NTL to:
(1) amend article fourth of NTL's current restated certificate of
incorporation to:
o designate two series of common stock of NTL, of which shares
initially would be designated as "NTL Incorporated--NTL
Stock," and "NTL Incorporated--Broadcast Tracking Stock;"
o reclassify each outstanding share of the existing common
stock of NTL as one share of NTL Stock;
o increase the total authorized shares of common stock of NTL
from 800,000,000 to [ ]; and
o authorize the board of directors to create additional series
of common stock of NTL other than NTL Stock and Broadcast
Tracking Stock; and
(2) establish the NTL Broadcast Incentive Plan to allow us to issue
Broadcast Tracking Stock to the senior management and employees of
the Broadcast Group.
A copy of our proposed amendment of article fourth of our restated
certificate of incorporation in accordance with the tracking stock proposal
is attached as Annex II to this proxy statement, and is referred to in this
proxy statement as our "charter amendment." A copy of the NTL Broadcast
Incentive Plan as proposed to be adopted is attached as Annex III.
We refer to the amendment and restatement of our certificate of
incorporation and the adoption of our incentive plan together as the
"tracking stock proposal." We describe the proposal in more detail in the
accompanying proxy statement, which you should read in its entirety before
voting.
Only stockholders of record at the close of business on [ ] [ ], 2000,
are entitled to notice of and to vote at the special meeting. For at least
ten days prior to the special meeting, a list of stockholders entitled to
vote at the special meeting will be available for examination by any
stockholder, for any purpose germane to the special meeting, during
ordinary business hours at NTL 's corporate office.
Stockholders of record are cordially invited to attend the special
meeting. Please complete, sign and date the enclosed proxy card and
promptly return it in the enclosed postage-paid envelope. If you attend the
special meeting, you may vote in person if you wish, whether or not you
have already signed and returned your proxy card. You may revoke your proxy
at any time before it is voted. Please review the proxy statement
accompanying this notice for more complete information regarding the
matters proposed for your consideration.
The proxy statement and proxy card are enclosed with this notice.
By order of the Board of Directors,
Richard J. Lubasch
Secretary
New York, New York [ ], 2000.
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND OUR
TRACKING STOCK PROPOSAL...................................................1
Time, Place And Date Of The Special Meeting...............................1
The Tracking Stock Proposal...............................................1
Special Meeting Voting And Record Date....................................4
Quorum And Required Vote..................................................5
Cost Of Proxy Solicitation................................................5
Additional Information And Stockholder Communication......................6
SUMMARY OF OUR TRACKING STOCK PROPOSAL......................................9
NTL, NTL Group And The Broadcast Group....................................9
The Tracking Stock Proposal..............................................11
Initial Issuance of Broadcast Tracking Stock.............................12
Subsequent Issuances of Broadcast Tracking Stock.........................12
Risk Factors.............................................................13
Reasons for the Tracking Stock Proposal..................................13
SUMMARY COMPARISON OF EXISTING COMMON STOCK WITH TERMS OF
NTL STOCK AND BROADCAST TRACKING STOCK...................................15
U.S. Federal Income Tax Considerations...................................23
Establishment of NTL Broadcast Management Incentive Plan.................23
Amendments to Stock Based Compensation Plans.............................23
NTL--SUMMARY CONSOLIDATED FINANCIAL DATA...................................23
NTL GROUP--SUMMARY COMBINED FINANCIAL DATA.................................23
THE BROADCAST GROUP--SUMMARY FINANCIAL DATA................................23
RISK FACTORS...............................................................24
We cannot predict how the issuance of Broadcast Tracking
Stock will affect the market price of NTL Stock.......................24
Holders of NTL Stock and Broadcast Tracking Stock will be
common stockholders of NTL and will not have any legal
rights relating to specific assets of NTL.............................24
Financial performance of one group could adversely affect
the other group.......................................................24
If NTL encounters financial difficulty, the value of a
group's stock may suffer for reasons unrelated to the
prospects of that group...............................................24
Holders of NTL Stock and Broadcast Tracking Stock will
vote together as a single class and will have limited
separate voting rights................................................24
Limits exist on voting power of Broadcast Tracking Stock,
and as a result the holders of NTL Stock will be able
to control majority votes.............................................25
In circumstances where a separate class vote is required,
a series of common stock with less than a majority of
the total voting power can block action...............................25
Existing stockholders of NTL will have a reduced interest
in the Broadcast Group................................................25
The cost of maintaining separate businesses will likely
exceed the costs associated with operating NTL as a
single entity.........................................................25
Conversion of Broadcast Tracking Stock into NTL Stock may
adversely affect the holders of Broadcast Tracking Stock
or the holders of NTL Stock...........................................25
Having multiple series of common stock could create conflicts
between the interests of the holders of each series, and
our board of directors could resolve those conflicts in a
manner that adversely affects holders of one or more groups...........26
Principles of Delaware law may protect decisions of our board
of directors that have a disparate impact upon holders of
NTL Stock and Broadcast Tracking Stock................................26
Stockholders will not vote separately as a series on how to
allocate consideration received in connection with a merger
of NTL between holders of NTL Stock or Broadcast Tracking
Stock.................................................................27
We may dispose of assets of NTL Group or the Broadcast Group
without your approval.................................................27
Corporate-level income taxes may be incurred on a sale of a
group that would not be incurred if the group were a
separate corporation..................................................27
We do not intend to pay dividends on Broadcast Tracking Stock,
and even if we decide to do so, we are not required to pay
dividends equally on NTL Stock and Broadcast Tracking Stock...........27
Having multiple series of common stock may inhibit or prevent
acquisition bids for NTL, NTL Group or the Broadcast Group............28
The market prices of NTL Stock and Broadcast Tracking Stock
could decline if we issue more common stock...........................28
We may not offer Broadcast Tracking Stock at all.........................28
The IRS could assert that the receipt of tracking stock is
taxable to you or us or that the tracking stock is
"section 306 stock"...................................................29
Recent Clinton Administration proposals, if enacted, could
result in taxation on issuances of tracking stock.....................29
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS..................30
INFORMATION ABOUT NTL COMMON STOCK OWNERSHIP...............................31
NTL Common Stock Owned by NTL Directors and Executive Officers...........31
Compensation Committee Interlocks and Insider Participation..............33
Executive Compensation...................................................33
Option Grants Table......................................................34
Option Exercises and Year-end Value Table................................34
MARKET PRICE DATA AND DIVIDEND POLICY......................................35
THE TRACKING STOCK PROPOSAL................................................36
Background and Reasons for the Tracking Stock Proposal...................36
Initial Issuance of Broadcast Tracking Stock.............................38
Options, Awards and Rights to Purchase relating to Broadcast
Tracking Stock........................................................38
Subsequent Issuances of Broadcast Tracking Stock.........................38
PROPOSAL NUMBER 1
AMENDMENT AND RESTATEMENT OF OUR CURRENT
CERTIFICATE OF INCORPORATION.............................................39
Description of NTL Stock and Broadcast Tracking Stock....................39
Other Provisions Of Our Charter, Bylaws And Delaware Law.................50
NTL Common Stock.........................................................51
NTL Preferred Stock......................................................51
Special Charter Provisions...............................................54
Section 203 of the Delaware General Corporation Law......................55
Transfer Agent and Registrar.............................................55
Rights Agreement.........................................................56
Certain Management and Allocation Policies...............................57
Anti-takeover Considerations.............................................61
Recommendation of the Board of Directors.................................61
PROPOSAL NUMBER 2
ADOPTION OF THE NTL BROADCAST MANAGEMENT INCENTIVE PLAN..................61
Recommendation of the Board of Directors.................................62
PROPOSAL NUMBER 3
AMENDMENT AND RESTATEMENT OF CURRENT STOCK OPTION PLANS..................62
Recommendation of the Board of Directors.................................62
Stockholder Proposals and Nominations....................................62
STOCK EXCHANGE LISTINGS....................................................63
NO DISSENTERS' RIGHTS......................................................63
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS.............................63
INDEPENDENT AUDITORS.......................................................68
LEGAL MATTERS..............................................................68
Annex I -- Illustrations of Certain Terms
Annex II -- NTL Incorporated Amendment to Article Fourth of the
Restated Certificate of Incorporation
Annex III -- NTL Broadcast Management Incentive Plan
Annex IV -- NTL Group Description of Business
Annex V -- The Broadcast Group Description of Business
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND OUR
TRACKING STOCK PROPOSAL
TIME, PLACE AND DATE OF THE SPECIAL MEETING
Why did I receive this proxy statement?
We sent you this proxy statement and the enclosed proxy card because
NTL's board of directors is soliciting your proxy to vote at the special
meeting of stockholders. The special meeting will be held on [ ], [ ],
2000, beginning at 10:00 a.m., local time, at the Essex House Hotel, 160
Central Park South, New York, New York 10019.
At this special meeting, we will ask you to consider and approve the
tracking stock proposal described in this proxy statement.
This proxy statement summarizes the information you need to know to
vote on an informed basis at the special meeting; however, you do not need
to attend the special meeting to vote your shares (under the section
entitled "Special Meeting Voting and Record Date", see "How do I vote by
proxy?"). We began sending this proxy statement, the attached notice of
special meeting and the enclosed proxy card on [ ], 2000, to all
stockholders entitled to vote.
THE TRACKING STOCK PROPOSAL
What is the tracking stock proposal?
If you approve the tracking stock proposal we will be authorized to:
(1) amend article fourth of our current restated certificate of
incorporation to:
o authorize the board of directors to issue common stock in
multiple series, with the initial two series to be designated
as "NTL Incorporated-NTL Stock" and "NTL
Incorporated-Broadcast Tracking Stock";
o reclassify each outstanding share of existing common stock of
NTL as one share of NTL Stock;
o increase the total authorized shares of common stock from
800,000,000 to [ ];
o authorize the board of directors to create additional series
of common stock of NTL other than NTL Stock and Broadcast
Tracking Stock; and
(2) establish the NTL Broadcast Incentive Plan described in this proxy
statement.
What is "tracking stock"?
"Tracking stock," which people sometimes call "alphabet stock,"
"letter stock" or "targeted stock," is a type of common stock that the
issuing company intends to reflect (or "track") the performance of a
particular business or division. Tracking stock is an equity interest in a
corporation with rights determined in part by reference to the performance
of specific assets of the corporation.
As mentioned above, we propose creating two new series of common
stock, to be designated as NTL Stock and Broadcast Tracking Stock, in the
form of tracking stock.
o We intend Broadcast Tracking Stock to reflect the performance of the
Broadcast Group.
o We intend NTL Stock to reflect the performance of our other
businesses and our retained interest in the Broadcast Group. We
refer to these businesses and our retained interest in the Broadcast
Group as NTL Group.
o We have allocated, for financial reporting purposes, all NTL's
consolidated assets, liabilities, revenue, expenses and cash flow
between the NTL Group and the Broadcast Group. Currently, the
Broadcast Group is not a material part of NTL's total business
operations. More detailed descriptions of these businesses are
included as annexes to this proxy statement. We encourage you to
review this information before you vote.
We can't assure you that the market values of NTL Stock and Broadcast
Tracking Stock will in fact reflect the performance of the NTL Group and
the Broadcast Group as we intend. Holders of NTL Stock and Broadcast
Tracking Stock will continue to be common stockholders of NTL and, as such,
will be subject to risks associated with an investment in NTL as a whole
and all of our businesses, assets and liabilities.
What happens to my existing common stock when you implement the tracking
stock proposal? Do I need to send in my certificates?
If we file our charter amendment implementing the tracking stock
proposal, that filing will automatically reclassify each of your shares as
one share of NTL Stock and your existing stock certificate will
automatically represent the same number of shares of NTL Stock. Since the
reclassification is automatic, you do not need to send in your stock
certificates or make any notation reflecting the change.
How and when will you first issue Broadcast Tracking Stock?
If you approve the tracking stock proposal and it is implemented by
the board of directors, we currently plan to distribute to our
stockholders, shares of Broadcast Tracking Stock intended to represent
approximately 10% of the equity value initially attributed to the Broadcast
Group. We expect that this distribution would occur some time in our fiscal
year 2000. However, we could choose to conduct the distribution at a later
time, or not to make the distribution at all, depending on circumstances at
the time.
This would leave NTL Group with a retained interest intended to
represent the remaining equity value initially attributed to the Broadcast
Group that is not represented by issued and outstanding Broadcast Tracking
Stock.
Instead of a distribution, we may first issue Broadcast Tracking Stock
through an initial public offering or private placement for cash, by an
offer of exchange with the holders of NTL Stock, or by issuing the stock to
acquire stock or assets of another company. We do not currently intend to
pursue an initial public offering, private sale, exchange offer, or
acquisition using the Broadcast Tracking Stock.
Why are you presenting the tracking stock proposal?
The board of directors believes that designating NTL Stock and
Broadcast Tracking Stock as tracking stocks should:
o enable investors to review separate financial information about the
Broadcast Group and separately value Broadcast Tracking Stock. This
should encourage investors and analysts to focus more attention on
the Broadcast Group and its contribution to the value of NTL;
o enable us to issue Broadcast Tracking Stock in one or more private or
public financings, thus raising capital for NTL Group and/or the
Broadcast Group;
o provide us with greater flexibility in responding to strategic
opportunities, such as acquisitions, by allowing us to issue either
NTL Stock or Broadcast Tracking Stock, as appropriate under the
circumstances; and
o preserve the financial, tax, strategic and operational benefits of
being a single enterprise.
The designation of the tracking stocks, together with the creation of
the NTL Broadcast Incentive Plan, will also enable us to issue stock-based
compensation tied to Broadcast Tracking Stock, thereby providing more
focused incentives to management and employees of the Broadcast Group.
The tracking stock proposal would provide us with the flexibility to
designate additional series of common stock with respect to our other
businesses, if similar considerations would warrant this action.
Finally, the increase in our authorized common stock which is part of
the tracking stock proposal will ensure that NTL continues to have
sufficient common stock to meet its obligations under its rights plan and
compensation plans, while maintaining the ability to sell additional stock
in private or public financings, or issue common stock as consideration in
an acquisition or effect stock splits in the future.
Will NTL Stock be listed on the NASDAQ National Market? What about Broadcast
Tracking Stock?
When we reclassify our existing common stock as NTL Stock, it will
continue to trade on the NASDAQ National Market under the symbol "NTLI". We
currently intend to apply to the NASDAQ National Market for quotation of
Broadcast Tracking Stock on the NASDAQ National Market.
What voting rights will I have?
On all matters as to which holders of NTL Stock and Broadcast Tracking
Stock will vote together as a single class, and subject to some exceptions
and qualifications:
o each share of NTL Stock will entitle the holder to one vote;
o each share of Broadcast Tracking Stock will entitle the holder, for
any particular vote, to one vote prior to the 31st trading day after
the effective date of our charter amendment and after that date, to a
number of votes equal to the average market value of one share of
Broadcast Tracking Stock divided by the average market value of one
share of NTL Stock over a specified 20 trading day period prior to
the record date of that vote; and
o in no event will Broadcast Tracking Stock represent in excess of 15%
of the total voting power of all outstanding shares of the common
stock of NTL.
Do you intend to pay dividends?
We currently intend to retain all earnings of the Broadcast Group to
finance operations and fund future growth for the Broadcast Group. We do
not expect to pay any dividends on Broadcast Tracking Stock for the
foreseeable future. We do not expect to change our dividend policy with
respect to our currently outstanding existing common stock (which will
become NTL Stock) as a result of the tracking stock proposal. In addition,
we are a holding company and the existing indentures and credit facilities
of our operating subsidiaries contain covenants which may limit the amount
of funds which may be transferred by our subsidiaries to us for dividends
to our stockholders or otherwise.
What kind of financial information will I receive in the future?
You will continue to receive consolidated financial information for
NTL as a whole. In addition, you will receive separate operating results
and business and financial information for NTL Group and the Broadcast
Group.
Will the tracking stock proposal result in a change of control of NTL?
No.
Will the tracking stock proposal result in a spin-off?
No. This proposal will not result in a distribution or spin-off of any
of our assets or liabilities and will not affect ownership of our assets or
responsibility for our liabilities. Holders of NTL Stock and Broadcast
Tracking Stock will all be stockholders of the same company and subject to
all risks associated with an investment in NTL and all of our businesses,
assets and liabilities. These series of common stock do not represent
ownership interests in the assets of any business group and do not entitle
their holders to any special rights to receive specific assets of any
business group.
If I hold my shares through a broker, how do I vote on the tracking stock
proposal?
You should contact your broker directly to determine the procedures
through which you can vote on the tracking stock proposal.
Why is NTL seeking stockholder approval?
NTL is a company incorporated in Delaware. Under Delaware law, the
amendments to NTL's restated certificate of incorporation to authorize the
issuance of multiple classes of common stock, including the Broadcast
Trading Stock, and to increase the authorized common stock of NTL must be
approved by the affirmative vote of the holders of a majority of the
outstanding shares of NTL common stock.
Am I entitled to appraisal rights?
No. You will have no right under Delaware law to seek appraisal of the
value of your NTL shares in connection with the matters being voted upon.
Are there any significant disadvantages to me from the share issuances?
NTL does not believe so. You should, however, review the risk factors
commencing on page [ ] before deciding on how to vote.
What are the consequences of my not voting on the tracking stock proposal?
Your failure to vote on the tracking stock proposal will have the same
effect as a vote against the proposal.
What are the tax consequences of the tracking stock proposal?
NTL believes that neither you nor NTL will recognize any income, gain
or loss for U.S. Federal income tax purposes as a result of the
reclassification of existing common stock into NTL Stock or the issuance of
Broadcast Tracking Stock. Moreover, except where cash is received in lieu
of fractional shares, neither you nor NTL will recognize any income, gain,
or loss upon the distribution of a dividend of Broadcast Tracking Stock to
the holders of NTL Stock, or upon the exchange of Broadcast Tracking Stock
for NTL Stock, as we presently contemplate such transactions would be
carried out. The Internal Revenue Service ("IRS") could, however, disagree.
There are no court decisions bearing directly on similar transactions, and
the IRS has announced that it will not issue advance rulings on the Federal
income tax consequences of such transactions. Thus, you should consult a
tax advisor.
How does the board of directors recommend I vote on the tracking stock
proposal?
The board of directors recommends a vote FOR the tracking stock
proposal and related matters.
SPECIAL MEETING VOTING AND RECORD DATE
Who can vote?
You are entitled to vote if you owned our existing common stock at the
close of business on [ ], 2000. This is called the record date.
How many shares of voting stock are outstanding?
The existing common stock is our only class of voting stock as of the
record date. The existing common stock held by NTL in treasury is not
eligible to vote. On [ ], 2000, there were [ ] shares of our
existing common stock outstanding.
How many votes do I have?
Each share of existing common stock that you own entitles you to one
vote. The proxy card indicates the number of shares of existing common
stock that you owned on the record date and are eligible to vote at the
special meeting.
How do I vote in person?
If you owned existing common stock on the record date, you can attend
the special meeting. If you plan to attend the special meeting you may vote
in person. However, if your shares are held in the name of your broker,
bank or other nominee, you must bring an account statement or letter from
the nominee indicating that you are the beneficial owner of the shares on
the record date.
How do I vote by proxy?
To vote by proxy, you should complete, sign and date the enclosed
proxy card and return it promptly, to be received by NTL no later than
[ ], 2000 at 3:00 p.m. (E.S.T.) in the prepaid envelope provided.
May I revoke my proxy?
The accompanying proxy is revocable on written instructions, including
a subsequently received proxy, signed in the same manner as the proxy, and
received by the Secretary of the Company at any time at or before the
balloting on the matter with respect to which such proxy is to be
exercised. If you attend the Special Meeting you may, if you wish, revoke
your proxy by voting in person.
If I plan to attend the special meeting, should I still vote by proxy?
Whether you plan to attend the special meeting or not, we urge you to
vote by proxy. Returning the proxy card will not affect your right to
attend the special meeting and vote.
How will my proxy get voted?
If you properly fill in your proxy card and send it to us in time to
vote no later than [ ], 2000 at 3:00 p.m. (E.S.T.), your "proxy" (one of
the individuals named on your proxy card) will vote your shares as you have
directed. If you sign the proxy card but do not make specific choices, your
proxy will vote your shares "FOR" each of the charter amendment proposal
and the incentive plan proposal.
If you mark "abstain" on your proxy card, your shares will be counted
as present for purposes of determining the presence of a quorum. If
necessary and unless you have indicated on your proxy card that you wish to
vote against the charter amendment proposal and the incentive plan
proposal, the individuals named on your proxy card may vote in favor of a
proposal to adjourn the special meeting to a later date in order to solicit
and obtain sufficient votes for the charter amendment proposal and the
incentive plan proposal.
What does it mean if I get more than one proxy card?
If your shares are registered differently and are in more than one
account, you will receive more than one proxy card. Each proxy card will
indicate the number of shares you are entitled to vote on that particular
card. Sign and return all proxy cards to ensure that all your shares are
voted.
QUORUM AND REQUIRED VOTE
What is a quorum and why is it necessary?
In order to carry on the business of the special meeting, we must have
a quorum. This means a majority of the votes eligible to be cast by holders
of our voting stock must be represented in person or by proxy at the
special meeting. Abstentions will count for quorum purposes. If you submit
a properly executed proxy card, even if you abstain from voting, you will
be considered part of the quorum. Broker non-votes are not entitled to vote
and therefore will not be counted for quorum purposes.
What is a broker non-vote?
A broker non-vote occurs with respect to any proposal when a broker
holds your shares in its name and is not permitted to vote on that proposal
without instruction from the beneficial owner of the shares and no
instruction is given. A broker non-vote is not counted as either a
favorable or unfavorable vote.
What vote is required to approve the tracking stock proposal?
The approval of this proposal will require the favorable vote of the
holders of a majority of the common stock of NTL outstanding. For purposes
of this vote, abstentions will have the same effect as votes against the
proposal.
Our directors and executive officers beneficially owned approximately
5.04% of the outstanding shares of our existing common stock as of June 23,
2000. They have advised us that they will vote, or cause to be voted, all
shares of existing common stock that they own of record or beneficially in
favor of the tracking stock proposal.
COST OF PROXY SOLICITATION
What are the costs of soliciting these proxies and who pays them?
All expenses of soliciting proxies, including clerical work, printing
and postage, will be paid by NTL. Proxies may be solicited personally, or
by mail, telephone or facsimile, by current and former directors, officers
and other employees of NTL, but NTL will not pay any compensation for such
solicitations. In addition, NTL has agreed to pay D.F. King & Co., Inc. a
fee of $[ ], plus reasonable expenses, for proxy solicitation services. NTL
will also reimburse brokers and other persons holding shares in their names
or in the names of nominees for their expenses for sending material to
principals and obtaining their proxies.
ADDITIONAL INFORMATION AND STOCKHOLDER COMMUNICATION
Where can I find more information about NTL?
NTL files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports,
statements or other information filed by NTL at the SEC's public reference
rooms at the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. NTL's filings with the SEC are also available to
the public from commercial document retrieval services and at the world
wide web site maintained by the SEC at "http://www.sec.gov." Reports, proxy
statements and other information concerning NTL may also be inspected at
the offices of The NASDAQ Stock Market, Inc. which is located at 1735 K
Street, N.W., Washington, D.C. 20006.
The SEC allows NTL to "incorporate by reference" information into this
proxy statement, which means that NTL can disclose important information to
you by referring you to other documents filed separately with the SEC. The
information incorporated by reference is considered part of this proxy
statement, except for any information superceded by information contained
directly in this proxy statement or in later filed documents incorporated
by reference in this proxy statement. This proxy statement incorporates by
reference the documents set forth below that NTL has previously filed with
the SEC. These documents contain important business and financial
information about NTL that is not included in or delivered with this proxy
statement.
FILINGS PERIOD
----------------------------------------------------------------------------
Annual Report on Form 10-K of Year ended December 31, 1998 (filed
NTL Communications Corp. March 31, 1999) and Year ended
December 31, 1999 (filed March 27,
2000)
Annual Report on Form 10-K of Year ended December 31, 1999 (filed
NTL (Delaware), Inc. March 17, 2000)
Quarterly Report on Form 10-Q Quarter ended March 31, 1999 (filed
of NTL Communications Corp. May 17, 1999), quarter ended June
30, 1999 (filed August 16, 1999),
quarter ended September 30, 1999
(filed November 12, 1999) and
quarter ended March 31, 2000 (filed
May 15, 2000)
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999 (filed
of NTL (Delaware), Inc. May 17, 1999), June 30, 1999 (filed
August 16, 1999), September 30, 1999
(filed November 12, 1999) and March
31, 2000 (filed May 15, 2000)
Current Reports on Form 8-K of Dated April 1, 1999 (filed April 1,
NTL (Delaware), Inc. 1999), dated April 8, 1999 (filed
April 12, 1999), dated April 30,
1999 (filed May 12, 1999), dated May
26, 1999 (filed June 9, 1999), dated
June 23, 1999 (filed July 8, 1999),
dated July 9, 1999 (filed July 19,
1999), dated July 18, 1999 (filed
July 26, 1999), dated July 26, 1999
(filed July 30, 1999), dated August
13, 1999 (filed August 16, 1999),
dated August 19, 1999 (filed
September 17, 1999), dated September
20, 1999 (filed October 4, 1999),
dated September 24, 1999 (filed
October 20, 1999), dated October 25,
1999 (filed November 9, 1999), dated
November 8, 1999 (filed November 8,
1999), dated November 12, 1999
(filed November 12, 1999), dated
November 23, 1999 (filed November
24, 1999), dated December 3, 1999
(filed December 15, 1999), dated
December 9, 1999 (filed December 21,
1999), dated December 16, 1999
(filed December 16, 1999), dated
January 6, 2000 (filed January 21,
2000), dated January 25, 2000 (filed
January 25, 2000), dated February 4,
2000 (filed February 10, 2000),
dated February 15, 2000 (filed
February 16, 2000), dated February
17, 2000 (filed February 22, 2000),
dated March 16, 2000 (filed March
29, 2000), dated April 27, 2000
(dated April 27, 2000), dated May 4,
2000 (filed May 4, 2000), dated May
10, 2000 (filed May 16, 2000) and
dated May 18, 2000 (filed May 19,
2000)
Current Reports on Form 8-K of Dated January 25, 1999 (filed
NTL Communications Corp. January 25, 1999), dated Corp. March
8, 1999 (filed March 11, 1999),
dated March 18, 1999 (filed March
23, 1999), dated April 1, 1999
(filed April 1, 1999), dated April
8, 1999 (filed April 12, 1999),
dated April 8, 1999 (filed April 13,
1999), dated June 3, 1999 (filed
June 3, 1999), dated August 19, 1999
(filed September 17, 1999), dated
September 20, 1999 (filed October 4,
1999), dated November 23, 1999
(filed November 24, 1999), dated
January 25, 2000 (filed January 25,
2000), dated February 4, 2000 (filed
February 10, 2000) and dated
February 15, 2000 (filed February
16, 2000)
Current Reports on Form 8-K of Dated May 17, 2000 (filed May 30,
NTL Incorporated 2000) and dated May 30, 2000 (filed
May 30, 2000)
If you are a stockholder, NTL may have sent you some of the documents
incorporated by reference. You can obtain any of the documents incorporated
by reference from NTL, the SEC, the SEC's world wide web site or The NASDAQ
Stock Market, Inc. as described above. Documents incorporated by reference
are available from NTL without charge, excluding all exhibits, except that
if NTL has specifically incorporated by reference an exhibit in this proxy
statement, the exhibit will also be provided without charge. Stockholders
may obtain documents incorporated by reference in this proxy statement by
requesting them in writing or by telephone from NTL at the following
address:
NTL Incorporated
110 East 59th Street
New York, New York 10022
Telephone: (212) 906-8440
Attention: Investor Relations
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM NTL, PLEASE DO SO BY [ ], 2000
TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this proxy statement. NTL has not authorized anyone to provide
you with information that is different from what is contained in this proxy
statement. This proxy statement is dated [ ], 2000. You should not assume
that the information contained in this proxy statement is accurate as of
any date other than that date. Neither the mailing of this proxy statement
to stockholders nor the issuance of NTL Stock or Broadcast Tracking Stock
creates any implication to the contrary.
Can I get information on NTL's latest earnings, Form 10-K, Form 10-Q or the
Annual Report directly from NTL?
Yes.
o You can contact NTL Investor Relations at (212) 906-8440
o You can e-mail NTL Investor Relations at
[email protected]
o You can write to NTL at 110 East 59th Street, New York, New York
10022, Attention: Investor Relations
SUMMARY OF OUR TRACKING STOCK PROPOSAL
This summary, together with the section "Questions and Answers About
the Special Meeting and Our Tracking Stock Proposal" on pages 1 through [ ]
highlights important selected information from this document. To understand
the tracking stock proposal fully and for a more complete description of
the legal terms of the tracking stock proposal, you should read carefully
this entire proxy statement and the documents to which you have been
referred or which are incorporated by reference in this proxy statement.
In this proxy statement, references to "(pound sterling)" "pounds
sterling," "(pound)," "pence" or "p" are to the lawful currency of the
United Kingdom and references to "U.S. dollars," "dollars," "$" or "(cent)"
are to the lawful currency of the United States. Solely for your
convenience, this proxy statement contains translations of certain foreign
currency amounts into U.S. dollars and certain U.S. dollar amounts into
foreign currencies. These translations should not be construed as
representations that the foreign currency amounts actually represent such
U.S. dollar amounts or vice versa or could have been or could be or will be
converted into U.S. dollars or foreign currencies, as the case may be, at
the rate indicated or at any other rate.
NTL, NTL GROUP AND THE BROADCAST GROUP
NTL
NTL, through its subsidiaries, owns and operates broadband communications
networks, for telephone, cable television and Internet services and
transmission networks for television and radio systems in the United
Kingdom, the Republic of Ireland, France, Switzerland and Australia. NTL's
predominant lines of business are residential services, national
telecommunications services and broadcast transmission and tower services.
Residential services include telephony, cable television, Internet access
and interactive services. National telecommunications services include
business telephony, national and international carrier telecommunications,
Internet services and communications services. Broadcast transmission and
tower services include digital and analog television and radio
broadcasting, tower and site leasing and Satellite Communications services.
From an accounting standpoint, we have separated the Broadcast Group, a
division whose business is the provision of facilities and services to the
broadcast and wireless communications industries principally in the U.K.
and Australia, from the rest of our businesses. We have allocated all of
our consolidated assets, liabilities, revenue, expenses and cash flow
between the NTL Group and the Broadcast Group. Currently, the Broadcast
Group is not a material part of NTL's total business operations.
On April 1, 1999, NTL Incorporated completed a corporate restructuring
to create a new holding company structure. The restructuring was
accomplished through a merger under section 251(g) of the Delaware General
Corporation Law. At the effective time of the merger, all stockholders of
NTL Incorporated became stockholders in the new holding company and NTL
became a wholly owned subsidiary of the new holding company. The new
holding company took the NTL Incorporated name and the old NTL Incorporated
was renamed NTL Communications Corp.
On May 18, 2000, NTL Incorporated again completed a corporate
restructuring to create a new holding company structure. The restructuring
was accomplished under Section 251(g) of the Delaware General Corporation
Law. At the effective time of the merger, all stockholders of NTL
Incorporated became stockholders in the new holding company and NTL became
a wholly owed subsidiary of the new holding company. The new holding
company took the NTL Incorporated name and the old NTL Incorporated was
renamed NTL (Delaware), Inc.
The new holding company's stock trades under the same NTLI symbol on
the NASDAQ National Market with the same CUSIP number. In each merger, all
outstanding shares of old NTL Incorporated were converted into shares of
the new holding company with the same voting powers, designations,
preferences and rights, and the same qualifications, restrictions, and
limitations, as the shares of old NTL Incorporated.
Our principal executive offices are located at 110 East 59th Street,
New York, New York 10022. Our telephone number is (212) 906-8440.
NTL Group
NTL Group is a leading broadband communications company providing services
in the U.K., the Republic of Ireland, France and Switzerland. Further
expansion into Continental Europe is intended as, and when, opportunities
arise.
In the U.K., NTL Group provides residential, business and wholesale
customers with the following services:
o Residential Services, including telephony, cable television,
personal computer and television-based Internet access and
interactive services. Based on the expertise it has developed
in the U.K., NTL Group expects to develop similar residential
product offerings for its cable television systems in Switzerland,
France and the Republic of Ireland as their network upgrade
permits it has developed in the U.K. and in Switzerland. Cable
systems in Continental Europe typically feature mature cable
television product offerings, but are relatively unmodernized
compared to equivalent systems in the U.K. As such, penetration
of basic cable television services is much higher than that
currently achieved in the U.K., but there is low penetration of
telephony and Internet products. NTL Group plans to modernize and
expand the product. In addition to its residential fixed line
operations, NTL Group is placing increasing emphasis on
developing a mobile product offering to complement its fixed line
operations and continues to explore cost effective alternatives.
o National Telecommunications Services, including business
telecommunications, national and international carrier
telecommunications, Internet services and radio communications
services. NTL Group's U.K. business services group (excluding CWC
Consumer Co.) serves approximately 46,200 business
and carrier customers, including: AT&T, Cisco, Colt, MCI Worldcom,
Microsoft, Orange, Sun Microsystems and Vodafone.
NTL Group provides its broad range of services over local, national
and international network infrastructure. This network infrastructure in the
U.K. consists of:
o Broadband Communications Networks that currently pass
approximately 8.2 million homes (an additional 2.1 million homes
are passed by broadband networks in Switzerland, France and
Ireland). These high-capacity two-way local broadband networks
serve entire communities throughout their regional franchise
areas. NTL Group's fiber optic cables will ultimately pass nearly
every business in each regional franchise area and are connected
to nodes which are typically within approximately 500 meters of
each of the 600 homes typically served by each node. Each home is
then connected by a siamese cable consisting of two copper pair
telephone wires and a coaxial cable, allowing NTL Group to deliver
telephone, cable television and Internet services over a single
integrated network. This siamese cable also allows NTL Group to
deploy both cable modems and digital subscriber line technology
for the provision of broadband communications services.
o National/International Synchronous Digital Hierarchy, Known as
Sdh, Fiber Optic Telecommunications Network which connects all of
the major population centers in the U.K. to Ireland, Continental
Europe and the United States. This self-healing, fully redundant
3,500 mile backbone network utilizes Asynchronous Transfer Mode,
known as ATM, technology and was built with sufficient duct
capacity to accommodate over 2,300 fibers on the majority of its
routes. NTL Group has designed this network to allow NTL Group to
place the active components, such as routing devices, at its edge
and close to NTL's customers. This design will ultimately reduce
NTL Group's costs and increase NTL Group's ability to offer a
broad range of voice and data solutions.
We have included a more detailed description of the current business
of NTL Group in Annex IV to this proxy statement. You should review this
information before you decide how to vote on the tracking stock proposal.
The Broadcast Group
The Broadcast Group is a leading owner and operator of broadcast and
wireless communications infrastructure principally in the U.K. and
Australia. In April 1999, we acquired NTN, the exclusive provider of
television and radio transmission services to Australia's national TV and
radio broadcasters. The Broadcast Group utilizes 2,710 tower sites in
the U.K. for its broadcast and wireless services while NTN transmits from
561 tower sites throughout Australia.
The Broadcast Group provides a number of services:
o Television and radio broadcast transmission
o Tower and site leasing
o Satellite communications services
Based on our experience of providing broadcast services to the U.K.'s
commercial television operators, our pioneering approach and expertise in
digital broadcasting, we believe the Broadcast Group is uniquely positioned
to capitalize on the global trends towards privatization, outsourcing and
digitalization and the tremendous growth opportunities in the wireless
communications industry.
U.K. Broadcast Transmission
The Broadcast Group transmits its services using a national
infrastructure in the U.K. of 1,289 owned or shared transmission sites with
over 3,500 transmitters delivering broadcast signals for the three
commercial national television channels and most of the U.K.'s independent
local, regional and national radio broadcasters. The Broadcast Group also
designs, installs, operates, and maintains new transmitter networks and has
developed radio spectrum expertise which enables it to plan and develop the
coverage of television and radio services and networks.
Television Broadcasting
The Broadcast Group provides analog broadcast transmission for
national and regional broadcasters, such as the regional ITV companies,
Channel 4 and Channel 4 and Channel 5 in the U.K. We also currently provide
digital broadcast transmission for two of the three commercial national
digital television operators in the U.K. These services currently carry up
to 12 separate channels which include the ITV network, Channel Four,
Channel Five and a range of new digital channels and services including Pay
Per View. For all of these services the Broadcast Group builds, owns,
operates and maintains all of the facilities and infrastructure required to
broadcast.
Radio Broadcasting
The Broadcast Group is one of two major companies providing
transmission sites and services to the radio industry in the U.K. We have
an 85% share by value of the local commercial radio transmission market and
have approximately 40% (by value) of the national commercial market. The
Broadcast Group offers a range of services to local and national radio
broadcasting licensees in the U.K. including: target service area planning;
site location; installation and commissioning; and equipment selection,
procurement, operation, monitoring and maintenance. We offer total
broadcast contract services, in which we design, build, own and maintain
the operators' transmission facilities, and facility management contract
services where we maintain customer-owned equipment and administer the
operation of the transmission service.
Satellite and Media Services
The Broadcast Group owns and operates a network of over 30 satellite
uplink dishes which have access to over 50 satellites and are used by its
broadcast and media customers to provide a total of 130 television
channels. These uplink facilities also have extensive fiber connections
with facility houses, studios and playout facilities in the U.K. and
Ireland, and via a partnership with Williams Vyvx in the U.S., 48 U.S.
cities. In addition, the Broadcast Group also owns and operates a fleet of
satellite news gathering vehicles and "flyaway" uplinks which together with
its fixed uplink facilities are used by a range of broadcast, satellite and
media customers for occasional transmissions such as live news and sports
events.
Australian Broadcast Transmission
In April 1999, the Broadcast Group purchased NTN, the exclusive
provider of television and radio transmission services to Australia's
national TV and radio broadcasters, ABC and SBS. NTN transmits from 561
tower sites throughout Australia. In addition, NTN serves regional and
community TV and radio broadcasters, and provides equipment hosting
services to telecommunications operators and emergency service
communications operators on its towers. NTN's customers include Telstra,
WIN Television, Prime Television, Vodafone and Air Services Australia. NTN
holds long term contractual relationships with the majority of its
customers.
Towers and Sites
The Broadcast Group is a network service provider in the wireless
communications industry, renting antenna space on our owned and leased
towers and sites to a variety of carriers operating wireless services. In
addition, through our strategy of outsourcing services, the Broadcast Group
also provides facilities and services, relating to the leasing of space on
our towers, directly to the professional user market. Typically we receive
fees for installing customers' equipment and antennas on a tower in
addition to rental payments from customers payable under site leases. As of
April 30, 2000, in the U.K. over 378 companies rented antenna space on our
towers and sites. During the last four years, the number of lessees on our
towers has grown from 1,989 to over 3,813 in April 2000 (excluding
broadcast customers).
We have included a more detailed description of the current business
of the Broadcast Group in Annex V to this proxy statement. You should
review this information before you decide how to vote on the tracking stock
proposal.
THE TRACKING STOCK PROPOSAL
You are being asked to consider and vote in favor of the tracking
stock proposal. If you approve the tracking stock proposal, we will file a
charter amendment that will:
o authorize the board of directors to issue common stock in multiple
series, with the initial two series to be designated as "NTL
Incorporated-NTL Stock" and "NTL Incorporated-Broadcast Tracking
Stock";
o reclassify each outstanding share of the existing common stock as
one a share of NTL Stock;
o increase the total authorized shares of common stock of NTL from
800,000,000 to [ ]; and
o authorize the board of directors to create additional series of
common stock of NTL other than NTL Stock and Broadcast Tracking
Stock.
Further, as part of the tracking stock proposal:
o We intend Broadcast Tracking Stock to reflect the performance of
the Broadcast Group.
o We intend NTL Stock to reflect the performance of NTL Group.
o We have allocated, for financial reporting purposes, all of NTL's
consolidated assets, liabilities, revenue, expenses and cash flow
between NTL Group and the Broadcast Group.
o We will initially authorize [ ] shares of NTL Stock and
[ ] shares of Broadcast Tracking Stock.
If you approve the tracking stock proposal, we expect to file our
charter amendment and establish the NTL Broadcast Incentive Plan shortly
before we issue Broadcast Tracking Stock. Our board of directors, in its
sole discretion, may determine not to proceed with the tracking stock
proposal at any time prior to the effectiveness of the charter amendment,
or may determine not to designate Broadcast Tracking Stock in the charter
amendment.
INITIAL ISSUANCE OF BROADCAST TRACKING STOCK
We currently plan to distribute to our stockholders shares of
Broadcast Tracking Stock intended to represent approximately 10% of the
equity value initially attributed to the Broadcast Group. This would leave
NTL Group with a retained interest intended to represent the remainder of
the equity value initially attributable to the Broadcast Group that is not
represented by issued and outstanding Broadcast Tracking Stock.
We expect that this distribution would occur some time in our fiscal
year 2000. However, we could choose to conduct this distribution at a later
time, or not to make any distribution at all, depending on circumstances at
the time. Instead of a distribution, NTL may first issue Broadcast Tracking
Stock:
o by an offer to the public for cash;
o by a private placement for cash;
o by issuing the stock to acquire stock or assets of another
company; or
o by an offer to exchange shares of Broadcast Tracking Stock for
shares of NTL Stock.
We also currently plan to grant to management and employees of the
Broadcast Group under the NTL Broadcast Incentive Plan, stock options to
purchase, or restricted stock awards of, Broadcast Tracking Stock
representing approximately [ ]% of the total shares of Broadcast Tracking
Stock deemed outstanding after we first issue Broadcast Tracking Stock,
assuming for this purpose that NTL Group's retained interest in the
Broadcast Group is represented by issued and outstanding shares of
Broadcast Tracking Stock.
The exercise of these stock options or grant of these stock awards
would reduce NTL Group's retained interest in the Broadcast Group.
SUBSEQUENT ISSUANCES OF BROADCAST TRACKING STOCK
After we first distribute Broadcast Tracking Stock, we may issue
additional shares of Broadcast Tracking Stock from time to time and further
reduce NTL Group's retained interest in the Broadcast Group by:
o distributing a dividend of Broadcast Tracking Stock to the holders
of NTL Stock;
o selling Broadcast Tracking Stock in public or in a private
placement for cash;
o offering to exchange Broadcast Tracking Stock for NTL Stock;
o issuing Broadcast Tracking Stock or options to purchase Broadcast
Tracking Stock to employees under stock-based compensation
arrangements;
o using Broadcast Tracking Stock as consideration in an acquisition;
or
o any combination of the above.
Authorized but unissued shares of NTL Stock, Broadcast Tracking Stock
and any common stock not previously designated by the board of directors as
NTL Stock or Broadcast Tracking Stock, will be available for issuance by
NTL from time to time at the discretion of the board of directors. The
board of directors could authorize issuance of the remaining shares for any
proper corporate purpose, such as raising capital, paying stock dividends,
providing compensation or benefits to employees or acquiring other
companies or businesses. Your approval is not necessary for the issuance of
the remaining authorized but unissued shares of common stock unless such
approval is required by the board of directors, Delaware law, or NASDAQ
rules.
RISK FACTORS
When evaluating whether to vote in favor of the tracking stock
proposal, you should be aware that there are a number of risks relating to
such proposal. Some of the risks are set forth below:
o the market value of NTL Stock may be less than the market value of
the existing common stock after the reclassification;
o financial performance of one group could adversely affect the
other;
o actions by directors and officers could favor the holders of one
series of common stock or one group over the other;
o the board of directors may pay more or less dividends on a series
of common stock than if the related group was a separate company;
o allocation of corporate opportunities could favor one group over
the other group;
o holders of a series of common stock may receive less consideration
upon a sale of assets than if the related group was a separate
company;
o in circumstances where a separate series vote is required, a
series of common stock with less than a majority of the voting
power may have limited influence on stockholder votes; and
o the existence of a tracking stock structure could discourage a
change of control.
You should carefully consider these risks, described more fully in
"Risk Factors" beginning on page [ ] , as well as the other information and
data included or incorporated by reference in this proxy statement before
you vote on the tracking stock proposal.
REASONS FOR THE TRACKING STOCK PROPOSAL
The tracking stock proposal was adopted by our board of directors
following its review of various alternatives to enhance stockholder value
and support NTL's strategic objectives. The board of directors believes
that the recent historical price performance of the existing common stock
has failed to adequately reflect the value of the various businesses of
NTL, including the Broadcast Group. The board of directors believes that
proceeding with the tracking stock proposal, and initially designating NTL
Stock and Broadcast Tracking Stock as tracking stocks, will:
o enable investors to review separate financial information about
the Broadcast Group and separately value Broadcast Tracking Stock.
This should encourage investors and analysts to focus more
attention on the Broadcast Group and its contribution to the value
of NTL;
o enable us to issue Broadcast Tracking Stock in one or more private
or public financings, thus raising capital for NTL Group and/or
the Broadcast Group;
o provide us with greater flexibility in responding to strategic
opportunities, such as acquisitions, by allowing us to issue
either NTL Stock or Broadcast Tracking Stock as appropriate under
the circumstances;
o enable us to attract, retain and motivate the senior management
and employees of the Broadcast Group through the issuance of
stock-based compensation tied to the performance of Broadcast
Tracking Stock; and
o preserve the financial, tax, strategic and operational benefits of
being a single enterprise.
The tracking stock proposal also gives the board of directors the
flexibility to use its authority to designate additional series of common
stock to obtain the benefits of the creation of tracking stock for NTL's
other business groups as it deems appropriate. Any such issuance would be
subject to the risk factors set forth above.
Finally, the increase in the number of authorized shares of common
stock contemplated by the tracking stock proposal will ensure that we have
a sufficient number of shares of common stock available to implement the
tracking stock proposal, provide additional common stock available for
future designation and issuance, fund our rights plan and stock
compensation plan obligations, provide for future stock splits and allow
NTL to address any future capital needs that may arise.
SUMMARY COMPARISON OF EXISTING COMMON STOCK WITH TERMS OF
NTL STOCK AND BROADCAST TRACKING STOCK
<TABLE>
<CAPTION>
EXISTING
COMMON STOCK NTL STOCK BROADCAST TRACKING STOCK
<S> <C> <C> <C>
BUSINESS: All businesses NTL Group consists of all of The Broadcast Group consists
of NTL our businesses and other of our broadcast and wireless
assets other than the communications assets and
Broadcast Group. operations as more fully
described in Annex V of this
proxy statement.
We cannot assure you that We cannot assure you that the
the market value of NTL market value of Broadcast
Stock will in fact reflect the Tracking Stock will in fact
performance of NTL Group reflect the performance of the
as we intend. Holders of Broadcast Group as we intend.
NTL Stock will continue to Holders of Broadcast Tracking
be common stockholders of Stock will continue to be
NTL and, as such, will be common stockholders of NTL
subject to all of the risks and, as such, will be subject to
associated with an all of the risks associated with
investment in NTL and all of an investment in NTL and all
our businesses, assets and of our businesses, assets and
liabilities. liabilities.
ISSUANCE: Our existing The charter amendment The restated charter would
common stock would reclassify each create a new series of common
is already outstanding share of existing designated "Broadcast
outstanding. common stock as one share Tracking Stock". We
of NTL Stock. currently plan to distribute to
our stockholders, shares of
Broadcast Tracking Stock
intended to represent
approximately 10% of the
equity value initially attributed
to the Broadcast Group. We
expect that this distribution
would occur some time in our
fiscal year 2000. However,
we could choose to conduct
the distribution at a later time,
or not to make the distribution
at all, depending on
circumstances at the time.
Instead of this distribution,
NTL may first issue Broadcast
Tracking Stock through an
initial public offering or
private placement for cash, by
an offer of exchange with the
holders of NTL Stock, or by
issuing the stock to acquire
stock or assets of another
company. NTL Group would
hold a retained interest in the
Broadcast Group intended to
represent the balance of the
equity value initially
attributable to the Broadcast
Group.
We also currently plan to grant
to the Broadcast Group senior
management and employees
under the NTL Incentive Plan
options to purchase, or
restricted stock awards of,
Broadcast Tracking Stock
representing approximately [ ]%
of the Broadcast Tracking Stock
deemed outstanding at the time we
first issue Broadcast Tracking
Stock (assuming, for this
purpose, that NTL Group's
retained interest in the
Broadcast Group is represented
by issued and outstanding shares
of Broadcast Tracking Stock). The
exercise of these stock options
or grant of stock awards would
reduce NTL Group's retained
interest in the Broadcast Group.
After we first issue Broadcast
Tracking Stock, we may
issue additional shares of
Broadcast Tracking Stock,
and further reduce NTL Group's
retained interest in the
Broadcast Group by:
o distributing a dividend of
Broadcast Tracking Stock to
the holders of NTL Stock or
Broadcast Tracking Stock;
o selling Broadcast Tracking
Stock in private or public
financings for cash;
o offering to exchange
Broadcast Tracking Stock
for NTL Stock;
o issuing Broadcast Tracking
Stock or options to purchase
Broadcast Tracking Stock to
employees under compensation
arrangements;
o using Broadcast Tracking
Stock as consideration in an
acquisition; or
o any combination of the above.
RETAINED N/A We would adjust the retained N/A
INTEREST: interest in the Broadcast
Group of NTL Group as
appropriate to reflect
issuances or repurchases of
Broadcast Tracking Stock,
capital contributions to, or
returns of capital from, the
Broadcast Group and certain
other events.
AUTHORIZED We are currently The tracking stock proposal The tracking stock proposal
AND authorized to will authorize us to issue will authorize us to issue
OUTSTANDING issue only one multiple series of common multiple series of common
COMMON series of stock, and we will initially stock, and we will initially
STOCK: common stock. designate two series of designate two series of
common stock--NTL Stock common stock--NTL Stock
and Broadcast Tracking and Broadcast Tracking Stock.
Stock.
We are currently The tracking stock proposal The tracking stock proposal
authorized to will authorize us to increase will authorize us to increase
issue up to the number of authorized the number of authorized
800,000,000 shares to [ ] shares of shares to [ ] shares of
shares of common stock. common stock.
common stock.
Approximately We will initially authorize We will initially authorize
270,775,000 [ ] shares of NTL [ ] shares of
shares of Stock. Authorized shares of Broadcast Tracking Stock.
existing NTL Stock, together with the Authorized shares of
common stock then authorized shares of Broadcast Tracking Stock,
were Broadcast Tracking Stock, together with the then
outstanding on will count against the total authorized shares of NTL
June 23, 2000. number of shares of common Stock, will count against the
These shares stock we are authorized to total number of shares of
count against issue. Immediately common stock we are
the total number following the authorized to issue. After the
of shares we are implementation of the tracking stock proposal is
authorized to tracking stock proposal, implemented, we expect to
issue. approximately [ ] issue those shares of
In addition, the shares of NTL Stock will be Broadcast Tracking Stock
board of outstanding, based on the described above in this table
directors has number of shares of existing under "Issuance."
currently common stock outstanding
reserved on [ ], 2000.
approximately
133,889,000
shares of
existing
common stock
for issuance
upon exercise of
the rights plan,
upon conversion
of outstanding
convertible
notes, upon
exercise of
outstanding
warrants, upon
conversion of
outstanding
convertible
preferred stock
and upon exercise
of existing
employee and
director options.
LISTING: NASDAQ NTL will apply to the NTL will apply to the
National Market NASDAQ National Market NASDAQ National Market for
under the for the redesignation of the the listing of Broadcast
symbol "NTLI". existing common stock as Tracking Stock.
NTL Stock, which would
continue to trade under the
symbol "NTLI".
DIVIDENDS: NTL has never We do not expect to change We currently intend to retain
paid a cash our dividend policy with all of our earnings attributable
dividend. respect to our existing to the Broadcast Group to
common stock, which finance its operations, repay
becomes NTL Stock as a its allocable indebtedness and
result of the tracking stock fund future growth. We do not
proposal. Also, see "Risk expect to pay any cash
Factors" for a discussion of dividends on Broadcast
our dividend policy and Tracking Stock in the
limitations imposed by our foreseeable future. Also, see
operating subsidiaries' "Risk Factors" for a discussion
indentures and credit of our dividend policy and
facilities. limitations imposed by our
operating subsidiaries'
indentures and credit facilities.
We are We will be permitted to pay We will be permitted to pay
permitted to pay dividends out of all funds of dividends out of all funds of
dividends out of NTL legally available for the NTL legally available for the
the assets of payment of dividends under payment of dividends under
NTL legally Delaware law, but our Delaware law, but our charter
available for charter amendment will amendment will provide that
dividends under provide that the total the total amounts paid as
Delaware law. amounts paid as dividends dividends on Broadcast
on NTL Stock cannot exceed Tracking Stock cannot exceed
the available dividend the available dividend amount
amount for NTL Group. The for the Broadcast Group. The
available dividend amount available dividend amount for
for NTL Group is based on the Broadcast Group is based
the amount that would be on the amount that would be
legally available for the legally available for the
payment of dividends under payment of dividends under
Delaware law if NTL Group Delaware law if the Broadcast
were a separate Delaware Group were a separate
corporation and certain Delaware corporation and
other assumptions applied. certain other assumptions
Also, see "Risk Factors" for applied. Also, see "Risk
a discussion of our dividend Factors" for a discussion of
policy and limitations our dividend policy and
imposed by our operating limitations imposed by our
subsidiaries' indentures and operating subsidiaries'
credit facilities. indentures and credit facilities.
Dividends on The board of directors, The board of directors, subject
the existing subject to the limitations set to the limitations set forth
common stock forth above, and subject to above, and subject to the
are payable at the operating subsidiaries on limitations on dividends
the sole dividends contained in our contained in our operating
discretion of the operating subsidiaries' subsidiaries' indentures and
board of indentures and credit credit facilities may, in its
directors and are facilities, may in its sole sole discretion, declare and pay
determined after discretion, declare and pay dividends on neither series of
consideration of dividends on neither series of common stock, on one, but not
various factors common stock, on one, but both, series of common stock,
including (without not both, series of common or on both series of common
limitation) the both, series of common stock, stock, in equal or unequal
earnings and financial or on both series of common amounts.
condition of NTL stock, in equal or unequal
and its subsidiaries. amounts.
VOTING One vote per NTL Stock will have one On all matters as to which all
RIGHTS: share. vote per share. series of our common stock
vote together as a single class,
each outstanding share of
Broadcast Tracking Stock will
have one vote prior to the
31st trading day after the
effective date of the charter
amendment. For each vote of
stockholders on or after that
day, each share of Broadcast
Tracking Stock will have a
number of votes equal to the
ratio of the average market
value of one share of Broadcast
Tracking Stock to the average
market value of one share of NTL
Stock over a specified 20 trading
day period prior to the record
date of that vote. Outstanding
Broadcast Tracking Stock will
in no event represent in excess
of 15% of the total voting power
of all outstanding shares of all
series of NTL common stock.
Because each share of Because each share of
Broadcast Tracking Stock Broadcast Tracking Stock will
ill have a variable number have a variable number of
votes, the relative voting votes, the relative voting
power of one share of NTL power of one share of NTL
Stock and one share of Stock and one share of
Broadcast Tracking Stock Broadcast Tracking Stock will
will fluctuate as described fluctuate as described more
more fully beginning on fully beginning on page[ ].
page[ ].
The holders of NTL Stock
The holders of NTL Stock and Broadcast Tracking
and Broadcast Tracking Stock will vote together
Stock will vote together as a single class, except
as a single class, except for certain class
for certain class votes as votes as provided under
provided under Delaware Delaware law or by NASDAQ
law or by NASDAQ rules. rules.
RIGHTS ON None. If we dispose of all or If we dispose of all or
DISPOSITION: substantially all of the assets substantially all of the assets
of NTL Group, and the of the Broadcast Group, and
disposition is not an exempt the disposition is not an
disposition, as described on exempt disposition, as
[ ] , subject to the limitations described on page [ ],
contained in our operating subject to the limitations
subsidiaries' indentures and contained in our operating
credit facilities, we would be subsidiaries' indentures and
required to choose one of the credit facilities, we would be
following alternatives: required to choose one of the
following alternatives:
o pay a dividend to the
holders of NTL Stock in an o pay a dividend to the holders
amount equal to the net of Broadcast Tracking Stock
proceeds of such in an amount equal to the net
disposition; proceeds of such disposition
(net of corresponding
o if the disposition involves amounts allocated to NTL
all of the assets of NTL Group in respect of its
Group, redeem all retained interest in the
outstanding shares of NTL Broadcast Group);
Stock in exchange for an
amount equal to the net o if the disposition involves
proceeds of the disposition; all of the assets of the
or Broadcast Group, redeem all
outstanding shares of
o if the disposition involves Broadcast Tracking Stock in
substantially all, but not exchange for an amount
all, of the assets of NTL equal to the net proceeds of
Group, redeem a number the disposition (net of
of whole shares of NTL corresponding amounts
Stock in exchange for an allocated to NTL Group in
amount equal to the net respect of its retained
proceeds of the disposition. interest in the Broadcast
Group);
o if the disposition involves
substantially all, but not
all, of the assets of the
Broadcast Group, redeem a
number of whole shares of
Broadcast Tracking Stock in
exchange for an amount
equal to the net proceeds of
the disposition (net of
corresponding amounts
allocated to NTL Group in
respect of its retained
interest in the Broadcast
Group); or
o convert each share of
Broadcast Tracking Stock
into a number of shares of
NTL Stock equal to 110% of
the ratio of the average
market value of one share of
Broadcast Tracking Stock to
the average market value of
one share of NTL Stock,
calculated during a specified
20 trading day period prior
to the disposition.
SALES OF None The proceeds from any The proceeds from any
LESS THAN disposition of assets that do disposition of assets that do
SUBSTANTIALLY not comprise all or not comprise all or
ALL OF THE substantially all of the substantially all of the
ASSETS OF A properties and assets properties and assets attributed
GROUP: attributed to NTL Group will to the Broadcast Group will be
be assets attributed to NTL assets attributed to the
Group and used for its Broadcast Group and used for
benefit, subject to the its benefit, subject to the
policies described under policies described under "The
"The Tracking Stock Tracking Stock
Proposal--Certain Proposal--Certain
Management and Allocation Management and Allocation
Policies" beginning on page[ Policies" beginning on page [
]. ].
CONVERSION AT None None We will have the right, at any
OPTION OF time, to convert shares of
COMPANY: Broadcast Tracking Stock into
a number of shares of NTL
Stock initially equal to 120%
of the ratio of the average
market value of one share of
Broadcast Tracking Stock to
the average market value of
one share of NTL Stock over a
20 trading day period ending
on the fifth trading day prior
to the mailing of the
conversion notice for
conversions occurring in the
first quarter after the original
issuance of Broadcast
Tracking Stock. The
percentage applied to the ratio
of market values will decline
ratably each quarter over a
period of ten quarters to
110%.
Notwithstanding the conversion
provisions outlined above,
in the event that certain
adverse tax law changes
were to take place, as further
explained on page [ ],
we will have the right to
convert shares of Broadcast
Tracking Stock into a
number of shares of NTL
Stock equal to a percentage,
which will not be more
than 110% or less than 100% (as
determined by our board
of directors, at the time the
charter amendment is filed, to
be in the best interests of our
stockholders), applied to the
ratio of the average market
values of the Broadcast Tracking
Stock and the NTL Stock described
above, regardless of when such
adverse tax law changes take
place.
LIQUIDATION: Upon liquidation Upon liquidation of NTL, Upon liquidation of NTL,
of NTL, holders of holders of NTL Stock will be holders of Broadcast Tracking
existing entitled to receive the net Stock will be entitled to
common stock assets of NTL, if any, receive the net assets of NTL,
are entitled to available for distribution to if any, available for
receive the net stockholders (after payment distribution to stockholders
assets of NTL, if or provision for all liabilities (after payment or provision for
any, remaining of NTL and payment of the all liabilities of NTL and
for distribution liquidation preference payment of the liquidation
to holders of existing payable to any holders of preference payable to any
common stock in equal preferred stock, if any). holders of preferred stock, if
amounts per share Amounts due upon liquidation any). Amounts due upon
(after payment or in respect of shares of NTL liquidation in respect of shares
provision for all Stock and Broadcast Tracking of NTL Stock and Broadcast
liabilities of NTL and Stock will be distributed Tracking Stock will be
payment of the pro rata in accordance distributed pro rata in
liquidation preference with the relative average accordance with the relative
payable to any holders market value of one share average market value of one
of preferred stock, of NTL Stock and one share share of NTL Stock and one
if any). of Broadcast Tracking Stock share of Broadcast Tracking
over a specified 20 trading Stock over a specified 20
day period ending 300 days trading day period ending 300
after the implementation of days after the implementation
the tracking stock proposal of the tracking stock proposal
(or, if the liquidation occurs (or, if the liquidation occurs
prior to that date, the 20 prior to that date, the 20
trading day period prior to trading day period prior to the
the liquidation). In the liquidation). In the absence of
absence of a public trading a public trading market for
market for Broadcast Tracking Broadcast Tracking Stock,
Stock, market value would be market value would be
determined in good faith by determined in good faith by
the board of directors in the board of directors in their
their sole discretion. sole discretion.
CERTAIN N/A Because NTL Group and the Because NTL Group and the
MANAGEMENT Broadcast Group are part of Broadcast Group are part of a
AND a single enterprise, we will single enterprise, we will
ALLOCATION establish guidelines for establish guidelines for
POLICIES: allocation of corporate costs allocation of corporate costs
and charges among NTL, and charges among NTL, NTL
NTL Group and the Group and the Broadcast
Broadcast Group, including: Group, including:
o allocation of the existing o allocation of the existing
indebtedness of NTL; indebtedness of NTL;
o accounting for transfers of o accounting for transfers of
cash or property from one cash or property from one
group to the other; group to the other;
o the allocation of shared o the allocation of shared
services and corporate, services and corporate,
general and administrative general and administrative
costs; costs;
o allocation of retirement o allocation of retirement plan
plan costs; and costs; and
o the allocation of taxes and o the allocation of taxes and
tax benefits. tax benefits.
We will also establish We will also establish
guidelines to handle guidelines to handle
corporate opportunity and corporate opportunity and
fiduciary duty questions. fiduciary duty questions.
Once adopted, the board of Once adopted, the board of
directors or management directors or management
may modify or rescind any may modify or rescind any
of these policies at any time, of these policies at any time,
or may adopt additional or may adopt additional
policies, at any time, in its or policies, at any time, in its or
their sole discretion, their sole discretion,
without stockholder approval. without stockholder approval.
These policies are described These policies are described
more fully beginning on more fully beginning on
page [ ]. page [ ].
STOCKHOLDERS Holders of Holders of NTL Stock will Holders of Broadcast Tracking
OF ONE existing continue to be subject to the Stock will continue to be
COMPANY: common stock risks associated with an subject to the risks associated
are subject to investment in NTL and all of with an investment in NTL
the risks its businesses, assets and and all of its businesses, assets
associated with liabilities. Financial effects and liabilities. Financial
an investment in arising from the Broadcast effects arising from NTL
NTL and all of Group that affect NTL's Group that affect NTL's
its businesses, overall results of operations overall results of operations or
assets and or financial condition could, financial condition could, if
liabilities. if significant, affect the significant, affect the results
results of operations or of operations or financial
financial position of NTL position of the Broadcast
Group or the market price of Group or the market price of
NTL Stock. Any net losses Broadcast Tracking Stock.
of NTL Group or the Any net losses of NTL Group
Broadcast Group, and or the Broadcast Group, and
dividends or distributions on, dividends or distributions on,
or repurchases of, NTL or repurchases of, NTL Stock,
Stock, Broadcast Tracking Broadcast Tracking Stock, or
Stock, or any other common any other common stock or
stock or preferred stock, will preferred stock, will reduce
reduce the assets of NTL the assets of NTL legally
legally available for payment available for payment of
of future dividends on NTL future dividends on NTL
Stock and Broadcast Stock and Broadcast Tracking
Tracking Stock. Stock.
REDEMPTION None None Although we have no present
IN EXCHANGE intention to do so, our board
FOR STOCK OF of directors may in the future
SUBSIDIARY: decide to spin-off the
Broadcast Group. To do so, NTL
may, subject to the
limitations contained in our
operating subsidiaries'
indentures and credit facilities,
redeem Broadcast Tracking Stock
for a number of shares of one
or more wholly owned subsidiaries
of NTL then owning all of the
assets and liabilities of the
Broadcast Group.
</TABLE>
U.S. FEDERAL INCOME TAX CONSIDERATIONS
We have been advised by Skadden, Arps, Slate, Meagher & Flom LLP, our
special tax counsel, that (i) for U.S. Federal income tax purposes, NTL
Stock and Broadcast Tracking Stock will be treated as stock of NTL; (ii)
neither NTL nor you, except where you receive cash in lieu of fractional
shares, will recognize any income, gain, or loss upon the reclassification
of the existing stock, the issuance of Broadcast Tracking Stock, the
distribution of a dividend of Broadcast Tracking Stock to the holders of
NTL Stock, or the exchange of Broadcast Tracking Stock for NTL Stock, as we
presently contemplate such transactions would be carried out; and (iii) the
Broadcast Tracking Stock so received will not be "section 306 stock" in
your hands. There are no court decisions or other authorities that control
the tax treatment of tracking stock, such as the Broadcast Tracking Stock.
In addition, the IRS has announced that it will not issue advance rulings
on the classification of an instrument with characteristics similar to
those of NTL Stock and Broadcast Tracking Stock. Therefore, the U.S.
Federal income tax treatment of the tracking stock proposal is subject to
some uncertainty. See "Certain U.S. Federal Income Tax Considerations"
beginning on page [ ].
ESTABLISHMENT OF NTL BROADCAST INCENTIVE PLAN
As part of the tracking stock proposal, we will establish the NTL
Broadcast Incentive Plan. Under this plan, we will grant to senior
management and employees of the Broadcast Group options to purchase, or
restricted stock awards of, Broadcast Tracking Stock representing
approximately % of the total shares of Broadcast Tracking Stock deemed
outstanding after we first issue Broadcast Tracking Stock, assuming for
this purpose that NTL Group's retained interest in the Broadcast Group is
represented by issued and outstanding shares of Broadcast Tracking Stock.
See Annex III for the complete text of the plan as proposed.
NTL--SUMMARY CONSOLIDATED FINANCIAL DATA
[TO COME]
NTL GROUP--SUMMARY COMBINED FINANCIAL DATA
[TO COME]
THE BROADCAST GROUP--SUMMARY FINANCIAL DATA
[TO COME]
RISK FACTORS
You should carefully consider the risk factors described below, as
well as the other information included in this proxy statement, before you
decide how to vote on the proposals.
WE CANNOT PREDICT HOW THE ISSUANCE OF BROADCAST TRACKING STOCK WILL AFFECT
THE MARKET PRICE OF NTL STOCK
We cannot predict the price at which NTL Stock will trade following
the issuance of Broadcast Tracking Stock. The market price of NTL Stock may
not equal or exceed the market price of our existing common stock. Some of
the terms of NTL Stock and Broadcast Tracking Stock may adversely affect
their trading price. Examples include:
o the right of the NTL board of directors to convert Broadcast
Tracking Stock into NTL Stock; and
o the discretion of NTL's board of directors in making various
determinations relating to (1) a variety of matters affecting
the rights of the holders of NTL Stock and Broadcast Tracking
Stock, such as dividends and the allocation of merger proceeds,
and (2) a variety of cash management and allocation matters.
HOLDERS OF NTL STOCK AND BROADCAST TRACKING STOCK WILL BE COMMON
STOCKHOLDERS OF NTL AND WILL NOT HAVE ANY LEGAL RIGHTS RELATING TO SPECIFIC
ASSETS OF NTL
Holders of NTL Stock and Broadcast Tracking Stock will be common
stockholders of the same company. NTL Group and the Broadcast Group will
not be separate legal entities but rather parts of NTL. As a result,
stockholders will continue to be subject to all of the risks of an
investment in NTL and all of our businesses, assets and liabilities. The
reclassification of the existing common stock as NTL Stock and the issuance
of Broadcast Tracking Stock, and the allocation of assets and liabilities
and stockholders' equity between NTL Group and the Broadcast Group will not
result in a distribution or spin-off to stockholders of any of our assets
or liabilities and will not affect ownership of our assets or
responsibility for our liabilities or those of our subsidiaries. As a
result, the implementation of the tracking stock proposal will not affect
the rights of the holders of any debt of NTL or its subsidiaries. The
assets we attribute to one group will be subject to the liabilities of the
other groups, whether such liabilities arise from lawsuits, contracts or
indebtedness that we attribute to another group. If we are unable to
satisfy one group's liabilities out of the assets we attribute to it, we
may be required to satisfy those liabilities with assets we have attributed
to another group. Further, holders of NTL Stock and Broadcast Tracking
Stock will only have the rights specified in our charter amendment, and
will not have any legal rights related to specific assets of any specific
group.
FINANCIAL PERFORMANCE OF ONE GROUP COULD ADVERSELY AFFECT THE OTHER GROUP
The financial performance of one group that affects our consolidated
results of operations or financial condition could, if significant, affect
the results of operations or financial condition of the other group and the
market price of the tracking stock relating to the other group. In
addition, net losses of either group and dividends and distributions on, or
repurchases of, any series of common stock or repurchases of preferred
stock at a price per share greater than par value will reduce the funds we
can pay on each series of common stock under Delaware law. For these
reasons, you should read our consolidated financial information in addition
to the financial information we provide for each group.
IF NTL ENCOUNTERS FINANCIAL DIFFICULTY, THE VALUE OF A GROUP'S STOCK MAY
SUFFER FOR REASONS UNRELATED TO THE PROSPECTS OF THAT GROUP
Financial results of each group will affect NTL's consolidated
results of operations, financial position and borrowing costs. This could
affect the results of operations or financial position of the other group
or the market price of the series of stock relating to the other group.
HOLDERS OF NTL STOCK AND BROADCAST TRACKING STOCK WILL VOTE TOGETHER AS A
SINGLE CLASS AND WILL HAVE LIMITED SEPARATE VOTING RIGHTS
Holders of NTL Stock and Broadcast Tracking Stock will vote together
as a single class, except in certain limited circumstances provided under
Delaware General Corporation Law or NASDAQ rules. In addition to the
approval of the holders of a majority of the voting power of all shares of
tracking stock voting together as a single class, the approval of a
majority of the outstanding shares of NTL Stock and Broadcast Tracking
Stock, each voting as a separate class, would be required under Delaware
law to approve any amendment to our charter that would change the par value
of the shares of the series or alter or change the powers, preferences or
special rights of the shares of the series so as to affect them adversely.
LIMITS EXIST ON VOTING POWER OF BROADCAST TRACKING STOCK, AND AS A RESULT
THE HOLDERS OF NTL STOCK WILL BE ABLE TO CONTROL MAJORITY VOTES
Except for limited matters on which a separate class vote may be
required, holders of NTL Stock and Broadcast Tracking Stock will vote
together as a single class on all matters requiring a stockholder vote.
Matters on which the NTL Stock and Broadcast Tracking Stock will vote
together may involve an apparent or real divergence of interests between
the holders of each series of common stock in the aggregate. The aggregate
voting power of all of the outstanding shares of Broadcast Tracking Stock
at any time is limited to 15% of the total voting power of all of the
outstanding shares of all series of NTL common stock. Consequently, the
aggregate voting power of all of the outstanding shares of Broadcast
Tracking Stock will not represent a majority of the outstanding voting
power of all of the outstanding shares of all series of NTL common stock.
Currently, if matters come before the stockholders of NTL that require a
majority vote, the holders of NTL Stock, if they vote in a similar manner,
will be able to control the vote. These matters may include mergers or
other extraordinary transactions. In addition, the issuance or repurchase
of shares of any series of common stock could cause changes in the relative
voting power of the groups, subject to the 15% limitation on the voting
power of the Broadcast Tracking Stock described above.
IN CIRCUMSTANCES WHERE A SEPARATE CLASS VOTE IS REQUIRED, A SERIES OF
COMMON STOCK WITH LESS THAN A MAJORITY OF THE TOTAL VOTING POWER CAN BLOCK
ACTION
If Delaware law, NASDAQ rules, our restated certificate of
incorporation or the board of directors requires a separate vote on a
matter by the holders of either NTL Stock or Broadcast Tracking Stock,
those holders could prevent approval of the matter--even if the holders of
a majority of the total number of votes cast or entitled to be cast, voting
together as a class, were to vote in favor of it.
EXISTING STOCKHOLDERS OF NTL WILL HAVE A REDUCED INTEREST IN THE BROADCAST
GROUP
Following the proposed distribution of the Broadcast Group shares to
NTL stockholder, holders of NTL Stock will participate in the ownership of
the Broadcast Group through NTL Group's retained interest in the Broadcast
Group. NTL Group's retained interest in the Broadcast Group will decrease
as a result of the issuance of additional shares of the series of common
stock that tracks the Broadcast Group. After any issuance of Broadcast
Tracking Stock, the stockholders of NTL will no longer share as holders of
NTL Stock in the gains or losses attributable to the portion of that group
that is represented by the outstanding shares of Broadcast Tracking Stock
that are issued. The price at which any shares of Broadcast Tracking Stock
may be sold in the future may not reflect accurately the value of the
series of common stock that is issued and thus holders of NTL Stock may not
appropriately benefit from such issuances. Following the proposed
distribution of the Broadcast Group shares to NTL stockholders, existing
stockholders of NTL will not have any special rights to subscribe for
Broadcast Tracking Stock.
THE COST OF MAINTAINING SEPARATE BUSINESSES WILL LIKELY EXCEED THE COSTS
ASSOCIATED WITH OPERATING NTL AS A SINGLE ENTITY
The costs associated with implementing the tracking stock proposal
and the ongoing costs of operating separate businesses will likely exceed
the costs associated with operating NTL as it currently exists. At a
minimum, the issuance of Broadcast Tracking Stock will result in a complex
capital structure and additional reporting requirements with respect to the
Broadcast Group.
CONVERSION OF BROADCAST TRACKING STOCK INTO NTL STOCK MAY ADVERSELY AFFECT
THE HOLDERS OF BROADCAST TRACKING STOCK OR THE HOLDERS OF NTL STOCK
At any time, the board of directors, in its sole discretion and
without stockholder approval, could choose to convert shares of Broadcast
Tracking Stock into shares of NTL Stock, including a conversion at a time
when either or both series of our common stock may be considered to be
overvalued or undervalued. Any conversion at a premium would dilute the
interests of the holders of NTL Stock in NTL. Any conversion would also
preclude holders of Broadcast Tracking Stock from retaining their
investment in a security that is intended to reflect separately the
performance of the Broadcast Group. It would also give holders of shares of
Broadcast Tracking Stock a greater or lesser premium than any premium that
might be paid by a third-party buyer of all or substantially all of the
assets of the Broadcast Group.
HAVING MULTIPLE SERIES OF COMMON STOCK COULD CREATE CONFLICTS BETWEEN THE
INTERESTS OF THE HOLDERS OF EACH SERIES, AND OUR BOARD OF DIRECTORS COULD
RESOLVE THOSE CONFLICTS IN A MANNER THAT ADVERSELY AFFECTS HOLDERS OF ONE
OR MORE GROUPS
Having multiple series of common stock could give rise to occasions
when the interests of holders of one or more series might diverge or appear
to diverge from the interests of holders of the remaining series. In
addition, given the inter-group relationships between NTL Group and the
Broadcast Group, there will likely be inherent conflicts of interest
between the groups. Inter-group issues that could give rise to conflicts of
interest include:
o whether to allocate the proceeds of issuances (or the costs of
repurchases) of Broadcast Tracking Stock to NTL Group in
respect of its retained interest in the Broadcast Group, on the
one hand, or to the equity of the Broadcast Group on the other;
o how to allocate consideration received in connection with a
merger involving NTL among holders of each series of common
stock;
o whether and when to issue NTL Stock in exchange for Broadcast
Tracking Stock;
o whether or when to approve dispositions of assets of any group;
o how to allocate available cash between NTL Group and the
Broadcast Group and decisions as to whether and how to make
transfers of funds from one group to another;
o how to allocate assets and resources, such as management time,
between the groups;
o how to allocate costs and expenses between the groups; and
o whether and to what extent the groups compete with each other
and how corporate opportunities are allocated between the
groups.
Our board of directors intends to adopt certain policies relating to
cash management and allocations between the Broadcast Group and NTL Group.
For a more comprehensive description of these policies, see "Cash
Management and Allocation Policies," beginning on page [ ]. We cannot
assure you that the policies determined by our board of directors are as
favorable to the holders of one series of common stock as policies that
could be set by the related business group if it were a separate company.
Our board of directors will make operational and financial decisions
concerning the groups, and implement these policies in a manner, that may
affect these businesses differently, potentially favoring one group at the
expense of the other. Our board of directors will be required to make any
decision relating to these matters in the good faith business judgment that
the decision is in the best interests of NTL and all of our stockholders as
a whole. Although it has no present intention to do so, the board of
directors also may, in the exercise of its business judgment in accordance
with the directors' fiduciary duties to NTL and our stockholders, modify,
rescind or add to any of these policies. A decision to modify or rescind
these policies, or adopt additional policies, could have different effects
on the holders of Broadcast Tracking Stock or NTL Stock, or could adversely
affect the holders of one series of common stock compared to the other.
If directors own disproportionate interests (in percentage or value
terms) in NTL Stock or Broadcast Tracking Stock, that disparity could
create, or appear to create, potential conflicts of interest when those
directors are faced with decisions that could affect the holders of one
series of common stock differently than the holders of the other series.
PRINCIPLES OF DELAWARE LAW MAY PROTECT DECISIONS OF OUR BOARD OF DIRECTORS
THAT HAVE A DISPARATE IMPACT UPON HOLDERS OF NTL STOCK AND BROADCAST
TRACKING STOCK
Delaware law provides that a board of directors owes an equal duty to
all stockholders regardless of class or series and does not have separate
or additional duties to the holders of any particular class or series of
stock. Recent cases in Delaware involving tracking stocks have established
that decisions by directors or officers involving differing treatment of
tracking stocks may be judged under the "business judgment rule." Under
these principles of Delaware law and the "business judgment rule," you may
not be able to challenge board of directors' decisions that have a
disparate impact upon holders of NTL Stock or Broadcast Tracking Stock, if
the board of directors is adequately informed with respect to such
decisions and acts in good faith and in the honest belief that it is acting
in the best interest of our stockholders and does not have a conflict of
interest.
STOCKHOLDERS WILL NOT VOTE SEPARATELY AS A SERIES ON HOW TO ALLOCATE
CONSIDERATION RECEIVED IN CONNECTION WITH A MERGER OF NTL BETWEEN HOLDERS
OF NTL STOCK OR BROADCAST TRACKING STOCK
Our charter amendment will not contain any provisions governing how
consideration received in connection with a merger or consolidation
involving NTL is to be allocated among the holders of NTL Stock and
Broadcast Tracking Stock. None of the holders of NTL Stock or Broadcast
Tracking Stock will have a separate class vote in any merger or
consolidation so long as we divide the type and amount of consideration
among these holders in a manner we determine, in our sole discretion, to be
fair. As a result, the consideration to be received by holders of NTL Stock
or Broadcast Tracking Stock in any such merger or consolidation may be
materially less valuable than the consideration they would have received if
that group had been sold separately or if a separate class vote on such
merger or consolidation had occurred.
WE MAY DISPOSE OF ASSETS OF NTL GROUP OR THE BROADCAST GROUP WITHOUT YOUR
APPROVAL
Delaware law requires stockholder approval only for a sale or other
disposition of all or substantially all of the assets of NTL. Any
disposition requiring stockholder approval would require a vote of all NTL
stockholders voting together as a single class. As long as the assets
attributed to a group represent less than substantially all of our assets,
we may approve sales and other dispositions of any amount of the assets of
that group without any stockholder approval. If we dispose of all or
substantially all of the assets of any group, we would be required, if the
disposition is not an exempt disposition under the terms of our charter
amendment, to choose one of the following three alternatives:
o declare and pay a dividend to the holders of the relevant
series of common stock;
o redeem shares of the relevant series of common stock for cash,
securities or other property; or
o if the Broadcast Group's assets were sold, convert shares of
Broadcast Tracking Stock into outstanding shares of NTL Stock.
Holders of any series of common stock may receive less value for
their shares than the value that a third-party buyer might pay for all or
substantially all of the assets of such group. The board of directors will
decide, in its sole discretion, how to proceed and is not required to
select the option that would result in the highest value to holders of NTL
Stock or Broadcast Tracking Stock.
CORPORATE-LEVEL INCOME TAXES MAY BE INCURRED ON A SALE OF A GROUP THAT
WOULD NOT BE INCURRED IF THE GROUP WERE A SEPARATE CORPORATION
NTL may incur a tax liability upon a sale of the assets of a group,
which would be allocated to that group and reduce the amount available for
distribution to the holders of the tracking stock for that group. By
contrast, if the group were a separate corporation whose stock was held
directly by such holders, they could sell their stock directly to the
buyer, in which case no corporate-level tax would be incurred.
Consequently, the holders of tracking stock could receive less upon a
disposition of a related group than they would if they directly held stock
of a separate corporation.
WE DO NOT INTEND TO PAY DIVIDENDS ON BROADCAST TRACKING STOCK, AND EVEN IF
WE DECIDE TO DO SO, WE ARE NOT REQUIRED TO PAY DIVIDENDS EQUALLY ON NTL
STOCK AND BROADCAST TRACKING STOCK
We do not intend to pay cash dividends in the foreseeable future on
Broadcast Tracking Stock. We do not intend to change our current dividend
policy with respect to our existing common stock, which will become NTL
Stock. In addition, we are a holding company and the existing indentures
and credit facilities of our operating subsidiaries contain covenants which
may limit the amount of funds which may be transferred by our subsidiaries
to us for dividends to our stockholders or otherwise. Under our charter
amendment, our board of directors could, subject to the limitations on
dividends contained in our operating subsidiaries' indentures and credit
facilities, decide to pay dividends on neither series of common stock, on
one, but not both series of common stock, or on both series of common
stock, in equal or unequal amounts. Such a decision would not necessarily
have to reflect:
o the financial performance of any group;
o the amount of assets available for dividends on any series of
common stock; or
o the amount of prior dividends declared on any series of common
stock.
HAVING MULTIPLE SERIES OF COMMON STOCK MAY INHIBIT OR PREVENT ACQUISITION
BIDS FOR NTL, NTL GROUP OR THE BROADCAST GROUP
If NTL Group or the Broadcast Group were separate companies, any
person interested in acquiring either of them without negotiating with
management could seek control of that entity by obtaining control of its
outstanding voting stock by means of a tender offer or proxy contest.
Although we intend NTL Stock and Broadcast Tracking Stock to reflect the
separate performance of NTL Group and the Broadcast Group, as appropriate,
a person interested in acquiring only one group without negotiation with
NTL's management could obtain control of that group only by obtaining
control of the outstanding voting stock of NTL.
The existence of multiple series of common stock could present
complexities and could in certain circumstances pose obstacles, financial
and otherwise, to an acquiring person. The existence of multiple series of
common stock could, under certain circumstances, prevent stockholders from
profiting from an increase in the market value of their shares as a result
of a change in control of NTL by delaying or preventing such a change in
control.
In addition, some of the provisions of our charter amendment,
by-laws, and Delaware law may inhibit changes of control not approved by
the board of directors. For additional anti-takeover constraints, see "The
Tracking Stock Proposal--Other Provisions of Our Charter, Bylaws and
Delaware Law" beginning on page [ ].
THE MARKET PRICES OF NTL STOCK AND BROADCAST TRACKING STOCK COULD DECLINE
IF WE ISSUE MORE COMMON STOCK
Our charter amendment will allow our board of directors, in its sole
discretion, to issue authorized but unissued shares of common stock in
multiple series. Our board of directors may issue NTL Stock or Broadcast
Tracking Stock, or may designate and issue a new series of common stock,
to, among other things:
o raise capital;
o pay stock dividends or provide for stock splits;
o acquire companies or businesses; or
o provide compensation or benefits to employees.
Under Delaware law, the board of directors would not need your
approval for these issuances. We do not intend to seek your approval for
any such issuances unless:
o stock exchange regulations or other applicable law require
approval; or
o the board of directors deems it advisable.
These issuances could cause the market prices of the series of common
stock issued to decline as more stock became available.
WE MAY NOT OFFER BROADCAST TRACKING STOCK AT ALL
This proxy statement describes our current intentions regarding
future issuances of Broadcast Tracking Stock. Because these issuances are
subject to various conditions and uncertainties, we cannot assure you that
any issuances will occur.
THE IRS COULD ASSERT THAT THE RECEIPT OF TRACKING STOCK IS TAXABLE TO YOU
OR US OR THAT THE TRACKING STOCK IS "SECTION 306 STOCK"
We have been advised by our special tax counsel that unless you
receive cash in lieu of fractional shares, no income, gain or loss will be
recognized by you or NTL for U.S. Federal income tax purposes as a result
of the reclassification of the existing stock, the distribution of a
dividend of Broadcast Tracking Stock to the holders of NTL Stock, or an
exchange of Broadcast Tracking Stock for NTL Stock, as we presently
contemplate such transactions would be carried out. However, the IRS could
disagree. There are no court decisions or other authorities that control
the tax treatment of tracking stock such as Broadcast Tracking Stock. In
addition, the IRS has announced that it will not issue rulings on the
characterization of stock with characteristics similar to Broadcast
Tracking Stock. It is possible, therefore, that the IRS could successfully
assert that the receipt of Broadcast Tracking Stock, as well as the
subsequent conversion of Broadcast Tracking Stock into NTL Stock, or the
sale of Broadcast Tracking Stock by NTL, could be taxable to NTL or you. In
addition, it is possible that the IRS will successfully assert that
Broadcast Tracking Stock is section 306 stock, with the consequence that
the gain on a subsequent disposition of that stock would be treated as
ordinary income, unless the disposition terminates the stockholder's entire
interest in NTL. See "Certain U.S. Federal Income Tax Considerations"
beginning on page [ ].
RECENT CLINTON ADMINISTRATION PROPOSALS, IF ENACTED, COULD RESULT IN
TAXATION ON ISSUANCES OF TRACKING STOCK
In February 1999 and again in February 2000 the Clinton
Administration proposed legislation relating to the issuance of tracking
stock similar to Broadcast Tracking Stock. The February 1999 proposal would
impose a corporate-level tax on the issuance of tracking stock. The
February 2000 proposal would tax shareholders on the receipt of tracking
stock received in a distribution on or in exchange for their existing
stock. Both provisions are proposed to be effective for tracking stock
issued on or after the date of enactment. Neither of these proposals has
been incorporated in any proposed legislation in the U.S. House of
Representatives or the U.S. Senate. We cannot predict whether either
proposal will be enacted or, if enacted, whether it will be in the form
proposed. If enacted, these proposals could impede NTL's ability to
distribute or sell Broadcast Tracking Stock. The enactment of the proposal
could also be a "Tax Event" that would entitle us to convert outstanding
Broadcast Tracking Stock into a number of shares of NTL Stock equal to a
factor, which will not be more than 110% or less than 100% (as determined
by our board of directors to be in the best interests of our stockholders
at the time the charter amendment is filed), applied to the ratio of the
average market values of the Broadcast Tracking Stock and the NTL Stock
over a specified trading period prior to that conversion. See "Description
of NTL Stock and Broadcast Tracking Stock--Conversion of Broadcast Tracking
Stock at Option of NTL" at page [ ] and "Certain U.S. Federal Income Tax
Considerations," beginning on page [ ].
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking
statements" as that term is defined under the Private Securities Litigation
Reform Act of 1995. When used in this proxy, the words, "believe,"
"anticipate," "should," "intend," "plan," "will," "expects," "estimates,"
"projects," "positioned," "strategy," and similar expressions identify such
forward-looking statements. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of NTL, NTL Group or the
Broadcast Group, or industry results, to be materially different from those
contemplated or projected, forecasted, estimated or budgeted, whether
expressed or implied, by such forward-looking statements. Such factors
include, among others: general economic and business conditions, industry
trends, NTL's, NTL Group's and the Broadcast Group's ability to continue to
design network routes, install facilities, obtain and maintain any required
government licenses or approvals and finance construction and development,
all in a timely manner, at reasonable costs and on satisfactory terms and
conditions, as well as assumptions about customer acceptance, churn rates,
overall market penetration and competition from providers of alternative
services, the impact of new business opportunities requiring significant
up-front investment, terms and deployment of capital.
INFORMATION ABOUT NTL COMMON STOCK OWNERSHIP
NTL COMMON STOCK OWNED BY NTL DIRECTORS AND EXECUTIVE OFFICERS
Security Ownership of Principal Stockholders and Management
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of June 23, 2000, by (i) each
executive officer and director of NTL, (ii) all directors and executive
officers as a group and (iii) stockholders holding 5% or more of the Common
Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------------------
PRESENTLY EXERCISABLE
OPTIONS WARRANTS,
CONVERTIBLE BONDS
EXECUTIVE OFFICERS, DIRECTORS COMMON AND EXCHANGEABLE
AND PRINCIPAL STOCKHOLDERS STOCK PREFERRED(1) TOTAL PERCENT(2)
----------------------------- ----------- ---------------------- --------- ----------
<S> <C> <C> <C> <C>
Barclay Knapp.................... 224,428 3,057,509 3,281,937 1.20%
George S. Blumenthal(3).......... 113,217 2,554,073 2,667,290 *
Richard J. Lubasch(4)............ 61,249 502,289 563,538 *
John F. Gregg(5)................. 1,250 437,450 438,700 *
Leigh Costikyan Wood............. 1,086 548,264 549,350 *
Gregg N. Gorelick................ 85,154 97,752 182,906 *
Bret Richter..................... 291 100,653 100,944 *
Steven L. Wagner................. 0 293,753 293,753 *
Robert T. Goad(6)................ 854,950 0 854,950 *
Sidney R. Knafel(7).............. 1,679,268 608,638 2,287,906 *
Ted H. McCourtney(8)............. 179,879 124,365 304,244 *
Del Mintz(9)..................... 921,995 130,743 1,052,738 *
Alan J. Patricof(10)............. 11,263 124,365 135,628 *
Warren Potash(11)................ 2,170 126,916 129,086 *
Jean-Louis Vinciguerra........... 0 0 0 *
Graham Wallace................... 0 0 0 *
Michael S. Willner(12)........... 694,201 580,602 1,274,803 *
ALL DIRECTORS AND OFFICERS
AS A GROUP (17 in number)...... 4,830,401 9,287,372 14,117,773 5.04%
France Telecom S.A.(13).......... 50,680,756 36,813,058 87,493,814 28.44%
Cable & Wireless plc(14)......... 44,362,614 0 44,362,614 16.38%
Bell Atlantic Corporation(15).... 24,469,861 0 24,469,861 9.04%
Prime 66 Partners, L.P.(16)...... 13,349,999 1,275,510 14,625,509 5.68%
Composite 66, L.P.(16)........... 344,429 0 344,429
H&S Partners I, L.P.(16)......... 0 510,204 510,204
AXA Assurances I.A.R.D.
Mutuelle(17)................... 113,471,917 1,397,172 14,869,089 5.46%
Janus Capital Corporation(18).... 11,707,370 3,018,651 14,726,021 5.38%
</TABLE>
---------------
* Represents less than one percent
(1) Includes shares of NTL common stock purchased upon the exercise of
options which are exercisable or become so in the next 60 days
("Presently Exercisable Options"), shares of NTL common stock
purchased upon the conversion of the 7% Convertible Subordinated
Notes due 2008 or 5.75% Convertible Subordinated Notes due 2009 (the
"Convertible Bonds") and shares of Common Stock purchased upon the
exchange of the Senior Redeemable Exchangeable Preferred Stock which
are exchangeable or become so in the next 60 days (the "Exchangeable
Preferred"). Of the options, warrants, convertible bonds and
exchangeable preferred shown in the table above:
(a) 610,309 options were assumed by NTL in 1993, having a weighted
average exercise price of $1.08 per share;
(b) 12,163,088 options are employee and non-employee director
options that have been issued by NTL under the 1993 Employee
Stock Option Plan, the 1993 Non-Employee Director Stock Option
Plan, the 1998 Non-Qualified Stock Option Plan or certain other
stock option agreements, having a weighted average exercise
price of $16.82 per share; and
(c) 968,546 are NTL seven-year warrants that were issued pursuant
to certain non-competition agreements having an exercise price
of $3.568 per share.
(2) Includes Common Stock, Presently Exercisable Options, warrants,
Convertible Bonds and Exchangeable Preferred.
(3) Includes 3,299 shares of Common Stock owned by trusts for the benefit
of Mr. Blumenthal's children. Also includes 711,118 options held in
Grantor Retained Annuity Trusts.
(4) Includes 174 shares of Common Stock owned by Mr. Lubasch as custodian
for his child, as to which shares Mr. Lubasch disclaims beneficial
ownership.
(5) Mr. Gregg owns $100,000 of the 7% Convertible Bonds, convertible into
2,551 shares of common stock.
(6) Includes 824,701 shares of Common Stock owned by Columbia Management,
Inc., Mr. Goad's wholly-owned investment company. Columbia
Management, Inc., of which Mr. Goad is the sole shareholder, is a
limited partner in European Cable Capital Partners, L.P. ("ECCP").
Columbia Management, Inc. owns or has options to acquire, in each
case as a limited partner, an aggregate of 206,086 units of
partnership interests in ECCP ("ECCP Units"), which constitute 9.20%
of all ECCP Units on a fully-diluted basis. ECCP owns 8,765,286
shares of NTL. Neither Mr. Goad nor Columbia Management, Inc. has a
right to control or direct ECCP on the disposition of shares of NTL,
which it owns, and they therefore disclaim any beneficial ownership
of the shares of NTL owned by ECCP.
(7) Includes 25,958 shares of Common Stock owned by Insight
Communications UK, Inc., Mr. Knafel's wholly-owned investment
company. Also includes 73,363 shares of Common Stock owned by a
foundation of which Mr. Knafel is President, as to which shares Mr.
Knafel disclaims beneficial ownership.
(8) Includes 162,616 shares of Common Stock held by limited partnerships
of which Mr. McCourtney is a general partner as to which shares Mr.
McCourtney disclaims beneficial ownership except to the extent of his
pro-rata interest. An additional 2,572 shares of Common Stock are
held by trusts for the benefit of Mr. McCourtney's children, as to
which shares Mr. McCourtney disclaims beneficial ownership.
(9) Includes 39 shares owned by Mr. Mintz's wife, as to which shares Mr.
Mintz disclaims beneficial ownership. Mr. Mintz owns $250,000 of the
7% Convertible Bonds, convertible into 6,378 shares of Common Stock.
(10) Includes 499 shares of Common Stock owned by Mr. Patricof's wife, as
to which shares Mr. Patricof disclaims beneficial ownership.
(11) Mr. Potash owns $100,000 of the 7% Convertible Bonds, convertible
into 2,551 shares of Common Stock.
(12) Includes 138,579 shares of Common Stock held by trust accounts for
the benefit of Mr. Willner's children as to which shares Mr. Willner
disclaims beneficial ownership.
(13) Based solely upon Schedule 13-D (Amendment No. 5), dated June 9,
2000, filed by France Telecom S.A. and Compagnie Generale des
Communications (COGECOM) S.A. with the Securities and Exchange
Commission (the "SEC") and 42,229,730 shares of common stock and
2,000,000 preferred shares, convertible into 25,000,000 shares of
common stock, acquired on May 30, 2000.
(14) Based solely upon acquisition of 44,362,614 shares of Common Stock on
May 30, 2000 in connection with NTL's acquisitions of CWC ConsumerCo.
(15) Based solely on the acquisition of 24,469,861 shares of Common Stock
on May 30, 2000 in connection with NTL's acquisitions of CWC
ConsumerCo.
(16) Based solely upon Schedule 13-G (Amendment No. 4), dated May 24,
2000, filed by Prime 66 Partners, L.P., Composite 66, L.P. and H&S
Partners I, L.P. with the SEC.
(17) Based solely upon Schedule 13-G, dated February 14, 2000, filed by
AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA
Conseil Vie Assurance Mutuelle, AXA Courtage Assurance Mutuelle, AXA
and AXA Financial, Inc. with the SEC.
(18) Based solely upon Schedule 13-G (Amendment No. 1), dated February 14,
2000, filed by Janus Capital Corporation and Thomas H. Bailey with
the SEC.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the members of the Compensation Committee were Sidney R.
Knafel, Ted H. McCourtney and Del Mintz.
EXECUTIVE COMPENSATION
The following table discloses compensation received by NTL's Chief
Executive Officer and the four other most highly paid executive officers
for the three years ended December 31, 1999.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- ------------
OTHER ANNUAL COMMON STOCK ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) OPTIONS(#) ($)(3)
--------------------------- ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Barclay Knapp............. 1999 273,333 350,000 -- -- 16,000
President and Chief 1998 270,000 350,000 -- 1,484,375 14,667
Executive Officer 1997 270,000 -- -- -- 12,734
George S. Blumenthal...... 1999 273,333 350,000 -- -- 16,000
Chairman and Treasurer 1998 270,000 350,000 -- 1,484,375 14,667
1997 270,000 -- -- -- 12,734
Leigh C. Wood............. 1999 243,750 128,751 159,845(a) 156,250 --
Senior Vice President 1998 225,000 186,300 162,000(b) 625,000 --
and Chief Operating 1997 225,000 149,500 331,800(c) 117,188 --
Officer of
U.K. Operations
Richard J. Lubasch........ 1999 235,083 250,000 -- 117,188 16,000
Executive Vice 1998 227,000 250,000 -- 312,500 14,667
President--General 1997 227,000 165,000 -- 39,064 12,734
Counsel and Secretary
Steven L. Wagner.......... 1999 216,044 85,071 170,727(d) -- --
Vice President-- 1998 204,000 127,900 169,600(e) 312,500 --
Marketing 1997 195,700 100,100 216,200(f) 54,689 2,500
</TABLE>
---------------
(1) In 1997, NTL charged Cellular Communications International, Inc.
("CCII") and Cellular Communications of Puerto Rico, Inc. ("CCPR")
$871,000 and $1,492,000, respectively, for direct costs where
identifiable and a fixed percentage of its corporate overhead. In 1998,
NTL charged CCII, CCPR and CoreComm (which was formed in 1998)
$982,000, $1,148,000 and $313,000, respectively. In 1999, NTL charged
CCII, CCPR and CoreComm $439,000, $741,000 and $2,268,000,
respectively. In the opinion of management of NTL, the above
allocations are reasonable.
(2) Other annual compensation reflects perquisites, such as relocation
expenses and housing, travel, professional fee and car and fuel
allowances, including:
(a) housing allowance of $96,000
(b) housing allowance of $121,900.
(c) housing allowance of $162,900 and relocation expense of $122,300.
(d) housing allowance of $96,000.
(e) housing allowance of $127,500.
(f) housing allowance of $120,800.
(3) All other compensation reflects NTL's match of employee contributions
to a 401(k) plan.
OPTION GRANTS TABLE
The following table provides information on stock option grants
during 1999 to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------- VALUE AT ASSUMED ANNUAL RATE
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES OR BASE ----------------------------
GRANTED IN FISCAL PRICE EXPIRATION 5%($) 10%($)
NAME (#)(1) YEAR ($/SHARE) DATE $81.84 $130.32
---- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leigh C. Wood.......... 156,250 2.39% 50.24 03/18/09 4,937,500 12,512,500
Richard J. Lubasch..... 117,188 1.79% 50.24 03/18/09 3,703,141 9,384,415
</TABLE>
---------------
(1) All options were granted on March 19, 1999 at an exercise price equal
to the closing price of the Common Stock on The Nasdaq Stock Market's
National Market (the "NASDAQ") on such date; 20% were exercisable upon
issuance, 20% became exercisable on January 1, 2000 and an additional
20% will become exercisable on each of January 1, 2001, 2002 and 2003.
Upon a change of control of NTL, all unvested options become fully
vested and exercisable.
(2) The amounts shown in these columns are the potential realizable value
of options granted at assumed rates of stock price appreciation (5% and
10%) specified by the SEC, and have not been discounted to reflect the
present value of such amounts. The assumed rates of stock price
appreciation are not intended to forecast the future appreciation of
the Common Stock.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information on stock option exercises
during 1999 by the named executive officers and the value at December 31,
1999 of unexercised in-the-money options held by each of the named
executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR-END
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)*
ACQUIRED VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
EXERCISE(#) REALIZED($) UNEXERCISABLE(U) UNEXERCISABLE(U)
----------- ----------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
Barclay Knapp............ 31,471 2,517,765 2,834,853(E) 261,527,967(E)
1,335,937(U) 102,114,849(U)
George S. Blumenthal..... 463,390 22,307,233 2,424,565(E) 222,662,671(E)
1,335,937(U) 102,114,849(U)
Leigh C. Wood............ -- -- 360,764(E) 29,199,784(E)
773,438(U) 56,379,810(U)
Richard J. Lubasch....... 25,000 2,276,500 416,351(E) 36,689,371(E)
398,439(U) 28,117,318(U)
Steven L. Wagner......... -- -- 220,315(E) 18,534,716(E)
</TABLE>
---------------
* Based on the closing price on the NASDAQ on December 31, 1999 of $99.80.
MARKET PRICE DATA AND DIVIDEND POLICY
Shares of NTL common stock trade on NASDAQ and Easdaq under the
symbol "NTLI." From October 14, 1993 through March 26, 1997, NTL common
stock was quoted and traded on the NASDAQ under the symbol "ICTL." The
information set forth below gives retroactive effect to the 5-for-4 stock
split in February 2000, the 5-for-4 stock split in October 1999 and the
4-for-3 stock split in August 1995.
NTL COMMON STOCK
----------------------------
1996 HIGH LOW
------------- ------------
First Quarter................................. $19.275 $13.838
Second Quarter................................ 21.838 17.763
Third Quarter................................. 19.200 14.475
Fourth Quarter................................ 18.075 14.475
1997
First Quarter................................. $17.125 $11.600
Second Quarter................................ 17.328 12.163
Third Quarter................................. 17.838 12.875
Fourth Quarter................................ 18.800 16.163
1998
First Quarter................................. $29.275 $17.125
Second Quarter................................ 34.563 22.875
Third Quarter................................. 41.600 22.725
Fourth Quarter................................ 38.078 20.475
1999
First Quarter................................. $54.563 $33.638
Second Quarter................................ 64.638 43.600
Third Quarter................................. 68.725 51.200
Fourth Quarter................................ 102.300 51.100
2000
First Quarter................................. $109.688 $78.876
Second Quarter................................ [ ] [ ]
Third Quarter (through )..... [ ] [ ]
On [ ], the last trading day prior to the public announcement of the
tracking stock proposal, NTL common stock closed at $[ ] per share. On [ ],
2000, the last practicable trading day prior to the printing of this proxy
statement, NTL common stock closed at $[ ] per share on NASDAQ.
The market price of shares of NTL common stock is subject to
fluctuation. As a result, stockholders of NTL are urged to obtain current
market quotations.
Since its inception, NTL has not declared or paid any cash dividends
on the NTL common stock. NTL currently intends to retain its earnings for
future growth and, therefore, does not anticipate paying cash dividends in
the foreseeable future. Also, see "Risk Factors" for a discussion of our
dividend policy and limitations imposed by our operating subsidiaries'
indentures and credit facilities.
THE TRACKING STOCK PROPOSAL
BACKGROUND AND REASONS FOR THE TRACKING STOCK PROPOSAL
We continually review each of our businesses and NTL as a whole to
determine the best way to realize the inherent value of our business
operations. As a result of this review process, we recently began to
evaluate various alternatives to maximize stockholder value, including the
creation of a "tracking stock" intended to track the performance of the
Broadcast Group.
At a board meeting on May 31, 2000, the board of directors met with
management of NTL and discussed the alternatives to achieve NTL's
strategies and have NTL's equity valuation more fully recognize the value
of our broadcast and wireless communications assets. In these discussions,
our board of directors evaluated the effect that each alternative would
have on our ability to:
o enhance stockholder value;
o raise funds in a cost-effective manner in the capital markets;
o create a more valuable currency for strategic acquisitions; and
o attract and retain key personnel.
The board of directors considered the following alternatives:
o the preservation of our current equity and operating structure;
o the operation of one or more of our businesses as stand-alone
companies;
o one or more "spin-offs" of the businesses; and
o the tracking stock proposal.
Our board of directors used several criteria to contrast the benefits
and drawbacks of these alternatives to our stockholders, including:
o the assessment of the capital markets acceptance of the
alternatives and the likelihood of success of the alternatives,
based on its understanding of these markets and consultations
between members of the board of directors and our financial
advisors, independent accountants and counsel;
o the flexibility to provide equity incentives to the employees
of NTL's separate businesses;
o the ability to raise equity capital to fund the specific need
of NTL's separate businesses in the future; and
o the regulatory and tax consequences to NTL and the separate
businesses of operating under the various alternatives.
Our board of directors concluded in its business judgment that the
tracking stock proposal would be most likely to enhance stockholder value
and address NTL's strategic objectives. The board of directors based its
decision on its belief that the proper valuation of certain of our
businesses, including the Broadcast Group's provision of facilities and
services to the broadcast and wireless communications industries
principally in the UK and Australia, was not reflected in the current
equity structure and that there are benefits to be retained by maintaining
NTL's current operating structure. In reaching its conclusion, the board of
directors was informed by management that it had consulted with NTL's legal
counsel and independent accountants. The board of directors considered
various strategic, financial, legal and tax implications of the tracking
stock proposal and considered the following principal potential advantages
of the tracking stock proposal:
o The initial designation of two series of common stock that
would separately track the businesses of NTL Group and the
Broadcast Group could increase stockholder value by more
specifically tracking the earnings, growth and cash flows of
each group;
o The expectation that different groups of investors will invest
in Broadcast Tracking Stock who might otherwise not invest in
the existing common stock;
o Multiple series of common stock should provide NTL with
additional equity securities that can be used to raise capital
and can be issued in connection with acquisitions and
investments;
o By remaining a single enterprise, NTL believes it will retain
certain benefits including the oversight of certain key members
of the current management; and
o The creation of multiple series of common stock that track its
different businesses would provide NTL flexibility to link
employee incentive compensation plans with the performances of
the different businesses.
The board of directors also considered the following potential
disadvantages of the tracking stock proposal:
o NTL will incur additional administrative costs in connection
with the creation and ongoing maintenance of multiple series of
common stock;
o The tracking stock proposal could create diverging or
conflicting interests among tracked business groups and could
pose potential conflicts for the board of directors;
o The creation of multiple series of common stock increases the
complexity of NTL's capital structure, may not be well
understood by investors, and could inhibit the efficient
valuation of one or more of the series of common stock;
o The holders of each series of common stock would continue to be
subject to all the risks associated with investing in NTL as a
whole; and
o There is no controlling precedent as to the tax treatment of
tracking stock, and an adverse change in the tax laws, or in
the interpretations of the tax laws, could require us to revise
our capital structure.
Additionally, creating the tracking stocks and establishing the NTL
Broadcast Incentive Plan will enable us to issue stock-based compensation
tied to the tracking stocks, thereby providing more focused incentives to
management and employees of the tracked groups.
The tracking stock proposal also gives the board of directors the
flexibility to use its authority to designate additional series of common
stock to obtain the benefits of the creation of tracking stock for NTL's
other business groups as it deems appropriate.
Finally, the increase in the number of shares of authorized common
stock contemplated by the tracking stock proposal will ensure that we have
a sufficient number of shares of common stock available for:
o obligations we may have under our rights plan with respect to
each series of common stock;
o future stock splits or stock dividends;
o future designations of additional series of common stock;
o future sale or distribution of any series of common stock to
the public; and
o issuance of any series of common stock under our stock-based
compensation plans.
After considering these factors and others, based upon management's
recommendation and after extensive consultation with our financial and
legal advisors, the board of directors determined in its business judgment
that on balance the potential advantages of the tracking stock proposal
outweighed its potential disadvantages. The board of directors ultimately
concluded that the tracking stock proposal is advisable, in the best
interests of the stockholders and NTL and is the best means for achieving
NTL's strategic goals.
On [ ], the board of directors considered the tracking stock proposal
described in this proxy statement, determined that it is in the best
interests of NTL and its stockholders, approved it and resolved to
recommend that you vote for it.
INITIAL ISSUANCE OF BROADCAST TRACKING STOCK
We currently plan to distribute to our stockholders shares of
Broadcast Tracking Stock intended to represent approximately 10% of the
equity value initially attributed to the Broadcast Group.
This would leave NTL Group with a retained interest intended to
represent the remaining equity value initially attributed to the Broadcast
Group that is not represented by issued and outstanding Broadcast Tracking
Stock. Any retained interest of NTL Group in the Broadcast Group cannot be
voted by NTL Group or NTL.
We expect that the distribution of Broadcast Tracking Stock would
occur some time in our fiscal 2000. However, we could choose to conduct the
distribution at a later time, or not to make any distribution at all,
depending on circumstances at the time.
Instead of a distribution, NTL may first issue Broadcast Tracking
Stock through an initial public offering or private placement for cash, by
an offer of exchange with the holders of NTL Stock, or by issuing the stock
to acquire stock or assets of another company.
OPTIONS, AWARDS AND RIGHTS TO PURCHASE RELATING TO BROADCAST TRACKING STOCK
After we first distribute Broadcast Tracking Stock, we currently plan
to grant options to purchase, or make restricted stock awards of, Broadcast
Tracking Stock to senior management and employees of the Broadcast Group
under the NTL Broadcast Incentive Plan, which is subject to your approval
as part of the tracking stock proposal. The aggregate amount of Broadcast
Tracking Stock available for grant under the NTL Broadcast Incentive Plan
will be limited to approximately [ ]% of the total number of shares of
Broadcast Tracking Stock that would be deemed issued and outstanding at the
time we first issue Broadcast Tracking Stock, assuming for this purpose
that NTL Group's retained interest is represented by issued and outstanding
Broadcast Tracking Stock.
For example, if we first distribute [ ] shares of Broadcast Tracking
Stock representing 10% of the initial equity value of the Broadcast Group
to our stockholders, NTL Group's 90% retained interest, if represented by
issued and outstanding Broadcast Tracking Stock, would be [ ] shares, for a
deemed total issued and outstanding [ ] shares of Broadcast Tracking Stock.
Using this example, we will grant options or restricted stock awards to the
Broadcast Group employees for up to [ ] shares of Broadcast Tracking Stock
under the NTL Broadcast Incentive Plan.
SUBSEQUENT ISSUANCES OF BROADCAST TRACKING STOCK
After we first distribute Broadcast Tracking Stock, we may issue
additional shares of that stock, and further reduce NTL Group's retained
interest in the Broadcast Group, from time to time by:
o distributing a dividend of Broadcast Tracking Stock to the
holders of NTL Stock;
o selling Broadcast Tracking Stock to the public
o selling Broadcast Tracking Stock in a private placement for
cash;
o offering to exchange Broadcast Tracking Stock for NTL Stock;
o issuing Broadcast Tracking Stock or options to purchase
Broadcast Tracking Stock to employees under compensation plans;
o using Broadcast Tracking Stock as consideration in an
acquisition; or
o any combination of the above.
PROPOSAL NUMBER 1
AMENDMENT OF ARTICLE FOURTH OF OUR CURRENT
RESTATED CERTIFICATE OF INCORPORATION
You are being asked to consider and vote in favor of a proposal to
authorize us to amend article fourth of our current restated certificate of
incorporation. We refer to our current certificate of incorporation, as so
amended and restated, as our "charter amendment." The charter amendment
would, among other things:
o authorize the board of directors to issue multiple series of
common stock, with two initial series of common stock
designated as NTL Stock and Broadcast Tracking Stock;
o reclassify each share of existing common stock of NTL as one
share of NTL Stock; and
o initially authorize [ ] shares of NTL Stock and
[ ] of Broadcast Tracking Stock.
If you approve the charter amendment proposal, we expect to file the
charter amendment and re-classify your common stock shortly before we first
issue Broadcast Tracking Stock. At that time, each holder of one share of
the existing common stock would become the holder of one share of NTL
Stock. A copy of the proposed charter amendment, in substantially the same
form in which it will be filed with the Secretary of State of the State of
Delaware, is attached to this proxy statement as Annex II.
At any time prior to the effectiveness of the charter amendment, the
board of directors may abandon the tracking stock proposal without further
action by the stockholders. If the charter amendment proposal is not
approved by the stockholders, the existing common stock will not be
reclassified as NTL Stock, and Broadcast Tracking Stock will not be issued.
After the charter amendment is effective, the board of directors may
determine in its sole discretion, not to proceed with the distribution of,
or otherwise issue, Broadcast Tracking Stock.
DESCRIPTION OF NTL STOCK AND BROADCAST TRACKING STOCK
Authorized Stock and Designations of Series of Common Stock
Under our current restated certificate of incorporation, we are
authorized to issue 810,000,000 shares of stock, consisting of 800,000,000
shares of common stock, par value $0.01 per share, and 10,000,000 shares of
preferred stock, $0.01 par value per share. As of June 23, 2000,
approximately 270,775,000 shares of existing common stock were issued and
outstanding. Under our restated certificate, our board of directors has the
authority to designate the preferred stock in one or more series, without
stockholder approval. Currently, there exists multiple series of preferred
stock. See "Other Provisions Of Our Charter, Bylaws And Delaware Law -
Description of NTL Capital Stock."
Our charter amendment will:
o authorize NTL to issue a total of [ ] shares
of common stock in multiple series;
o designate two series of common stock, currently intended to be
NTL Stock and Broadcast Tracking Stock;
o initially authorize NTL to issue [ ] shares of
NTL Stock and [ ] shares of Broadcast Tracking
Stock; and
o re-classify each share of existing common stock as one share of
NTL Stock.
We intend Broadcast Tracking Stock to reflect the performance of the
Broadcast Group.
We intend NTL Stock to reflect the performance of NTL Group, which
consists of our other businesses and our retained interest in the Broadcast
Group.
We have allocated, for financial reporting purposes, all of NTL's
consolidated assets, liabilities, revenue, expenses and cash flow between
NTL Group and the Broadcast Group. In the future, we will publish financial
statements for each of NTL Group and the Broadcast Group, together with
consolidated financial statements of NTL covering all of NTL Group and the
Broadcast Group.
Under our current certificate, to issue a new class or series of
common stock we must obtain stockholder approval. Under the charter
amendment, our board of directors could, without the need to obtain
stockholder approval:
o designate common stock not previously designated by the board
of directors, or previously designated but unissued common
stock, into one or more additional new series of common stock;
or
o increase or decrease from time to time the total number of
authorized shares of each designated series of common stock.
However, the board of directors could not increase the number of
shares of authorized stock of a designated series above a number which,
when added to the number of authorized shares of all designated common
stock, would exceed the total number of authorized shares of common stock.
In addition, the board of directors could not decrease the number of shares
authorized of any series of common stock below the number of shares
outstanding of such series and shares reserved for options, warrants, the
rights plan and, as applicable, any retained interest of one group by
another.
At the time it creates any new series of common stock, our board of
directors would be authorized to determine and designate the number of
shares of each new series and all rights and privileges of each new series,
including dividend rights, exchange or redemption provisions, rights upon
liquidation or merger, and voting rights.
Authorized but unissued shares of NTL Stock and Broadcast Tracking
Stock and previously undesignated common stock would be available for
issuance by NTL from time to time, as determined by the board of directors,
for any proper corporate purpose. These purposes could include raising
capital, paying stock dividends, effecting a stock split, providing
compensation or benefits to employees or acquiring other companies or
businesses, or designating a new series of common stock. NTL would not be
required to solicit your approval for any issuance described above, unless
required by the Delaware law or NASDAQ Rules. The board of directors will
continue to be able to issue shares of preferred stock in series, without
stockholder approval.
Conversion and Redemption
Our current certificate does not provide for either mandatory or
optional conversion or redemption of our existing common stock. The charter
amendment will permit the conversion or redemption of Broadcast Tracking
Stock as described below.
Dividends
We will be permitted to pay dividends on NTL Stock and Broadcast
Tracking Stock out of assets of NTL legally available for the payment of
dividends under Delaware law. Our charter amendment, however, will provide
that the total amounts paid as dividends on any of NTL Stock or Broadcast
Tracking Stock cannot exceed the available dividend amount for each group.
The "available dividend amount" for NTL Group at any time is the
amount that would then be legally available for the payment of dividends on
NTL Stock under Delaware law if:
o NTL Group and the Broadcast Group were each an independent
Delaware corporation,
o NTL Group had outstanding (1) a number of shares of common
stock, par value $0.01 per share, equal to the number of shares
of NTL Stock that are then outstanding and (2) a number of
shares of preferred stock, par value $0.01 per share, equal to
the number of shares that have been attributed to NTL Group and
are then outstanding,
o the assumptions about the Broadcast Group set forth in the
following paragraph were true, and
o NTL Group owned a number of shares of Broadcast Tracking Stock
equal to the number of shares that would be issuable with
respect to NTL Group's retained interest in Broadcast Tracking
Stock.
Similarly, the "available dividend amount" for the Broadcast Group at
any time is the amount that would then be legally available for the payment
of dividends under Delaware law on Broadcast Tracking Stock if the
Broadcast Group were an independent Delaware corporation having outstanding
(1) a number of shares of common stock, par value $0.01 per share, equal to
the number of shares of Broadcast Tracking Stock that are then outstanding
plus the number of shares of Broadcast Tracking Stock that would be
issuable with respect to NTL Group's retained interest in the Broadcast
Group and (2) a number of shares of preferred stock, par value $0.01 per
share, equal to the number of shares that have been attributed to the
Broadcast Group and are then outstanding.
The amount legally available for the payment of dividends on common
stock of a corporation under Delaware law is generally limited to:
o the total assets of the corporation
o less its total liabilities
o less the aggregate par value of the outstanding shares of its
common and preferred stock.
However, if that amount is not greater than zero, the corporation may
also pay dividends out of the net profits for the corporation for the
fiscal year in which the dividend is declared and/or the preceding fiscal
year. As mentioned above, these restrictions will form the basis for
calculating the available dividend amounts for NTL Group and the Broadcast
Group. These restrictions will also form the basis for calculating the
aggregate amount of dividends that NTL as a whole can pay on its common
stock (regardless of series). Thus, net losses of any business group, and
any dividends and distributions on, or repurchases of, any series of common
stock, will reduce the assets legally available for dividends on other
series of common stock.
Subject to the limitations on dividends contained in our operating
subsidiaries' indentures and credit facilities and the foregoing
limitations (and to any other limitations set forth in any future series of
preferred stock or in any agreements binding on NTL from time to time), we
have the right to pay dividends on none, any or all of the series of common
stock, in equal or unequal amounts, notwithstanding the performance of any
business group, the amount of assets available for dividends on any series,
the amount of prior dividends declared on any series or any other factor.
At the time of any dividend on the outstanding shares of Broadcast
Tracking Stock (including any dividend required as a result of a
disposition of all or substantially all of the assets of the Broadcast
Group), we will credit to NTL Group, and charge against the Broadcast Group
a corresponding amount in respect of NTL Group's retained interest in that
group for purposes of calculating available dividend amounts for future
dividends. Specifically, the corresponding amount will equal (1) the
aggregate amount of such dividend times (2) a fraction, the numerator of
which is the number of shares that would be issuable with respect to NTL
Group's retained interest in the Broadcast Group and the denominator of
which is the number of shares of Broadcast Tracking Stock then outstanding.
Mandatory Dividend, Redemption or Conversion of Broadcast Tracking Stock
If we sell or dispose of all or substantially all of the properties
and assets of the Broadcast Group in a transaction other than one described
below under "-- Exceptions to the Dividend, Redemption or Conversion
Requirement if a Disposition Occurs," we will:
o pay a dividend to the holders of Broadcast Tracking Stock in
cash and/or securities or other property having a value equal
to their proportionate interest in the net proceeds of the
disposition; or
o if the disposition involves all of the properties and assets,
redeem all outstanding shares of Broadcast Tracking Stock in
exchange for cash and/or securities or other property having a
value equal to the proportionate interest the holders of
Broadcast Tracking Stock have in the net proceeds of the
disposition; or
o if the disposition involves substantially all, but not all, of
the properties and assets, redeem a number of whole shares of
Broadcast Tracking Stock having an aggregate average market
value, during the 20 trading day period beginning on the 16th
trading day following consummation of such transaction, equal
to the proportionate interest the holders of Broadcast Tracking
Stock have in the value of the net proceeds of the disposition;
or
o convert each outstanding share of the series of Broadcast
Tracking Stock into a number of shares of NTL Stock equal to
110% of the ratio of the average market value of one share of
Broadcast Tracking Stock to the average market value of one
share of NTL Stock during the 20 trading day period ending on
the fifth trading day prior to the first public announcement of
such disposition transaction.
We will determine the proportionate interest of the holders of
Broadcast Tracking Stock in the net proceeds of a disposition by assuming
that NTL Group's retained interest in the Broadcast Group is represented by
issued and outstanding shares of Broadcast Tracking Stock.
We may only pay a dividend or redeem shares of a series class of
common stock if we have legally available funds under Delaware law. We will
pay the dividend or complete the redemption or conversion on or prior to
the 90th trading day following the disposition date.
For purposes of determining whether a disposition has occurred,
"substantially all of the properties and assets" attributed to a group
means a portion of the properties and assets that represents at least 80%
of the value of the properties and assets attributed to that group.
The "net proceeds" of a disposition means an amount equal to what
remains of the gross proceeds of the disposition after any payment of, or
reasonable provision is made as determined by our board of directors for:
o any taxes payable by us, or which would have been payable but
for the utilization of tax benefits attributable to the groups
not subject to the disposition, in respect of the disposition
or in respect of any resulting dividend or redemption;
o any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses; and
o any liabilities of or attributed to the group whose assets are
disposed, including, without limitation, any liabilities for
deferred taxes, any indemnity or guarantee obligations incurred
in connection with the disposition or otherwise, any
liabilities for future purchase price adjustments and any
preferential amounts plus any accumulated and unpaid dividends
in respect of the preferred stock attributed to that group.
We may elect to pay the dividend or redemption price either in the
same form as the proceeds of the disposition or in any other combination of
cash, securities or other property that our board of directors or, in the
case of securities that have not been publicly traded for a period of at
least 15 months, an independent investment banking firm, determines will
have an aggregate market value of not less than the value of the net
proceeds.
Exceptions to the Dividend, Redemption or Conversion Requirement if a
Disposition Occurs. We are not required to take any of the above actions
for any disposition of all or substantially all of the properties and
assets attributed to the group making such disposition in a transaction or
series of related transactions that results in our receiving for those
properties and assets primarily equity securities of any entity which:
o acquires those properties or assets or succeeds to the business
conducted with those properties or assets or controls such
acquirer or successor; and
o is primarily engaged or proposes to engage primarily in one or
more businesses similar or complementary to the businesses
conducted by the group making such disposition prior to the
disposition, as determined by our board of directors.
The purpose of this exception is to enable us technically to dispose
of properties or assets of a group to other entities engaged or proposing
to engage in businesses similar or complementary to those of that group
without requiring a dividend on, or a conversion or redemption of, the
class of common stock of that group, so long as we hold an equity interest
in that entity. A joint venture in which we own a direct or indirect equity
interest is an example of such an acquirer. We are not required to control
that entity, whether by ownership or contract provisions.
We are also not required to effect a dividend, redemption or
conversion if:
o the disposition is of all or substantially all of our
properties and assets in one transaction or a series of related
transactions in connection with our dissolution, liquidation or
winding up and the distribution of our assets to stockholders;
o the disposition is on a pro rata basis, such as in a spin-off,
to the holders of all outstanding shares of the group;
o the disposition is made to any person or entity controlled by
us, as determined by the board of directors;
o the disposition is made at a time when only one series of
common stock is outstanding; or
o before the 30th trading day following the disposition, we have
mailed a notice stating that we are exercising our right to
convert all of the outstanding shares of Broadcast Tracking
Stock, as applicable, into newly issued shares of NTL Stock as
contemplated under "Conversion of Common Stock at Option of
NTL" below.
Sale of less than substantially all the assets of a group. The
proceeds from any disposition of assets that do not comprise all or
substantially all of the properties and assets attributed to a group will
be allocated to that group and used for its benefit, subject to the
policies described under "--Certain Management and Allocation Policies"
beginning on page [ ].
Conversion of Broadcast Tracking Stock at Option of NTL
We will have the right, at any time, to convert each share of
Broadcast Tracking Stock into a number of shares of NTL Stock initially
equal to 120% of the ratio of the average market value of one share of
Broadcast Tracking Stock to the average market value of one share of NTL
Stock over a 20-day trading period ending on the fifth trading day prior to
the mailing of the conversion notice for conversions occurring in the first
quarter after the original issuance of Broadcast Tracking Stock. The
percentage applied to the ratio of market values will decline ratably each
quarter over a period of ten quarters to 110%.
If, however, we convert Broadcast Tracking Stock into NTL Stock as a
result of a Tax Event (as defined below), we will have the right to convert
shares of Broadcast Tracking Stock into a number of shares of NTL Stock
equal to a percentage, which will not be more than 110% or less than 100%
(as determined by our board of directors, at the time the charter amendment
is filed, to be in the best interests of our stockholders), applied to the
ratio of the average market values of the Broadcast Tracking Stock and the
NTL Stock described above, regardless of when such adverse tax law changes
take place.
The conversion ratio that will result in the specified premium will
be calculated based on the average market value of one share of Broadcast
Tracking Stock as compared to the average market value of one share of NTL
Stock during the 20 consecutive trading day period ending on, and
including, the 5th trading day immediately preceding the date on which we
mail the notice of conversion to holders of Broadcast Tracking Stock.
"Tax Event" means NTL's receipt of an opinion of our tax counsel
that, as a result of:
o any amendment to, or change in, the laws or regulations
interpreting the laws of the United States or any political
subdivision or taxing authority thereof or therein, including
any announced proposed change in such regulations by an
administrative agency; or
o any official or administrative pronouncement, action or
judicial decision interpreting or applying those laws or
regulations (regardless of whether such pronouncement, action
or judicial decision involves NTL),
it is more likely than not that for U.S. Federal income tax purposes:
o NTL or our stockholders are, or at any time in the future will
be, subject to tax upon the issuance of shares of any of NTL
Stock or Broadcast Tracking Stock, or
o any NTL Stock or Broadcast Tracking Stock is not or at any time
in the future will not be treated solely as stock of NTL, or
o any NTL Stock or Broadcast Tracking Stock is or will be treated
as section 306 stock under the Code.
For purposes of rendering this opinion, tax counsel will assume that
any administrative proposals will be adopted as proposed. However, in the
event of an announced proposed legislative change, tax counsel shall render
an opinion only in the event of enactment.
These provisions allow us the flexibility to recapitalize our
outstanding series of common stocks into one class of common stock that
would, after the recapitalization, represent an equity interest in all of
our businesses. The optional conversion could be exercised at any future
time if our board of directors determines that, under the facts and
circumstances then existing, an equity structure consisting of multiple
series of common stocks was no longer in the best interests of all of our
stockholders. A conversion could be exercised, however, at a time that is
disadvantageous to the holders of either or both NTL Stock or Broadcast
Tracking Stock. For additional information on the risks of a conversion and
the limited remedies available to stockholders, see "Risk
Factors--Conversion of Broadcast Tracking Stock into NTL Stock may
adversely affect the holders of Broadcast Tracking Stock or the holders of
NTL Stock" on page [ ].
Conversion would be based upon the relative market values of NTL
Stock, on the one hand, and Broadcast Tracking Stock, on the other. Many
factors could affect the market values of NTL Stock and Broadcast Tracking
Stock, including our results of operations and those of each of the groups,
trading volume and general economic and market conditions. Market values
could also be affected by decisions by our board of directors or our
management that investors perceive to affect adversely one series of common
stock compared to the other. These decisions could include changes to our
management and allocation policies, transfers of assets between groups,
allocations of corporate opportunities and financing resources between the
groups and changes in dividend policies.
Redemption of Broadcast Tracking Stock in Exchange for Stock of Subsidiary
Although it currently has no intention to do so, the board of
directors may, subject to the limitations contained in our operating
subsidiaries' indentures and credit facilities, redeem on a pro-rata basis
all of the outstanding shares of Broadcast Tracking Stock for shares of the
common stock of one or more of our wholly owned subsidiaries which own all
of the assets and liabilities attributed to the Broadcast Group (and no
other assets or liabilities), as applicable. We may redeem shares of
Broadcast Tracking Stock for subsidiary stock only if we have legally
available funds under Delaware law. In connection with any such exchange,
in the event that we have a retained interest in the Broadcast Group, we
could retain any remaining shares of common stock of the subsidiary holding
the Broadcast Group's assets or distribute those shares as a dividend on
NTL Stock.
As a result of a redemption in exchange for stock of a subsidiary,
holders of the series of common stock redeemed would hold securities of a
separate legal entity. This redemption could be authorized by the board of
directors at any time in the future if it determines that, under the facts
and circumstances then existing, an equity structure comprised of multiple
series of common stock designated as tracking stocks is no longer in the
best interests of all of our stockholders as a whole.
General Conversion and Redemption Provisions
Notices Upon Disposition of Group Assets. Not later than the 20th
trading day after the consummation of a sale of all or substantially all of
the assets of a group, we will announce publicly by press release:
o the estimated net proceeds of the disposition;
o the number of shares of the series of common stock outstanding
that tracks the group whose assets were disposed of;
o the number of shares of any series of common stock into which
the series of common stock that tracks the group whose assets
were disposed of is convertible and the conversion, exchange or
exercise price of those convertible securities; and
o if the group is not NTL Group, the number of shares issuable
with respect to NTL Group's retained interest in that group.
Not later than the 40th trading day after the consummation of the
disposition, we will announce publicly by press release whether we will:
o pay a dividend or redeem shares of the series of common stock
that tracks the group whose assets have been disposed with the
net proceeds of the disposition; or
o convert the shares of the series of common stock that tracks
the group whose assets are disposed into another series of
common stock.
We will mail to each holder of shares of the series of common stock
that tracks the group whose assets were disposed any additional notices and
other information required by our charter amendment.
Notice upon Optional Conversion or Redemption in Exchange for Stock
of a Subsidiary. If NTL determines to convert shares of Broadcast Tracking
Stock into shares of NTL Stock or into shares of stock of a subsidiary as
described above, NTL will send each holder of Broadcast Tracking Stock that
is being converted or redeemed a notice not less than 30 nor more than 45
days prior to the conversion or redemption date. Such notice will contain:
o a statement that all outstanding shares of Broadcast Tracking
Stock will be converted or redeemed, as applicable;
o the conversion or redemption date;
o the number of shares of NTL Stock or the number of shares of
stock of the subsidiary, as the case may be, which each holder
of Broadcast Tracking Stock will receive;
o the place or method for redemption or conversion; and
o any other information required by our charter amendment.
Selection of Shares for Redemption. If less than all of the
outstanding shares of Broadcast Tracking Stock are to be redeemed, we will
redeem those shares proportionately from among the holders of outstanding
shares of Broadcast Tracking Stock or by such method as may be determined
by our board of directors to be equitable.
Fractional Interests; Transfer Taxes. We will not be required to
issue fractional shares of any capital stock or any fractional securities
to any holder of Broadcast Tracking Stock upon any conversion, redemption,
dividend or other distribution described above. If a fraction is not issued
to a holder, we will pay cash instead of that fraction.
We will pay all documentary, stamp or similar issue or transfer taxes
that may be payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on conversion or redemption of
shares. We would not, however, be required to pay any tax that might be
payable in respect of any transfer involved in the issue or delivery of any
shares of capital stock and/or other securities in a name other than that
in which Broadcast Tracking Stock so exchanged or redeemed were registered,
and no such issue or delivery will be made unless and until the person
requesting such issue pays to NTL the amount of any such tax or establishes
to our satisfaction that such tax has been paid.
Stockholder Rights Upon Conversion or Redemption. If shares of
Broadcast Tracking Stock are converted or redeemed as previously described,
after such conversion or redemption, all rights of a holder of shares of
Broadcast Tracking Stock that were converted or redeemed will cease. The
only right a holder of shares of Broadcast Tracking Stock converted or
redeemed would have at that time is the right to receive the cash and/or
the certificates representing shares of capital stock, securities or other
property into which Broadcast Tracking Stock was converted or for which it
was redeemed, together with any payments for fractional shares or rights to
dividends, as provided above, without interest. No holder of a certificate
that prior to the conversion or redemption represented shares of Broadcast
Tracking Stock converted or redeemed will be entitled to receive any
dividends or other distribution or interest payment with respect to shares
of any kind of capital stock into, or in exchange for which, shares of the
Broadcast Tracking Stock were converted or redeemed until surrender of such
holder's certificate in exchange for a certificate(s) representing shares
of such capital stock. Upon the surrender of the holder's certificate,
there will be paid to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable with
respect to a record date occurring after the conversion, but which were not
paid by reason of the foregoing, with respect to the number of whole shares
of capital stock represented by the certificate or certificates issued upon
such surrender. From and after a conversion, NTL will, however, be entitled
to treat the certificates for Broadcast Tracking Stock that have not yet
been surrendered for conversion as being evidence of the ownership of the
number of whole shares of capital stock into which the shares of Broadcast
Tracking Stock represented by those certificates should have been
converted, notwithstanding the failure to surrender such certificates.
Voting Rights
Holders of NTL Stock and Broadcast Tracking Stock will generally vote
as a single class on all matters requiring a stockholder vote.
Until the 31st trading day following the effective date of the
charter amendment, on all matters as to which all series of common stock
will vote together as a single class:
o each share of NTL Stock will have one vote; and
o each share of Broadcast Tracking Stock will have one vote.
On and after that 31st trading day, at each vote of stockholders, the
aggregate voting power of the NTL Stock and Broadcast Tracking Stock will
be adjusted as follows:
o each share of NTL Stock will have one vote; and
o each share of Broadcast Tracking Stock will have a number of
votes (or a fraction of a vote) based on the ratio of the
average market value of one share of Broadcast Tracking Stock
to the average market value of one share of NTL Stock during
the 20 consecutive trading days ending on (and including) the
record date of the vote.
For example, if the average market value of one share of Broadcast
Tracking Stock for the period specified above was $20.00, and the average
market value of one share of the NTL Stock for the period specified above
was $40.00, each share of NTL Stock would have one vote and each share of
Broadcast Tracking Stock would have 0.5 votes based on the following
calculation:
$20.00
-------- = 0.5 votes per share
$40.00
However, in the event that the foregoing calculation results in the
holders of Broadcast Tracking Stock holding in excess of 15% of the total
voting power of all outstanding shares of common stock, the vote of each
share of Broadcast Tracking Stock that exceeds such amount will be reduced
such that all of the outstanding shares of Broadcast Tracking Stock in the
aggregate represent 15% of the total voting power of all outstanding shares
of NTL's common stock.
The voting formula above is intended to equate the relative voting
rights of the series of common stock to their relative market
capitalization at the time of each adjustment. The periodic adjustments
could influence an investor interested in acquiring and maintaining a fixed
percentage of the voting power of NTL's outstanding stock to acquire that
percentage of all series of common stock, and would limit the ability of
investors in one class to acquire for the same consideration relatively
more or less votes per share than investors in the other series.
Because, of the limitations on the voting power of Broadcast Tracking
Stock, when the holders of NTL Stock and Broadcast Tracking Stock vote
together as a single class, the holders of NTL Stock will be in a position
to control the outcome of a majority vote even if the matter involves a
conflict of interest between the holders of NTL Stock and Broadcast
Tracking Stock.
If shares of only one series of common stock are outstanding, each
share of that series will have one vote. If any series of common stock is
entitled to vote as a separate class with respect to any matter, each share
of that series will, for purposes of such vote, have one vote on such
matter.
If the tracking stock proposal is approved by our stockholders and
implemented by our board of directors, we would set forth the number of
outstanding shares of NTL Stock and Broadcast Tracking Stock in our annual
and quarterly reports filed pursuant to the Exchange Act, and disclose in
any proxy statement for a stockholder meeting the number of outstanding
shares and per share voting rights of each of NTL Stock and Broadcast
Tracking Stock.
The holders of NTL Stock and Broadcast Tracking Stock will not have
any rights to vote separately as a class on any matter coming before our
stockholders, except for the limited class voting rights provided under
Delaware law described below or by NASDAQ rules.
Liquidation
Currently, in the event of our liquidation, dissolution or winding up
(whether voluntary or involuntary), after payment, or provision for
payment, of our debts and other liabilities and the payment of full
preferential amounts to which the holders of any preferred stock are
entitled, holders of existing common stock are entitled to share equally in
our remaining net assets.
Under the charter amendment, in the event of our voluntary or
involuntary liquidation, dissolution or winding-up, the holders of NTL
Stock and Broadcast Tracking Stock will be entitled to receive our assets,
if any, remaining for distribution to stockholders (after payment of or
provision for all liabilities, including contingent liabilities, and
payment of the liquidation preference payable to any holders of our
preferred stock), on a per share basis in proportion to the liquidation
units per share of each series. Each share of NTL Stock will have one
liquidation unit. Each share of Broadcast Tracking Stock will have a number
of liquidation units, including a fraction of one liquidation unit, equal
to the ratio of the average market value of a share of Broadcast Tracking
Stock over the last 20 consecutive trading day period ending 300 days after
the effective date of the NTL charter amendment, to the average market
value of a share of NTL Stock over the same period, expressed as a decimal
fraction rounded to the nearest five decimal places.
If the voluntary or involuntary liquidation, dissolution or
winding-up of NTL occurs prior to that 300th day, the average market value
will be determined based on:
o the 20 consecutive trading day period ending immediately prior
to the liquidation, dissolution or winding-up event, or
o the actual number of consecutive trading days prior to the
liquidation, dissolution or winding-up event if that event
occurs prior to the 21st trading day after the effective date
of the NTL charter amendment.
After the number of liquidation units with respect to Broadcast
Tracking Stock has been calculated in accordance with this formula, the
number will not be changed except as provided below. Thus, the liquidation
rights of the holders of the respective series may not bear any
relationship to the relative market values or the relative voting rights of
the series.
The liquidation units of the NTL Stock and Broadcast Tracking Stock
were determined by NTL and are based upon, among other factors, each
group's initial level of debt and equity capitalization, each group's
recent historical financial performance, the market prices of shares of
comparable companies that are publicly traded and the current state of the
markets for public offerings and other stock transactions.
After the number of liquidation units with respect to Broadcast
Tracking Stock has been calculated as provided above, if NTL subdivides, by
stock split, reclassification or otherwise, or combines, by reverse stock
split, reclassification or otherwise, the outstanding shares of NTL Stock
or Broadcast Tracking Stock, the number of liquidation units of the NTL
Stock or Broadcast Tracking Stock, as applicable, shall be adjusted as
determined by the board of directors so as to avoid any dilution in the
aggregate liquidation rights of either series of common stock.
In the absence of a public trading market for the shares of Broadcast
Tracking Stock, our board of directors will exercise its good faith
judgment to determine the market value of a share of that stock for
purposes of this formula.
NTL considers that its complete liquidation is a remote contingency,
and its financial advisors believe that, in general, these liquidation
provisions are immaterial to the value of NTL Stock and Broadcast Tracking
Stock.
In the case of our dissolution, liquidation or winding up:
o no holder of NTL Stock will have any special right to receive
specific assets of NTL Group; and
o no holder of Broadcast Tracking Stock will have any special
right to receive specific assets of the Broadcast Group.
Neither a merger nor consolidation of NTL into or with any other
corporation, nor any sale, transfer or lease of all or any part of our
assets, will, alone, be deemed a liquidation or winding up of NTL, or cause
the dissolution of NTL, for purposes of these liquidation provisions.
Retained Interest of NTL Group in the Broadcast Group
The number of shares of Broadcast Tracking Stock that, if issued,
would initially represent 100% of the equity value of the Broadcast Group
will be determined by the board of directors based on:
o the historical and projected financial and operating
information of the Broadcast Group;
o the market prices of securities and certain financial and
operating information of companies engaged in activities
similar to those of the Broadcast Group; and
o prevailing equity market conditions.
The equity value of the Broadcast Group remaining after we first
distribute Broadcast Tracking Stock initially will be held by NTL Group.
This retained interest, because it represents an interest between two
business groups within NTL, would not constitute outstanding shares of
common stock and, accordingly, would not be represented by shares of
Broadcast Tracking Stock and would not be voted on any matter by the NTL
Group, including any matter requiring the vote of the holders of Broadcast
Tracking Stock as a separate class. However, the market value attributable
to NTL Group's retained interest in the Broadcast Group should be reflected
in the market value of the NTL Stock, which in turn would affect the
aggregate voting power represented by NTL Stock on any matter in which
holders of NTL Stock and Broadcast Tracking Stock vote together as a single
class.
We will adjust NTL Group's retained interest in the Broadcast Group
to reflect further issuances or repurchases of the stock that relates to
that group, capital contributions to, or returns of capital from, that
group and certain other events, including any distribution of that stock
representing all of our retained interest in that group to holders of NTL
Stock.
In this proxy statement, we call the percentage interest in the
Broadcast Group intended to be represented at any time by the outstanding
shares of the series of common stock that tracks that group the
"Outstanding Interest Percentage," and we call the remaining percentage
interest in the Broadcast Group intended to be represented at any time by
NTL Group's retained interest in that group the "Retained Interest
Percentage." At any time, the Outstanding Interest Percentage equals the
number of shares outstanding of the series of common stock that tracks a
group divided by the total number of notional shares of that series deemed
outstanding (expressed as a percentage) and the Retained Interest
Percentage equals the number of shares of the series of common stock that
tracks that group issuable with respect to NTL Group's retained interest in
that group divided by the total number of notional shares of that series
deemed outstanding (expressed as a percentage). The sum of the Outstanding
Interest Percentage and the Retained Interest Percentage always equals
100%.
At the time that we file the charter amendment for the Broadcast
Group, the Retained Interest Percentage will be 100% and the Outstanding
Interest Percentage will be 0%.
Whenever we decide to issue shares of Broadcast Tracking Stock, we
would determine, in our sole discretion, whether to attribute that issuance
(and the proceeds thereof) to NTL Group in respect of its retained interest
in the Broadcast Group (in a manner analogous to a secondary offering of
common stock of a subsidiary owned by a corporate parent) or to the
Broadcast Group (in a manner analogous to a primary offering of common
stock). If we issue any shares of Broadcast Tracking Stock and attribute
that issuance (and the proceeds thereof) to NTL Group in respect of its
retained interest in the Broadcast Group, the number of shares issuable
with respect to NTL Group's retained interest in the Broadcast Group would
be reduced by the number of shares of that series we issue, the number of
outstanding shares of Broadcast Tracking Stock would be increased by the
same amount, the total number of notional shares deemed outstanding of
Broadcast Tracking Stock would remain unchanged, the Retained Interest
Percentage would be reduced and the Outstanding Interest Percentage would
be correspondingly increased. If we instead attribute that issuance (and
the proceeds thereof) to the Broadcast Group, the number of shares issuable
with respect to NTL Group's retained interest in the Broadcast Group would
remain unchanged, the number of outstanding shares of Broadcast Tracking
Stock and the total number of notional shares deemed outstanding of
Broadcast Tracking Stock would be increased by the number of shares we
issue, the Retained Interest Percentage would be reduced and the
Outstanding Interest Percentage would be correspondingly increased.
We have the right to issue shares of Broadcast Tracking Stock as a
distribution on NTL Stock. If we did so, we would attribute that
distribution to NTL Group in respect of its retained interest in the
Broadcast Group. As a result, the number of shares of Broadcast Tracking
Stock issuable with respect to NTL Group's retained interest in the
Broadcast Group would be reduced by the number of shares so distributed,
the number of outstanding shares of Broadcast Tracking Stock would be
increased by the same amount, the total number of notional shares deemed
outstanding of Broadcast Tracking Stock would remain unchanged, the
Retained Interest Percentage would be reduced and the Outstanding Interest
Percentage would be correspondingly increased. If instead we issued shares
of Broadcast Tracking Stock as a distribution on outstanding shares of
Broadcast Tracking Stock, we would attribute that distribution to the
Broadcast Group, in which case we would proportionately increase the number
of shares of Broadcast Tracking Stock issuable with respect to NTL Group's
retained interest in the Broadcast Group. As a result, the number of shares
of Broadcast Tracking Stock issuable with respect to NTL Group's retained
interest in the Broadcast Group and the total number of notional shares
deemed outstanding of Broadcast Tracking Stock would each be increased by
the same percentage as the number of outstanding shares of Broadcast
Tracking Stock is increased and the Retained Interest Percentage and
Outstanding Interest Percentage would remain unchanged.
At the time of any dividend on the outstanding shares of Broadcast
Tracking Stock (including any dividend required as a result of a
disposition of all or substantially all of the assets of the Broadcast
Group, but excluding any dividend payable in shares of Broadcast Tracking
Stock), we will credit to NTL Group, and charge against the Broadcast
Group, a corresponding amount in respect of NTL Group's retained interest
in the Broadcast Group. Specifically, the corresponding amount will equal
(1) the aggregate amount of such dividend times (2) a fraction, the
numerator of which is the number of shares of Broadcast Tracking Stock
issuable with respect to NTL Group's retained interest in the Broadcast
Group and the denominator of which is the number of shares of Broadcast
Tracking Stock then outstanding.
If we decide to repurchase shares of Broadcast Tracking Stock, we
would determine, in our sole discretion, whether to attribute that
repurchase (and the cost thereof) to NTL Group (in a manner analogous to a
purchase of common stock of a subsidiary by a corporate parent) or to the
Broadcast Group (in a manner analogous to an issuer repurchase). If we
repurchase shares of Broadcast Tracking Stock and attribute that repurchase
(and the cost thereof) to NTL Group, the number of shares of Broadcast
Tracking Stock issuable with respect to NTL Group's retained interest in
the Broadcast Group would be increased by the number of shares so
purchased, the number of outstanding shares of Broadcast Tracking Stock
would be decreased by the same amount, the total number of notional shares
of Broadcast Tracking Stock deemed outstanding would remain unchanged, the
Retained Interest Percentage would be increased and the Outstanding
Interest Percentage would be correspondingly decreased. If we instead
attribute that repurchase of Broadcast Tracking Stock (and the cost
thereof) to the Broadcast Group, the number of shares of Broadcast Tracking
Stock issuable with respect to NTL Group's retained interest in the
Broadcast Group would remain unchanged, the number of outstanding shares of
Broadcast Tracking Stock and the total number of notional shares of
Broadcast Tracking Stock deemed outstanding would be decreased by the
number of shares so repurchased, the Retained Interest Percentage would be
increased and the Outstanding Interest Percentage would be correspondingly
reduced.
We may, in our sole discretion, determine to transfer cash or other
property of the Broadcast Group to NTL Group in return for a decrease in
NTL Group's retained interest in the Broadcast Group (in a manner analogous
to a return of capital) or to transfer cash or other property of NTL Group
to the Broadcast Group in return for an increase in NTL Group's retained
interest in the Broadcast Group (in a manner analogous to a capital
contribution). If we determine to transfer cash or other property of the
Broadcast Group to NTL Group in return for a decrease in NTL Group's
retained interest in the Broadcast Group, the number of shares of Broadcast
Tracking Stock issuable with respect to NTL Group's retained interest in
the Broadcast Group and the total number of notional shares of Broadcast
Tracking Stock deemed outstanding would each be decreased by an amount
equal to the fair value of such cash or other property divided by the
market value of a share of Broadcast Tracking Stock on the day of transfer,
the number of outstanding shares of Broadcast Tracking Stock would remain
unchanged, the Retained Interest Percentage would be decreased and the
Outstanding Interest Percentage would be correspondingly increased. If we
instead determine to transfer cash or other property of NTL Group to the
Broadcast Group in return for an increase in NTL Group's retained interest
in the Broadcast Group, the number of shares of Broadcast Tracking Stock
issuable with respect to NTL Group's retained interest in the Broadcast
Group and the total number of notional shares of Broadcast Tracking Stock
deemed outstanding would each be increased by an amount equal to the fair
value of such cash or other property divided by the market value of a share
of Broadcast Tracking Stock on the day of transfer, the number of
outstanding shares of Broadcast Tracking Stock would remain unchanged, the
Retained Interest Percentage would be increased and the Outstanding
Interest Percentage would be correspondingly decreased.
We may not attribute issuances of Broadcast Tracking Stock to NTL
Group, transfer cash or other property of the Broadcast Group to NTL Group
in return for a decrease in NTL's retained interest in the Broadcast Group
or take any other action to the extent that doing so would cause the number
of shares of Broadcast Tracking Stock issuable with respect to NTL Group's
retained interest in the Broadcast Group to decrease below zero.
For illustrations showing how to calculate the Retained Interest
Percentage, the Outstanding Interest Percentage, the number of shares of
Broadcast Tracking Stock issuable with respect to NTL Group's retained
interest in the Broadcast Group, and the total number of notional shares
deemed outstanding of Broadcast Tracking Stock after giving effect to
certain hypothetical dividends, issuances, repurchases and transfers, see
Annex I--"Illustrations of Certain Terms."
Effectiveness of Certain Terms
The terms described under "--Dividends," "--Mandatory Dividend,
Redemption Or Conversion of Tracking Stock," "--Conversion of Broadcast
Tracking Stock at Option of NTL," "--Redemption of Broadcast Tracking Stock
in Exchange for Stock of a Subsidiary," "--General Conversion and
Redemption Provisions," "-- Voting Rights," "--Liquidation" and "--Retained
Interest of NTL Group in the Broadcast Group," above apply only when there
is Broadcast Tracking Stock outstanding.
Determinations by the Board
Our charter amendment will continue to provide that any
determinations made by our board of directors in good faith under our
charter amendment or in any certificate of designation filed pursuant
thereto would be final and binding on all stockholders of NTL, subject to
rights under applicable Delaware law and under the Federal securities laws.
Preemptive Rights
Holders of NTL Stock and Broadcast Tracking Stock will not have any
preemptive rights to subscribe for any additional shares of capital stock
or securities that we may issue in the future.
OTHER PROVISIONS OF OUR CHARTER, BYLAWS AND DELAWARE LAW
Description of NTL Capital Stock
General
NTL's authorized capital stock consists of 800,000,000 shares of
common stock, par value $0.01 per share, and 10,000,000 shares of preferred
stock, par value $0.01 per share. At the close of business on June 23,
2000:
o approximately 270,775,000 shares of common stock were issued
and outstanding;
o no shares of common stock were held in NTL's treasury;
o approximately 152,000 shares of 13% preferred stock were issued
and outstanding;
o 1,000,000 shares of series A junior participating preferred
stock, the "rights preferred stock", were reserved for issuance
under the rights agreement;
o approximately 15,288,000 shares of common stock were reserved
for issuance upon conversion of the 7% convertible notes;
o approximately 11,092,000 shares of common stock were reserved
for issuance upon the conversion of the 5 3/4% convertible
notes;
o approximately 4,186,000 shares of common stock were reserved
for issuance upon the exercise of warrants;
o approximately 34,669,000 shares of common stock were reserved
for issuance upon conversion of all series of NTL's convertible
preferred stock;
o approximately 67,654,000 shares of common stock were reserved
for issuance pursuant to various employee and director stock
options;
o 1,850,000 shares of 5% cumulative preferred stock, series A
were issued and outstanding, referred to as the "5% cumulative
preferred stock";
o 750,000 shares of 5% cumulative participating convertible
preferred stock, series A were issued and outstanding;
o 5,000 shares of 5% cumulative participating convertible
preferred stock, series C; 9,437.50 shares of 5% cumulative
participating convertible preferred stock, series D; and
9,555.47 shares of 5% cumulative participating convertible
preferred stock, series E, were issued and outstanding; and
o 2,000,000 shares of 5% cumulative participating convertible
preferred stock, series B, were issued and outstanding; all
series of 5% cumulative participating convertible preferred
stock are referred to as the "5% participating preferred
stock".
NTL COMMON STOCK
The holders of NTL's common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of NTL's
stockholders and do not have cumulative voting rights in the election of
directors. Holders of NTL common stock are entitled to receive
proportionately such dividends as may from time to time be declared by
NTL's board of directors out of funds legally available for the payment of
dividends. In the event of NTL's liquidation, dissolution or winding up,
holders of NTL common stock would be entitled to share proportionately in
all of NTL's assets available for distribution to holders of NTL common
stock remaining after payment of liabilities and liquidation preference of
any outstanding NTL preferred stock. Holders of NTL common stock have no
preemptive rights and have no rights to convert NTL common stock into any
other securities, and there are no redemption provisions with respect to
such shares.
NTL PREFERRED STOCK
The NTL board of directors has the authority to issue preferred stock
in one or more series and to fix as to any series of preferred stock the
designation, title, voting powers and any other preferences, and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions, without any further vote or action by our
stockholders.
13% Preferred Stock. The 13% preferred stock ranks prior to the
common stock, rights preferred stock, all series of 5% participating
preferred stock and the 5% cumulative preferred stock with respect to
dividend rights and rights on liquidation, winding up and dissolution, and
each share of 13% preferred stock has a liquidation preference of $1,000.
Holders of shares of 13% preferred stock are entitled to receive, when, as
and if declared by NTL's board of directors, quarterly dividends per share
at a rate of 13% per annum.
Dividends accruing on or prior to February 15, 2004, may, at NTL's
option, be paid in cash, by issuing additional shares of 13% preferred
stock having an aggregate liquidation preference equal to the amount of
such dividends, or in any combination of cash and additional shares of
preferred stock. Dividends accruing after February 15, 2004 must be paid in
cash. NTL may redeem any or all of the 13% preferred stock on or after
February 15, 2002 at declining redemption prices as set forth in the
certificate of designation with respect to the 13% preferred stock, plus
accrued and unpaid dividends to the date of redemption.
NTL must redeem all outstanding shares of 13% preferred stock on
February 15, 2009 at a price equal to 100% of the liquidation preference of
the 13% preferred stock, plus accrued and unpaid dividends to the date of
redemption.
Holders of 13% preferred stock have no general voting rights, except
as otherwise required under the DGCL and except in some circumstances as
set forth in the certificate of designation with respect to the 13%
preferred stock including:
o amending certain rights of the holders of the 13% preferred
stock; and
o the issuance of any class of equity securities that ranks on a
parity with or senior to the 13% preferred stock, other than
additional shares of the 13% preferred stock issued instead of
cash dividends or parity securities issued to finance the
redemption by NTL of the 13% preferred stock.
In addition, if:
o dividends are in arrears for six quarterly periods, whether or
not consecutive;
o NTL fails to make a mandatory redemption; or
o NTL fails to make an offer to purchase all of the outstanding
shares of 13% preferred stock following a 13% preferred stock
change of control triggering event, as defined in the
certificate of designation with respect to the 13% preferred
stock, as required or fails to purchase all of the shares of
13% preferred stock validly tendered pursuant to that offer or
holders of a majority of the outstanding shares of 13%
preferred stock, voting as a class, will be entitled to elect
two directors to NTL board of directors.
In the event of a 13% preferred stock change of control triggering
event, NTL will, subject to some conditions, offer to purchase all
outstanding shares of 13% preferred stock at a purchase price equal to 101%
of the liquidation preference of the 13% preferred stock, plus accrued and
unpaid dividends to the date of purchase. Moreover, in the event of a 13%
preferred stock change of control call event, as defined in the certificate
of designation with respect to the 13% preferred stock, NTL will have the
option to redeem all of the outstanding shares of 13% preferred stock at a
redemption price equal to 100% of the liquidation preference of the 13%
preferred stock plus the applicable premium and accrued and unpaid
dividends to the date of repurchase.
On any scheduled dividend payment date, NTL may, at its option,
exchange all, but not less than all, of the shares of 13% preferred stock
then outstanding into NTL's 13% series B subordinated exchange debentures
due 2009.
5% participating preferred stock. The 5% participating preferred
stock ranks prior to the common stock and the rights preferred stock, on
parity with the 5% cumulative preferred stock, and junior only to the 13%
preferred stock, with respect to dividend rights and rights on liquidation,
winding up and dissolution, and each share of 5% participating preferred
stock has a liquidation preference equal to the greater of $1,000, plus any
accrued and unpaid dividends and the amount payable on the preferred stock
if the preferred stock were converted to common stock prior to liquidation.
Holders of shares of 5% participating preferred stock are entitled to
receive, when, as and if declared by NTL's board of directors quarterly
dividends per share at a rate of 5% per annum. Dividends may be paid, at
NTL's option, either in:
o cash;
o common stock; or
o additional shares of preferred stock having terms substantially
similar to the series of 5% participating preferred stock upon
which the additional shares of preferred stock are issued as a
dividend, except that the conversion rate of such additional
preferred shall be increased for each dividend payment date
after the first dividend payment date by a compounding factor
set forth in the certificate of designations with respect to
the 5% participating preferred stock.
NTL may redeem any or all of the 5% participating preferred stock on
the earlier of:
o seven years from the issue date; and
o the date that is both (A) four years from the issue date and
(B) after the NTL common stock has traded at a value over $96
per share for a period of over 25 consecutive trading days, at
NTL's option, for either:
(1) cash in an amount of $1,000 per share of NTL series B
preferred stock, plus accrued and unpaid dividends;
(2) shares of NTL common stock valued at $1,000 per share of
NTL series B preferred stock, plus accrued and unpaid
dividends; or
(3) any combination of cash and shares of NTL common stock at
a redemption price based on the respective combination of
consideration.
Holders of shares of 5% participating preferred stock have the option
to require NTL to redeem all outstanding shares of 5% participating
preferred stock on and after August 13, 2009, at a price equal to 100% of
the liquidation preference of the 5% participating preferred stock, payable
in cash, common stock, or any combination of cash and common stock.
NTL must redeem all shares of 5% participating preferred stock that
remain outstanding on the twentieth anniversary of the issue date at a
redemption price equal to $1,000 per share, payable at NTL's option in
cash, common stock or any combination of cash and common stock, plus
accrued and unpaid dividends.
Holders of shares of 5% participating preferred stock have no general
voting rights, except as otherwise required by law and except in some
circumstances as set forth in the certificate of designation, including:
o if dividends on the preferred stock are in arrears for six
quarterly periods, whether or not consecutive;
o if NTL fails to honor a redemption request made upon the
occurrence of a mandatory redemption event;
o if NTL files for voluntary bankruptcy or if an involuntary
petition is filed against NTL;
o for purposes of amending the certificate of incorporation in a
way that adversely affects the rights of the holders of shares
of 5% participating preferred stock; or
o to approve the issuance of any equity securities that rank on
parity with or senior to the 5% participating preferred stock
or to increase the authorized amounts of any such other class
or series, other than shares of additional NTL preferred stock
issued as dividends or to refinance, redeem or refund the 13%
preferred stock provided that the maximum accrual value of such
securities may not exceed the maximum accrual value of the 13%
preferred stock.
Holders of shares of the 5% participating preferred stock, series A,
voting separately as a class, will have the right to elect one director to
serve on NTL's board of directors according to the certificate of
designation, so long as France Telecom or any of its affiliates holds at
least one share of the 5% participating preferred stock, series A, and is
also the holder of at least 10,198,480 shares.
For so long as France Telecom is the holder of at least one share of
the 5% participating preferred stock, series B, it shall be entitled to
elect 3 persons, or in the event the NTL board of directors consists of 14
or more directors, 4 persons, to the NTL board of directors. In either
case, any director elected by a holder of shares of 5% participating
preferred stock, series A, shall be counted toward the 3 or 4 directors, as
the case may be, that France Telecom is entitled to elect under the terms
governing the shares of 5% participating preferred stock, series B. If at
any point after completion of the investment, France Telecom ceases to hold
any shares of NTL series A preferred stock or series B preferred stock, but
continues to hold at least 15% of the shares of NTL common stock
outstanding calculated assuming all NTL convertible securities are
converted to NTL common stock and all options exercisable for NTL common
stock are exercised in full, France Telecom will have the right to nominate
either 3 or 4 persons for election to the NTL board of directors, depending
on the size of the NTL board of directors. NTL has agreed to use its best
efforts to support the election of those nominees.
Holders of shares of 5% participating preferred stock have the right,
at any time and from time to time, to convert any or all outstanding shares
of 5% participating preferred stock held by them, but not any fractional
shares, into common stock, such that each share of the 5% participating
preferred stock is convertible into 12.5 shares of common stock, subject to
adjustment according to the certificate of designation.
5% cumulative preferred stock. The 5% cumulative preferred stock
ranks prior to the common stock and the rights preferred stock, on parity
with the 5% participating preferred stock, and junior only to the 13%
preferred stock, with respect to dividend rights and rights on liquidation,
winding up and dissolution, and each share of 5% cumulative preferred stock
has a liquidation preference equal to $1,000, plus any accrued and unpaid
dividends. Holders of shares of 5% cumulative preferred stock are entitled
to receive quarterly dividends at a rate of 5% per annum, payable in
additional shares of 5% cumulative preferred stock. Dividends on the shares
accrue from the issue date and are payable in arrears on the redemption
date of the shares.
The shares of 5% cumulative preferred stock, are redeemable for cash
at a rate of $1,000 per share, in whole or in part, at the option of any
holder that is not a commercial bank, at the earlier of (i) two years from
the initial issue date or (ii) the date of exchange of the shares as
described below by any holder that is not a commercial bank. After the
shares of 5% cumulative preferred stock are outstanding for six months, and
assuming the satisfaction of specific conditions, including the receipt of
any necessary regulatory approvals, the shares would be exchangeable by any
holder that is not a commercial bank, in whole or in part, for shares of
the capital stock of an entity referred to as "Eurotel", which is or will
be a direct or indirect subsidiary of NTL owning all of the capital stock
of entities that are primarily engaged in the broadband communications,
broadcasting and cable television business in Continental Europe outside of
France. In no event would the aggregate amount of capital stock of Eurotel
that may be acquired by non-commercial bank holders upon exchange of shares
of 5% cumulative preferred stock exceed 50% of the capital stock of
Eurotel. Any shares of 5% cumulative preferred stock remaining outstanding
after the acquisition by non-commercial bank holders of the maximum amount
of capital stock of Eurotel would be subject to redemption for cash as
described above.
SPECIAL CHARTER PROVISIONS
NTL's certificate of incorporation, which NTL refers to as the
"charter", contains the provisions described below. Those charter
provisions may have the effect, alone or in combination with each other or
with the existence of authorized but unissued common stock and any series
of preferred stock, of precluding or rendering more difficult a hostile
takeover making it more difficult to remove or change the composition of
NTL's incumbent board of directors and its officers, being adverse to
stockholders who desire to participate in a tender offer and depriving
stockholders of possible opportunities to sell their shares at temporarily
higher prices.
Classified board and filling of vacancies on the board of directors.
The charter provides that the directors shall be divided into three
classes, each of which shall serve a staggered three-year term, and that
vacancies on NTL's board of directors that may occur between annual
meetings may be filled by NTL's board of directors. In addition, this
provision specifies that any director elected to fill a vacancy on NTL's
board of directors will serve for the balance of the term of the replaced
director.
Removal of directors. The charter provides that directors can be
removed only by the stockholders for cause and then only by the affirmative
vote of the holders of not less than two-thirds of NTL's combined voting
power.
Voting requirement for certain business combinations. The charter
also provides that, in addition to any affirmative vote required by law,
the affirmative vote of holders of two-thirds of NTL's voting power shall
be necessary to approve any "business combination", as defined below,
proposed by an "interested stockholder", as defined below. The additional
voting requirements will not apply, however, if:
o the business combination was approved by not less than a
majority of the continuing directors; or a series of conditions
are satisfied requiring, in summary, the following:
(A) that the consideration to be paid to NTL's stockholders
in the business combination must be at least equal to the
higher of:
(1) the highest per-share price paid by the interested
stockholder in acquiring any shares of common stock
during the two years prior to the announcement date
of the business combination or in the transaction
in which it became an interested stockholder, such
date is referred to as the "determination date",
whichever is higher; or
(2) the fair market value per share of common stock on
the announcement date or determination date,
whichever is higher, in either case appropriately
adjusted for any stock dividend, stock split,
combination of shares or similar event with
non-cash consideration treated similarly; and
(B) various "procedural" requirements are complied with, such
as the consent solicitation of proxies pursuant to the
rules of the SEC and no decrease in regular dividends, if
any, after the interested stockholder became an
interested stockholder, except as approved by a majority
of the continuing directors.
An "interested stockholder" is defined as anyone who is the
beneficial owner of more than 15% of the voting power of the voting stock,
other than NTL and any employee stock plans sponsored by NTL, and includes
any person who is an assignee of or has succeeded to any shares of voting
stock in a transaction not involving a public offering that were at any
time within the prior two-year period beneficially owned by an interested
stockholder. The term "beneficial owner" includes persons directly and
indirectly owning or having the right to acquire or vote the stock.
Interested stockholders participate fully in all stockholder voting.
A "business combination" includes the following transactions:
o merger or consolidation of NTL or any subsidiary of NTL with an
interested stockholder or with any other corporation or entity
which is, or after such merger or consolidation would be, an
affiliate of an interested stockholder;
o the sale or other disposition by NTL or a subsidiary of NTL of
assets having a fair market value of $5,000,000 or more if an
interested stockholder, or an affiliate of an interested
stockholder is a party to the transaction;
o the adoption of any plan or proposal for NTL's liquidation or
dissolution proposed by or on behalf of an interested
stockholder, or an affiliate of an interested stockholder; or
o any reclassification of securities, recapitalization, merger
with a subsidiary, or other transaction which has the effect,
directly or indirectly, of increasing the proportionate share
of any class of NTL's outstanding stock, or securities
convertible into stock, or a subsidiary owned by an interested
stockholder, or an affiliate of an interested stockholder.
Determinations of the fair market value of non-cash consideration are
made by a majority of the continuing directors.
The term "continuing directors" means any member of NTL's board of
directors, while that person is a member of NTL's board of directors, who
is not an affiliate or associate or representative of the interested
stockholder and was a member of NTL's board of directors prior to the time
that the interested stockholder became an interested stockholder, and any
successor of a continuing director while that successor is a member of the
NTL's board of directors, who is not an affiliate or associate or
representative of the interested stockholder and is recommended or elected
to succeed the continuing director by a majority of continuing directors.
Voting requirements for certain amendments to the charter. The
charter provides that the provisions set forth in this section under the
heading "Special Charter Provisions" may not be repealed or amended in any
respect, unless that action is approved by the affirmative vote of the
holders of not less than two-thirds of NTL's voting power. The requirement
of an increased stockholder vote is designed to prevent a stockholder who
controls a majority of NTL's voting power from avoiding the requirements of
the provisions discussed above by simply amending or repealing such
provisions.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Generally, Section 203 of the Delaware General Corporation Law
prohibits a publicly held Delaware corporation from engaging in any
business combination with an interested stockholder for a period of three
years following the time that such stockholder becomes an interested
stockholder, unless:
o prior to such time either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder is approved by the board of directors of
the corporation;
o upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding, for purposes of determining the number of shares
outstanding, those shares held by persons who are both
directors and officers and certain employee stock plans; or
o at or after such time the business combination is approved by
the board and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative
vote at least two-thirds of the outstanding voting stock which
is not owned by the interested stockholder. A business
combination includes certain mergers, consolidations, asset
sales, transfers and other transactions resulting in a
financial benefit to the interested stockholder. An interested
stockholder is a person who, together with affiliates and
associates, owns, or within the preceding three years, did own,
15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
NTL's transfer agent and registrar for the NTL Stock and the
Broadcast Tracking Stock will be Continental Stock Transfer & Trust
Company.
RIGHTS AGREEMENT
On August 27, 1993, NTL's board of directors adopted a rights
agreement. The rights agreement provides that one right will be issued with
each share of common stock issued, whether originally issued or from NTL's
treasury, on or after October 13, 1993 and prior to the rights distribution
date, which NTL define below. The rights are not exercisable until the
rights distribution date and will expire at the close of business on
October 13, 2003 unless previously redeemed by NTL as described below. When
exercisable, each right entitles the owner to purchase from NTL one
one-hundredth of a share of rights preferred stock at a purchase price of
$100.00. As a result of the August 1995, October 1999 and February 2000
stock splits, each share of NTL common stock is associated with 0.48 of a
right.
Except as described below, the rights will be evidenced by the common
stock certificates. The rights will separate from the common stock and a
"rights distribution date" will occur upon the earlier of
(1) 10 days following a public announcement that a person or group
of affiliated or associated persons, an "acquiring person", has
acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of the
common stock, the "stock acquisition date", and
(2) 10 business days following the commencement of a tender offer
or exchange offer that would result in a person or group
becoming an acquiring person.
After the rights distribution date, rights certificates will be
mailed to holders of record of the common stock as of the rights
distribution date and after that time the separate rights certificates
alone will represent the rights.
The rights preferred stock issuable upon exercise of the rights will
be entitled to a minimum preferential quarterly dividend payment of $0.01
per share and will be entitled to an aggregate dividend of 208.33 times the
dividend, if any, declared per share of common stock other than one payable
in common stock. In the event of liquidation, the holders of the rights
preferred stock will be entitled to a minimum preferential liquidation
payment of $1.00 per share plus accrued and unpaid dividends and will be
entitled to an aggregate payment of 208.33 times the payment made per share
of the common stock. Each share of rights preferred stock will have 208.33
votes and will vote together with the common stock. In the event of any
merger, consolidation or other transaction in which shares of the common
stock are changed or exchanged, each share of rights preferred stock will
be entitled to receive 208.33 times the amount received per share of the
common stock. These rights are protected by customary antidilution
provisions. Because of the nature of the rights preferred stock's dividend,
liquidation and voting rights, the value of one one-hundredth of a share of
rights preferred stock purchasable upon exercise of each right should
approximate the value of one share of the common stock.
In the event that a person becomes an acquiring person, except
pursuant to a tender offer or an exchange offer for all outstanding shares
of common stock at a price and on terms determined by at least a majority
of the members of NTL's board of directors who are not NTL's officers and
who are not representatives, nominees, affiliates or associates of an
acquiring person, to be fair to NTL's stockholders and otherwise in NTL's
best interests and the best interests of NTL's stockholders, a "qualifying
offer", each holder of a right will after that time have the right to
receive, upon the exercise of that right at the then current exercise
price, the common stock, or in some circumstances, cash, property or other
of NTL's securities, having a value equal to two times the exercise price
of the right. Notwithstanding any of the foregoing, following the
occurrence of any such event, all rights that are or, under some
circumstances specified in the rights agreement, were beneficially owned by
any acquiring person, or related parties, will be null and void. However,
rights are not exercisable following the occurrence of the event set forth
above until such time as the rights are no longer redeemable by NTL as set
forth below.
In the event that, at any time following the stock acquisition date,
(1) NTL is acquired in a merger or other business combination
transaction in which NTL is not the surviving corporation or
the common stock is changed or exchanged, other than a merger
which follows a qualifying offer and satisfies certain other
requirements; or
(2) 50% or more of NTL's assets, cash flow or earning power is sold
or transferred, each holder of a right, except rights which
previously have been voided as set forth above, shall after
that time have the right to receive, upon the exercise of the
right at the then current exercise price, common stock of the
acquiring company having a value equal to two times the
exercise price of the right.
At any time until 10 days following the stock acquisition date, NTL
may redeem the right in whole, but not in part, at a price of $0.01 per
right. Immediately upon the action of NTL's board of directors ordering
redemption of the rights, the rights will terminate and the only right of
the holders of the rights will be to receive the $0.01 redemption price.
Until a right is exercised, the holder of a right, as such, shall
have no rights as NTL's stockholder, including without limitation, the
right to vote or to receive dividends. While the distribution of the rights
will not be taxable to stockholders or to NTL, stockholders may, depending
upon the circumstances, recognize taxable income in the event that the
rights become exercisable for the common stock, or other consideration, or
for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal terms of the
rights, any of the provisions of the rights agreement may be amended by
NTL's board of directors prior to the rights distribution date. After the
rights distribution date, the provisions of the rights agreement may be
amended by NTL's board of directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of rights,
excluding the interests of any acquiring person, or to shorten or lengthen
any time period under the rights agreement, provided that no amendment to
adjust the time period governing redemption shall be made at such time as
the rights are not redeemable.
On March 31, 1999 and on May 17, 2000, in connection with separate
holding company merger agreements that NTL in each case had previously
entered into with other affiliated parties, as of each date, the rights
agreement was amended to provide that NTL would assume the obligations of
the rights agreement from the predecessor to NTL with respect to each
holding company merger. On October 23, 1999, in connection with the
purchase by France Telecom of shares of NTL common stock from designated
holders of NTL common stock, NTL amended the rights agreement so that such
purchase of NTL common stock when aggregated with France Telecom's and its
affiliate's holdings of shares of NTL common stock or securities
convertible into NTL common stock as of such date would not result in
France Telecom becoming an acquiring person under the rights agreement.
On March 28, 2000, in connection with the issuance and sale by NTL of
shares of 5% cumulative preferred stock, series A to a group of banks and
France Telecom, NTL amended the rights agreement so that such purchase of
preferred stock and its subsequent permitted conversion by France Telecom
into shares of NTL common stock when aggregated with France Telecom's and
its affiliate's holdings of shares of NTL common stock or securities
convertible into NTL common stock as of such date would not result in
France Telecom becoming an acquiring person under the rights agreement. On
May 30, 2000, in connection with the issuance of shares of NTL common stock
to Cable and Wireless plc as partial consideration for NTL's acquisition of
the residential cable assets of Cable & Wireless Communications plc, a
subsidiary of Cable and Wireless, and the issuance and sale by NTL of
shares of 5% cumulative participating convertible preferred stock, series B
and shares of NTL common stock to France Telecom in a private placement,
NTL amended the rights agreement so that Cable and Wireless would not be
classified as an acquiring person under the rights agreement based on its
holdings of shares of NTL common stock as of such date and as to France
Telecom that its purchase of shares of 5% cumulative participating
convertible preferred stock, Series B and shares of NTL common stock when
aggregated with France Telecom's and its affiliate's holdings of shares of
NTL common stock or securities convertible into NTL common stock as of such
date would not result in France Telecom becoming an acquiring person under
the rights agreement. The rights agreement remained in full force and
effect after each amendment and otherwise was unaffected.
The rights have anti-takeover effects as they will cause substantial
dilution to a person or group that acquires a substantial interest in NTL
without the prior approval of NTL's board of directors. The effect of the
rights may be to inhibit a change in control of NTL, including through a
third party tender offer at a price which reflects a premium to then
prevailing trading prices, that may be beneficial to NTL's stockholders.
CERTAIN MANAGEMENT AND ALLOCATION POLICIES
General
A fundamental objective of our board of directors and management is
to highlight the separate performance of each of NTL Group and the
Broadcast Group and to allow each group to focus on its own business
strategy and financial model. Because NTL Group and the Broadcast Group
will not be separate legal entities, NTL has carefully considered a number
of issues with respect to the financing of each group, competition between
groups, inter-group business transactions, corporate opportunities and the
allocation of shared services expenses, corporate general and
administrative expenses, debt, interest, taxes, retirement benefit costs,
and other support activities between the groups. Following is a summary of
policies and guidelines that we plan to follow to help us to allocate costs
and charges between the groups in a manner that will ensure that
transactions between the groups are made on a basis that in management's
judgment would be fair and equitable. We are not requesting stockholder
approval of these policies, and the policies may be changed at any time
without stockholder approval. We anticipate that the board of directors
will adopt a statement of policy reflecting these policies, and may
establish a committee of the board of directors to oversee the interaction
between NTL Group and the Broadcast Group.
Fiduciary and Management Responsibilities
Our directors and officers will have the same fiduciary duties to
holders of NTL Stock and Broadcast Tracking Stock that they currently have
to the holders of our existing common stock. Under Delaware law, absent an
abuse of discretion, a director or officer will be deemed to have satisfied
his or her fiduciary duties to NTL and our stockholders if that person is
disinterested and acts in accordance with his or her good faith business
judgment in the interests of NTL and all of our stockholders as a whole.
Our board of directors and our chief executive officer, in establishing
policies with regard to intracompany matters such as business transactions
between groups and allocations of assets, liabilities, debt, shared
services expenses, corporate general and administrative costs, taxes,
interest, retirement benefit costs, corporate opportunities and other
matters, will consider various factors and information which could benefit
or cause detriment to the stockholders of the respective groups and will
make determinations in the best interests of NTL and all of our
stockholders as a whole. NTL will adhere to the principle that transactions
and transfers between groups should be made on a basis that in management's
judgment would be fair and equitable.
Preparation of Financial Statements
If the tracking stock proposal is approved and implemented, we will
prepare financial statements in accordance with generally accepted
accounting principles, consistently applied, for NTL Group and the
Broadcast Group and for NTL on a consolidated basis. The financial
statements of NTL Group and the Broadcast Group taken together will
comprise all the accounts included in the corresponding consolidated
financial statements of NTL. The financial statements of each of NTL Group
and the Broadcast Group will reflect the financial condition, results of
operations and cash flows of the businesses included in the corresponding
group.
The financial statements of each group will also include the
allocated portions of debt, interest, retirement benefit costs, shared
services costs, corporate general and administrative costs and taxes for
each group. We will make these allocations for the purposes of preparing
the financial statements of each group. However, the holders of NTL Stock
and Broadcast Tracking Stock will still be subject to all of the risks
associated with an investment in NTL as a whole.
Treasury Activities
NTL plans to continue to manage most financial activities on a
centralized basis. These activities include the investment of surplus cash,
the issuance and repayment of short-term and long-term debt and the
issuance and repurchase of common stock. If we transfer cash or other
property allocated to one group to another group, we may account for that
transfer in one of the following ways:
o as an adjustment to allocated pooled debt, or as a short-term
or long-term loan between groups, or as a repayment of a
previous borrowing, as described under "Inter-group Loans"
below; or
o as a sale of assets between groups; or
o as a reduction or increase in NTL Group's retained interest in
the Broadcast Group.
Our board of directors has not adopted specific criteria to determine
which of the foregoing will be applied to a particular transfer of cash or
property from one group to another. Our board of directors and management
will make these determinations, either in specific instances or by setting
generally applicable policies, in the exercise of its business judgment.
These determinations will be based on all relevant circumstances, including
the financing needs and objectives of the receiving group, the investment
objectives of the transferring group, the availability, cost and time
associated with alternative financing sources, prevailing interest rates
and general economic conditions. We will make all transfers of assets from
one group to another on a fair and equitable basis for the foregoing
purposes.
Although we may allocate our debt and preferred stock between groups,
the debt will remain the obligation of NTL as a whole and all of our
stockholders will be subject to the risks associated with those
obligations.
NTL Debt and Preferred Stock. We may allocate our debt between the
groups or, if we so determine, in its entirety to a particular group, for
example, in the case of specific acquisition financing. We will allocate
preferred stock, if issued, in a similar manner. We refer to debt and
preferred stock allocated between groups as "pooled."
The portion of the pooled debt allocated to the Broadcast Group will
bear interest for purposes of its financial statements at a rate to reflect
the board of directors' good faith determination as to the relative credit
risks of the Broadcast Group, and applied to the Broadcast Group's
allocated portion of the pooled debt balance at the beginning of each
period for which interest expense is calculable. The remainder of the
interest expense on pooled debt for such period will be allocated to NTL
Group. Preferred stock, if issued and if pooled in a manner similar to the
pooled debt, will bear dividends for group financial statement purposes at
a rate based on the weighted average dividend rate of the preferred stock
similarly calculated and applied. Any expense related to increases in
pooled debt or preferred stock will be reflected in the weighted average
interest or dividend rate of such pooled debt or preferred stock as a
whole.
If we allocate debt for a particular financing in its entirety to one
group, that debt will bear interest for group financial statement purposes
at the rate applicable to such debt as determined by the board of directors
as provided above. If we allocate preferred stock in its entirety to one
group, we will charge the dividend cost to that group in a similar manner.
Any additional expenses related to debt or preferred stock that is
allocated in its entirety to a group will be allocated in whole to that
group.
Inter-group Loans. Cash or other property that we allocate to one
group that is transferred to another group could be accounted for either as
adjustments to allocated pooled debt, or as a short-term loan or as a
long-term loan. We will establish guidelines for the terms on which loans
between the groups will be made, including the interest rates, amortization
schedule, maturity and redemption terms.
Equity Issuances and Repurchases and Dividends. We will reflect all
financial effects of issuances and repurchases of shares of NTL Stock or
Broadcast Tracking Stock entirely in the financial statements of that
group. We will reflect financial effects of dividends or other
distributions on, and purchases of, shares of NTL Stock or Broadcast
Tracking Stock entirely in the respective financial statements of the
related group.
Competition Between Groups
Although NTL Group and the Broadcast Group are engaged in different
principal businesses, our board of directors and management recognize that
the two groups may engage in indirect competition, in appropriate
circumstances and for the benefit of stockholders, from time to time.
Transfers of Assets Between Groups
Our charter amendment permits the transfer of assets between groups
without stockholder approval. NTL has established a policy that all such
transfers will be made on a fair and equitable basis, as determined in good
faith by our board of directors or management. The consideration for such
transfers may be paid by one group to another in cash or other
consideration, including adjustment of the retained interest.
Sales of Products and Services Between Groups. The sale of products or
services between groups will be on a fair and equitable basis, as
determined in good faith by our board of directors or management.
Joint Transactions. Two or more groups may from time to time engage in
transactions jointly, including with third parties. Research and
development and other services performed by one group for a joint venture
or other collaborative arrangement will be charged on a fair and equitable
basis.
Review of Corporate Opportunities
Our board of directors will review any significant matter which
involves the allocation of a corporate opportunity to either of NTL Group
or the Broadcast Group in part to any combination of the groups. Delaware
law requires our board of directors to make its determination with regard
to the allocation of any such opportunity and the benefit of that
opportunity in accordance with their good faith business judgment of the
best interests of NTL and all of our stockholders as a whole. Among the
factors that our board of directors may consider in making this allocation
is:
o whether a particular corporate opportunity is principally
related to the business of NTL Group or the Broadcast Group;
o whether one group, because of its managerial or operational
expertise, will be better positioned to undertake the corporate
opportunity; and
o existing contractual agreements and restrictions.
Shared Services and Support Activities
We will directly charge costs for certain shared services, including
support activities, to NTL Group and the Broadcast Group based upon the
respective use of such services and activities and the good faith judgment
of our board of directors or management. Where determinations based on use
alone are not practical, we will use other methods and criteria to provide
a reasonable allocation of the cost of shared services, including support
activities attributable to the groups. Such allocated shared services,
including support activities, represent, among other things, financial and
accounting services, information systems services, certain selling and
marketing activities, executive management, human resources, corporate
finance, legal and corporate planning activities.
Taxes
We will generally determine the income tax provisions of NTL and its
subsidiaries on a consolidated basis. We will allocate those consolidated
income tax provisions and related tax payments or refunds between the
groups based principally on the taxable income and tax credits directly
attributable to each group. These allocations will reflect each group's
contribution, whether positive or negative, to NTL's consolidated taxable
income and the consolidated tax liability and tax credit position. We will
credit tax benefits that cannot be used by the group generating those
benefits but can be used on a consolidated basis to the group that
generated such benefits.
Current and deferred taxes and taxes payable or refundable allocated
to each group in its historical financial statements may differ from those
that would have been allocated to each group had they filed separate income
tax returns.
Dividend Policy
The board of directors will retain the discretion whether or not to
pay dividends on any series of common stock.
We do not expect to change our current dividend policy for the
outstanding existing common stock which will become NTL Stock. We do not
expect to pay dividends on Broadcast Tracking Stock in the future. In
addition, we are a holding company and the existing indentures and credit
facilities of our operating subsidiaries contain covenants which may limit
the amount of funds which may be transferred by our subsidiaries to us for
dividends to our stockholders or otherwise.
While the board of directors does not currently plan to change the
policy for payment of dividends referred to above, the board of directors
has the discretion to change this policy at any time. The amount of funds
legally available for dividends will reflect the gains or losses of all
groups, and NTL may be unable to pay dividends on a series of common stock
that tracks a group regardless of the financial condition or results of
operations of that group. We cannot assure you that there will be amounts
available for payment of dividends on any series of common stock.
In addition, subject to the limitations described above, and the
limitations set forth generally in this section, the board of directors may
in its sole discretion declare and pay dividends on neither series of
common stock, on one but not both series of common stock or on both series
of common stock. The amount of any dividend may likewise vary between NTL
Stock and Broadcast Tracking Stock in the sole discretion of the board of
directors.
We will otherwise be permitted to pay dividends on NTL Group Stock
out of assets of NTL legally available for the payment of dividends under
Delaware law, but the total amounts paid as dividends on NTL Group Stock
cannot exceed the available dividend amount for NTL Group.
We will otherwise be permitted to pay dividends on Broadcast Tracking
Stock (and transfer corresponding amounts to NTL Group in respect of its
retained interest in the relevant group), but the total of the amounts paid
as dividends on the shares of Broadcast Tracking Stock and the
corresponding amounts transferred to NTL Group in respect of its retained
interest in the relevant group cannot exceed the available dividend amount
for that group.
We expect that determinations to pay dividends on NTL Stock or
Broadcast Tracking Stock would be based primarily upon the financial
condition, results of operations, capital requirements, any restrictions
contained in our financing or other agreements and such other factors as
our board of directors deems relevant.
Changes in Policies
Neither our board of directors nor management has any current plans
to change the above policies. However, these policies may be modified by
the board of directors or management in its or their sole discretion
without the approval of stockholders. Any modifications to the above
policies will be made by the board of directors or management in its or
their good faith business judgment of NTL's best interests, taking into
consideration the interests of NTL and all of NTL's stockholders.
ANTI-TAKEOVER CONSIDERATIONS
If NTL Group and the Broadcast Group were separate companies and not
part of a single enterprise, any person interested in acquiring any group
without negotiating with management could seek control of that entity by
obtaining control of its outstanding voting stock by means of a tender
offer or proxy contest. Although we intend NTL Stock and Broadcast Tracking
Stock to reflect the separate performance of NTL Group and the Broadcast
Group, a person interested in acquiring any group without negotiation with
NTL's management could obtain control of that group only by obtaining
control of our outstanding voting stock.
The existence of multiple series of common stock could present
complexities and could in certain circumstances pose obstacles, financial
and otherwise, to an acquiring person. The existence of multiple series of
common stock could, under certain circumstances, prevent stockholders from
profiting from an increase in the market value of their shares as a result
of a change in control of NTL by delaying or preventing such a change in
control.
If the tracking stock proposal is implemented, there would be an
additional [ ] shares of common stock available for future issuance without
further stockholder approval. One of the effects of the existence of
authorized and unissued common stock and preferred stock could be to enable
the board to issue shares to persons friendly to current management which
could render more difficult or discourage an attempt to obtain control of
NTL by means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management. Such additional shares
also could be used to dilute the stock ownership of persons seeking to
obtain control of NTL.
For additional anti-takeover considerations, see "--Other Provisions
of Our Charter, Bylaws and Delaware Law" beginning at page [ ].
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors has carefully considered proposal number 1,
the charter amendment proposal, and believes that its approval by the
stockholders is in the best interests of NTL and its stockholders and,
accordingly, unanimously recommends that stockholders vote for the approval
of the proposal number 1, the charter amendment proposal.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF PROPOSAL NUMBER 1, THE CHARTER AMENDMENT PROPOSAL
PROPOSAL NUMBER 2
ADOPTION OF THE NTL BROADCAST INCENTIVE PLAN
You are being asked to consider and vote in favor of the proposal to
authorize us to adopt the NTL Broadcast Incentive Plan. The following
summary of the NTL Broadcast Incentive Plan should be read with the full
text of the proposed plan set forth as Annex III.
[to come]
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors has carefully considered proposal number 2,
the incentive plan proposal, and believes that its approval by the
stockholders is in the best interests of NTL and its stockholders and,
accordingly, unanimously recommends that stockholders vote for the approval
of proposal number 2, the incentive plan proposal.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF PROPOSAL NUMBER 2, THE INCENTIVE PLAN PROPOSAL
Stockholder Proposals and Nominations
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting must be received by the Company at the address set forth on the
first page of this proxy statement on or before December 29, 2000 to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
Notices of stockholder proposals submitted outside the processes of
Rule 14a-8 will be considered timely, pursuant to the advance notice
requirements set forth in Article II, Section 4 of NTL's by-laws, if such
notices are received not less than 75 days nor more than 90 days prior to
the annual meeting of stockholders; provided, however, that in the event
that less than 90 days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on
the fifteenth day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure was made, whichever
first occurs. Such stockholder's notice shall set forth as to each matter
the stockholder proposes to bring before the annual meeting:
o a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such
business at the annual meeting;
o the name and record address of the stockholder proposing such
business;
o the class, series and number of shares of capital stock of NTL
which are beneficially owned by the stockholder; and
o any material interest of the stockholder in such business.
Any such proposal or notice should be directed to the attention of
the Secretary, NTL Incorporated, 110 East 59th Street, New York, New York
10022.
SEC rules set forth standards for the exclusion of some stockholder
proposals from a proxy statement for an annual meeting.
STOCK EXCHANGE LISTINGS
The existing common stock is currently listed on the NASDAQ National
Market and EASDAQ under the symbol "NTLI." NTL will apply to the NASDAQ
National Market for redesignation of the existing common stock as NTL
Stock, which would continue to trade under the symbol "NTLI." NTL will also
apply to the NASDAQ National Market for the listing of Broadcast Tracking
Stock.
NO DISSENTERS' RIGHTS
Under Delaware law, stockholders will not have appraisal rights in
connection with the tracking stock proposal or the other matters to which
you are asked to vote.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material U.S. Federal
income tax consequences of the implementation of the tracking stock
proposal. This discussion, including the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, our special tax counsel, is based on the Code, Treasury
Department regulations, published positions of the IRS, and court decisions
now in effect, all of which are subject to change, possibly with
retroactive effect. In particular, Congress could enact legislation
affecting the treatment of stock with characteristics similar to NTL Stock
and Broadcast Tracking Stock or the Treasury Department could issue
regulations or other guidance that change current law. Any future
legislation or regulation (or other guidance) could apply retroactively to
the implementation of the tracking stock proposal and render the opinion of
Skadden, Arps, Slate, Meagher & Flom LLP obsolete. See "Absence of
Authority Regarding Tracking Stock; Possible Legislative, Regulatory, or
Other Changes" below.
The discussion below is included for general information only. It
does not discuss all aspects of U.S. Federal income taxation that may be
relevant to you in light of your personal circumstances, nor does it
discuss state, local, and foreign tax consequences. Rather, it addresses
only Federal income tax considerations that may be relevant to United
States shareholders who hold their existing NTL common stock and will hold
their Broadcast Tracking Stock as capital assets within the meaning of
Section 1221 of the Code. The discussion may not apply to certain
shareholders who are subject to special treatment under the Federal income
tax laws, such as insurance companies, corporations subject to the
alternative minimum tax, banks, dealers in securities, tax-exempt
organizations, persons that hold existing common stock as part of a
straddle, hedging or conversion transaction, persons whose functional
currency is not the U.S. dollar, or shareholders who acquired their stocks
pursuant to the exercise of employee stock options or otherwise as
compensation. Certain U.S. Federal income tax consequences to Non-U.S.
shareholders are set forth further below.
You should consult your own tax advisor as to the application of the
Federal income tax laws to your particular situation, as well as to the
applicability and effect of any state, local, foreign or other Federal tax
laws.
Reclassification of Existing Common Stock
If the tracking stock proposal is implemented, each share of existing
common stock will be reclassified as one share of NTL Stock
(Reclassification). In the opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, our special tax counsel, for United States Federal income tax
purposes:
o NTL Stock will be treated as NTL stock, and will not constitute
"section 306 stock" within the meaning of Section 306(c) of the
Code or "nonqualified preferred stock" within the meaning of
Section 351(g) of the Code.
o Neither you nor NTL will recognize income, gain, or loss as a
result of the Reclassification.
o You will have the same tax basis and holding period for the NTL
Stock as you have in your existing common stock.
o The amendment and restatement of the Rights Agreement will not
result in income, gain or loss to you.
While it is not clear whether the Reclassification even constitutes
an exchange of stock for Federal income tax purposes, NTL intends to take
the position that it does and, as such, qualifies as a tax-free
recapitalization within the meaning of Section 368(a)(1)(E) of the Code.
Stockholders who exchange their stock in a recapitalization are required to
attach an information statement describing the exchange to their tax
returns for the year in which the exchange occurs. NTL intends to mail such
a statement to you for this purpose.
Issuance of Broadcast Tracking Stock
After the Reclassification, NTL may sell shares of Broadcast Tracking
Stock, distribute shares of Broadcast Tracking Stock as a dividend on the
NTL Stock, or issue Broadcast Tracking Stock in exchange for outstanding
NTL Stock. Based on the manner in which NTL expects to carry out these
contemplated transactions, it is the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, our special tax counsel, that for U.S. Federal income
tax purposes:
o The Broadcast Tracking Stock will be treated as NTL stock, and
will not constitute "section 306 stock" within the meaning of
Section 306(c) of the Code or "nonqualified preferred stock"
within the meaning of Section 351(g) of the Code.
o NTL will not recognize income, gain, or loss on a sale,
distribution, or exchange of Broadcast Tracking Stock.
o If NTL makes a pro-rata dividend of Broadcast Tracking Stock to
all holders of NTL Stock, you will not recognize any income,
gain, or loss on the receipt of such stock dividend (except
where cash is received in lieu of fractional shares). You will
be required to allocate your tax basis in the NTL Stock
immediately before the distribution between the NTL Stock and
the Broadcast Tracking Stock (including any fractional share
which is deemed received and sold for cash) in proportion to
their respective fair market values immediately after the
distribution. Your holding period for the Broadcast Tracking
Stock will include the period for which you have held the NTL
Stock.
o If NTL issues Broadcast Tracking Stock to you in exchange for
NTL Stock, that exchange will be a tax-free recapitalization
under Section 368(a)(1)(E) of the Code. You will not be
required to recognize income, gain, or loss upon the exchange
of Broadcast Tracking Stock for NTL Stock held by you, except
to the extent that cash is received in lieu of fractional
shares. Your tax basis in the Broadcast Tracking Stock received
in such exchange (including any fractional share which is
deemed received and sold for cash) will equal the tax basis in
the NTL Stock you surrender in the exchange. Your holding
period for the Broadcast Tracking Stock received in the
exchange will include the period for which you have held the
NTL Stock surrendered in the exchange.
Under certain circumstances, section 305 of the Code requires a
stockholder to include the value of stock received in a dividend or
recapitalization in gross income (subject to the intercorporate
dividends-received deduction in the case of corporate stockholders), if the
effect of the stock dividend or recapitalization, in conjunction with other
distributions by the corporation, is to cause (i) the receipt of cash or
property (other than stock) by some stockholders and (ii) an increase in
the proportionate interest in the assets or earnings and profits of the
corporation by other stockholders. Based on our plan for the distribution
of Broadcast Tracking Stock, it is Skadden, Arps, Slate, Meagher & Flom
LLP's opinion that this rule will not apply to any distribution of the
Broadcast Tracking Stock.
Conversion of Broadcast Tracking Stock into NTL Stock
Skadden, Arps, Slate, Meagher & Flom LLP has advised that, subject to
unanticipated circumstances that may exist at the time of conversion, if we
exercise any of our options to convert Broadcast Tracking Stock into NTL
Stock, that conversion will be tax-free to you (except where cash is
received in lieu of fractional shares). Your tax basis in the shares you
receive as a result of such conversion will equal your adjusted tax basis
in the shares you surrender (subject to adjustment for fractional shares
redeemed for cash), and your holding period in the shares you receive will
include the holding period of the shares you surrender in the exchange.
Dividends
General. In general, stockholders of a corporation are taxed (subject
to the dividends received deduction in the case of corporate stockholders)
on the receipt of dividends. In addition, under certain circumstances where
some shareholders of a corporation receive cash or other property from the
corporation while other shareholders increase their proportionate equity
interest in the corporation, Section 305 of the Code can tax a stockholder
whose proportionate equity interest in the earnings and profits or assets
of the corporation is increased as if such stockholder received a
constructive dividend. Based on the terms and conditions of the tracking
stock proposal and other circumstances, NTL does not believe that this rule
will apply to you for the foreseeable future.
Backup withholding. Certain non-corporate holders of NTL Stock or
Broadcast Tracking Stock could be subject to backup withholding at a rate
of 31% on the payment of dividends on such stock. Backup withholding will
apply only if the shareholder (i) fails to furnish his, her or its Taxpayer
Identification Number which, for an individual, would be his or her social
security number, (ii) furnishes an incorrect Taxpayer Identification
Number, (iii) is notified by the IRS that he, she or it has failed properly
to report payments of interest or dividends, or (iv) under certain
circumstances, fails to certify, under penalties of perjury, that he, she
or it has furnished a correct Taxpayer Identification Number and has not
been notified by the IRS that he, she or it is subject to backup
withholding for failure to report payments of interest or dividends.
Shareholders should consult their tax advisors regarding their
qualifications for an exemption from backup withholding and the procedure
for obtaining such an exemption if applicable. The amount of any backup
withholding from a payment of a dividend is allowed as a credit against the
shareholder's Federal income tax liability and may entitle such shareholder
to a refund, provided that the required information is furnished to the
IRS.
Absence of Authority Regarding Tracking Stock; Possible Legislative,
Regulatory, or Other Changes
The IRS has announced that it will not issue advance rulings on the
classification of tracking stock, and there are no court decisions or other
authorities that control the tax treatment of tracking stock. Skadden,
Arps, Slate, Meagher & Flom LLP's opinion is not binding on the IRS or a
court. It is possible, therefore, that the IRS could assert that NTL Stock
or Broadcast Tracking Stock represents property other than stock of NTL. In
that event, NTL and/or you could be required to recognize significant
taxable income or gain on the sale or distribution of Broadcast Tracking
Stock. Alternatively, the IRS could contend that Broadcast Tracking Stock
received as a dividend or in a recapitalization is section 306 stock, in
which case the proceeds from a sale of such stock would generally be
taxable as ordinary income, unless the disposition terminates the
stockholder's entire interest in NTL. Skadden, Arps, Slate, Meagher & Flom
LLP is of the opinion, however, that the IRS would not prevail in this
assertion under current law.
It is also possible that Congress could enact legislation or the IRS
could promulgate regulations that would adversely affect the tax treatment
of tracking stock. In February 1999 and again in February 2000 the Clinton
Administration proposed legislation relating to the issuance of tracking
stock similar to Broadcast Tracking Stock. The February 1999 proposal would
impose a corporate-level tax on the issuance of tracking stock. The
February 2000 proposal would tax shareholders on the receipt of tracking
stock received in a distribution on or in exchange for their existing
stock. Both provisions are proposed to be effective for tracking stock
issued on or after the date of enactment. Neither of these proposals has
been incorporated in any proposed legislation in the U.S. House of
Representatives or the U.S. Senate. NTL cannot predict whether either
proposal will be enacted or, if enacted, whether it will be in the form
proposed. In addition, the IRS could issue regulations or other
administrative guidance, including regulations issued pursuant to its broad
authority under Section 337(d) of the Code, or a court could render a
decision that changes current law or adversely affects existing
interpretations of current law affecting tracking stock. Any such change,
which may or may not be retroactive, could alter the tax consequences to us
or to our shareholders discussed herein. While it is likely that any such
legislative or regulatory change (unless interpretive of existing law)
would apply only to tracking stock issued after the effective date of the
change, that date could precede a planned sale or distribution of Broadcast
Tracking Stock, in which case the change would apply to such sale or
distribution. In that event, NTL would have the right to convert all the
outstanding shares of Broadcast Tracking Stock into a number of shares of
NTL Stock equal to a factor, which will not be more than 110% or less than
100% (as determined by the NTL board of directors at the time the charter
amendment is filed to be in the best interests of NTL's stockholders),
applied to the ratio of the average market values of the Broadcast Tracking
Stock and the NTL Stock described above.
Certain U.S. Tax Consequences to Non-U.S. Holders
The following discussion applies to you if you are a (1) a
nonresident alien individual; (2) a foreign corporation, partnership or
other entity; or (3) a foreign estate or trust (Non-U.S. Holder).
Dividends. Dividends paid to a Non-U.S. Holder generally will be
subject to withholding of Federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty. However, if
the dividend is effectively connected with the conduct of a trade or
business of the Non-U.S. Holder within the United States, the dividend will
instead be taxed at ordinary Federal income tax rates on a net income
basis. Further, if the Non-U.S. Holder is a corporation, this effectively
connected dividend income may also be subject to an additional branch
profits tax.
NTL must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such investor and the amount, if any, of tax
withheld with respect to such dividends. This information may also be made
available to the tax authorities in the Non-U.S. Holder's country of
residence.
Sale or other Disposition of NTL Stock or Broadcast Tracking Stock. A
Non-U.S. Holder generally will not be subject to Federal income tax on any
gain recognized on the sale or other disposition of NTL Stock or Broadcast
Tracking Stock, except in the following circumstances:
o The gain is effectively connected with a trade or business of
the Non-U.S. Holder within the United States.
o The Non-U.S. Holder is an individual who is present in the
United States for 183 or more days in the taxable year of the
sale or other disposition.
o The Non-U.S. Holder is subject to tax pursuant to the
provisions of the Code applicable to certain United States
expatriates.
o NTL is or has been during certain periods a "United States Real
Property Holding Corporation." NTL believes that it will not
constitute a United States Real Property Holding Corporation
immediately after the offering and does not expect to become a
United States Real Property Holding Corporation.
Backup withholding. Upon the sale or other disposition of NTL Stock
or Broadcast Tracking Stock by a Non-U.S. Holder to or through a United
States office of a broker, such broker may be required to impose backup
withholding at a rate of 31% and report the sale to the IRS, unless the
investor certifies its foreign status under penalties of perjury or
otherwise establishes an exemption from backup withholding. Upon a sale or
other disposition to or through a foreign office of a United States broker
or a foreign broker with certain types of relationships with the United
States, the broker is not required to impose backup withholding. However,
the broker is required to report the sale or other disposition to the IRS,
unless the broker has documentary evidence in its files that the seller is
a Non-U.S. Holder and certain other conditions are met, or the holder
otherwise establishes an exemption.
Amounts withheld under these backup withholding rules are generally
allowable as a refund or credit against the Non-U.S. Holder's U.S. Federal
income tax liability, if any, provided that the required information is
furnished to the IRS in a timely manner.
Final U.S. Treasury regulations, effective for payments made after
December 31, 2001, will affect the procedures to be followed by a Non-U.S.
Holder in establishing such investor's foreign status for purposes of the
withholding, backup withholding, and information reporting rules described
in the preceding paragraphs. Prospective Non-U.S. Holders should consult
their tax advisors concerning such regulations.
Federal Income Tax Consequences Arising from Stock-Based Compensation
Plans. The following is a summary of certain U.S. Federal income tax
consequences generally arising with respect to awards of nonqualified stock
options (NSOs), incentive stock options (ISOs) or restricted stock under
the NTL Broadcast Incentive Plan. This discussion does not address all
aspects of taxation relating to such awards that may be relevant to
particular participants in light of their personal investment or tax
circumstances and does not discuss any state, local or foreign tax issues.
This discussion is based on the Code as currently in effect and on
applicable Treasury regulations and judicial and administrative
interpretations, all of which are subject to change possibly with
retroactive effect. It is recommended that participants consult their tax
advisers before exercise of any such ISOs or NSOs and before disposing of
any shares of NTL Stock, Broadcast Tracking Stock or any subsequently
designated series of common stock (collectively referred to below as
"common stock") acquired upon the exercise thereof. Different rules may
apply in the case of a participant subject to Section 16 of the Exchange
Act.
Nonqualified Stock Options
A participant generally will not be taxed upon the grant of an NSO.
Rather, at the time of exercise of such NSO (and in the case of an untimely
exercise of an ISO), the participant will recognize ordinary income for
Federal income tax purposes in an amount equal to the excess of the fair
market value of the common stock purchased over the option price. A
participant's holding period with respect to the common stock will begin on
the date of exercise. We will generally be entitled to a tax deduction at
such time and in the same amount that the participant recognizes ordinary
income.
If shares of common stock acquired upon exercise of an NSO (or upon
untimely exercise of an ISO) are later sold or exchanged, then the
difference between the amount realized on such sale and the fair market
value of such common stock on the date that ordinary income was recognized
with respect thereto will generally be taxable as long-term or short-term
capital gain or loss (if the common stock is a capital asset of the
participant) depending upon the length of time such shares were held by the
participant.
Incentive Stock Options
A participant will not be subject to tax upon either the grant of an
ISO or upon a timely exercise of an ISO. Exercise of an ISO will be timely
if made during its term and if the participant remains an employee of NTL
or a subsidiary at all times during the period beginning on the date of
grant of the ISO and ending on the date three months before the date of
exercise (or one year before the date of exercise in the case of a disabled
participant). Exercise of an ISO will also be timely if made by the legal
representative of a participant who dies (i) while in the employ of NTL or
a subsidiary of NTL or (ii) within three months after termination of
employment. The tax consequences of an untimely exercise of an ISO will be
determined in accordance with the rules applicable to NSOs described above.
(See "Federal Income Tax Consequences - Nonqualified Stock Options.")
If the common stock acquired pursuant to the timely exercise of an
ISO is later disposed of, the participant will, except as noted below,
recognize long-term capital gain or loss (if the common stock is a capital
asset of the participant) equal to the difference between the amount
realized upon such sale and the option price. We, under these
circumstances, will not be entitled to any federal income tax deduction in
connection with either the exercise of the ISO or the sale of such common
stock by the participant.
If, however, the common stock acquired pursuant to the exercise of an
ISO is disposed of by the participant prior to the expiration of two years
from the date of grant of the ISO or within one year from the date such
stock is transferred to him upon exercise (a "disqualifying disposition"),
any gain realized by the participant will generally be subject to tax at
the time of such disqualifying disposition as follows: (i) at ordinary
income rates to the extent of the difference between the option price and
the lesser of the fair market value of the common stock on the date the ISO
is exercised and the amount realized on such disqualifying disposition and
(ii) if the common stock is a capital asset of the participant, as
short-term or long-term capital gain to the extent of any excess of the
amount realized on such disqualifying disposition over the fair market
value of the common stock on the date which governs the determination of
the participant's ordinary income. In such case, NTL may claim a Federal
income tax deduction at the time of such disqualifying disposition for the
amount taxable to the participant as ordinary income. Any capital gain
recognized by the participant will be long-term or short-term capital gain,
depending upon whether the disqualifying disposition occurs more than one
year after the date of exercise.
The amount by which the fair market value of the stock on the
exercise date of an ISO exceeds the option price will generally be an item
of adjustment for purposes of the "alternative minimum tax" imposed by
Section 55 of the Code.
Exercise with Shares
According to a published ruling of the IRS, a participant who pays
the option price upon exercise of an NSO, in whole or in part, by
delivering common stock already owned by the participant will not recognize
gain or loss for Federal income tax purposes on the common stock
surrendered, but will otherwise be subject to tax according to the rules
for NSOs described above. (See "Federal Income Tax Consequences -
Nonqualified Stock Options.") With respect to shares of common stock
acquired upon exercise which are equal in number to the shares of common
stock surrendered, the basis of such shares will be equal to the basis of
the shares surrendered, and the holding period of shares acquired will
include the holding period of the shares surrendered. The basis of
additional shares received upon exercise will be equal to the fair market
value of such shares on the date which governs the determination of the
participant's ordinary income, and the holding period for such additional
shares will commence on such date.
The Treasury Department has issued proposed regulations that, if
adopted in their current form, would appear to provide for the following
rules with respect to the exercise of an ISO by surrender of previously
owned common stock. If shares of common stock surrendered in payment of the
exercise price of an ISO are "statutory option stock" (including common
stock acquired pursuant to the exercise of an ISO) and if, at the date of
surrender, the applicable holding period for ISOs has not been met, such
surrender will constitute a "disqualifying disposition" and any gain
realized on such transfer will be subject to tax, as discussed above. (See
"Federal Income Tax Consequences - Incentive Stock Options.") Otherwise,
when shares of common stock are surrendered upon exercise of an ISO, in
general, (i) no gain or loss will be recognized as a result of the
exchange, (ii) the number of shares received that is equal in number to the
shares surrendered will have a basis equal to the shares surrendered and
(except for purposes of determining whether a disposition will be a
disqualifying disposition) will have a holding period that includes the
holding period of the shares exchanged, and (iii) any additional shares
received will have a zero basis and will have a holding period that begins
on the date of the exchange. If any of the shares of common stock received
are disposed of within two years of the date of grant of the ISO or within
one year after exercise, the shares of common stock with the lowest basis
will be deemed to be disposed of first, and such disposition will be a
disqualifying disposition giving rise to ordinary income as discussed
above.
Restricted Stock
With respect to awards of restricted stock, a participant may file an
election with the IRS, within 30 days of the date of grant, electing
pursuant to Section 83(b) of the Code to recognize and measure ordinary
taxable income on the date of grant in an amount equal to the excess, if
any, of the fair market value of the restricted stock on the date of grant
over the amount, if any, paid for such restricted stock. No further tax
will be due in connection with the restricted stock until the participant
sells or otherwise disposes of the common stock following the lapse of
restrictions on transferability. The gain or loss that the participant will
incur upon the subsequent disposition of such common stock will be taxed as
long-term or short-term capital gain or loss. If a participant does not
make an 83(b) election, the participant will recognize and measure ordinary
taxable income in an amount equal to the fair market value of the common
stock at the time such common stock are either not restricted as to
transferability or subject to a substantial risk of forfeiture. The gain or
loss that the participant will incur upon the subsequent disposition of
such common stock will be taxed as long-term or short-term capital gain or
loss from the date that such common stock is first no longer restricted as
to transferability or subject to a substantial risk of forfeiture. We will
generally be entitled to a tax deduction at such time and in the same
amount that the participant recognizes ordinary income.
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP, NTL's independent auditors,
will be present at the special meeting. Such representatives will have the
opportunity to make a statement if they so desire and will be available to
answer appropriate questions at that time.
LEGAL MATTERS
The validity of the issuance of the NTL Stock and the Broadcast
Tracking Stock will be passed upon for us by Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York, our special counsel.
ANNEX I
ILLUSTRATION OF TERMS OF BROADCAST TRACKING STOCK
The following illustrations show how to calculate the:
o Retained Interest Percentage;
o Outstanding Interest Percentage;
o Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group; and
o Total number of notional shares deemed outstanding with respect
to the Broadcast Group
after giving effect to certain hypothetical dividends, issuances,
repurchases and transfers, in each case based on the assumptions set forth
herein.
In these illustrations, the number of shares issuable with respect to
NTL Group's retained interest in the Broadcast Group is initially assumed
to be 100. Unless otherwise specified, each illustration below should be
read independently as if none of the other transactions referred to below
had occurred. Actual calculations may be slightly different due to
rounding. The illustrations are not intended to be complete and are
qualified in their entirety by the more detailed information contained in
this document and the annexes to this document. The following illustrations
are purely hypothetical and the numbers used herein, including assumptions
of market values, were chosen to simplify the calculations and are not
intended to represent estimates of actual numbers or values. Capitalized
terms used but not otherwise defined in this illustration of terms have the
respective meanings ascribed to them in this document.
"Total number of notional shares deemed outstanding with respect to
the Broadcast Group" means the number of shares of Broadcast Tracking Stock
outstanding plus the number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group.
At any given time, the percentage interest in the Broadcast Group
intended to be represented by the outstanding shares of Broadcast Tracking
Stock--which we call the Outstanding Interest Percentage--is equal to:
NUMBER OF OUTSTANDING SHARES OF BROADCAST TRACKING STOCK
---------------------------------------------------------------
TOTAL NUMBER OF NOTIONAL SHARES DEEMED OUTSTANDING WITH
RESPECT TO THE BROADCAST GROUP
and the remaining percentage interest in the Broadcast Group intended to be
represented by NTL Group's retained interest in the Broadcast Group--which
we call the Retained Interest Percentage--is equal to:
NUMBER OF SHARES ISSUABLE WITH RESPECT TO NTL GROUP'S
RETAINED INTEREST IN THE BROADCAST GROUP
---------------------------------------------------------------
TOTAL NUMBER OF NOTIONAL SHARES DEEMED OUTSTANDING WITH
RESPECT TO THE BROADCAST GROUP
The sum of the Outstanding Interest Percentage and the Retained
Interest Percentage would always equal 100%. In our example, before the
first issuance of shares of Broadcast Tracking Stock the number of shares
issuable with respect to NTL Group's retained interest in the Broadcast
Group is equal to 100, the Retained Interest Percentage is 100% and the
Outstanding Interest Percentage is 0%.
Issuance of Tracking Stock
The following illustrations reflect an assumed issuance by NTL of 20
shares of Broadcast Tracking Stock in a public offering.
Offering For Account of the Broadcast Group
Assume the issuance is attributed to the Broadcast Group as an
increase in its equity, with the net proceeds credited solely to the
Broadcast Group.
Shares previously issued and outstanding............................0
Newly issued shares for account of the Broadcast Group.............20
Total issued and outstanding after the offering..............20
o The number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group (100) would remain
unchanged.
o As a result, the issued and outstanding shares (20) would
represent an Outstanding Interest Percentage of approximately
17%, calculated as follows:
20
--------
20 + 100
The Retained Interest Percentage would accordingly be about 83%.
o In this case, in the event of any dividend or other
distribution paid on the outstanding shares of Broadcast
Tracking Stock (other than a dividend or other distribution
payable in shares of the Broadcast Group Stock), NTL Group
would be credited, and the Broadcast Group would be charged,
with an amount equal to 500% (representing the ratio of the
number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group (100) to the total number of
shares of Broadcast Tracking Stock issued and outstanding
following the offering (20)) of the aggregate amount of such
dividend or distribution.
Additional Issuance of Tracking Stock
The following illustrations reflect an assumed issuance of an
additional 15 shares by NTL of Broadcast Tracking Stock after the assumed
initial issuance of 20 shares attributed to the Broadcast Group as an
increase in its equity.
Additional Offering for Account of NTL Group
Assume the issuance is attributed to NTL Group in respect of its
retained interest, with the net proceeds credited solely to NTL Group.
Shares previously issued and outstanding...........................20
Newly issued shares for account of NTL Group.......................15
Total issued and outstanding after additional offering.......35
o The number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group would decrease by the
number of shares of Broadcast Tracking Stock issued for the
account of NTL Group.
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to the additional
offering...........................................................100
Newly issued shares for account of NTL Group....................... 15
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group after the additional offering...... 85
o As a result, the total issued and outstanding shares (35) would
in the aggregate represent an Outstanding Interest Percentage
of approximately 29%, calculated as follows:
35
-------
35 + 85
The Retained Interest Percentage would accordingly be reduced to
approximately 71%.
o In this case, in the event of any dividend or other
distribution paid on Broadcast Tracking Stock (other than a
dividend or other distribution payable in shares of the
Broadcast Group Stock), NTL Group would be credited, and the
Broadcast Group would be charged, with an amount equal to
approximately 243% (representing the ratio of the number of
shares issuable with respect to NTL Group's retained interest
in the Broadcast Group (85) to the total number of shares of
Broadcast Tracking Stock issued and outstanding following the
additional offering (35)) of the aggregate amount of such
dividend or distribution.
Additional Offering for Account of Tracked Group
Assume the issuance is attributed to the Broadcast Group as an
increase in its equity, with the net proceeds credited solely to the
Broadcast Group.
Shares previously issued and outstanding...........................20
Newly issued shares for account of the Broadcast Group.............15
Total issued and outstanding after the additional offering...35
o The number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group (100) would remain
unchanged.
o As a result, the total issued and outstanding shares (35) would
in the aggregate represent an Outstanding Interest Percentage
of approximately 26%, calculated as follows:
35
------
35 + 100
The Retained Interest Percentage would accordingly be reduced to
approximately 74%.
o In this case, in the event of any dividend or other
distribution paid on Broadcast Tracking Stock (other than a
dividend or the distribution payable in shares of the Broadcast
Group stock), NTL Group would be credited, and the Broadcast
Group would be charged, with an amount equal to approximately
286% (representing the ratio of number of shares issuable with
respect to NTL Group's retained interest in the Broadcast Group
(100) to the total number of shares of Broadcast Tracking Stock
issued and outstanding following the additional offering (35))
of the aggregate amount of such dividend or distribution.
Offerings of Convertible Securities
If NTL were to issue any securities convertible into or exercisable
for shares of the Broadcast Group stock, the Outstanding Interest Fraction
and the Retained Interest Fraction would be unchanged at the time of such
issuance. If any shares of Broadcast Tracking Stock were issued upon
conversion or exercise of such securities, however, then the Outstanding
Interest Fraction and the Retained Interest Fraction would be affected as
shown above under "Additional Offering for Account of NTL Group", if such
securities were attributed to NTL Group, or under "Additional Offering for
Account of the Broadcast Group", if such securities were attributed to the
Broadcast Group.
Repurchases of NTL Tracking Stock
The following illustrations reflect an assumed repurchase by NTL of 5
shares of Broadcast Tracking Stock after the assumed initial issuance of 20
shares of Broadcast Tracking Stock attributed to the Broadcast Group as an
increase in its equity.
Repurchase for the Account of NTL Group
Assume the repurchase is attributed to NTL Group as an increase in
its retained interest in the Broadcast Group, with the cost charged solely
against NTL Group.
Shares previously issued and outstanding.................... 20
Shares repurchased for account of NTL Group...................5
Total issued and outstanding after repurchase..........15
o The Number of Shares Issuable with Respect to NTL Group's
Retained Interest in the Broadcast Group would be increased by
the number of any shares of Broadcast Tracking Stock
repurchased for the account of NTL Group.
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to repurchase...............100
Number of shares repurchased for the account of NTL Group...........5
Number of shares Issuable with respect to NTL Group's retained
interest in the Broadcast Group after repurchase..................105
o As a result, the total issued and outstanding shares (15) would
in the aggregate represent an Outstanding Interest Percentage
of approximately 12.5%, calculated as follows:
15
--------
15 + 105
The Retained Interest Percentage would accordingly be increased to
approximately 87.5%.
Repurchase for Account of the Broadcast Group Without Participation
by NTL Group
Assume the repurchase is attributed to the Broadcast Group, with the
cost being charged solely against the Broadcast Group. Further assume that
the board of directors does not determine to transfer assets from the
Broadcast Group to NTL Group to hold constant the Outstanding Interest
Fraction and Retained Interest Fraction.
Shares previously issued and outstanding.......................... 20
Shares repurchased for account of the Broadcast Group...............5
Total issued and outstanding after repurchase......................15
o The number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group (100) would remain
unchanged.
o As a result, the total issued and outstanding shares (15) would
in the aggregate represent an Outstanding Interest Percentage
of approximately 13%, calculated as follows:
15
--------
15 + 100
The Retained Interest Percentage would accordingly be increased to
approximately 87%.
Repurchase for Account of the Broadcast Group With Participation by
NTL Group
Assume the repurchase is attributed to the Broadcast Group, with the
cost being charged solely against the Broadcast Group. Further assume that
the repurchase is made in connection with a tender offer for 5, or 25%, of
the then outstanding shares at a price of $20 per share, and that the board
of directors determines to transfer cash or other assets from the Broadcast
Group to NTL Group to hold constant the Outstanding Interest Fraction and
Retained Interest Fraction.
Shares previously issued and outstanding.......................... 20
Shares repurchased for account of the Broadcast Group...............5
Total issued and outstanding after repurchase................15
o In order to hold constant the Outstanding Interest Fraction and
Retained Interest Fraction, the board of directors determines
that the market value of a share of Broadcast Tracking Stock in
this context is $20 and transfers from the Broadcast Group to
NTL Group an amount of cash or other assets equal to about 500%
(representing the ratio of the number of shares issuable with
respect to NTL Group's retained interest in the Broadcast Group
(100) to the total number of shares of the Broadcast Tracking
Stock issued and outstanding (20), in each case immediately
prior to the repurchase) of the aggregate amount of the cash
paid in the tender offer to holders of outstanding shares of
the Broadcast Tracking Stock ($100), for a total of $500.
o In that case, the number of shares issuable with respect to NTL
Group's retained interest in the Broadcast Group (100) would be
decreased to reflect the amount of cash so transferred ($500)
divided by the market value per share of the Broadcast Tracking
Stock ($20).
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to transfer.................100
Adjustment in respect of NTL Group's retained interest to
reflect transfer to NTL Group of funds theretofore allocated
to the Broadcast Group............................................ 25
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group after transfer.....................75
o As a result, the total issued and outstanding shares (15) would
in the aggregate continue to represent an Outstanding Interest
Percentage of approximately 17%, calculated as follows:
15
-------
15 + 75
The Retained Interest Percentage would accordingly continue to remain
83%.
o Assuming that the board of directors transferred only half of
the $500 amount, or $250, from the Broadcast Group to NTL
Group, the number of shares issuable with respect to NTL
Group's retained interest in the Broadcast Group (100) would
decrease by the amount of cash so transferred ($250) divided by
the market value per share of Broadcast Tracking Stock ($20).
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to transfer................ 100
Adjustment in respect of NTL Group's retained interest to
reflect transfer to NTL Group of cash theretofore allocated
to the Broadcast Group......................................... 12.5
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group after transfer.................. 87.5
o In that case, as a result, the total issued and the outstanding
shares (15) would in the aggregate represent an Outstanding
Interest Percentage of a little less than 15%, calculated as
follows:
15
---------
15 + 87.5
The Retained Interest Percentage would accordingly be increased to a
little more than 85%.
Tracking Stock Dividends
The following illustrations reflect assumed dividends of Broadcast
Tracking Stock on outstanding shares of NTL Stock and outstanding shares of
the Broadcast Tracking Stock, respectively, after the assumed initial
issuance of 20 shares of Broadcast Tracking Stock attributed to the
Broadcast Group as an increase in its equity.
Tracking Stock Dividend on NTL Stock
Assume 1,000 shares of NTL Stock are outstanding and NTL declares a
dividend of 1/20 of a share of Broadcast Tracking Stock on each outstanding
share of NTL Stock.
Shares previously issued and outstanding...........................20
Newly issued shares for account of NTL Group.......................50
Total issued and outstanding after dividend................. 70
o Any dividend of shares of Broadcast Tracking Stock to the
holders of shares of NTL Stock would be treated as a reduction
in the number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group.
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to dividend.................100
Number of shares distributed on outstanding shares of NTL Stock
for account of NTL Group...........................................50
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group after dividend.....................50
o As a result, the total issued and outstanding shares (70) would
in the aggregate represent an Outstanding Interest Percentage
of approximately 58%, calculated as follows:
70
-------
70 + 50
The Retained Interest Percentage would accordingly be reduced to
approximately 42%. Note, however, that after the dividend, the holders of
NTL Stock would also hold 50 shares of the Broadcast Tracking Stock, which
would represent half the value attributable to the Broadcast Group
originally held by NTL Group.
Tracking Stock Dividend on the Tracked Stock
Assume NTL declares a dividend of 1/5 of a share of Broadcast
Tracking Stock on each outstanding share of the Broadcast Tracking Stock of
the same series.
Shares previously issued and outstanding...........................20
Newly issued shares for account of the Broadcast Group..............4
Total issued and outstanding after dividend..................24
o The number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group would reflect the
stock dividend payable in shares of Broadcast Tracking Stock to
holders of shares of the Broadcast Group Stock. That is, the
number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group would be increased by a number
equal to 500% (representing the ratio of the number of shares
issuable with respect to NTL Group's retained interest in the
Broadcast Group (100) to the number of shares of Broadcast
Tracking Stock issued and outstanding (20), in each case
immediately prior to such dividend) of the aggregate number of
shares issued in connection with such dividend (4), or 20.
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to dividend.................100
Adjustment in respect of NTL Group's retained interest to
reflect shares distributed on outstanding shares of the Broadcast
Tracking Stock.....................................................20
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group after dividend....................120
o As a result, the total issued and outstanding shares (24) would
in the aggregate represent an Outstanding Interest Percentage
of approximately 17%, calculated as follows:
24
--------
24 + 120
The Retained Interest Percentage would accordingly remain
approximately 83%.
Capital Transfers of Cash or Other Assets Between NTL Group and Tracked Group
Capital Contribution of Cash or Other Assets From NTL Group To
Tracked Group
The following illustration reflects the assumed contribution by NTL
Group to the Broadcast Group, after the assumed initial issuance of 20
shares of Broadcast Tracking Stock attributed to the Broadcast Group as an
increase in its equity, of $100 of assets allocated to NTL Group at a time
when the market value of the Broadcast Tracking Stock is $20 per share.
Shares previously issued and outstanding.......................... 20
Newly issued shares.................................................0
Total issued and outstanding after contribution..............20
o The number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group would increase to
reflect the contribution to the Broadcast Group of assets
theretofore allocated by NTL Group by a number equal to the
value of the assets contributed ($100) divided by the market
value of Broadcast Tracking Stock at that time ($20), or 5
shares.
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to contribution.............100
Increase to reflect contribution to the Broadcast Group of assets
allocated to NTL Group............................................. 5
Number of shares issuable with Respect to NTL Group's retained
interest in the Broadcast Group after contribution...............105
o As a result, the total issued and outstanding shares (20) would
in the aggregate represent an Outstanding Interest Percentage
of 16%, calculated as follows:
20
--------
20 + 105
The Retained Interest Percentage would accordingly increase to 84%.
Return of Capital Transfer of Cash or Other Assets from the Broadcast
Group To NTL Group
The following illustration reflects the assumed transfer by the
Broadcast Group to NTL Group, after the assumed initial issuance of 20
shares of Broadcast Tracking Stock attributed to the Broadcast Group as an
increase in its equity, of $100 of assets allocated to the Broadcast Group
on a date on which the market value of Broadcast Tracking Stock is $20 per
share.
Shares previously issued and outstanding...........................20
Newly issued shares.................................................0
Total issued and outstanding after contribution..............20
o The number of shares issuable with respect to NTL Group's
retained interest in the Broadcast Group would decrease to
reflect the transfer to NTL Group of assets theretofore
allocated to the Broadcast Group by a number equal to the value
of the assets transferred ($100) divided by the market value of
Broadcast Tracking Stock at that time ($20), or 5 shares.
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group prior to contribution.............100
Decrease to reflect transfer to NTL Group of assets allocated to
the Broadcast Group.................................................5
Number of shares issuable with respect to NTL Group's retained
interest in the Broadcast Group after contribution................ 95
o As a result, the total issued and outstanding shares (20) would
in the aggregate represent an Outstanding Interest Percentage
of approximately 17.4%, calculated as follows:
20
-------
20 + 95
The Retained Interest Percentage would accordingly decrease to
approximately 82.6%.
ANNEX II
AMENDMENT TO ARTICLE FOURTH OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
NTL INCORPORATED
FOURTH. A. Authorized Capital. The total number of shares of stock which
the Corporation shall have the authority to issue is ___________ shares,
consisting of ___________ shares of common stock, par value $0.01 per share
(the "Common Stock"), and 10,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock").
I. COMMON STOCK
1. Issuance of Common Stock in Series; Designation; Reclassification.
(a) Subject to the provisions of this Article Fourth, Section I
and the provisions of the GCL, the Corporation shall have the
authority to issue shares of Common Stock in multiple series. One
series of Common Stock shall be designated as NTL Stock ("NTL
Stock"). The second series of Common Stock shall be designated as
Broadcast Tracking Stock ("Broadcast Tracking Stock"). When the
filing of this amendment to the Corporation's Restated Certificate of
Incorporation becomes effective, each share of Common Stock
outstanding immediately prior thereto shall automatically be
reclassified as one share of NTL Stock (and outstanding certificates
that had theretofore represented shares of Common Stock shall
thereupon represent an equal number of shares of NTL Stock despite
the absence of any indication thereon to that effect).
(b) The total number of shares of NTL Stock which the
Corporation shall have the authority to issue shall initially be
___________, and the total number of shares of Broadcast Tracking
Stock which the Corporation shall have the authority to issue shall
initially be __________. The Board of Directors (or such committee of
the Board of Directors as the Board of Directors shall empower) is
hereby empowered to authorize by resolution or resolutions, an
increase in the number of authorized shares of NTL Stock or Broadcast
Tracking Stock in (but not above a number for either series that,
when added to the number of authorized shares of all other designated
series of Common Stock would exceed the total number of authorized
shares of Common Stock) or a decrease in the number of authorized
shares of NTL Stock or Broadcast Tracking Stock (but not below the
number of shares then outstanding). The Board of Directors shall have
the authority to designate, prior to the time of the first issuance
of the Broadcast Tracking Stock, the number which, immediately prior
to such first issuance, will constitute the Number of Shares Issuable
with Respect to NTL Group's Retained Interest in the Broadcast Group
and any other terms which are consistent with applicable law and the
provisions of this Article Fourth, Section I.
(c) The Board of Directors (or such committee of the Board of
Directors as the Board of Directors shall empower) is hereby
empowered to authorize by resolution or resolutions from time to time
the issuance of one or more additional series of Common Stock and to
fix the designations, powers, preferences and relative,
participating, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, if any, with
respect to each series of Common Stock and the number of shares
constituting each such series, and to increase or decrease the number
of shares of any such series to the extent permitted by the GCL, as
amended from time to time.
2. Dividends.
(a) Dividends. Subject to the preferences and other terms of
any outstanding series of Preferred Stock, the holders of any series
of Common Stock shall be entitled to receive dividends on their
shares of Common Stock if, as, and when declared by the Board of
Directors out of the lesser of (i) the funds of the Corporation
legally available therefor or (ii) the Available Dividend Amount for
the Group to which such series of Common Stock relates.
(b) Discrimination Between or Among Series of Common Stock.
Subject to paragraph (a) of subsection 2 of this Article Fourth,
Section I and subject to the preferences and other terms of any
outstanding series of Preferred Stock, the Corporation shall have the
authority to declare and pay dividends on a single series of Common
Stock, or one or more series of Common Stock, in equal or unequal
amounts, notwithstanding the relative amounts of the Available
Dividend Amount with respect to any Group, the amount of assets
available for dividends on either series of Common Stock, the amount
of prior dividends paid on either series of Common Stock, the
respective voting rights of each series of Common Stock or any other
factor.
3. Mandatory Dividend, Redemption or Conversion on Disposition of
All or Substantially All of the Assets of a Group; Optional Conversion of
NTL Stock for Broadcast Tracking Stock; Redemption of Broadcast Tracking
Stock for Stock of a Subsidiary at the Corporation's Option.
(a) Mandatory Dividend, Redemption or Conversion.
(i) In the event of a Disposition of All or Substantially
All of the Assets of a Group (other than an Exempt Disposition), the
Corporation shall, on or before the 90th Trading Day after the
Disposition Date, provided that the funds of the Corporation are
legally available therefor:
(x) declare and pay a dividend to holders of the series of
Common Stock that relates to that Group (in cash,
securities (other than Common Stock) or other property,
or a combination thereof), subject to the limitations on
dividends set forth under subsection 2 of this Article
Fourth, Section I, in an aggregate amount having a Fair
Value (determined as of the Disposition Date) equal to
the product of the Outstanding Interest Fraction with
respect to such Group (determined as of the record date
for such dividend) and the Fair Value (determined as of
the Disposition Date) of the Net Proceeds of such
Disposition;
(y) redeem from holders of the series of Common Stock that
relates to the Group that consummated such Disposition,
in exchange for cash, securities (other than Common
Stock) or other property (or a combination thereof) in an
amount equal to the product of the Outstanding Interest
Fraction with respect to such Group (determined as of the
redemption date) and the Fair Value (determined as of the
Disposition Date) of the Net Proceeds of such
Disposition, all of the outstanding shares of such series
of Common Stock, unless such Disposition involves
substantially all, but not all, of the assets attributed
to such Group, in which case, a number of shares of such
series of Common Stock (rounded, if necessary, to the
nearest whole number) having an aggregate average Market
Value, during the 20 consecutive Trading Day period
beginning on the 16th Trading Day following the
Disposition Date, equal to such amount; or
(z) if that Disposition relates to the Broadcast Group
convert each outstanding share of Broadcast Tracking
Stock into a number of shares of NTL Stock (rounded, if
necessary, to the nearest whole number) equal to 110% of
the ratio of the average Market Value of one share of
Broadcast Tracking Stock to the average Market Value of
one share of NTL Stock during the 20 consecutive Trading
Day period ending on (and including) the fifth trading
day prior to the first public announcement immediately
preceding the Disposition Date).
(ii) For purposes of this subsection 3 of this Article
Fourth, Section I, if a Group consummates a Disposition in a series
of related transactions, such Disposition shall not be deemed to have
been completed until consummation of the last of such transactions.
(b) Optional Conversion of NTL Stock for Broadcast Tracking Stock
(i) The Corporation may, at any time, convert each
outstanding share of Broadcast Tracking Stock into a number of shares
of NTL Stock (rounded, if necessary, to the nearest whole number)
equal to that percentage of the ratio of the average Market Value of
one share of Broadcast Tracking Stock to the average Market Value of
one share of NTL Stock (the "Applicable Percentage") specified for
the applicable conversion date below. The average Market Value of a
share of each series of Common Stock shall be determined during the
20 consecutive Trading Day period ending on (and including) the 5th
Trading Day immediately preceding the date on which the Corporation
mails the notice of conversion to holders of Broadcast Tracking
Stock.
If the Conversion Date The Applicable Percentage Will
Falls During the Period be the Percentage Specified for
Indicated Below Such Period Below
--------------------- ----------------------------
First Quarter 120%
Second Quarter 119%
Third Quarter 118%
Fourth Quarter 117%
Fifth Quarter 116%
Sixth Quarter 115%
Seventh Quarter 114%
Eighth Quarter 113%
Ninth Quarter 112%
Tenth Quarter 111%
After Tenth Quarter 110%
For purposes of the foregoing chart, (x) the first "Quarter" is the
period from and including the date of first issuance of shares of
Broadcast Tracking Stock to but excluding the third month anniversary
of such date (provided that, if the date of first issuance of shares
of Broadcast Tracking Stock is the 29th, 30th or 31st day of any
month, the first "Quarter" will be the period from and including such
date of first issuance to but excluding the third month anniversary
of the first day of the month immediately following the month in
which such date of first issuance falls) and (y) each subsequent
"Quarter" is the period from and including the day after the end of
the prior Quarter to but excluding the third month anniversary of
such day.
(ii) Notwithstanding the preceding paragraphs, if a Tax
Event has occurred, the Applicable Percentage shall equal 110%
irrespective of when the exchange occurs. "Tax Event" means the
receipt by the Corporation of an opinion of a tax advisor experienced
in such matters, who shall not be an officer or employee of the
Corporation or any of its affiliates, to the effect that, as a result
of any amendment to, or change in, the laws (or any regulations
thereunder) of the United States or any political subdivision or
taxing authority thereof or therein (including any proposed change in
such regulations announced by an administrative agency), or as a
result of any official or administrative pronouncement or action or
judicial decision interpreting or applying such laws or regulations,
it is more likely than not that for United States federal income tax
purposes (1) the Corporation, its subsidiaries or affiliates or any
of its successors or its stockholders is or, at any time in the
future, will be subject to tax upon the issuance of shares of either
NTL Stock or Broadcast Tracking Stock, (2) either NTL Stock or
Broadcast Tracking Stock is not or, at any time in the future, will
not be treated solely as stock of the Corporation or (3) either NTL
Stock or Broadcast Tracking Stock is or will be treated as Section
306 stock under the Internal Revenue Code of 1986, as amended. For
purposes of rendering such opinion, a tax advisor shall assume that
any administrative proposals will be adopted as proposed. However, in
the event a change in law is proposed, a tax advisor shall render an
opinion only in the event of enactment.
(c) Optional Redemption of Broadcast Tracking Stock for Stock
of a Subsidiary.
At any time at which all of the assets and liabilities of
the Broadcast Group (and no other assets or liabilities of the
Corporation or any subsidiary thereof) are held directly or
indirectly by one or more subsidiaries of the Corporation (the "Group
Subsidiaries"), the Board of Directors may, provided that there are
funds of the Corporation legally available therefor, declare that all
of the outstanding shares of Broadcast Tracking Stock shall be
redeemed, as of the exchange date described below, for the number of
fully paid and nonassessable shares of common stock of each of such
Group Subsidiaries as is equal to the product of the Outstanding
Interest Fraction with respect to the Broadcast Group (determined as
of the redemption date) and the number of shares of common stock of
each such Group Subsidiary held by the Corporation immediately before
such exchange. Such shares of common stock of such Group Subsidiaries
may be delivered directly or indirectly through the delivery of
shares of one or more of such Group Subsidiaries that own directly or
indirectly all of the other shares that are deliverable pursuant to
the preceding sentence.
(d) General Dividend, Conversion and Redemption Provisions.
(i) If the Corporation completes a Disposition of All or
Substantially All of the Assets of a Group (other than an Exempt
Disposition), the Corporation shall, not more than the 20 Trading
Days after the consummation of such Disposition, issue a press
release specifying (w) the Net Proceeds of such Disposition, (x) the
number of shares of the series of Common Stock related to such Group
then outstanding, (y) the number of shares of such series of Common
Stock issuable upon conversion, redemption or exercise of any
convertible or exchangeable securities, options or warrants and the
conversion, redemption or exercise prices thereof and (z) if the
Group is not NTL Group, the Number of Shares Issuable with Respect to
NTL Group's Retained Interest in such Group. The Corporation shall,
not more than 40 Trading Days after such consummation, announce by
press release which of the actions specified in subsection 3(a)(i) of
this Article Fourth, Section I it has determined to take, and upon
making that announcement, that determination will be irrevocable. In
addition, the Corporation shall, not more than 45 Trading Days after
such consummation and not less than 30 Trading Days before the
applicable payment date, redemption date or conversion date, send a
notice by first-class mail, postage prepaid, to holders of the
relevant series of Common Stock at their addresses as they appear on
the transfer books of the Corporation, specifying:
(1) if the Corporation has determined to pay a
special dividend, (A) the record date for such dividend, (B)
the payment date of such dividend (which cannot be more than 90
Trading Days after such consummation) and (C) the aggregate
amount and type of property to be paid in such dividend (and
the approximate per share amount thereof);
(2) if the Corporation has determined to undertake
a redemption, (A) the date of redemption (which cannot be more
than 90 Trading Days after such consummation), (B) the
aggregate amount and type of property to be paid as a
redemption price (and the approximate per share amount
thereof), (C) if less than all shares of the relevant series of
Common Stock are to be redeemed, the number of shares to be
redeemed and (D) the place or places where certificates for
shares of such series of Common Stock, properly endorsed or
assigned for transfer (unless the Corporation waives such
requirement), should be surrendered in return for delivery of
the cash, securities or other property to be paid by the
Corporation in such redemption; and
(3) if the Corporation has determined to undertake
a conversion, (A) the date of conversion (which cannot be more
than 90 Trading Days after such consummation), (B) the number
of shares of the other series of Common Stock to be issued in
the conversion for each outstanding share of such series of
Common Stock and (C) the place or places where certificates for
shares of such series of Common Stock, properly endorsed or
assigned for transfer (unless the Corporation waives such
requirement), should be surrendered in return for delivery of
the other series of Common Stock to be issued by the
Corporation in such conversion.
(ii) If the Corporation has determined to complete any
conversion described in subsection 3(b) or (c) of this Article
Fourth, Section I, the Corporation shall, not less than 30 Trading
Days and not more than 45 Trading Days before the exchange date, send
a notice by first-class mail, postage prepaid, to holders of the
relevant series of Common Stock at their addresses as they appear on
the transfer books of the Corporation, specifying (x) the conversion
date and the other terms of the conversion and (y) the place or
places where certificates for shares of such series of Common Stock,
properly endorsed or assigned for transfer (unless the Corporation
waives such requirement), should be surrendered for delivery of the
stock to be issued or delivered by the Corporation in such
conversion.
(iii) Neither the failure to mail any notice required by
this subsection 3(d) of this Article Fourth, Section I to any
particular holder nor any defect therein would affect the sufficiency
thereof with respect to any other holder or the validity of any
dividend, redemption or conversion contemplated hereby.
(iv) If the Corporation is redeeming less than all of the
outstanding shares of a series of Common Stock pursuant to subsection
3(a)(i) of this Article Fourth, Section I, the Corporation shall
redeem such shares pro rata or by lot or by such other method as the
Board of Directors determines to be equitable.
(v) No holder of shares of a series of Common Stock being
converted or redeemed shall be entitled to receive any cash,
securities or other property to be distributed in such conversion or
redemption until such holder surrenders certificates for such shares,
properly endorsed or assigned for transfer, at such place as the
Corporation shall specify (unless the Corporation waives such
requirement). As soon as practicable after the Corporation's receipt
of certificates for such shares, the Corporation shall deliver to the
person for whose account such shares were so surrendered, or to the
nominee or nominees of such person, the cash, securities or other
property to which such person shall be entitled, together with any
fractional payment referred to below, in each case without interest.
If less than all of the shares of Common Stock represented by any one
certificate is converted or redeemed, the Corporation shall also
issue and deliver a new certificate for the shares of such Common
Stock not converted or redeemed.
(vi) The Corporation shall not be required to issue or
deliver fractional shares of any capital stock or any other
fractional securities to any holder of Common Stock upon conversion,
redemption, dividend or other distribution described above. If more
than one share of Common Stock shall be held at the same time by the
same holder, the Corporation may aggregate the number of shares of
any capital stock that would be issuable or any other securities that
would be distributable to such holder upon any such conversion,
redemption, dividend or other distribution. If there are fractional
shares of any capital stock or any other fractional securities
remaining to be issued or distributed to any holder, the Corporation
shall, if such fractional shares or securities are not issued or
distributed to such holder, pay cash in respect of such fractional
shares or securities in an amount equal to the Fair Value thereof
(without interest).
(vii) From and after the date set for any conversion or
redemption contemplated by this subsection 3 of this Article Fourth,
Section I, all rights of a holder of shares of Common Stock being
converted or redeemed shall cease except for the right, upon
surrender of the certificates theretofore representing such shares,
to receive the cash, securities or other property for which such
shares were converted or redeemed, together with any fractional
payment as provided above, in each case without interest (and, if
such holder was a holder of record as of the close of business on the
record date for a dividend not yet paid, the right to receive such
dividend). A holder of shares of Common Stock being converted shall
not be entitled to receive any dividend or other distribution with
respect to shares of the other series of Common Stock until after
certificates theretofore representing the shares being converted are
surrendered as contemplated above. Upon such surrender, the
Corporation shall pay to the holder the amount of any dividends or
other distributions (without interest) which theretofore became
payable with respect to a record date occurring after the conversion,
but which were not paid by reason of the foregoing, with respect to
the number of whole shares of the other series of Common Stock
represented by the certificate or certificates issued upon such
surrender. From and after the date set for any conversion, the
Corporation shall, however, be entitled to treat the certificates for
shares of a series of Common Stock being converted that were not yet
surrendered for conversion as evidencing the ownership of the number
of whole shares of the other series of Common Stock for which the
shares of such Common Stock should have been converted,
notwithstanding the failure to surrender such certificates.
(viii) The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes that might be payable in
respect of the issue or delivery of any shares of capital stock
and/or other securities on any conversion or redemption contemplated
by this subsection 3; provided, however, that the Corporation shall
not be required to pay any tax that might be payable in respect of
the issue or delivery of any shares of capital stock and/or other
securities on any conversion or redemption contemplated by this
subsection 3; provided, however, that the Corporation shall not be
required to pay any tax that might be payable in respect of any
transfer involved in the issue or delivery of any shares of capital
stock and/or other securities in a name other than that in which the
shares so converted or redeemed were registered, and no such issue or
delivery will be made unless and until the person requesting such
issue pays to the Corporation the amount of any such tax, or
establishes to the satisfaction of the Corporation that such tax has
been paid.
(ix) The Corporation may, subject to applicable law,
establish such other rules, requirements and procedures to facilitate
any dividend, redemption or conversion contemplated by this
subsection 3 as the Board of Directors may determine to be
appropriate under the circumstances.
4. Voting Rights.
At every meeting of stockholders, the holders of NTL Stock and
the holders of Broadcast Tracking Stock shall vote together as a single
class on all matters as to which common stockholders generally are entitled
to vote, unless a separate vote is required by applicable law. On all such
matters for which no separate vote is required, (a) holders of NTL Stock
shall be entitled to one vote per share of NTL Stock held and (b) before
the 31st Trading Day after the Effective Date, holders of Broadcast
Tracking Stock shall be entitled to one vote per share of Broadcast
Tracking Stock held. On and after the 31st Trading Day after the Effective
Date, holders of Broadcast Tracking Stock shall be entitled to a number of
votes per share of Broadcast Tracking Stock held (calculated to the nearest
five decimal places) equal to the Average Market Value of one share of
Broadcast Tracking Stock divided by the Average Market Value of one share
of NTL Stock during the 20 Trading Day period ending on (and including) the
applicable record date; provided that, in no event, shall the total number
of votes of all outstanding Broadcast Tracking Stock exceed 15% of the
total number of votes of all outstanding series of Common Stock.
5. Liquidation Rights.
In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, holders of each series of
Common Stock shall be entitled to receive their proportionate interests in
the net assets of the Corporation, if any, remaining for distribution to
stockholders, after payment of or provision for all liabilities, including
contingent liabilities of the Corporation and payment of the liquidation
preference payable to any holders of the Corporation's Preferred Stock, if
any such stock is outstanding. Each share of each series of Common Stock
will be entitled to a share of net liquidation proceeds in proportion to
the respective liquidation units per share of such class. Each share of NTL
Stock shall have one liquidation unit. Each share of the other series of
Common Stock shall have a number of liquidation units (including a fraction
of one liquidation unit) equal to the quotient (rounded to the nearest five
decimal places) of the average Market Value of one share of such series of
Common Stock during the 20 consecutive Trading Day period ending on, and
including, the 300th day after the Effective Date, divided by the average
Market Value of one share of NTL Stock during such 20 Trading Day period.
If the liquidation, dissolution, or winding-up of the Corporation occurs
before such 300th day, the average Market Value will be determined based on
the 20 consecutive Trading Day period ending immediately before the
liquidation, dissolution, or winding-up event, or such lesser number of
consecutive Trading Days immediately prior to such event if the
liquidation, dissolution, or winding-up event occurs prior to the 21st
Trading Day after the Effective Date.
Neither the merger nor consolidation of the Corporation with
any other entity, nor a sale, transfer or lease of all or any part of the
assets of the Corporation, would, alone, be deemed a liquidation,
dissolution or winding-up for purposes of this subsection 5 of this Article
Fourth, Section I.
6. Adjustments to Number of Shares Issuable with Respect to NTL
Group's Retained Interest in Any Group.
The Number of Shares Issuable with Respect to NTL Group's
Retained Interest in any Group, as in effect from time to time, shall,
automatically without action by the Board of Directors or any other person,
be:
(a) adjusted in proportion to any changes in the number of
outstanding shares of the series of Common Stock related to such
Group caused by subdivisions (by stock split, reclassification or
otherwise) or combinations (by reverse stock split, reclassification
or otherwise) of shares of such series of Common Stock or by
dividends or other distributions of shares of such series of Common
Stock on shares of such series of Common Stock (and, in each such
case, rounded, if necessary, to the nearest whole number);
(b) decreased by (i) if the Corporation issues any shares of
the series of Common Stock related to such Group and the Board of
Directors attributes that issuance (and the proceeds thereof) to NTL
Group, the number of shares of each series of Common Stock so issued,
and (ii) if the Board of Directors reallocates to NTL Group any cash
or other assets theretofore allocated to such Group in connection
with a redemption of shares of the series of Common Stock related to
such Group (as required pursuant to clause (ii) of the proviso to the
definition of NTL Group below) or in return for a decrease in the
Number of Shares Issuable with Respect to NTL Group's Retained
Interest in such Group, the number (rounded, if necessary, to the
nearest whole number) equal to (x) the aggregate Fair Value of such
cash or other assets divided by (y) the Market Value of one share of
the series of Common Stock related to such Group as of the date of
such reallocation; and
(c) increased by (i) if the Corporation repurchases any shares
of the series of Common Stock related to such Group and the Board of
Directors attributes that repurchase (and the consideration therefor)
to NTL Group, the number of shares of such series of Common Stock so
repurchased and (ii) if the Board of Directors re-allocates to such
Group any cash or other assets theretofore allocated to NTL Group in
return for an increase in the Number of Shares Issuable with Respect
to NTL Group's Retained Interest in such Group, the number (rounded,
if necessary, to the nearest whole number) equal to (x) the Fair
Value of such cash or other assets divided by (y) the Market Value of
one share of the series of Common Stock related to such Group as of
the date of such re-allocation.
Neither the Corporation nor the Board of Directors shall take
any action that would, as a result of any of the foregoing adjustments,
reduce the Number of Shares Issuable with Respect to NTL Group's Retained
Interest in any Group to below zero. Subject to the preceding sentence, the
Board of Directors may attribute the issuance of any shares of any series
of Common Stock (and the proceeds here from) or the repurchase of any
series of Common Stock (and the consideration therefor) to NTL Group and
Delivery or to the Group to which such series of Common Stock relates, as
the Board of Directors determines in its sole discretion; provided,
however, that the Board of Directors must attribute to NTL Group the
issuance of any shares of any series of Common Stock that are issued (1) as
a dividend or other distribution on, or as consideration for the repurchase
of, shares of NTL Stock or (2) as consideration to acquire any assets or
satisfy any liabilities attributed to NTL Group.
7. Additional Definitions.
As used in this Article Fourth, the following terms shall have
the following meanings (with terms defined in singular having comparable
meaning when used in the plural and vice versa), unless the context
otherwise requires:
"ALL OR SUBSTANTIALLY ALL OF THE ASSETS" of any Group means a portion
of such assets that represents at least 80% of the then current Fair
Value of the assets of such Group.
"AVAILABLE DIVIDEND AMOUNT" for NTL Group, on any day on which
dividends are paid on shares of NTL Stock, is the amount that would,
immediately prior to the payment of such dividends, be legally
available for the payment of dividends on shares of NTL Stock under
Delaware law if (a) NTL Group and each other Group were each a
single, separate Delaware corporation, (b) NTL Group had outstanding
(i) a number of shares of common stock, par value $0.01 per share,
equal to the number of shares of NTL Stock that are then outstanding
and (ii) a number of shares of preferred stock, par value $0.01 per
share, equal to the number of shares of Preferred Stock that have
been attributed to NTL Group and are then outstanding, (c) the
assumptions about each Group that is not NTL Group set forth in the
next sentence were true and (d) NTL Group owned a number of shares of
each series of Common Stock (other than NTL Stock) equal to the
Number of Shares Issuable with Respect to NTL Group's Retained
Interest in each Group to which each such series of Common Stock
relates.
"AVAILABLE DIVIDEND AMOUNT" for any Group other than NTL Group, on
any day on which dividends are paid on shares of the series of Common
Stock relating to such Group, is the amount that would, immediately
prior to the payment of such dividends, be legally available for the
payment of dividends on shares of such series of Common Stock under
Delaware law if such Group were a single, separate Delaware
corporation having outstanding (a) a number of shares of common
stock, par value $0.01 per share, equal to the number of shares of
such series of Common Stock that are then outstanding plus the Number
of Shares Issuable with Respect to NTL Group's Retained Interest in
such Group and (b) a number of shares of preferred stock, par value
$0.01 per share, equal to the number of shares of Preferred Stock
that have been attributed to such Group and are then outstanding.
"BROADCAST GROUP" means (a) the division of the Corporation whose
business is the provision of facilities and services to the broadcast
and wireless communications industries principally in the U.K. and
Australia; and all of the businesses, assets and liabilities of the
Corporation and its subsidiaries that the Board of Directors has, as
of the Effective Date, allocated to the Broadcast Group for
accounting purposes, (b) any assets or liabilities acquired or
incurred by the Corporation or any of its subsidiaries after the
Effective Date in the ordinary course of business and attributable to
the Broadcast Group, (c) any businesses, assets or liabilities
acquired or incurred by the Corporation or any of its subsidiaries
after the Effective Date that the Board of Directors has specifically
allocated to the Broadcast Group or that the Corporation otherwise
allocates to the Broadcast Group in accordance with policies
established from time to time by the Board of Directors and (d) the
rights and obligations of the Broadcast Group under any inter-Group
debt deemed to be owed to or by the Broadcast Group (as such rights
and obligations are defined in accordance with policies established
from time to time by the Board of Directors); provided, however,
that:
"DISPOSITION" means a sale, transfer, assignment or other disposition
(whether by merger, consolidation, sale or otherwise) of All or
Substantially All of the Assets of a Group to one or more persons or
entities, in one transaction or a series of related transactions.
"DISPOSITION DATE" is the date of the consummation of a Disposition.
"EFFECTIVE DATE" means the date on which this Amended and Restated
Certificate of Incorporation becomes effective under Delaware law.
"EXEMPT DISPOSITION" means any of the following:
(a) Disposition in connection with the liquidation, dissolution
or winding-up of the Corporation and the distribution of assets
to stockholders, (b) a Disposition to any person or entity
controlled by the Corporation (as determined by the Board of
Directors in its sole discretion), (c) a Disposition by any
Group for which the Corporation receives consideration
primarily consisting of equity securities (including, without
limitation, capital stock of any kind, interests in a general
or limited partnership, interests in a limited liability
company or debt securities convertible into or exchangeable
for, or options or warrants to acquire, any of the foregoing,
in each case without regard to the voting power or other
management or governance rights associated therewith) of an
entity which is primarily engaged or proposes to engage
primarily in one or more businesses similar or complementary to
businesses conducted by such Group prior to the Disposition, as
determined by the Board of Directors in its sole discretion,
(d) a dividend, out of any Group's assets, to holders of series
of Common Stock related to such Group and a re-allocation of a
corresponding amount of such Group's assets to NTL Group as
required pursuant to clause (ii) of the proviso to the
definition of NTL Group above, (e) a dividend, out of NTL
Group's assets, to holders of NTL Stock and (f) any other
Disposition, if (i) at the time of the Disposition there are no
shares of NTL Stock outstanding, (ii) at the time of the
Disposition there are no shares of the series of Common Stock
relating to the Group that consummated such Disposition
outstanding or (iii) before the 30th Trading Day following the
Disposition the Corporation has mailed a notice stating that it
is exercising its right to exchange all of the outstanding
shares of the series of Common Stock relating to the Group that
consummated such Disposition for newly issued shares of NTL
Stock as contemplated under subsection 3(b) of this Article
Fourth, Section I.
"FAIR VALUE" means (a) in the case of cash, the amount thereof, (b)
in the case of capital stock that has been Publicly Traded for a
period of at least 15 months, the Market Value thereof and (c) in the
case of other assets or securities, the fair market value thereof as
the Board of Directors shall determine in good faith (which
determination shall be conclusive and binding on all stockholders).
"GROUP" initially means NTL Group or the Broadcast Group; provided
that if the Board of Directors authorizes the issuance of shares of a
series of Common Stock other than NTL Stock or Broadcast Tracking
Stock, the Board of Directors shall designate the assets and
liabilities of NTL Group to which such series of Common Stock
relates, which assets and liabilities shall be an additional "Group"
for all purposes of this Article Fourth.
"MARKET VALUE" of a share of any class or series of capital stock on
any Trading Day means the average closing price of such security's
sales on all domestic securities exchanges on which such security may
at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any
day such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ National Market System as
of 4:00 P.M., New York City time, on such day, or, if on any day such
security is not quoted in the NASDAQ National Market System, the
average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar or successor
organization (and in each such case excluding any trades that are not
bona fide, arm's length transactions). If at any time such security
is not listed on any domestic securities exchange or quoted in the
NASDAQ National Market System or the domestic over-the-counter
market, the "Market Value"of such security shall be the fair market
value of a share of such class or series as the Board of Directors
shall determine in good faith (which determination shall be
conclusive and binding on all stockholders); provided, that, for
purposes of determining the average Market Value of a share of any
class or series of capital stock for any period, (a) the "Market
Value" of a share of any class or series of capital stock on any day
prior to any "ex-dividend" date or any similar date occurring during
such period for any dividend or distribution (other than any dividend
or distribution contemplated by clause (b)(ii) of this sentence) paid
or to be paid with respect to such capital stock shall be reduced by
the Fair Value of the per share amount of such dividend or
distribution and (b) the "Market Value" of a share of any class or
series of capital stock on any day prior to (i) the effective date of
any subdivision (by stock split or otherwise) or combination (by
reverse stock split or otherwise) of outstanding shares of such class
or series of capital stock occurring during such period or (ii) any
"ex-dividend" date or any similar date occurring during such period
for any dividend or distribution with respect to such capital stock
to be made in shares of such class or series of capital stock shall
be appropriately adjusted, as determined by the Board of Directors,
to reflect such subdivision, combination, dividend or distribution;
and provided further, if (a) the Corporation repurchases outstanding
shares of any series Common Stock other than NTL Stock and the Board
of Directors attributes that repurchase (and the consideration
therefor) to the Group to which such series of Common Stock relates
and (b) the Board of Directors determines to re-allocate to NTL Group
cash or other assets theretofore allocated to the Group to which such
series of Common Stock relates in order to avoid a change in the
Retained Interest Percentage, the "Market Value" of a share any
series Common Stock other than NTL Stock used to compute the
corresponding reduction in the Number of Shares Issuable with Respect
to NTL Group's Retained Interest in the Group to which such series of
Common Stock relates will equal the Fair Value of the consideration
paid per share of Common Stock so repurchased; and provided further,
if the Corporation redeems a portion of the outstanding shares of any
of series of Common Stock other than NTL Stock (and the Board of
Directors re-allocates to NTL Group cash or other assets theretofore
allocated to the Group to which such series of Common Stock relates
in the manner required by clause (ii) of the proviso to the
definition of NTL Group above), the "Market Value" of a share of such
series of Common Stock used to compute the corresponding reduction in
the Number of Shares Issuable with Respect to NTL Group's Retained
Interest in the Group to which such series of Common Stock relates
will equal the Fair Value of the consideration paid per share of such
series of Common Stock so redeemed.
"NET PROCEEDS" of a Disposition of any of the assets of a Group means
the positive amount, if any, remaining from the gross proceeds of
such Disposition after any payment of, or reasonable provision (as
determined in good faith by the Board of Directors, which
determination will be conclusive and binding on all stockholders)
for, (a) any taxes payable by the Corporation or any subsidiary or
affiliate thereof in respect of such Disposition or which would have
been payable but for the utilization of tax benefits attributable to
the Group not the subject of the Disposition, (b) any taxes payable
by the Corporation in respect of any resulting dividend or
redemption, (c) any transaction costs, including, without limitation,
any legal, investment banking and accounting fees and expenses and
(d) any liabilities (contingent or otherwise) of, attributed to or
related to, such Group, including, without limitation, any
liabilities for deferred taxes or any indemnity or guarantee
obligations which are outstanding or incurred in connection with the
Disposition or otherwise, any liabilities for future purchase price
adjustments and any obligations with respect to outstanding
securities (other than Common Stock) attributed to such Group as
determined in good faith by the Board of Directors.
"NTL GROUP" means (a) all of the businesses, assets and liabilities
of the Corporation and its subsidiaries, other than the businesses,
assets and liabilities that are part of any Group other than NTL
Group, (b) the rights and obligations of NTL Group under any
inter-Group debt deemed to be owed to or by NTL Group (as such rights
and obligations are defined in accordance with policies established
from time to time by the Board of Directors) and (c) a proportionate
interest in any Group other than NTL Group (after giving effect to
any options, Preferred Stock, other securities or debt issued or
incurred by the Corporation and attributed to any Group other than
NTL Group) equal to the Retained Interest Percentage; provided,
however, that: (i) the Corporation may re-allocate assets from one
Group to another Group in return for other assets or services
rendered by that other Group in the ordinary course of business or in
accordance with policies established by the Board of Directors from
time to time, and (ii) if the Corporation transfers cash, other
assets or securities to holders of shares of a series of Common Stock
other than NTL Stock as a dividend or other distribution on shares of
such series of Common Stock (other than a dividend or distribution
payable in shares of such series of Common Stock), or as payment in a
redemption required by subsection (3)(a) of this Article Fourth,
Section I, then the Board of Directors shall re-allocate from such
Group to NTL Group cash or other assets having a Fair Value equal to
the aggregate Fair Value of the cash, other assets or securities so
transferred times the Retained Interest Amount with respect to such
Group as of the record date for such dividend or distribution, or on
the date of such redemption, as the case may be.
(i) the Corporation may re-allocate assets from one Group
to another Group in return for other assets or services rendered by
that other Group in the ordinary course of business or in accordance
with policies established by the Board of Directors from time to
time, and (ii) if the Corporation transfers cash, other assets or
securities to holders of shares of Broadcast Tracking Stock as a
dividend or other distribution on shares of Broadcast Tracking Stock
(other than a dividend or distribution payable in shares of Broadcast
Tracking Stock), or as payment in a redemption of shares of Broadcast
Tracking Stock required by subsection 3(a) of this Article Fourth,
Section I, then the Board of Directors shall re-allocate from the
Broadcast Group to NTL Group cash or other assets having a Fair Value
equal to the aggregate Fair Value of the cash, other assets or
securities so transferred multiplied by a fraction, the numerator of
which shall equal the Number of Shares Issuable with Respect to NTL
Group's Retained Interest in such Group on the record date for such
dividend or distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of such Group
outstanding on such date.
"NUMBER OF SHARES ISSUABLE WITH RESPECT TO NTL GROUP'S RETAINED
INTEREST" means, with respect to any Group, initially the number the
Board of Directors designates prior to the time the Corporation first
issues shares of the series of Common Stock applicable to such Group
as the number of shares of such series of Common Stock that could be
issued by the Corporation for the account of NTL Group in respect of
its retained interest in such Group, as authorized by subsection 1 of
this Article Fourth, Section I; provided, however, that such number
as in effect from time to time shall automatically be adjusted as
required by subsection 6 of this Article Fourth, Section I.
"OUTSTANDING INTEREST FRACTION" means (i) with respect to NTL Group,
at any time of determination, and (ii) with respect to any other
Group, at any time of determination, a fraction the numerator of
which shall be the number of shares of the series of Common Stock
applicable to such Group outstanding on such date and the denominator
of which shall be the sum of the number of shares of the series of
Common Stock applicable to such Group outstanding on such date and
the Number of Shares Issuable with Respect to NTL Group's Retained
Interest in such Group.
"PUBLICLY TRADED" with respect to any security means (a) registered
under Section 12 of the Securities Exchange Act of 1934, as amended
(or any successor provision of law), and (b) listed for trading on
the NYSE (or any other national securities exchange registered under
Section 7 of the Securities Exchange Act of 1934, as amended (or any
successor provision of law)) or listed on the Nasdaq NMS (or any
successor market system).
"RETAINED INTEREST" means with respect to any Group, other than NTL
Group, at any time of determination, a fraction the numerator of
which shall be the Number of Shares Issuable with Respect to NTL
Group's Retained Interest in such Group and the denominator of which
shall be the number of shares of the series of common stock relating
to such Group outstanding on such date.
"RETAINED INTEREST PERCENTAGE" means (i) with respect to NTL Group,
at any time of determination, one (1) and (ii) with respect to any
Group that is not NTL Group, at any time of determination, a fraction
the numerator of which shall be the Number of Shares Issuable with
Respect to NTL Group's Retained Interest in such Group and the
denominator of which shall be the sum of the number of shares of the
series of common stock applicable to such Group outstanding on such
date and the Number of Shares Issuable with Respect to NTL Group's
Retained Interest in such Group.
"TRADING DAY" means each weekday on which the relevant security (or,
if there are two relevant securities, each relevant security) is
traded on the principal national securities exchange on which it is
listed or admitted to trading or on the Nasdaq NMS or, if such
security is not listed or admitted to trading on a national
securities exchange or quoted on the Nasdaq NMS, traded in the
principal over-the-counter market in which it trades.
8. Effectiveness of Subsections 2 through 7 of this Article
Fourth, Section I.
The terms of subsections 2 through 7, inclusive, of this
Article Fourth, Section I shall apply only when there are shares of
multiple series of Common Stock outstanding.
9. Determinations by the Board of Directors.
Subject to applicable law, any determinations made by the Board
of Directors in good faith under this Restated Certificate of
Incorporation, as it may be amended from time to time, including without
limitation any such determinations with respect to the businesses, assets
and liabilities of either Group, transactions between the Groups or the
rights of holders of any series of Common Stock or Preferred Stock made
pursuant to or in the furtherance hereof, shall be final and binding on all
stockholders of the Corporation. A record of all formal determinations of
the Board of Directors made as contemplated hereby shall be filed with the
records of the actions of the Board of Directors.
ANNEX III
NTL INCORPORATED
NTL BROADCAST INCENTIVE PLAN
[to come]
ANNEX IV
NTL GROUP
DESCRIPTION OF BUSINESS
In this Annex IV, references to "we," "our," and "us" are to NTL
Group. You should read this description together with the information
provided with respect to NTL Group in NTL's Form 10-K, for the 1999 fiscal
year, including various risk factors identified in that document with
respect to the business and operations of NTL Group.
OVERVIEW
NTL is a leading broadband communications company providing services
in the U.K., the Republic of Ireland, France and Switzerland. NTL has
recently completed its acquisition of the Cablecom Group in Switzerland and
the residential cable assets of Cable & Wireless Communications plc.
Further expansion into Continental Europe is intended as, and when,
opportunities arise.
In the U.K. NTL Group provides residential, business and wholesale
customers with the following services:
o Residential Services, including telephony, cable television,
personal computer and television-based Internet access and
interactive services. Based on the expertise it has
developed in the U.K., NTL Group expects to develop similar
residential product offerings for its cable television
systems in Switzerland, France, and the Republic of Ireland
as their network upgrade permits it has developed in the
U.K. As in Switzerland, cable systems in Continental Europe
typically feature mature cable television product offerings,
but are relatively unmodernized compared to equivalent
systems in the U.K. As such, penetration of basic cable
television services is much higher than that currently
achieved in the U.K., but there is low penetration of
telephony and Internet products. NTL Group plans to
modernize and expand the product. In addition to its
residential fixed line operations, NTL Group is placing
increasing emphasis on developing a mobile product offering
to complement its fixed line operations and continues to
explore cost effective alternatives.
o National Telecommunications Services, including business
telecommunications, national and international carrier
telecommunications, Internet services and radio communications
services. NTL Group's U.K. business services group (excluding
CWC Consumer Co.) serves approximately 46,200
business and carrier customers, including: AT&T, Cisco, Colt,
MCI Worldcom, Microsoft, Orange, Sun Microsystems and Vodafone.
NTL Group provides its broad range of services over local, national
and international network infrastructure. This network infrastructure
consists of:
o Broadband Communications Networks that currently pass approximately
8.2 million homes (an additional 2.1 million homes are
passed by broadband networks in Switzerland, France and
Ireland). These high-capacity two-way local broadband fiber
networks serve entire communities throughout their regional
franchise areas. NTL Group's fiber optic cables will
ultimately pass nearly every business in each regional
franchise area and are connected to nodes which are
typically within approximately 500 meters of each of the 600
homes typically served by each node. Each home is then
connected by a siamese cable consisting of two copper pair
telephone wires and a coaxial cable, allowing NTL Group to
deliver telephone, cable television and Internet services
over a single integrated network. This siamese cable also
allows NTL Group to deploy both cable modems and digital
subscriber line technology for the provision of broadband
communications services.
o National/International Synchronous Digital Hierarchy, Known as
Sdh, Fiber Optic Telecommunications Network which connects all
of the major population centers in the U.K. to Ireland,
Continental Europe and the United States. This self-healing,
fully redundant 3,500 mile backbone network utilizes
Asynchronous Transfer Mode, known as ATM, technology and was
built with sufficient duct capacity to accommodate over 2,300
fibers on the majority of its routes. NTL Group has designed
this network to allow NTL Group to place the active components,
such as routing devices, at its edge and close to NTL Group's
customers. This design will ultimately reduce NTL Group's costs
and increase NTL Group's ability to offer a broad range of
voice and data solutions.
NTL Group's objective is to exploit the convergence of the
telecommunications, entertainment and information services industries to
become the leading full service broadband communications company in the
markets in which it competes. It is currently focused on the U.K., Ireland,
France and Switzerland, but expects that Continental Europe, where it is
actively reviewing a number of opportunities, will increasingly be the
focus for future investment. NTL Group offers services to residential,
business and wholesale customers on a national and an international scale.
NTL Group believes that it will be able to deliver its strategy through its
entrepreneurial approach, innovative marketing, state-of-the-art networks
and technical excellence. NTL Group is currently employing several
strategies in the United Kingdom, and would anticipate this approach will
underpin its expansion into its other markets, to achieve its objective:
o Installing Flexible Integrated Full-service Networks. NTL
Group's integrated full-service networks provide a high-speed,
high-capacity, two-way communications pathway to the consumer
that is capable of delivering new services which are emerging
from the convergence of telecommunications, information and
entertainment. This strategy allows NTL Group to pursue four
revenue streams, residential cable television, residential
telephone, business telecommunications services and Internet
services, without significant incremental cost or capital
investment.
o Maximizing Network Capacity Utilization. NTL Group believes the
fixed cost structure of building communications networks allows
it to gain significant operating efficiencies from incremental
services provided over its networks. In NTL Group's local
franchise areas, its strategy is to maximize gross profit
contribution per home passed, rather than revenue per customer,
by increasing overall penetration of the number of services
provided over its network.
o Focusing on Target Market Segments. NTL Group believes that
tailoring its services to the needs of its customers will
increase the penetration of these services.
o Providing Superior Customer Service. NTL Group believes
customer service and attentiveness to the needs of customers
are critical to the continued growth of its residential and
business services. NTL Group operates multiple customer call
centers, including three large call centers in Luton, South
Wales and Central Scotland, as well as multiple call centers
throughout the regions of its recently acquired businesses.
Calls are answered at most locations 24 hours a day, 365
days a year. The customer call center representatives are
specially trained to deal with customers' inquiries and
needs with respect to NTL Group's various products and
services.
o Developing Advanced Management Information Systems. NTL Group
believes that advanced management information systems are
critical to effectively, efficiently and accurately serve its
customers. NTL Group uses proprietary software to handle its
subscriber management functions from one central location. The
system is capable of managing NTL Group's tariff and
discounting structures, also allows for the introduction of
new telephone and cable television services, such as 0800
numbers.
o Gaining Cost Efficiencies. NTL Group gains cost efficiencies by
centralizing some services provided to the U.K. franchise areas
in its head office in Hook, England.
Part of NTL Group's corporate strategy has been to expand its
operations through acquisitions. Over the last two years, NTL Group has
entered into over 25 acquisition, investment or joint venture agreements.
NTL Group intends to continue this strategy as, and when, the right
opportunities arise and, through its corporate finance and development
team, devotes a significant amount of time reviewing possible acquisitions,
investments and joint venture opportunities. In addition to the persons who
remain at a company acquired by NTL, NTL Group continues to recruit
management into the organization at both corporate and operational levels
to support the integration and expansion of its various broadband
initiatives.
NTL Group believes it has prudently financed its growth to date. To
address the increased financing requirements, if any, arising from its
acquisition based growth, while also maintaining a prudent capital
structure, NTL Group will continue to seek further investment from
strategic investors or will raise funds through the private and public
capital markets, depending on the circumstances.
NATIONAL CORPORATE BRANDING
In June 1999, we launched a national advertising campaign in the U.K.
to promote NTL as the U.K.'s complete communications company serving both
the residential and the business markets. During 1999, NTL spent
approximately (pound sterling) 29 million (approximately $46.9 million) on
the advertising campaign. This campaign coincided with a re-launch of the
NTL brand itself, which replaced all of our distinct brand-names (such as
CableTel, Comcast, Diamond and ComTel). In September 2000, we plan to
introduce the NTL brand into the CWC Consumer Co. franchise areas.
Along with highlighting our ability to provide customers with unique
communications services throughout the U.K., the new campaign builds on our
core aim of simplifying technology for the benefit of business and
residential customers. Extensive consumer research showed that customers
were confused by the technologies available and unable to make informed
decisions with ease.
RESIDENTIAL SERVICES - U.K.
We are a national provider of telecommunications, entertainment and
Internet access services to residential customers throughout the United
Kingdom. Our U.K. local-broadband currently pass approximately 8.2 million
homes. These networks serve entire regional communities, passing virtually
every home, business, and government institution. We currently provide our
telephone services over traditional telephone wires and our cable services
over a coaxial cable connection. We estimate that our local franchise
networks (not including our national network or our recent acquisition of
CWC ConsumerCo) cover approximately 7,000 route miles of fiber backbone
network, with approximately 400,000 fiber miles, and an estimated 75,000
route miles of coaxial/copper connections. These full-service networks are
capable of providing a high speed, high capacity, two-way voice, data and
video communications pathway to every customer. This approach allows us to
pursue four revenue streams, residential telephone, residential cable
television, Internet services and business telecommunications services,
without a significant increase in fixed investment.
Our cable entertainment network employs a coaxial cable and is built
with an initial capacity of 750MHz, which is easily expandable to 1 GHz of
capacity. The network currently has an active reverse path that allows us
to provide impulse pay-per-view. Most importantly, the fact that we have
installed both two pairs of telephone wires and coaxial cables into each of
our customers' homes allows us the advantage of deploying either of the
major high bandwidth communications technologies that are developing today:
cable modems and xDSL solutions.
Network Design. We are installing our broadband and
telecommunications network using established state-of-the-art technology,
deploying fiber optics directly to highly concentrated business areas and
residential nodes typically averaging 600 telephone lines or 600 homes
respectively. We install spare duct and can thus "pull" fiber into every
home when economically justifiable. In this manner, we achieve cost
efficiencies and rapid deployment from using standardized equipment, while
retaining flexibility to expand and adapt our network to technological
advances with little or no additional construction investment.
The design and construction of a new network varies depending upon
several factors including the number of route miles to be installed,
density of homes and businesses, type of road and sidewalk surface, and the
architecture of the network backbone. Each system has been designed with at
least one head-end and at least one telephone switching office. Each
system's head-end and telephone switching office is directly connected to
each node by fiber optic cable. Each node is then connected to a
subscriber's premises. Construction of each system has been planned on a
neighborhood-by-neighborhood basis to allow revenue generating operations
to commence in a neighborhood as construction of the portion of the system
serving such neighborhood is completed.
Fiber Optics. The evolution of fiber optic technology over the past
decade, including increases in the capacity of laser transmitters and
decreases in the price of optical receivers, has enabled the economic
deployment of fiber optic cable much closer to the customer than in
traditional coaxial cable television and twisted copper pair telephone
networks, thereby improving the quality and capacity of the cable
television and telephone service. The main advantages of deploying fiber in
place of both coaxial cable or copper wire are its smaller size, greater
capacity, freedom from electrical interference, and significant reduction
of the requirement for periodic maintenance. We deploy fiber to nodes which
are normally less than 500 meters from the furthest home.
Network Architecture. Our broadband networks are being built with an
initial capacity of 750 MHz, which is sufficient to carry over 60 analog
channels of television. With digital compression of the television signal,
many more channels can be transmitted. The system is upgradeable to 1 GHz.
Generally, a maximum of one amplifier is required between the head-end
optical receivers and a home. Traditional cable systems often employ
"cascades" of more than 5 amplifiers which degrade signal quality and
increase the potential for system failure.
Our local telecommunications network uses an SDH self-healing
redundant-ring based architecture, which improves our ability to flexibly
deploy capacity and further enhances system resilience. Telephone signals
are carried from the node to the home over traditional copper pair, over a
shorter distance than in traditional telephone networks, which improves
signal quality and allows higher bandwidth services such as ADSL to be more
easily deployed. Within a residential node, we use a dual drop consisting
of "Siamese" coaxial cable, capable of transmitting up to 1 GHz of
bandwidth, and two copper twisted pairs capable of providing two telephone
connections. Moreover, the dual drop is placed in an underground conduit
that has capacity for a fiber drop in the future. Large business customers
are connected to the telephone network directly through fiber optic cable
or microwave links.
Our network design allows us to implement either of the two main
broadband local-loop solutions: cable modems and DSL. The use of xDSL
Technologies could enable us to exploit our copper wire assets more fully.
We already use HDSL to meet the needs of particular business customers.
ADSL speeds vary according to the length of the copper wire loop; the
advantage that we have compared to an established telephone company is our
relatively short copper wire runs -- typically under 500 meters. This
facilitates down-load speeds of over 6 Mb/s.
Products, Services and Marketing. We believe the most effective
strategies to achieve maximum revenues and maximum penetration is to bundle
telephone, cable and Internet services. Our product and pricing strategies
emphasize choice, value, and quality and are designed to encourage
subscription to multiple services and maximize customer retention. We
believe that people want a value proposition based upon packages of
services. We believe that our ability to design attractive marketing plans
and better service packages relative to our competitors should have a
positive effect on our penetration rates and customer retention.
Bundled Cable Services. In 1996 we implemented a promotional pricing
and packaging structure called "Choices" for our in-region telephone and
cable television service. We have continued to refine and enhance the
initial package. The current monthly price for the Starter Pack is (pound
sterling) 9.25, which is the same as British Telecommunications plc's
("BT") monthly line rental charge as of October 1999. The Starter Pack
offers the customer:
o Telephone Service;
o Internet Access Service; and
o All six of the terrestrial channels, seven cable television
channels and our local TV channel; or
o A second telephone line.
This means that our customers can receive their telephone line plus
Internet access as well as cable television or a second telephone line for
the same monthly price that BT charges for telephone line rental alone. Our
customers can add either of the services they do not choose as a part of
the package for (pound sterling) 5 each. The (pound sterling) 9.25 price
point was specifically chosen to provide the customer with a simple
price/value proposition: for the price of a BT telephone line, we provide a
telephone line and more. BT has a long history of raising its line rental
charge annually, creating a rising pricing umbrella under which we can
position our services. We continue to improve the packaging structure in
order to enhance its attractiveness to customers.
In addition to the Starter Pack entry packages our Choice Collections
packages enable the customer to select from several channel groupings each
of which can be purchased for an additional charge.
In May 2000, NTL Group announced the roll-out of digital cable services
in Scotland, Northern Ireland and Wales. The service is expected to roll-out
to the South East, Midlands, Teeside, Cambridge and Oxford during the second
quarter and to Andover, Swindon, Stafford/Conventry, Warwick, West Herts,
Thames Valley and Northants throughout 2000. The digital cable service will
be available to customers in the Westminster and Milton Keynes franchise
areas in 2001. The (pound sterling) 13.00 digital offering is priced less than
the entry level packages provided by its competitors, Sky Digital and
OnDigital, when combined with telephony alone. CWC Consumer Co. had
approximately 190,000 digital customers at the time of its acquisition by
NTL Group in May 2000.
We believe that our bundled and flexible service package is
responsive to the desires and tastes of our customers. It emphasizes the
"value" of our residential telephone service by bundling it with a choice
of additional services for the price of BT's telephone line rental. As
opposed to choosing from a limited set of service options, the packages
provide the customer the opportunity to add services according to their
individual tastes, and change various aspects of the bundle rather than
disconnect the service completely. Through the use of our customer care and
billing systems, we can change our customers' services quickly and easily,
thus encouraging each customer to choose a package that meets his or her
individual needs. We seek to gain incremental revenues by selling
additional products and services as well as encouraging customers to
purchase higher tier packages. The Starter Pack serves as a shop window for
other incremental services.
CHOICES
STARTER PACK (POUND STERLING) 9.25 TELEPHONE PRICING
Includes:- 3,2,1 pence per minute
Nationwide
- Telephone Line Rental and 3 pence per minute for the day,
- Dial-up PC Internet Access 2 pence per minute for the evenings,
and 1 pence per minute for the
weekends
Plus choose one of the following: - free Internet access at all times to
NTL telephony customers
- Television Service with six CHOICE COLLECTIONS
terrestrial and seven cable - Music & youth,
channels - Classic,
Or - News & documentary,
- 2nd Telephone Line - Contemporary
Two TV packs
ADDITIONAL SERVICES (pound sterling) 8.00
- Extra telephone line,
Four TV packs
Or additional converter boxes (pound sterling) 13.00
(pound sterling) 5.00
Each BSKYB PACKAGES
- Advance features: reminder call, - Sky Sports 1 or 2
(pound sterling) 16.00
Three-way calling, speed dialing, - Movie Collection
(pound sterling) 17.00
Call barring, voicemail, call - Sport Collection
divert, (pound sterling) 20.00
Call waiting - Movie & Sports Collection
(pound sterling) 23.00
- One Feature PAY PER VIEW
(pound sterling) 1.00
- All Six - Movies on Demand
(pound sterling) 3.00
- Per Screening
(pound sterling) 2.99
CHOICE COLLECTIONS
CHOICE COLLECTIONS CHANNEL LINE-UP
Music and Youth MTV, VH-1, Cartoon Network, Rapture, Trouble,
The Box, Nickelodeon, BET on Jazz, U.K. Play
Classic Granada Plus, Carlton Food, U.K. Gold,
Performance, Discovery Home & Leisure
News and Documentaries Discovery, History Channel, CNN, National
Geographic, Travel Channel, Animal Planet,
U.K. Horizons
Contemporary Sci-Fi, Turner Classic Movies, Paramount
Comedy Channel, Granada Men & Motors, Granada
Breeze, Bravo, Living
Pay per View Services. We are a party to a joint venture with
Telewest for the provision of a cable-only movie, sport and special events
pay-per-view television service called Front Row which was launched to our
customers in March 1998. The joint venture represents the first-ever
alternative to BSkyB in the provision of movie and sports for pay
television. Front Row has signed content output contracts with major
Hollywood studios, including Warner Brothers, Sony Pictures Entertainment
(Columbia/Tristar), the Walt Disney Company (Walt Disney Studios, Miramax,
Hollywood Pictures and Touchstone), Dreamworks, MGM and Universal.
In June 2000, we announced our successful bid for the license to
televise 40 Premier League football matches per year, on a pay-per-view basis,
beginning at the start of the 2001/2002 season. NTL Group has agreed to a
total license fee of (pounds sterling) 328 million for the three year
license, or approximately (pounds sterling) 109 million per season.
Telephone Tariffs. As a result of our investment in our national
fiber backbone network, we are able to design and offer innovative
telephone service packages to our customers. By integrating our national
telecommunications network with our local networks, we are able to bypass a
portion of the wholesale long distance fees charged by BT and other
carriers for carrying calls to and from our local telephone networks. This
increased flexibility allows us to introduce more volume-oriented and/or
geographically based calling plans designed to give the customer even
greater choice and value. As an example, we recently launched "NTL 3-2-1
Pence", a per minute national call tariff of 3 pence during the day, 2
pence during the evening and 1 pence during the weekend. The tariff is
designed to charge customers a rate which is affected by when they call,
not where they call. Internet access and unlimited usage is free to NTL
telephony customers. The simplicity of this telephone tariff provides us
with a distinct pricing advantage over BT. While BT offers its customers a
series of complex discount plans, our 3-2-1 pricing structure offers a
clear and simple savings formula for customers.
The following table compares our tariffs to BT's published tariffs.
<TABLE>
<CAPTION>
BASE CHARGES
BT
BT TOGETHER
NTL BASE RATE RATE*
-------------------- -------------------- ----------------------
<S> <C> <C> <C>
Line Rental (pound sterling)9.25 (pound sterling)9.25 (pound sterling) 11.99
Call Set Up Fee/
minimum fee 3.5p 5.0p
</TABLE>
TELEPHONE PER MINUTE CHARGES
TELEPHONE TARIFFS
(PER MINUTE)
BT
BT TOGETHER
NTL BASE RATE RATE*
----- --------- --------
Local
Daytime........... 3.00p 3.95p 3.00p
Evening........... 2.00p 1.49p 1.00p
Weekend........... 1.00p 1.00p 1.00p
Short National
Daytime........... 3.00p 7.91p 4.00p
Evening........... 2.00p 3.95p 2.00p
Weekend........... 1.00p 2.00p 2.00p
Long National
Daytime........... 3.00p 7.91p 4.00p
Evening........... 2.00p 3.95p 2.00p
Weekend........... 1.00p 2.00p 2.00p
* Includes 180 minutes of local evening and weekend phone calling every
month.
Residential Marketing. We market our local telecommunications and
television service as an integral part of the emerging information
super-highway. This marketing strategy is continually being refined and
includes the following concepts in our advertising, literature and other
materials:
o Positioning us as a national telephone company with a strong
local presence;
o Introducing alternative telephone service, multi-channel
television and Internet access as the first of an expanding
array of services which will be carried on the network in the
future; and
o Emphasizing that we are bringing "More Choice" in television
viewing, "Better Value" in telephone service and "State of the
Art" communications technology in providing access to the
Internet;
We employ an extensive direct marketing and sales approach to gain
customers. We begin by building a relationship with our communities before
construction commences in a given area by closely coordinating our upcoming
activities with local government authorities and community groups and
eliciting feedback on ways to minimize disruptions and inconvenience.
Information packages and construction notices are delivered to the
neighborhood prior to construction. Our consumer liaisons personally visit
affected neighborhoods and households in order to meet the special needs of
the residents. All written and telephonic inquiries from residents are
input by name into a lead-tracking database, so that when areas are
released to marketing, our sales personnel have complete customer profiles
of the residents in their selling area.
We initiate our marketing in an area by direct mail, which is
followed by a personal appointment with a sales advisor. All information
regarding both current and future sales opportunities is entered into the
database, and current sales information is updated in our provisioning,
billing and subscriber management system. Unsold household data is
maintained for future telemarketing, direct mail, and re-marketing by the
sales force.
Additionally, as part of our focus in ensuring and maximizing
customer retention, we usually charge an installation fee of (pound
sterling) 25.00. We require a one year service agreement and encourage
direct debit payment as the standard. Approximately 40% of our customers
elect direct debit as a means of payment. The installation fee and one year
contract provide qualifying mechanisms to ensure that the customer
understands and recognizes the value of the services, while the
encouragement of direct debit payment helps to avoid non-payment or
non-payment related cancellations.
Non-cable Customers. In 1999, we extended our services offerings
beyond our franchise areas in order to offer a set of alternative service
options to over 15 million BT customers who are not passed by our local
broadband networks. By utilizing our investments in our national
telecommunications network, our international Internet facilities and our
back office and billing operations, we launched a set of products and
services that allow us to provide telephone and Internet services to every
home in the U.K. with a BT telephone line and a television.
The National Consumer Services, our first retail offering to the U.K.
consumer outside our franchise areas, has allowed us to significantly
increase our U.K. target market. We carry the consumer's telephone traffic
via indirect access for voice and Internet calls. Using indirect access,
the customer retains their BT line, but the calls are automatically routed
to our switch and national network. We therefore receive the call revenue
associated with the customer's voice traffic. The "off-net" customer
receives the benefit of our 3-2-1 pricing while we receive the revenues
from their telephone calls.
In the future, we plan to provide digital television services over a
digital terrestrial television box that will form part of our National
Consumer Services product offering. In January 2000, we selected the
Microsoft TV software platform to deliver enhanced interactive TV services
as part of our digital terrestrial TV and telephony package for U.K.
consumers. The Microsoft TV platform will enhance the "free to air" digital
terrestrial TV capability of the set top box by enabling us to provide
interactive digital TV services. Digital Terrestrial Television will allow
us to offer customers throughout the U.K. a bundled offering of telephone,
television, Internet and interactive services, that will mirror our
in-franchise product offerings. The bundle of services provides Internet
access via the personal computer or through our TV-Internet set top box
which enables full Internet access without the need to purchase a PC.
Customers simply use a keyboard and set-top box to access the Internet over
their television. This is an important market opportunity as it is
estimated that of the 24 million U.K. TV homes, over 18 million homes do
not have an Internet capable PC or Internet service.
NTL AND THE INTERNET - U.K.
Internet use in U.K. homes, businesses and educational institutions
is rising rapidly. We regard data services as one of the three legs --
voice, data and video -- upon which our business has been built. We provide
Internet services throughout the U.K. Our subscribers can take advantage of
the high data rates provided by our fiber network in order to access the
Internet via a personal computer or a television. We offer both consumer
and business Internet services and own 49% of VirginNet with Virgin
Communications Limited. However, our involvement is not simply based on
enabling reliable Internet access. Rather, we also operate to support the
development of Internet applications and usage. We provide the backbone for
VirginNet and Which? Online, with our call centers handling thousands of
calls a day for the two entities, consistently winning awards for speed of
service and customer satisfaction.
On March 7, 2000, NTL announced a plan to offer its residential
customers genuinely free, unlimited Internet access throughout the UK via
PC or TV. Called "ntlworld", this new free Internet service was available
on April 11, 2000 for PC users and on April 17, 2000 for TV Internet users
is due to follow shortly afterwards. ntlworld features no ISP subscription
charge, no call connection charge and no Internet per minute call charges.
Our customer research suggests that dial-up Internet subscribers are higher
spending, more apt to buy digital and high-speed services and "stickier"
from a retention point of view. This service builds upon NTL Group's vision
of becoming the premier provider of communication services in the UK and
Europe.
For businesses, we offer reliable and scalable solutions for
connecting to the Internet. These range from easy-to-connect dial up
connections to fixed access solutions for high volume, dedicated Internet
connectivity. Furthermore, our extensive and expanding network of entry
points guarantees rapid access to the Internet at all times. Other Internet
services available from NTL Group include: firewalls, Web hosting, and
virtual ISP services.
For the growing number of companies who wish to provide virtual
Internet services, we act as a wholesale provider of Internet services.
Furthermore, companies are increasingly turning to us for electronic
commerce solutions and, as a result, our Internet services for businesses
continue to grow. In all these cases, we offer a unique set of assets:
o networks;
o technology;
o customers; and
o interactive content
Internet Access, Interactive Services and Enhanced Television. We
have moved rapidly to take advantage of, and drive the convergence between
the Internet and the television. We are aggregating a broad range of
interactive content into a seamless service that can be deployed as part of
our interactive television services, such as TV-Internet and digital cable.
In May 2000, we launched digital cable television throughout Scotland,
Northern Ireland and Wales. We expect the service will roll out to the
remaining NTL franchises by the end of the third quarter, except for
Westminster and Milton Keynes which we expect will commence service in
2001.
Our decision to use open Internet standards for these products has
allowed us to rapidly integrate a wide range of advanced technologies and
partner with content companies who have already developed sites for the
Internet. Because we have built our interactive service offering on open
Internet standards, our platform allows these content sources to be easily
and cost effectively integrated to create a television/entertainment
experience rather than a computer-like experience. This includes using the
NTL user interface to allow simple navigation by remote control. In
designing the look and feel of our interactive services, we built upon the
U.K.'s familiarity with teletext services by allowing customers to use the
familiar four color remote control buttons to navigate through the
interactive screens. These enhanced services will ultimately be deployed as
part of our digital cable offering within our franchise areas.
We have partnered with over 50 content providers to deliver a wide
range of interactive services, including education, home shopping and
banking, travel, entertainment, games, news, sport and local content.
Content is organized in channels which include news, sport, travel,
entertainment and retailing. Already over 180 brands are contracted to our
interactive services. Partners include Tesco and The Arcadia Group in the
retail sector, ITN for news, the Sporting Life for sports coverage and the
BBC's Beeb service in entertainment.
For example, the travel channel allows viewers to search for travel
destinations, gather destination information and find travel deals from a
large real-time database. In addition, we are developing additional
channels that will provide games, education and financial and investment
content. All partners have contracted to provide a commission to NTL Group
on e-commerce transactions and we have also formed a joint venture to
exploit the advertising opportunity associated with this service.
The next stage in the development of our consumer proposition is
enhanced television services. Enhanced television is the use of interactive
technologies to enable television programs to become interactive. Enhanced
television can be viewed as a modified form of interactive services which
are constantly "on supply" as the viewer watches television. Applications
include the ability to enable viewers to participate in game shows, access
further information in documentaries or respond directly to advertising.
Viewers use their remote controls to access the additional program
information on demand.
A major advantage of our cable technology is that these enhanced
television links are not restricted to information delivered in the
broadcast stream, a major restriction of satellite delivered services. A
broad range of additional content can be delivered over the cable modem
integrated in the digital TV set top box. We are working with a number of
major broadcasters to develop the service and have already demonstrated a
number of program pilots.
Delivering enhanced television service requires close coordination
between the program creation and the technology of the broadcast system.
Our digital media center is being developed with the ability to schedule
the television feed and to add the interactive components to the broadcast
feed.
These new technologies not only provide a powerful new set of tools
for television producers, but also create large new commercial
opportunities for operators like us in providing a unique service to help
acquire and retain customers with a package of communications services. In
addition, we can exploit new revenue opportunities from e-commerce
generated by the interactive elements and from interactive advertising on
existing television services.
Digital Media Center. We have invested approximately $66.0 million in
a new media center which is at the heart of our digital operations. The
center acts as the marshaling point for all digital content, both
television and interactive. Television and interactive services are brought
to the center over satellite or fiber telecommunication links. Currently a
55 channel near video on demand service is produced using advanced digital
storage and server technology. A complete sports channel, British
Eurosport, is originated in the media center. In addition to the
interactive television elements, conditional access for pay TV and
electronic program guide datastreams are created and played out from the
center.
The new media center also houses the interactive servers for
on-demand elements and is the point at which the broadband cable modem path
is routed to access the Internet. The interactive system, scheduling and
conditional access system are directly integrated with our customer
management system. This allows direct customer interface through the TV
screen for billing, on-line help or self-provisioning of new services. The
system is controlled by a sophisticated scheduling system and control room
that monitors all channels. The resulting service feed is carried from the
center to each regional head-end using ATM technology. This feed is then
combined with local content, such as regional TV channels for delivery over
that local network. The system is capable of allowing full flexibility of
the regional line up of channels, for example to include regional services
from the major broadcasters, ITV, Channel 4 and the BBC.
The media center is connected to our U.K. national network and linked
to our satellite hubs for both in-bound and out-bound traffic. The system
architecture and flexibility allows the delivery of a customized service to
any point connected to our fiber telecommunications network (for example,
the current reach includes Dublin which allows us to connect Cablelink's
Dublin franchise to the media center).
High Speed Internet Service. In 1999, we launched NTL HiSpeed
Internet, which links our broadband cable network to the Internet at up to
ten times the speed of telephone. The new cable modem service operates at
speeds of up to 2.0 Mbps and will be offered at a minimum delivery speed of
512 Kbps. Our HiSpeed Internet is an "always on" service, removing log-on
delays and the need to log-off while using your telephone. It also utilizes
the hybrid fiber/coaxial cable television portion of our broadband network,
leaving the telephone line free to make or receive calls. This service is
currently priced at a flat rate of (pound sterling) 40 per month.
In addition, we are in the process of implementing a commercial pilot
of ADSL technology in parts of our Surrey franchise. ADSL can be
particularly attractive for us to install because we have very short copper
telephone line runs to our customers' premises which is critical for clear,
efficient data transport. Typically, our customer is within 500 meters from
a node whereas in the United States, ADSL customers' premises may be more
than 5,400 meters from the end of the copper wire. As a result, ADSL is
relatively easy for us to deploy and attractive to the customer
particularly because customers buy the amount of bandwidth they need and
receive a dedicated path, rather than the shared path of coax cable.
VirginNet. In addition to telecommunications and data services we
also offer wholesale Internet access solutions including network services,
call center operations, customer provisioning and billing to U.K. ISPs and
other corporate customers that would like to expand their Internet
presence. This service was launched in 1995 as our first national product
offering.
In 1996, we established the VirginNet joint venture with Virgin
Communications Limited. As of March 31, 2000, VirginNet had over 657,000
customers. The joint venture is 49% owned by NTL and 51% by Virgin.
VirginNet offers connectivity and proprietary content services to consumers
and small businesses throughout the U.K. VirginNet recently launched a
"free access" product offering, whereby customers only pay for the minutes
that they are online or in contact with a customer care representative. We
are able to support this service profitably because we carry the majority
of the VirginNet Internet traffic on our owned network facilities.
By integrating our Internet infrastructure with our national
telecommunications network we have been able to decrease the costs of
providing these wholesale services as well as increase the value of the
proposition by retaining a higher portion of the revenue from the data
traffic that our customers generate. We plan to continue to enhance our
Internet network, both nationally and internationally, to accommodate the
growth in the business.
OPERATING RESULTS - U.K. and the Republic of Ireland
Based on trials and experiences in the U.K. and the prior experience
of our management in the United States telecommunications market, we have
developed innovative marketing strategies that have led to increased
customer penetration rates, customer retention and operating profitability.
As of March 31, 2000, pro forma for the acquisitions of ComTel
Limited and Telecential Communications (collectively "ComTel"), Comcast
U.K. Cable Partners Limited ("Comcast U.K." or "NTL Triangle") (formerly
NTL (Bermuda) Limited), Diamond Cable Communications plc ("Diamond"),
Cablelink Limited ("Cablelink") and the BT cable franchises (but excluding
our 50% ownership of Cable London which Telewest purchased in November
1999) we had approximately 1.8 million residential telephony and cable
television customers, approximately 53.5% of which subscribed to both
telephone and television services. We counted a total of 2,793,700 million
revenue generating units (known as RGUs) resulting in approximately 47%
customer penetration, approximately 40% telephone penetration and
approximately 39% cable penetration, yielding 72.1% RGU penetration of
homes marketed. An RGU is one telephone account or one cable television
account. A customer who takes telephone and cable television service
generates two RGUs.
The franchises which NTL has developed since 1993 have achieved
industry-leading customer penetration and retention levels. As of March 31,
2000, approximately 93% of customers subscribed to both telephone and
television services. Our CATV penetration stands at approximately 47% with
telephone penetration at approximately 47%. NTL Group has experienced a
monthly telephone and CATV churn rate of approximately 1%.
Including Comcast U.K., ComTel, Diamond, Cablelink, the BT cable
franchises, as well as Internet subscribers, as of March 31, 2000, NTL
Group had approximately 2.5 million customers subscribing to more than 3.5
million services.
We believe this success has been largely due to our focus on customer
service and the development of product offerings that emphasize choice,
value and simplicity. We plan to apply our marketing and customer service
skills to enhance the operational performance of the combined entity. We
also expect to achieve significant operating synergies from the combined
operations including economies of scale in content and equipment
purchasing, reduced telephone interconnect and call termination costs and
improved operating leverage.
<TABLE>
<CAPTION>
CABLE TELEVISION AND TELEPHONY CUSTOMERS AS OF MARCH 31, 2000
-------------------------------------------------------------
"ORIGINAL" CABLELINK/ TOTAL UK/
NTL(1) U.K. ACQ.(2) BT CABLE(3) IRELAND(4)
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Homes passed 1,366,400 2,376,500 605,500 4,348,400
Homes marketed (Tel.) 1,171,300 2,033,800 0 3,205,100
Homes marketed (CATV) 1,171,300 2,147,300 553,600 3,872,200
Total customers 572,200 826,200 422,100 1,820,500
Dual 529,300 443,900 0 973,200
Telephone-only 18,000 283,200 0 301,200
Cable-only 24,900 99,100 422,100 546,100
Total RGUs (5) 1,101,500 1,270,100 422,100 2,793,700
Customer penetration 48.9% 38.5% 76.2% 47.0%
RGU penetration 94.0% 59.1% 76.2% 72.1%
Telephone penetration 46.7% 35.8% N/A 39.8%
Cable penetration 47.3% 25.3% 76.2% 39.2%
</TABLE>
----------
(1) Data for franchises which NTL has been developing since 1993.
(2) Data for franchises acquired by NTL in 1998/1999: Comcast UK, Diamond
Cable and ComTel.
(3) Data for Cablelink (Ireland) and the BT cable franchises acquired in
1999.
(4) Includes total subscribers for UK and Ireland.
(5) An RGU is one cable television account or one telephone account; a
dual customer generates two RGUs.
Our industry has demonstrated strong growth over the last several
years. The industry has now passed approximately 12.7 million homes (or 53%
of the U.K.'s total TV homes) with a broadband communications network. As a
result, the U.K. can claim to have one of the most advanced communications
infrastructures in the world. In addition, since January 1, 1992, the
industry has connected approximately 4.9 million telephone lines. (During
the same period, BT has also grown, adding approximately 2.8 million
telephone lines.) The following tables illustrate these statistics:
<TABLE>
<CAPTION>
TELEPHONY/CABLE INDUSTRY INSTALLED
TELEPHONE LINES
-----------------------------------------------------------------
RESIDENTIAL AND RESIDENTIAL
BUSINESS RESIDENTIAL TELEPHONE LINE
TELEPHONE LINES TELEPHONE LINES HOMES PASSED PENETRATION
--------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
January 1, 2000 4,896,121 4,242,828 12,650,435 34%
January 1, 1999 4,070,866 3,567,786 11,904,341 30%
January 1, 1998 3,442,196 3,038,809 10,693,809 28%
January 1, 1997 2,278,113 2,039,081 8,351,310 24%
January 1, 1996 1,419,819 1,287,248 6,042,296 21%
January 1, 1995 717,566 649,350 4,116,971 16%
January 1, 1994 314,381 279,728 2,786,202 10%
January 1, 1993 106,989 92,715 1,954,829 5%
January 1, 1992 21,225 N/A 1,343,557 --
Source: ITC
</TABLE>
U.K. MULTI-CHANNEL HOMES
TOTAL TOTAL DTH DTH NET
CUSTOMERS DTH (1) HOMES AS A % OF TOTAL ADDITIONS
------------ -------------- ---------------- ----------
12/31/99 8,404,000(2) 3,966,000 47.2% 508,000
12/31/98 7,073,000(3) 3,458,000 48.9% (125,000)
12/31/97 6,721,000 3,583,000 53.3% 137,000
12/31/96 6,072,000 3,446,000 56.8% 276,000
12/31/95 5,180,000 3,170,000 61.2% 358,400
12/31/94 3,960,000 2,811,600 71.0% --
(1) Direct to Home refers to homes receiving service via satellite dish
(2) Includes 605,000 and 527,000 Eire and ONDigital customers, respectively
at 12-31-99.
(3) Includes 576,000 Eire customers at 12-31-98.
Source: BSkyB
BUSINESS SERVICES - U.K.
NTL Group's business and nonresidential services have undergone a
significant transformation in the last twelve months, as NTL Group has
moved away from a simple product-based sales approach to a sector-based
approach. In the business market (comprised of government, industry, health
and education sectors) this sector approach enables us to provide a broad
array of services ranging from simple connectivity for small businesses to
integrated solutions of voice, video and data for large enterprises. These
services are provided on local, regional or national bases to approximately
46,200 business customers in the U.K. (excluding CWC ConsumerCo).
Our communication products are appealing because of our highly reliable
network services. In the business market our reported faults (as compiled
by the regulator, OFTEL) are 1.3 per 100 lines as compared to 3.3 per 100
lines, for BT, a statistically significant difference.
In recognition of the developing needs and concerns of our large
customers, NTL Group recently acquired Workplace Technologies plc, one of
the U.K.'s leading data network service integrators. Workplace's
consultancy services range from the design and installation of data, voice
and video networks to remote monitoring and support of these networks. We
believe that large customers are more concerned with functionality of
voice, video and data needs rather than costs. The combination of network
capability, ISP experience, and the market presence of NTL Group enables us
to offer a unique and comprehensive service to large customers.
Our primary activity in national telecommunications is to grow our
customer base, revenues, and EBITDA for our targeted carrier and business
customers. To date, we have implemented a "barbell" strategy where we sell
"connectivity" to very large, sophisticated customers such as carriers and
large corporations, and "solutions" to smaller businesses.
Our objective is to provide high quality voice, data and video
communications services to businesses throughout the U.K. and to carriers
which require U.K. and international connectivity. According to published
OFTEL statistics, the total market for telecommunications services in the
U.K. for the twelve months ended March 31, 1999 was estimated at
approximately (pound sterling) 24 billion. Of the total telecommunications
market, we estimate that approximately (pound sterling) 13 billion
represents business telecommunications and carrier telecommunications
services. Our national network has significantly expanded our
telecommunications opportunities beyond our franchise areas allowing us to
serve the much greater U.K. national market. We approach this market by
serving the following two market segments:
o National Business Telecommunications
o Carrier Services
National Business Telecommunications
In the business market, we describe ourselves as a "nationally
competitive but locally accountable" service provider, whose business
purpose is to "enable businesses to become more efficient and effective".
Our general business telecommunications strategy is to provide
comprehensive communications solutions to our customers. Rather than simply
offering our customers a lower price for their existing service, we offer a
package of services to the customer that is designed to address all of
their communications needs at a price which offers good value for money.
The services which we offer are often custom-designed for the specific
needs of the customer.
To date, we have been successful in obtaining telecommunications
contracts from businesses located within our franchise areas. At March 31,
2000, we had approximately 46,200 business customers and more than 202,400
telephone lines installed in the U.K. (excluding CWC ConsumerCo).
Business Customers. While we offer our services to a wide array of
companies throughout the U.K. within our franchise areas, we focus upon
education, healthcare, local government, and media and information
technology companies. Our communications solutions are attractive to these
customers because of our reliable, high bandwidth services and our ability
to package several services together at attractive prices. In addition, we
have a strong local presence due to the localization of our facilities and
the services we provide. As a result, our customers view us as a community
partner and benefit from our local account management.
We use a variety of different access technologies to connect
customers, based on customer size, geographic location and our network
reach. Access technologies currently deployed in our network include fiber
optics, copper wire and microwave radio.
We connect our larger business customers to our network using fiber
optic cable. This utilizes the significant penetration of fiber that we
have in our local access network. As the cost of fiber falls, the size of
business we will connect with fiber extends correspondingly. Currently, we
use copper wire pairs to connect small enterprises.
An example of our sector-focused strategy is our success in
penetrating the education market. We support customers at all levels of
education within the United Kingdom. One such customer is the U.K.'s Joint
Academic Network (JANET), which is the U.K.'s academic and research system
connecting several hundred institutions, including all U.K. universities,
most higher education colleges and most research establishments. SuperJANET
is the broadband, or high-speed portion of JANET. We developed high
bandwidth metropolitan area networks in a number of our regions throughout
the U.K. to support SuperJANET. NTL Group now provides student and academic
services to more than 25 universities through the U.K., and has won new
contracts this year with universities, including south Hampton, Surrey,
Swansea, and Strathclyde.
Cambridge University is a SuperJANET node where we provide all of the
university's high-speed data circuits and approximately 10,000 local
extensions, including lines in 6,500 student dorm rooms. At Oxford
University, students use our links for access to SuperJANET, and more than
700 students also have our phone lines in their dorm rooms. We also provide
the services of the South Wales Academic Network (SWAN). SWAN is a 60-mile
fiber network, with 13 sites that serve approximately 16,000 PCS, creating
approximately 2 million e-mails and 12 million hits on the World Wide Web
every month. SWAN will provide the gateway to SuperJANET for 23
institutions of higher learning that was previously available only to the
Universities in Cardiff and Swansea.
Our program for education has not only provided value-added
technology services to universities, but has also accelerated the
connection of local secondary and primary schools to the Internet. We
provide services to more than 2,500 primary and secondary schools. Funding
for these connections has been provided by the National Grid for Learning
and the Technology Trust infrastructure campaign. We were the first company
in the U.K. to introduce an economical flat rate Internet access package to
all schools within our franchise areas. To date, over 1,600 schools have
taken advantage of our attractive Internet offers. In England, Technology
Colleges Trust has partnered with us to link up the trust's more than 650
schools. This will enable the schools, for a flat rate, to get unlimited
usage of a 2 Mbps broadband connection to a new supergrid.
Our schools initiative in Londonderry aims to provide free Internet
access to every school in the city. This long term project will introduce
modern technology into education utilizing our infrastructure. We will also
host approximately 150,000 e-mail accounts (one for every student and
teacher) and connect to all 568 schools in Hertfordshire County Council
using ISDN and PSTN dial up. Bedfordshire County Council now has all 270
schools connected to the Internet via our ISDN Select.
National Services. Capitalizing on our experience in local business
markets and the extended reach of our national network, we have expanded
the scope of our business in order to compete for a share of the business
telecommunications market on a national basis. We believe that we can build
on the strengths gained in our local franchise areas to approach targeted
business users located in other areas of the U.K., initially focusing on
users with multiple business locations. We recently launched our national
business corporate service and our strategy is to target the largest
national businesses in specific market sectors.
We have a variety of alternative methods to connect the "last mile"
to the customers' premises from the national network:
o As a certified national public telecommunications operator, we
can readily obtain the permits to construct telecommunications
networks, and can simply build out our network to reach
customers. Although this is often clearly the most costly
approach, the expense can be justified in the case of large
customers or when a significant level of traffic is obtained
from several customers. For example, we have extended our fiber
optic network in London to support CNN's facilities.
o We can lease circuits on the local networks of other service
providers to connect to the customer's premises. Although this
may reduce the operating margin on a particular account, it
requires significantly less capital expenditure than a direct
connection, can often be installed relatively quickly, and can
be replaced at a later date if a more profitable connection
method can be deployed.
Business Products and Services
o Simple "Access" Services that connect the customer to us for
inbound and outbound voice and data calls. These access
services include traditional analog Business Exchange Lines
(BELs) and Digital Business Exchange Lines (DELs). DEL services
include Basis Rate Access, also known as "ISDN2", and Primary
Rate Access, also known as "ISDN30". These and other direct and
indirect access services are priced competitively and offered
in competition with a number of other direct and indirect
suppliers.
o Managed Voice Services which are best illustrated by our
Central Exchange "Centrex" service. This service presents the
customer with business exchange lines configured as a "virtual
PABX", as we completely handle the services normally associated
with a traditional PABX (or PBX). The success of this product
is well demonstrated in the East Midlands where eight of the 11
local government organizations use NTL Centrex as their main
business service, including the Nottingham City council with
more than 3,500 lines.
o Managed Data Services include fixed point-to-point private
circuits at speeds from 64 Kbps, through multiples of that
speed and individually tailored 100 Mbps and 155 Mbps services.
Other services include the provision of intersite data services
with particular transmission protocols, such as Internet
Protocol also known as TCP/IP, Frame Relay and ATM. Our ability
to design, deploy and manage a customer's data service has been
greatly enhanced with the recent acquisition of Workplace.
o Internet Services provided by NTL Group range from "Dial-up"
customers to dedicated private circuits for greater access
speeds. We are launching a range of new services and branded
hardware products, which include both entry level and advanced
"firewalls", and a self provisioning web-hosting service. We
own an interest in and provide communications network and back
office support for VirginNet and provide services to more than
twenty other Internet Service Providers.
Local Business Services. The local business telecommunications market
provides an attractive opportunity to NTL Group. For the most part, the
underlying capital investment needed to address this market is made through
the buildout of the network for the residential market in our franchised
areas.
Regional Business Services. The communications services we provide to
the education and government sectors is an excellent example of the
possibilities created by our newly built high bandwidth networks where we
can provide both region wide and intra-regional connectivity. We provide
extensive services to numerous local governments, particularly our Centrex
service that eliminates the need for a PBX, simplifies moves, adds and
changes and provides free calling between locations. Additionally, our
focus on the education market is demonstrated by the more than 3,000
primary and secondary schools, colleges and universities we serve; the
majority of which we connect to the Internet with speeds ranging from 128
Kbps to 2 Mbps. Funding for the Internet segment of the services has been
largely provided by the government, for whom Internet connectivity has
become a high priority.
Region-wide Business Services. In Hertfordshire, NTL Group provides
county-wide telecommunications for all the local schools as well as widely
dispersed municipal administrative offices. We were awarded all of
Hertfordshire County Council's voice and data traffic and installed Centrex
across all of the Council's sites (upward of 500 Centrex lines) based upon
an integrated solution. These sites include libraries, social services
offices and environmental services offices all linked to an NTL
Group-provisioned voice and data call center.
In addition to providing county-wide municipal council service in
Hertfordshire, we provide a customized package of Internet and
telecommunication services to all schools county-wide. The service, known
as the "Hertfordshire Learning Grid", inaugurated one of the largest
Internet and intranet projects in the U.K. education sector. NTL Group
installed, maintains and manages personal computers at all primary schools.
NTL Group arranged to train three teachers in each school on how to use the
Internet for communication, i.e. e-mail, how to use the Intranet for their
administration, and how to use the world wide web to gather information
which would support the teachers and help them to teach the children.
Additionally, NTL Group built a bespoke intranet service for both the
council's administration and schools which entailed a help desk, an e-mail
filtering system, Internet filtering, and intranet filtering. The complete
solution is fully managed by NTL Group and completely seamless to the
customer. All queries are managed by their respective NTL Group local
account manager.
National Business Services. Our national network (excluding CWC
ConsumerCo) was designed specifically to connect our local networks and
enable distance insensitive calling tariffs. We estimate that our national
network covers approximately 3,500 route miles and 170,000 resilient fiber
miles across England, Scotland, Wales, Northern Ireland and the Republic of
Ireland. Our national network has been designed with significant excess
capacity. For example, the trunk route specification provides for two large
ducts, each with capacity for 4 sub-ducts, only one of those eight
sub-ducts is currently used. Our total duct capacity exceeds 2,300 fibers
of which only a small portion is currently used.
Our national network is a fully redundant, SDH digital fiber network.
The major fiber routes are complemented by microwave radio connections
which increase the reach of the network. SDH technology improves network
reliability and performance and provides greater flexibility than
conventional transmission architecture. In addition, network availability,
management and routing are also superior to conventional transmission
architecture because signals are automatically rerouted to the best path
available if another is severed or degraded. We believe that we have a
competitive advantage over other carriers such as BT because SDH technology
has been built into our networks from the start, thus avoiding integration
problems with older network technologies.
An important source of revenue for NTL Group is the bandwidth and
connectivity we provide to other communications carriers. Our network is
used to interconnect these carriers to cities throughout the U.K. and
Ireland. NTL Group provides customers with bandwidth ranging from 2 Mbps to
STM-16's. Owning core infrastructure also opens up avenues for
international network expansion. Increasingly, network operators are
looking at minimizing capital outlay by swapping capacity on their
infrastructure for new nodes or additional capacity elsewhere. Our
customers include fixed wireline and mobile telecommunications operators,
cable operators, Internet service providers, and various information
technology and facilities management companies, notably.
o COLT where we have been awarded "preferred supplier" status for
the distribution of COLT's traffic outside the London area.
This covers bandwidths from 2 Mbps to STM-1.
o ENERGIS for which we provide high speed managed services to
enable the operator to more effectively address its "off-net"
customer base.
o GLOBAL ONE where as part of this international operator's
roll-out, we are providing managed services between London and
Dublin utilizing our recently completed sub-sea cable.
o VODAFONE AND ORANGE, for which we provide inter-switch capacity
on our national network. During 1998, both Vodafone and Orange
considerably increased their requirements for network services,
and as of December 1998, we supplied Orange with the majority
of its inter-switch capacity.
Carrier Services Products, and Marketing. We expect to continue to
successfully serve this marketplace through our strategy of providing high
quality and competitively priced services. Additionally, we continue to
utilize our specialized ability to provide tailored solutions necessary to
serve this demanding market.
The rapid expansion in voice traffic is expected to continue and we
have entered into interconnect agreements with national and international
operators to both reduce the costs of carriage and termination of our
originated traffic and of termination of other carriers' traffic.
The expected growth in the number of international operators building
and operating submarine cable systems has been substantial and continues to
grow with many of these cables transiting the U.K. We have considerably
increased physical connectivity to U.K. international cable landing
stations and products have been successfully developed to address the needs
of these international cable operators for backhaul services between the
cable landing sites and the major U.K. international nodes such as
Telehouse, London.
We believe the U.K. market for wholesale data services is significant
and growing rapidly due to the fast growth in IP, Internet and other data
traffic. Utilizing our state of the art ATM network, we have developed
Frame Relay and ATM wholesale products to address this increasing demand
for high speed data connectivity. Additionally, utilizing our core data
network, local loop infrastructure and connectivity to the main
international U.K. nodes will allow us to address the needs of
international operators for the of U.K. bound/generated data traffic.
In addition to telecommunications and data services we also offer
wholesale Internet access solutions including network services, call center
operations, customer provisioning and billing to U.K. Internet Service
Providers ("ISPs") and other corporate customers that would like to expand
their Internet presence. This service was launched in 1995 as our first
national product offering.
In 1996, we established the VirginNet joint venture with Virgin
Communications Limited. The joint venture is 49% owned by us and 51% by
Virgin. VirginNet offers connectivity and proprietary content services to
consumers and small businesses throughout the U.K. VirginNet recently
launched a "free access" product offering, whereby customers only pay for
the minutes that they are online or in contact with a customer care
representative. We are able to support this service profitably because we
carry the majority of the VirginNet Internet traffic on our owned network
facilities.
By integrating our Internet infrastructure with our national
telecommunications network we have been able to decrease the costs of
providing these wholesale services as well as increase the value of the
proposition by retaining a higher portion of the revenue from the data
traffic that our customers generate. We plan to continue to enhance our
Internet network, both nationally and internationally, to accommodate the
growth in the business.
SWITZERLAND, FRANCE AND REPUBLIC OF IRELAND
NTL Group has recently expanded its reach outside of the U.K. through
the acquisition of broadband networks in the Republic of Ireland
(Cablelink), France (1G Networks) and most recently Switzerland (Cablecom).
We plan to upgrade the networks of these cable companies to deliver bundled
telephony, high-speed Internet access via cable modem, DSL or 10-100 Mps
ethernet service and also to offer business telecommunications services.
Additionally, we plan to connect these national broadband networks to our
pan-European backbone and to the digital media center in the U.K.
As of March 31, 2000, Cablelink networks passed approximately 416,000
homes, the 1G networks passed approximately 265,000 homes and Cablecom over
1.4 million homes. These cable systems collectively served approximately
1.8 million cable television customers and Cablecom additionally served
over 159,000 Internet subscribers, including several thousand high-speed
modem users.
STRATEGIC INITIATIVES
European Expansion Our objective in expanding into Continental Europe
is not only to replicate our U.K. success, but also to develop new business
models for Europe, which could in turn enhance our U.K. operations as well.
Our European initiative is five-fold:
o Acquire well-positioned cable companies having high customer
penetrations and upgradable networks in key major markets;
o Link these with each other and the U.K. via a pan-European
fiber backbone network;
o Expand the range of services in each country initially via
indirect telephony, dial-up Internet and mobile virtual
networks and also offer business telecommunications services,
and "roll down" these fiber networks to our hubs and
collocation facilities to later offer unbundled telephony
access and DSL;
o Build metropolitan and local loop fiber networks to directly
connect customers in strategic areas, including building out
fiber optic networks to multiple dwelling units and single
family homes with leased or owned fiber
o Employ all of these assets to offer total broadband solutions
to both the consumer and B2B market within each country.
We are well on our way to achieving these goals. Cablecom, in
Switzerland, the "1G Networks," and, in France, and Cablelink, in Ireland,
are excellent cable companies in major markets and are in the process of
being upgraded.
We have secured agreements with major international
telecommunications carriers giving us a very high capacity dark-fiber
backbone network connecting any 24 cities of our choosing throughout
Europe. This network was realized by swapping capacity on our U.K.
networks, and will be rolled out as needed over the next 24 months.
We have commenced activities building out our fiber optic networks
directly to the home and to multiple family dwelling units in Switzerland
and the U.K., with an eye toward making this a feature of our standard
network build going forward. In addition, this fiber-to-the-homes (FTTH)
architecture could serve as a pure broadband connection strategy in areas
where we do not operate cable systems. For this reason, we have taken a
strategic stake in Sweden's B2 which is pursuing a similar strategy.
We plan to increase and expand these activities throughout 2000 and
beyond in order to achieve our objectives.
Mobile We strongly believe that having a mobile service to bundle
with our consumer and business offerings would be extremely attractive. We
have begun negotiations to secure a "virtual network operator" (VNO)
agreement for both current and UMTS services with one or more carriers in
the U.K.. We withdrew from the recent UMTS operator auction in the U.K.
because we believe the rate of return of our VNO strategy will be higher
than that for purchasing a UMTS license and becoming an actual carrier.
A VNO agreement will allow us to provide an NTL branded mobile
service as part of our bundle, including providing the NTL web portal as
the primary interactive service on the mobile phone itself which would
allow NTL to control the user experience. From the customer's view it
should be no different than if NTL were the carrier. Since NTL will be
providing a significant amount of both network and operations
infrastructure, we believe mobile operating margins should be attractive.
In addition, we believe that the current operators will desire to conclude
arrangements with us as the major alternative fixed operator in the U.K.
and to quickly recoup a portion of their expenditures for UMTS. Our goal is
to offer mobile service as part of NTL's bundled offerings in limited areas
by the first quarter of 2001.
Strategic Fund We have recently formed Brigadoon Ventures, Inc., to
focus on early stage strategic investments in emerging networks, Internet
content, communications technology and programming. We have always had
numerous opportunities to take small stakes in emerging areas of great
strategic interest to us. Creating the fund will allow us to attract
additional outside capital to make these investments along side with us,
thereby further leveraging our strategic vision. It is expected that the
fund will concentrate on those areas where we might eventually take a
majority stake and integrate the operation.
In March 2000, Brigadoon took a 25% stake in Bredbandsbolaget (B2), a
Swedish telecommunications company specializing in the provision of 10-100
Megabit broadband ethernet access and services via a direct fiber
connection to the home.
In May 2000, Brigadoon made a $6 million investment in Diva Systems
Corporation, a video-on-demand operator currently developing video on
demand capability for our U.K. network. NTL and Diva will work together to
be able to commercially deploy video-on-demand over NTL's cable network in
the U.K. and offer immediate in-home access to a diverse and continuously
evolving selection of movies and special interest material with fast-
forward, pause and rewind functionality plus high quality digital picture
and sound.
In June 2000, Brigadoon made a strategic investment in Into Networks,
Inc., a software-on-demand operator based in Cambridge, Massachusetts. NTL
intends to work with Into Networks to offer NTL subscribers in the U.K.,
Ireland, Switzerland and France click-and-play access to interactive CD-ROM
titles and other rich media over broadband networks.
RECENT ACQUISITIONS
Acquisition of CWC ConsumerCo and France Telecom Investment. On May
30, 2000, NTL completed its acquisition of the residential cable, business
cable, indirect residential telephony, residential internet and digital
television development and services businesses ("CWC ConsumerCo") of Cable
& Wireless Communications plc ("CWC"). NTL plans to integrate the CWC
ConsumerCo operations and facilities into NTL's existing cable operations
and franchise areas. On July 26, 1999, NTL announced that with the support
of France Telecom, it had agreed to acquire CWC ConsumerCo.
NTL issued as aggregate consideration approximately 85 million
shares of NTL common stock and paid approximately (pounds sterling) 2.85
billion in cash to CWC shareholders, plus cash payments for fractional
shares. NTL also assumed approximately (pounds sterling) 2.3 billion in
CWC's allocable net debt. In connection with the CWC ConsumerCo
acquisition, NTL entered into bank credit facilities comprising a (pounds
sterling) 2.5 billion credit agreement and a (pounds sterling) 1.3 billion
credit agreement to refinance indebtedness and for working capital
purposes.
On May 30, 2000, NTL completed an investment by France Telecom of
$4.5 billion, which was previously announced on July 26, 1999. NTL issued
and sold to France Telecom 42,229,730 shares of common stock at a per share
price of $59.20 and 2,000,000 shares of 5% cumulative participating
convertible preferred stock, series B, having an aggregate liquidation
preference of $2 billion, a conversion price of $80.00 per share and a
redemption price of $96.00 per share. On August 6, 1999, NTL and France
Telecom agreed that the aggregate consideration of $4.5 billion would be
payable by France Telecom at completion in pounds sterling which was fixed
on August 6, 1999 at (pounds sterling) 2.8 billion. NTL used the proceeds
from the France Telecom investment, as well as NTL's existing cash
resources, to fund the cash portion of the payments to CWC shareholders.
Acquisition of the Assets of Cablecom. On March 28, 2000, NTL
acquired the businesses and assets of Cablecom, Switzerland's largest cable
operator, from Swisscom AG, Siemens Schweiz AG and VEBA Telecom GmbH for
CHF 5.8 billion (approximately $3.5 billion).
Cablecom's revenues for the year ended December 31, 1999 were
$388 million. Cablecom is Switzerland's largest cable operator with
approximately 1.37 million subscribers, which reflects a penetration rate
of approximately 96% in its service areas, and delivers signals via its
national fiber backbone to other cable operators who serve a further
approximately 300,000 homes. Over 90% of the television broadcasting in
Switzerland is delivered over cable networks. Cablecom has an estimated 53%
share of the Swiss cable market and is the major cable operator in 12 of
Switzerland's 16 largest cities. Cablecom has been the catalyst for the
consolidation of the Swiss cable market and recently launched digital
television and high-speed internet services.
Cablecom also owns SwissOnline, one of the largest internet Service
Providers in Switzerland and one of the country's most popular portals with
approximately 159,000 customers. Cablecom already has a telecommunications
license to provide data consisting of internet, leased lines and
asynchronous transfer mode, and value added services throughout Switzerland
and it will shortly submit an application to extend the licenses for the
provisioning of voice telephony. Cablecom's network is currently being
upgraded as part of an investment program scheduled to go through 2003,
with over $250 million spent in the last two years. The network upgrade
program will include the completion of a national fiber ring which is
expected to cover approximately 75% of Switzerland by the end of 2001 as
one of the only two national fiber rings in Switzerland.
Through this acquisition, NTL will become the largest alternative
fiber link telecommunications operator in the Swiss telecommunications
market.
NTL financed the transaction from cash on hand, loan facilities and
the issuance of $1.85 billion of 5% cumulative preferred stock, series A,
to France Telecom and a group of commercial banks. The preferred stock
issued to the banks is subject to a put and call option agreement in favor
of France Telecom. On March 28, 2000 the Company entered into a CHF 4.1
billion (approximately $2.5 billion) senior secured credit facility,
consisting of a CHF 2.7 billion term loan facility used to finance
approximately 50% of the Cablecom acquisition consideration and a CHF 1.4
billion revolving credit facility to fund capital expenditures, working
capital, operating expenses and general corporate financing requirements.
Sale of New Series of NTL Preferred Stock to Finance Cablecom. On
February 17, 2000, NTL, France Telecom and a group of commercial banks,
referred to as the Banks, consisting of Banque Nationale de Paris, Credit
Agricole Indosuez, Deutsche Bank AG and Westdeutsche Landesbank
Girozentrale, referred to as the Banks, entered into an arrangement,
subject, among other things, to the completion of NTL's acquisition of the
assets of Cablecom Holding AG, involving the issuance of 1,850,000 shares
of 5% cumulative preferred stock, series A, of NTL for an aggregate
purchase price of $1.85 billion. The proceeds from this issuance of 5%
cumulative preferred stock were used primarily for the purpose of the
consummation of the acquisition of the assets of Cablecom Holding AG, which
was completed on March 28, 2000 , with any remaining proceeds to be used to
help fund NTL's acquisition of companies primarily engaged in the broadband
communications, broadcasting and cable television business in Continental
Europe outside of France.
Under the arrangement, at the option of the holder, the 5% cumulative
preferred stock is mandatorily redeemable for cash on and after the second
anniversary of the issuance. Any holder of the 5% cumulative preferred
stock, other than a commercial bank or its affiliate, has a right,
exercisable at any time after the 5% cumulative preferred stock shall have
been outstanding for six months and subject to certain conditions, to
exchange shares of 5% cumulative preferred stock for shares of Eurotel
Stock, having a value equal to the redemption price together with any
accrued and unpaid dividends. "Eurotel Stock" is defined as capital stock
of a direct or indirect wholly-owned subsidiary of NTL, which entity owns
all of the outstanding capital stock of entities that are primarily engaged
in the broadband communications, broadcasting and cable television business
in Continental Europe outside of France.
On and after the date that is the earlier of (1) the second
anniversary of the issue of the 5% cumulative preferred stock or (2) the
date of an exchange for Eurotel Stock, NTL has the right to redeem the
outstanding 5% cumulative preferred stock, in part or in whole, from any
holder of the 5% cumulative preferred stock, other than a commercial bank
or its affiliate, for cash at the redemption price together with any
accrued and unpaid dividends. Any time after a period of six months from
and exchange for Eurotel Stock, any holder of 5% cumulative preferred
stock, other than a commercial bank or its affiliate, at the holder's
opinion and subject to certain conditions, is entitled to convert any or
all of the shares of 5% cumulative preferred stock that remain outstanding
after the exchange for Eurotel Stock into fully paid and non-assessable
shares of NTL common stock together with any accrued and unpaid dividends.
Under separate arrangements, NTL and France Telecom have agreed to
certain corporate governance arrangements relating to the Eurotel entity in
the event the 5% cumulative preferred stock is exchanged for shares of
Eurotel Stock.
Contemporaneously with the execution of the purchase agreement
described above, France Telecom and the Banks entered into a put and call
option agreement with respect to the shares of 5% cumulative preferred
stock that were proposed to be sold to them by NTL. The put and call option
agreement generally provides that (1) France Telecom will have the right
exercisable at any time following the issue date but no later than five
business days before the second anniversary of the issue date to purchase
the 5% cumulative preferred stock held by the Banks and (2) the Banks will
also have the right in certain circumstances to require France Telecom to
acquire their shares of 5% cumulative preferred stock.
ANNEX V
The Broadcast Group
DESCRIPTION OF BUSINESS
In this Annex V, references to "we," "our," and "us" are to the
Broadcast Group. You should read this description together with the
information provided with respect to the Broadcast Group in NTL's Form
10-K, for the 1999 fiscal year, including the various risk factors
identified in that document with respect to the business and operations of
the Broadcast Group.
OVERVIEW
We are a leading owner and operator of broadcast and wireless
communications assets principally in the U.K. and Australia. We provide
services to broadcast, media and wireless communications customers using
these assets. These include broadcast transmission services for digital and
analog television and radio, video connectivity and uplinking using
satellite and fiber assets and tower site rental services.
The broadcast infrastructure used to deliver our services consists of
a network of strategically located broadcast and wireless transmission
towers, with approximately 3,500 broadcast transmitters. In addition, in
order to serve our broadcast and media customers, we also own and operate
satellite uplinking facilities consisting of 30 fixed satellite uplink
dishes able to access over 50 satellites, a network of mobile and
transportable uplinks, management and control systems and all associated
operations and maintenance.
Our tower portfolio consists of:
OWNED, TO WHICH WE
LEASED OR HAVE
LOCATION MANAGED ACCESS TOTAL
------------ ------------ ------------ ------------
U.K. 2,032 678 2,710
AUSTRALIA 410 151 561
------------ ------------ ------------ ------------
TOTAL 2,442 829 3,271
We currently provide digital and analog broadcast transmission for
national and regional broadcasters, such as the regional ITV companies,
Channel 4 and Channel 5 in the U.K. and ABC and SBS in Australia. In
addition to broadcast transmission, we also provide our broadcast and media
customers with program and content distribution services for over 130
full-time channels via satellite and fiber as well as occasional use
facilities such as remote satellite news gathering. We also provide similar
outsourcing services based around the use of our tower assets to our
customers, such as Vodafone Airtouch, and other mobile telecommunications
operators in the U.K.
Based on our experience of providing broadcast services to the U.K.'s
commercial television operators, our pioneering approach and expertise in
digital broadcasting, we believe that we are uniquely positioned to
capitalize on the global trends towards privatization, outsourcing and
digitalization of broadcast transmission infrastructure and the tremendous
growth opportunities in the wireless communications industry. Already this
strategy has been successfully implemented as evidenced by our successful
acquisition of the National Transmission Network ("NTN") from the
Australian Government in 1999. In addition to the existing established
broadcast service and tower business in Australia, we also intend to
implement an extensive east coast telecommunications network to deliver
managed services to broadcasters, carriers and internet service providers.
Our extensive customer base includes all of the U.K.'s commercial
terrestrial television broadcast companies, both of Australia's national
broadcasters for transmission services and all regional Australian
commercial TV broadcasters for site sharing, all of the U.K.'s cellular
mobile operators, many of the U.K.'s largest utility companies and
emergency service organizations. A significant proportion of this customer
base have long term contracts with us extending for up to 12 years and
providing a forward order book of (pound)1.6 billion ($2.4 billion ),
(pound)1.4 billion of this relates to the broadcast services business with
(pound)200 million relating to the wireless business.
We have provided innovative technologies and services to our customer
base, including the world's first and most complex roll-out of digital
terrestrial television in the U.K.
Our extensive tower portfolio in the U.K. and Australia already
generates significant revenues from wireless and cellular operators. As
these industries experience dramatic growth over the coming years, we
believe that we can generate new revenue streams by providing the tower
infrastructure needed to deliver new services offered by operators of
wireless services.
The nature of our business is such that a large proportion of our
income is generated from a number of long-term service contracts. As such,
the opportunities for new revenues are gained from existing relationships
and are often based on extensions in terms of new services or increased
coverage in which customer focused, trained project and service delivery
staff are more critical to business development than are formal sales and
marketing functions.
In support of our strategy of international expansion, in April 1999
we acquired NTN in Australia, whose terrestrial television and radio
transmission networks are used to deliver national services to
broadcasters. The acquisition included 561 transmission sites and
long term analog broadcast contracts with ABC and SBS, the two national
broadcasters in Australia. The broadcast network is the most extensive in
Australia and covers over 98% of the population.
In addition to an established business, we believe that this
acquisition will also develop in a similar way, and with comparable growth
to that which we have achieved in the U.K. We expect this growth to be in
the two significant areas of digitization of analog broadcast networks and
further expansion of telecommunications business, both for distribution
services and site leasing for mobile telephony. We have already
secured new long-term digital transmission business in addition to new
analog transmission business with our existing customers, ABC and SBS, and
we are actively pursuing other opportunities.
We have substantial experience in broadcast services, tower and site
management and telecommunications in the U.K. We believe that the
similarities with the Australian business and the synergies we are able to
draw upon as it develops place us particularly well to successfully manage
and grow this business.
INDUSTRY
We provide wireless transmission of electronic information and
entertainment content produced by our customers. This content can take the
form of video, audio and data and can be in either analog or digital form.
The industry comprises terrestrial television and radio broadcasters,
satellite broadcasters, media content companies, cellular operators and
wireless communications operators and users.
Many of our most significant customers transmit or broadcast video,
audio or data terrestrially requiring appropriate structures upon which to
place transmission antennas and equipment. Each structure provides coverage
within a defined area, with limitations being imposed by the power of the
transmission and by natural or man-made obstructions to the signal, such as
hills or buildings. Where a wider coverage is required, it may be necessary
to build a network of interconnected transmission sites. For example, in
the U.K., a national analog broadcast service requires over 1,200 sites.
The industry's structure in any country depends in large part on the
degree of regulation that has historically been imposed. In the U.S., the
relatively low level of regulation has resulted in a highly fragmented
market where operators have a regional focus and have historically owned
and maintained their own towers and infrastructure. In much of the rest of
the world including the U.K., the broadcast transmission and wireless
communications industries have historically been heavily regulated,
resulting in a consolidated industry from the outset. In the U.K., until
the late 1980's, the infrastructure was owned indirectly by the BBC and the
Independent Broadcasting Authority ("IBA"). This has resulted in large
integrated national networks. The U.K. has four analog national television
networks providing over 99.4% coverage from a network of 1,289 transmission
sites, of which we provide transmission service to two of them, and an
additional television network, Channel 5, providing 80% coverage. This
provision of coverage has also translated into the wireless communications
market, where the cellular licenses are awarded on a national basis and the
networks necessary to achieve this coverage are extensive with large
numbers of sites.
Each of the current mobile operators also provides close to a
national service with large numbers of sites.
During the last twenty years, as commercial demands for mobile
services have grown, the regulatory bodies such as the FCC in the U.S. and
the Radiocommunications Agency in the U.K. have significantly increased the
numbers of frequencies available to commercial operators. In turn, the new
wireless services based on these frequencies have further driven consumer
demand and the number of towers and sites required.
The nature of broadcast and wireless communications technology is
such that once a location is identified as suitable for one service, or one
part of a national service, it will most likely be suitable for many other
services. This common demand combined with the inherent economies of scale
in sharing such infrastructure leads to a commercial opportunity pressure,
as well as an environmental one, to share such facilities.
The commercial requirement for operators to expedite the roll-out of
their networks and the environmental pressures to reduce the proliferation
of telecommunications towers has encouraged the move towards consolidation
of ownership of towers. Furthermore, recognition that communications
infrastructure is not necessarily part of an operator's core business is
now creating opportunities for third parties, such as us, to acquire and
operate larger portfolios of tower infrastructure providing benefits to
both parties. We believe we are ideally placed to take advantage of this
trend to grow our tower portfolio and associated services.
In the U.K., two major privatizations of broadcast towers and
associated infrastructure resulted in the majority of the national TV and
radio transmission networks being owned and operated by two companies.
First, with the privatization of the IBA in 1991, we acquired approximately
50% of the towers and sites infrastructure used for transmission of the
independent TV and radio services together with all of the TV transmitter
systems and most of the radio transmitter systems. The remaining 50% was
privatized by the BBC in 1997. The U.K. has led what has now become a
global trend towards privatization of broadcast infrastructure and we are
actively pursuing many of these opportunities.
These developments have led to an emerging business model whereby the
tower and site infrastructure and services are increasingly being
consolidated into a small number of specialist operators. These operators
are able to deliver to the customer the economies of scale inherent in the
model as well as being able to apply the experience of operating and
managing such networks.
BROADCAST AND MEDIA
We and our predecessors have been involved in broadcast television
since the 1950s when we designed and built the television system for the
U.K.'s first independent commercial television network. We operate a
national infrastructure in the U.K. of 1,289 owned or shared transmission
sites with over 3,500 transmitters delivering broadcast signals for the
three commercial national television channels and most of the U.K.'s
independent local, regional, and national radio broadcasters. We also
design, install, operate, and maintain new transmitter networks and have
developed radio spectrum expertise which enables us to plan and develop the
coverage of television and radio services and networks. In addition, we are
able, through our satellite and NTL Group's fiber networks, to provide program
content distribution services to our broadcast customers and their program and
content suppliers.
In addition, we have expanded our service offerings over time to meet
the growing needs of our customer base as new technologies create new
broadcast markets. In 1993, we became active in the satellite services
market following the establishment of a direct to home satellite service on
the European Astra satellite fleet. We believe that we have become accepted
in the industry as one of the leading providers of satellite services in
the 7 years since we entered the market. Now supporting more than 130
fulltime satellite TV channels, we have been chosen by broadcasters such as
the BBC, CNN, Discovery, Flextech and QVC to meet their transmission needs
based on our reputation for quality and reliability.
Subsequent service developments have included:
o offering a range of occasional use services which meet the
outside broadcast needs of customers whether they be for
breaking news, sports events or music concerts;
o the establishment of playout services which enables us to take
ownership of the customers transmission needs from the point
that they deliver the program or content on tape and need a
channel to be created.
The broadcast business generates a significant portion of its revenue
from these customers through long-term contracts. The projected total
value of our present contracts for broadcast services is approximately
(pound)1.4 billion ($2.1 billion) with some contracts extending through
2012. We own not only the towers but also the transmission equipment and
much of the communications networks responsible for broadcasting the signal
from the studio to the viewer. As a result, contracts increasingly include
all aspects of the service to the broadcaster, in essence using us as the
customer's engineering department, thereby enabling our customers, the TV
and radio station owners, to focus exclusively on programming.
We believe that a new provider of broadcast transmission services to
the U.K.'s and Australia's national broadcasters would need to overcome
barriers to entry including:
o The provisioning of capital equipment for transmission services
and studio coding, decoding, and distribution circuits.
o Re-engineering of network either around our sites or, more
challenging, around a different set of sites. In the latter
case, planning permission would be particularly difficult to
receive for an alternative set of large transmitter sites, the
physical characteristics of the signal may preclude the use of
different sites and large numbers of viewers' aerials would
need to be re-directed.
o Attaining spectrum for a new network. There is a shortage of
broadcast spectrum and existing international frequency plans
are based on the existing transmitter sites.
TERRESTRIAL TELEVISION SERVICES
Analog services
In the U.K. the analog terrestrial broadcast industry is split broadly
in two segments:
o The publicly funded BBC, providing two national services.
o The separate commercial operators, funded by advertising
revenues, providing two national and one near to national
service. Within some of these services there are both regional
and national elements provided through the same infrastructure.
Although much of the content of the commercial networks is
national in nature, one of the three networks is made up of an
affiliation of 15 separate regional operators, some of whom
have merged at the corporate level into larger groupings.
We provide analog broadcast transmission services for the entire
commercial television broadcast sector in the U.K., and have done so since
the 1950s.
This consists of the ITV national network of 15 affiliated stations,
the national services of Channel 4 and Channel 5 as well as the regional
service S4C.
Until recently, the BBC and the IBA jointly operated the transmission
infrastructure, including the broadcast towers, on behalf of the
broadcasters. In 1991, the IBA's transmission network was privatized and we
were formed as the operator. In 1997, the BBC, in turn, privatized its
network. As such, the two BBC services use the transmission infrastructure
of an alternative operator, while the three commercial services use our
network.
In addition to these broadcast transmission services we also provide
many of the U.K.'s terrestrial broadcasters, in both the commercial and
public sector, with facilities and services leveraging our media expertise
such as in operating fixed teleports and mobile uplinking facilities around
the world. These services include: 1) the national distribution via
satellite of one of the U.K. national terrestrial broadcast networks,
Channel 5; 2) the provision of occasional satellite feeds for remote news
gathering to organizations such as the BBC and BSkyB and; 3) the provision
and management of studio playout facilities for SDN, one of the digital
terrestrial broadcasters.
In Australia, we provide national broadcast transmission services for
national public broadcasters SBS and ABC and site services to other
regional commercial free to air channels. The national channels are
government funded and the commercial channels are privately owned and are
primarily funded from advertising revenue.
Digital services
Digital gives our customers a number of business benefits. The key
benefit is that the bandwidth, or frequency spectrum, required to broadcast
a television or radio channel is reduced significantly thereby enabling
multiple channels to replace a single analog channel (for television typically
4 to 12 depending on quality required). This benefit translates into business
benefits to the broadcaster by:
o Increasing the number of channels capable of being delivered in
the broadcasters' licensed spectrum, or
o Reducing the cost of transmitting a single channel for
customers, encouraging new entrants, or
o Improving the quality, e.g. HDTV
In addition, the introduction of digital also enables broadcasters to
add other data, e-commerce and interactivity to their services, which
creates opportunities for new revenue streams.
Digital broadcast systems require a more complex engineering design
than their analog predecessors. We have exploited this by extending the
range of services into several new areas.
o A full range of tower planning, acquisition, installation and
management services enabling broadcast customers to rapidly
plan and implement new services.
o A complete transmission service, using our terrestrial tower
networks, our satellite uplinking or our fiber infrastructure.
By undertaking this element of the service, our customers are
then able to focus on their core business, reducing their time
to market by applying our expertise and enabling them to better
target their investment.
o A range of services to broadcast and media companies including
satellite news gathering networks, video communications
networks for the exchange of content and studio facilities and
playout centers. By providing these services we are further
enhancing our customers' ability to invest in, implement and
manage new services.
We believe the services provided have the twin benefits of enlarging
the total market available from broadcasting and further differentiating us
as a unique provider able to offer a complete range of services for digital
broadcasting.
We currently provide digital broadcast transmission for two of the
three commercial national digital television services in the U.K. These
services currently carry up to 12 separate channels which include the ITV
network, Channel Four, Channel Five and a range of new digital channels and
services including Pay Per View.
In November 1998, we made broadcast history with the launch of the
first commercial digital terrestrial television network which we planned
and built. Two of the four recipients of the digital terrestrial television
(DTT) multiplex licenses, ITV/Channel 4 and SDN (in which the NTL Group
holds a 33% equity interest) selected us as their supplier of transmission
services. As of April 2000, we were operating 81 DTT transmitting stations
reaching around 85% of the population of 59 million people. We have not
only successfully completed the first phase of the build program, including
playout centers and transmission in a timely fashion, but have also signed
12-year contracts to provide end-to-end service, including studio
compression, transmission and full systems integration.
It is anticipated that the digital network will ultimately grow to
match the coverage of the analog system which will cease operations. In
order to achieve the same high level of coverage for digital, we believe
that the same number of sites as those for the existing analog services
will be required which will represent a significant business expansion
opportunity for us.
In Australia, we are initially focused on leveraging our expertise,
infrastructure and customer relationships to secure digital transmission
service contracts with national and commercial television broadcasters. All
free to air television services are required to convert to digital in
accordance with a legislated schedule which mandates that triplecast
digital television services will be introduced from January 1, 2001.
Triplecast requires transmission of three signals by each broadcaster: High
Definition digital format in addition to Standard Definition digital and
analog formats.
The Australian government has recently announced the availability of
funding to our customers, ABC and SBS to facilitate the rollout of the new
digital services and provide additional financial support for the provision
of analog services.
SATELLITE AND MEDIA SERVICES
The expansion of the broadcast industry in the U.K. to include
alternative technology platforms such as satellite and cable TV has led to
the creation of a complex and thriving media sector in the U.K. above and
beyond the terrestrial broadcasters. We have been offering a range of
satellite services to our clients since 1993 when we established our first
teleport in the south of England.
We have successfully managed the technology transition from analog to
a digital platform on behalf of many of our clients. We currently provide
transmission to 130 satellite and cable TV channels of which approximately
70 channels have turned to us within the last two years to assist with
their digital services.
Our range of products and services has developed continuously to
match the needs of our customers. We seek to offer a one stop shop of
transmission and connectivity services to our clients; all based around the
core principles of quality and reliability. Hence, our broad range of
services allow us to move up the value chain in the provision of services
to such an extent that for many customers there is no need to utilize any
third party supplier of services.
Our Satellite and Media customers can be broadly categorized as
follows:
o Programmers who own and operate packages of content or channels
and whose business is delivering this content over a delivery
platform of satellite, cable or, in some cases, terrestrial.
Examples of such customers include Discovery Channel, Cartoon
Network, QVC, Flextech and the BBC.
o News agencies who gather and collate news content, particularly
breaking news, and deliver the content either as a channel or
packages of content to other programmers or broadcasters.
Examples of such customers include Reuters, APTN and CNN
International.
o Sports broadcasters who either own or have bought rights to
sports events and build program and content schedules around
these events. Examples of such customers include BSkyB, ISL and
CSI.
o Production companies, where a similar infrastructure to that
required by news agencies is used to deliver key events, such
as product launches, annual meetings and press announcements,
for large corporate clients, either within the U.K. or
globally. Examples of such customers include HSBC, British
Airways, Yahoo! and Merrill Lynch.
To meet the needs of these companies, we have developed a range of
products and services which include:
o Full-time satellite transmission services which provide access
to the major European and international satellite paths. These
include the U.K. and European direct to home and cable networks
and major satellites to distribute material to the U.S. and
Asia.
o Fiber interconnectivity between sites in the U.K. for
transmission of content between studios, facility houses and
transmission sites.
o Occasional satellite uplinking services which utilize our
network of satellite uplink dishes giving access to more than
50 satellites from the U.K.
o Mobile satellite news gathering trucks and fly-aways which
provide direct satellite uplinking, particularly for breaking
news events.
o International fiber optic links between the U.K. and the U.S.
through our alliance with Williams Vyvx which provides
connectivity between London and 48 U.S. cities for the purpose
of transmitting news, sports and programming content. In
addition, this gives us access to Williams Vyvx's U.S.
teleports thereby giving us the ability to uplink to more than
120 satellites around the world.
o Studio and playout services at our state of the art digital
media center in Langley, near London, where we have the
facility for automated or managed playout of content.
In combining all of our products, we believe that we have a unique
ability in the marketplace to provide a fully integrated solution,
capturing the image at the camera lens and conveying it through to its
final delivery at the viewer's home (glass to glass) thereby enabling the
broadcast TV license holders to focus on their core business of program
making.
RADIO BROADCAST
The broadcast radio market in the U.K. comprises the publicly funded
BBC and the commercial radio industry. The BBC operates five national radio
networks and 44 local radio stations. The Radio Authority regulates all
non-BBC radio in the U.K. This entity licences three national commercial
stations (Virgin, Classic FM and Talk Radio) and 250 metropolitan, regional
and local stations. Despite this diversity, ownership concentration is
high, with five or six major groups controlling the majority of stations.
We are one of two major companies providing transmission sites and
services to the radio industry. As a part of privatization arrangements of
the U.K. engineering arm of the BBC, the BBC has contracted with Crown
Castle International ("CCI") for all its transmission services. These
contracts extend until 2006. However, commercial radio stations are free to
contract with any supplier for their transmission services and we hold 85%
(by value) of the addressable market.
We offer a range of services to radio broadcasters including: target
service area planning; site location; installation and commissioning; and
equipment selection, procurement, operation, monitoring and maintenance. We
also offer total broadcast contract services, in which we design, build,
own and maintain the operators' transmission facilities, in much the same
way as for our broadcast television customers, and facility management
contract services in which we maintain customer-owned equipment and
administer the operation of the transmission service.
We are able to use our existing infrastructure of towers, as well as
sites made available to us under our site sharing arrangements, to provide
our radio customers with towers to afford them national, local or regional
services. In addition, we also provide over half of our customers with
complete broadcast transmission solutions using state-of-the art network
management and control systems. These customers also benefit from our
nationwide transmission system maintenance operation.
The migration to a new digital transmission platform will create
rapid growth in the broadcast radio transmission market. The Radio
Authority is committed to a fast roll-out of the new digital multiplex
licences and has already awarded the only national licence to Digital One,
a consortium in which NTL Group is a founding equity partner with a 33%
shareholding. We have a contract for the transmission of Digital One with a
total order book value in excess of (pound)40 million. A total of 12
further licences for regional and local digital radio will be awarded
during 2000. As of May 2000, we have won transmission contracts for six of
these and believe we are well positioned to win contracts for the remaining
licenses. For those with whom we do not win transmission contracts, we will
still be well placed to provide site leasing services using our tower and
site portfolio.
In Australia, we provide analog broadcast transmission services for
both national radio broadcasters, ABC and SBS, providing over 600 AM and FM
services and the HF Radio Australia service. We anticipate that up to 11
new metropolitan licenses will be issued to radio broadcasters in the
coming two years as well as opportunities to provide services to other
commercial and community broadcasters.
In addition to the existing analog services, digital services are
expected to be introduced in late 2002 which will provide significant new
revenue opportunities. NTL Broadcasting expects to play a significant role
in the implementation and operation of the networks based on the success
experienced in the roll out of digital radio in the U.K.
TRENDS
Key trends in broadcasting include:
o An increasing global trend towards private rather than public
ownership and operation of television and radio broadcast
transmission networks. We believe the outsourcing of these
networks will result in new business opportunities for us. In
markets where infrastructure ownership is still with the
regulator or government, it is anticipated that the model of the
U.K. and Australia will be adopted as governments become aware of
the commercial value of these networks and the historic rationale
for public ownership declines in importance.
o In geographic markets where broadcasters themselves retain
ownership and operate their own transmission infrastructure,
for example the U.S. market, there will be an increasing
recognition that transmission does not necessarily form a part
of a broadcasters' core business which will lead to the
increasing adoption of an outsourcing model.
o Digital terrestrial broadcast services will gradually replace
their analog predecessors in all markets, resulting in major
new digital services with operators running in parallel and in
competition with existing analog services. This process, which
started in the U.K., will likely be replicated across Europe.
The launch of digital terrestrial television services will
ultimately require the creation of an entire national broadcast
network of up to 1,200 sites to serve the U.K. population. In
Australia, large numbers of sites will also be required for its
transition to digital to replace the existing analog network of
561 sites, potentially with all sites requiring conversion to
digital. It is anticipated that the commercial imperative to
use frequencies more effectively combined with consumer demand
for increased choice and additional services will further drive
this trend.
o Increased complexity of digital networks. As additional
services such as interactive TV and the whole range of
e-commerce facilities are added to broadcast services, the
complexity of the networks will increase dramatically. This
will have implications for the operators in that they will
require an increased level of skill and understanding of the
technology from their network providers. We believe that our
industry leading expertise in digital broadcasting makes us
ideally placed to take advantage of this trend.
o Fragmentation of vertically integrated broadcasters who
previously operated in all elements of broadcasting. As
companies in the broadcast industry focus on one or two key
areas, elements of the service will be delivered by outside
organizations. This provides opportunities both for delivering
these services and providing communications infrastructure
between service providers.
o Increasing impact of content. The fundamental changes in the
way in which content is stored, distributed and broadcast
increases the complexity of these services. The integrated
nature of these services will require transmission service
providers to be increasingly skilled in handling content and
have a greatly improved understanding of the businesses of the
broadcasters themselves.
o "Not in my backyard" arguments against tower proliferation
driven by increased environmental and aesthetic concerns favor
existing tower operators and locations. This further reinforces
existing operators' positions and provides new revenue
opportunities.
WIRELESS COMMUNICATIONS
The wireless communications market comprises a number of application
segments: mobile communications including cellular and PCS telephony,
Global System for Mobile ("GSM"), Universal Mobile Telecommunications
System ("UMTS"), paging, Specialized and Enhanced Specialized Mobile Radio
("SMR" and "ESMR"), Point to Point Links, Public Access Mobile Radio and
Public Access Mobile Data ("PAMR" and "PAMD"), and Wireless Local Loop.
Traditionally, wireless communications operators have built and
operated their own communications infrastructure. However, these services
are increasingly outsourced as the wireless systems become more complex
enabling operators to focus resources on the provision of services. In
addition, the sharing of towers and sites is becoming increasingly
necessary for environmental and regulatory reasons.
INDUSTRY STRUCTURE
We are a network service provider in the wireless communications
industry, renting antenna space on our owned and leased towers and sites to
a variety of carriers operating wireless services. In addition, through our
strategy of outsourcing services, we also provide facilities and services,
relating to the leasing of space on our towers, directly to the
professional user market.
Typically we receive fees for installing customers' equipment and
antennas on towers in addition to rental payments from customers payable
under their site leases. As of April 30, 2000, in the U.K., over 378
companies rented antenna space on our towers and sites. These site rental
agreements have terms which are typically 10 years in length (and
renewable), and are generally subject to price indexation with inflation.
Site sharing customers are typically billed a year in advance. During the
last four years, the number of lessees on our towers has grown from 1,989
to over 3,813 in April 2000 (excluding broadcast customers).
WIRELESS APPLICATIONS
Both the consumer and professional markets use wireless networks for
a range of applications that are provided by the network operators who use
our network and infrastructure to deliver them. We serve each of the major
segments of these markets.
Cellular Telephony
Cellular telephony is used predominantly by the consumer market,
where it has the most widespread visibility, but it also extends to the
professional market. Cellular communications in the U.K. is the largest of
the wireless applications in term of customers, coverage, and usage of
wireless communications sites and is experiencing extraordinary growth that
is predicted to continue. Unlike the U.S., the regulation in the U.K. and
much of Europe has extended to the technical standards, which when combined
with other market differences has led to widespread implementation based on
common standards. This has resulted in 46% penetration of the population
with very strong growth and close to 100% geographic coverage of the
services. We currently provide infrastructure for all of the cellular
telephony operators in the U.K. under contracts accounting for (pound)33.8
million ($50.7 million ) revenues in 1999.
The mobile subscriber market has sharply risen from 10.5 million in
October 1998 to 25 million in March 2000. This figure is predicted to rise
beyond 50% of the U.K.'s population during 2000. In order to provide both
coverage and service availability this translates to increased demand for
sites. The factors driving this unprecedented growth in mobile
communications, network build and base stations include: subscriber growth;
price competition; and e-commerce via mobile devices.
In addition, price competition has been driven by the introduction of
pre-paid or "pay-as-you-go" phones and regulatory changes enabling number
portability between operators.
A further growth factor is the massive growth in internet trading and
other types of e-commerce, with various forecasts that 50-80% of all
commercial trading will be by electronic means by 2003. New services, such
as using the mobile phone as a credit/debit card are already being
developed to exploit these moves.
UMTS
UMTS is an advanced form of cellular telephony. Subsequent to
licensing first generation analog voice-only cellular systems in 1985 and
second generation digital GSM cellular systems in 1992, the U.K. government
has now awarded 3rd generation UMTS licenses. These licenses have been
awarded to four existing operators, all of whom are existing customers of
ours for site sharing and one new entrant.
OPERATOR NETWORK LICENSE
-------- ---------------
TIW (Hutchison) one 15 MHz paired spectrum plus 10 MHz unpaired spectrum
Vodafone one 15 MHz paired spectrum
ONE2ONE three 10 MHz paired spectrum plus 5 MHz unpaired spectrum
BT3G three 10 MHz paired spectrum plus 5 MHz unpaired spectrum
Orange three 10 MHz paired spectrum plus 5 MHz unpaired spectrum
UMTS third generation cellular licences in the U.K. have recently
been issued by the U.K. Government for the period to December 31, 2021,
allowing for 20 years of commercial services from January 1, 2002.
Because UMTS provides significantly higher bandwidth than existing
cellular technologies, UMTS will be able to introduce a range of new
services to consumers such as e-commerce, video and internet access.
We believe that these operators will require a complete national
network based around a radio site infrastructure of up to 4,000 sites each
by 2003 and potentially up to 10,000 or more sites by 2010, each ultimately,
at a time when environmental concerns are making the acquisition and
completion of these sites increasingly difficult.
As an independent owner and operator of tower infrastructure and
services, we believe we are well placed to take advantage of this business
by offering these operators a number of services:
o The existing four mobile cellular networks rely heavily on us
for elements of their tower and site networks. We believe that
the new fifth operator, TIW, will require access to a similar
number of our sites to provide competitive coverage with the
existing operators.
o Additional site sharing for existing operators migrating to
UMTS
o By utilizing facilities and networks elsewhere in NTL Group, in
particular its national network infrastructure, we are able to
provide operators with both the transmission site and
connectivity for the associated network. This will generate
additional revenues from both the new entrant and existing
operators.
o Provision of high capacity backhaul circuits using the NTL
Group fiber trunk network.
Although at an earlier stage in development, similar opportunities
also exist in Australia for which we believe we are particularly well
suited.
In Building
The dramatic growth necessitates reliable communications
infrastructure in all commercial areas, leading to a requirement for good
cellular coverage inside buildings. We believe this creates a new type of
radio site, which unlike towers, will exist within commercial buildings,
transport hubs, shopping malls and other large buildings. To this end, we
have won the exclusive contract to provide this service inside Bluewater,
Britain's largest shopping complex. Our initial analysis shows that there
are approximately 2,000 large retail, transport and other multi-tenanted
commercial properties in the U.K. that will require communications
infrastructure to facilitate wireless telephony.
This is predominantly an application for the consumer market but as
the existence of a wireless network within a building is increasingly
expected there are significant professional opportunities which will arise
such as in-building PMR networks, data kiosks and fixed telephony.
Paging
In the U.K. there are four analog paging networks and the government
has recently awarded licenses for five additional digital networks.
Developments in paging beyond basic text messaging to email delivery, voice
mail notification and two way messaging coupled with new packaging and
marketing of the services are leading to increased demand for paging
transmission infrastructure. We provide infrastructure for all five paging
companies and this accounts for less than 2% of our total revenues.
Private Mobile Radio ("PMR")
We provide towers for PMR services which include dispatch, command
and control, fleet management systems for utilities, local government and
emergency services as well as private businesses. This application is in
the professional user market.
Like other wireless segments, the complexity of digital platforms is
driving operators to outsource PMR functions including portfolios of
towers. We believe that in the U.K. outsourcing by public safety
organizations will bring up to 500 additional towers to the market by 2004
as part of the roll out of sites for the Public Safety Radio Communications
Project ("PSRCP").
Public Access Mobile Radio / Public Access Mobile Data (PAMR/PAMD)
PAMR and PAMD systems provide a combination of voice, dispatching and
data applications useful for businesses such as fleet operators as well as
hauling and logistics companies. PAMR/PAMD both complement and compete with
mobile data capabilities established over PMR systems. As some of our
customers transition to public communications systems, we will continue to
provide appropriate services and infrastructure as part of our existing
relationships with them. In the future, the major opportunity is based on
the U.K. government's decision to provide a new network serving the police
and other government services requiring emergency communication
capabilities. PSRCP will use a 3,000 site network, with build-out
commencing in 2000 and completion scheduled for 2005, to cover England,
Scotland and Wales and enable real-time delivery of critical information
such as vehicle records to police cars or medical information and advice to
paramedic teams. Implementation plans are not yet fully defined but we
believe that the site sharing, design and installation of the network
required by the project represent significant opportunities for us.
Point to Point Links
Approximately 250 PTOs compete with British Telecom for the provision
of the deregulated telecommunications sectors' most lucrative segment,
business network traffic. Most of these operators use microwave as part of
their network strategy, with strategic hilltop sites, which provide "line
of sight" microwave shots directly to large business users, as a key
network access node. Our network of hill-top sites provide a platform for
low-cost microwave access to U.K. businesses. A number of these PTOs lease
space on towers from us for this purpose.
AUSTRALIA
Australia has one of the world's highest mobile penetration rates at
approximately 40% or 7.5 million subscribers as of December 1999. There are
three national GSM operators and the Australian government has recently
undertaken further spectrum auctions resulting in three new mobile
operators. We believe we are well positioned to take advantage of this, in
particular since new entrants to the wireless market are very open to
outsourcing non-core activities and the increasing number of operators
using a finite number of sites.
TRENDS
Key trends in wireless communications include:
o Rapid growth of cellular mobile telephony, with recent annual
growth rates greater than 85% (FT Telecomms Markets) in the
U.K. for existing services. Granting of licences for 3rd
generation mobile will further boost demand, adding a new
national mobile operator and requiring the provision of five
entire networks. Because of the inherent differences of 3rd
generation technology, each network will require significantly
more sites and interconnection than previous services.
o Government policy continues to encourage new entrants into all
areas of the telecommunications and media market, continuing
its leadership in de-regulation of these markets. New operators
entering the fixed market are faced with significant costs in
installing local loop and interconnection infrastructure
whereas wireless communications operators offer a relatively
low cost and quick way of providing services. These new
wireless operators will drive the demand for tower sites.
o Environmental pressures to encourage sharing of site
facilities. Given that a single site could be ideally located
for a number of services, the sharing of these sites will
reduce the number of sites at a given location. In addition to
the economic benefits, the current negative publicity
surrounding the proliferation of transmission sites will
increasingly encourage operators to share facilities.
o The addition of new data based services to the existing
voice-only networks as the transition to late 2nd and 3rd
generation systems progresses. These services will include
e-commerce facilities such as banking, shopping, and
information delivery, mobile Internet access and mobile video.
Smaller cell sizes and advances in the technology will remove
the traditional bandwidth limitations that have restricted the
growth of these services.
o Increasing recognition by many communications and media
companies that ownership and operation of networks is not a
core business. This will drive increased demand for outsourced
provision of tower infrastructure.
o Increasing traffic volumes combined with pollution reduction
programs and legislation will drive increased demand for
traffic information, tolling and navigation systems and as a
result, the necessary supporting tower infrastructure.
o The advent of new digital technologies in all areas of
communications is creating new service opportunities such as
delivery of data to emergency services. These are dramatically
changing existing markets as well as creating new ones. In
addition to this global trend, the U.K. in particular has
established a lead in broadcast digital technology that can be
applied to other markets.
STRATEGY
Our objective is to be recognized as the leading global owner and
operator of towers and transmission networks and associated services for
wireless communications, broadcast and media industries. We believe that we
are strongly positioned to take advantage of global growth opportunities
because of our extensive core competencies in:
Towers Management
o Extensive U.K. and Australia portfolio.
o Experience in managing, owning, operating and maintaining
broadcast towers.
o Complete end-to-end capabilities covering all aspects of tower
and aerial design & installation.
Privatization transition management
o Management experience of public-private ownership transition.
o Expertise in effective management of labor relations.
o Extensive and proven ability to identify and effectively
implement economies of scale in broadcast networks.
o Expertise in increasing asset utilization.
Service excellence
o Supplier of choice for U.K. and Australian TV and radio
broadcasting services.
o Significant historical investment in infrastructure and control
systems to achieve 99.9% availability.
o State-of-the-art remote transmission control system for
national and regional broadcast networks both in the U.K.
and Australia.
Technology innovation
o History of service and support innovations.
o Implementation of the world's largest and most complex digital
terrestrial TV network including national and regional services
in the U.K.
o Implementation of the U.K.'s first national commercial digital
audio broadcasting radio network.
These competencies reinforce the following key strategies:
Capitalize on the growth in demand for cellular and wireless
communication services, by growing the site portfolio through acquisition
and organic growth. Examples of successful portfolio acquisitions include
Eastern Group Telecom with 121 established sites, with a further 589
locations agreed for development, plus Simoco U.K. with 112 towers.
Examples of organic growth include 241 towers that we have built and for
which we initially have One-2-One as the primary anchor tenant in addition
to 611 broadcast towers that we planned and built ourselves. Furthermore,
the requirement for wide spread coverage, in particular within buildings,
is also yielding new opportunities that we have already demonstrated
significant success, such as the Bluewater shopping center, the largest
shopping center in Europe. We expect the Bluewater contract to be the first
of many similar business opportunities in which we are involved.
Acquire existing broadcast transmission networks worldwide. Australia
is the first example of our strategy to acquire tower infrastructure and
associated broadcast systems outside the U.K. Globally, there is a trend
for governments and broadcasters to divest their transmission networks. We
intend to purchase networks of sites together with transmission contracts
and replicate the U.K. growth model overseas. For TV and radio, we will
initially target efficiency improvement in analog networks and then
participate in the introduction of digital services. There are
approximately 15 near-term opportunities for acquisition of state owned
broadcast assets including those in Canada, Malaysia, Thailand, Ireland,
Italy, Belgium, South Africa, the Netherlands, Finland and Hungary. To
achieve this strategy, the company is already building local relationships
in a number of countries where privatization is imminent. To this end, we
have already established a regional office in Singapore with outstations in
Malaysia and Thailand. In addition to representing us in those markets, the
offices are responsible for consultancy and other projects for the target
customer base which serves to build business relationships and provide
advance market intelligence in addition to generating revenue.
Maximize asset utilization by fully exploiting additional tower and
wireless services such as site leasing for owned tower infrastructure. This
replicates our U.K. model and forms a key part of our plans for Australia,
which include site sharing for mobile cellular operators and emergency
service communication services.
Participate in the continued roll-out of U.K. digital networks. We
believe that the continued roll-out of the U.K.'s digital TV, radio and
communications networks will generate significant revenue opportunities and
give us an opportunity to demonstrate our on-going commitment to the
implementation of highly complex, state-of-the-art digital broadcast and
communications systems. Digital broadcast systems require a more complex
engineering design than their analog predecessors. We have exploited this
by extending our range of services to include not only tower leasing and
transmission services (as with analog), but also "end to end" system
integration and service, from studio play-out centers to terrestrial
transmission. We have been successful in this area in the U.K. and plan to
replicate this successful experience internationally.
Expand scope of product portfolio available to customers. As the
industry increasingly focuses on its core business, we are able to support
this through our experience and knowledge to develop and deliver new
products and services to meet customers broadcast, network and
communication infrastructure requirements. These products and services are
based upon further expanding the revenue streams from our existing asset
portfolio. This includes new services such as interconnection, playout and
studio facilities where we have had significant success already, such as
our contracts with SDN and British Eurosport. We are currently in
discussions for what we believe will be similar significant new
opportunities.
Leverage extensive management experience with consulting services.
For example, we are becoming increasingly involved in our customers' tower
portfolio growth plans in areas where we are able to add significant values
such as frequency planning. As a result, closer customer relationships are
developed that enables us to take advantage of further outsourcing
opportunities.
AUSTRALIA
Our experience with privatization of the U.K. broadcast network, ten
years' experience of subsequent commercial operation, and our digital
broadcast expertise provide us with the know-how to take advantage of
similar developments in other countries. In April 1999, we significantly
expanded the sales and scope of our broadcasting business through the
acquisition of the Australian National Transmission Network ("NTN"), from
the Australian government.
Our acquisition of NTN adds 410 towers to our business with
significant growth opportunities similar to the U.K., including the
transition of the network to digital. In addition to the 410 towers we own,
we also have access to an additional 151 towers. As such, we operate 561
tower sites and provide television and radio transmission services to
Australia's national public TV and radio broadcasters, ABC and SBS. In
addition, we serve regional and community TV and radio broadcasters, and
provide equipment hosting services to telecommunications operators and
emergency service communications from our towers.
We intend to apply to the Australian network a strategy similar to
that successfully employed in the U.K., specifically we intend to:
o Yield operational efficiencies based on our experience of
broadcast operation and privatization in the U.K.
o Expand usage of tower infrastructure through new incremental
revenues on existing infrastructure
o Implement the transition to digital utilizing our U.K.
expertise, focusing on long term signal distribution and
transmission contracts
o Enter the distribution and connectivity markets, initially by
deploying an east coast telecommunications network to
distribute new digital TV signals and other carrier services.
This is similar to the successful market entry strategy used in
the U.K.
Since the acquisition of NTN, we have made a number of significant
improvements to the existing operations in Australia and are now well
positioned to take advantage of new opportunities in digital terrestrial
broadcasting, data broadcasting and wireless and cellular networks.
Our existing terrestrial television customers now benefit from a new
network operations center based in Sydney from which the entire terrestrial
TV network is managed. This facility is modeled on the existing facilities
in the U.K. and will also enable us to operate and manage new digital
terrestrial networks in the future. This new facility provides our
customers with significantly more information and visibility of the
networks and helps to further improve the responsiveness of our maintenance
services.
As part of the introduction of digital television in Australia, the
government is actively promoting "datacasting" services which will
ultimately provide homes with TV-based access to e-mail, the Internet,
financial services, shopping, news, games and other interactive services.
We have been awarded a datacasting trial licence by the Australian
Broadcasting Authority (ABA) which has facilitated development of a
technology platform for transmission to potential datacasters in order to
broadcast content to a number of homes and businesses in Sydney, Canberra
and Newcastle. We will also supply the associated end-to-end solution for
the operators in the trial. This will encompass cable feed, encoders,
multiplex, transmission services and the provision of set-top boxes.
We have also gained new customers in the wireless communications
market (such as Hutchison who uses certain of our towers for its CDMA
network rollout). We are also developing new transmission services to
support a recent Northern Territory government contract for two television
services in Darwin, eleven new television and radio services for the
Australian Broadcasting Corporation and 71 new analog television
services for SBS.
SERVICES
We are a leading global owner and operator of broadcast transmission
and wireless communications infrastructure and related services. We own and
manage 2,442 transmission towers and sites, of which 410 are located in
Australia and 2,032 are located in the U.K. Of these sites, 1,020 provide
broadcast services (611 in U.K., 410 in Australia). In addition to the
2,442 towers, we also have access to a further 829 sites for the use by our
broadcast customers (151 in Australia and 678 in the U.K.). Using these
sites and our supporting communication and service infrastructure, we are
able to deliver national and regional broadcast and wireless communication
services.
We have developed a range of associated complimentary services around
our site portfolio which enable us to use our experience and expertise to
provide maximum leverage of the portfolio. These services are:
o Tower and site infrastructure services
o Identification and acquisition of tower and sites, both
individually and whole portfolios.
o Tower design, construction and project management.
o Antenna design and installation.
o Both as a stand-alone service and as part of a wider
service package to broadcast and wireless customers.
o Network management and development
o Complete management and control of high availability
broadcast networks on behalf of broadcast customers
utilizing state-of-the-art remote monitoring and control
systems.
o Maintenance services for complete networks of broadcast
transmission equipment.
o Satellite uplinking services and associated support 24 hours a
day, 7 seven days a week
o Complete transmission services for entertainment
services and distribution.
o Mobile and transportable uplink facilities for customer
site or remote use such as breaking news and sport
services.
o Frequency and network planning
o Communications
o Extensive fiber and microwave communications network to
provide connection with and between tower and site
infrastructure.
o Fiber connectivity services between our uplink sites,
customer premises in the U.K. and U.S. studio and
playout facilities.
NETWORKS
Our tower and site portfolio consists of:
OWNED, TO WHICH WE
LEASED OR HAVE
LOCATION MANAGED ACCESS TOTAL
------------ ------------ ------------ ------------
U.K. 2,032 678 2,710
AUSTRALIA 410 151 561
------------ ------------ ------------ ------------
TOTAL 2,442 829 3,271
U.K. NETWORKS
Tower and Sites
We have 2,032 owned and managed sites in the U.K. that provide
extensive coverage of the U.K. population and landmass for our businesses
in site leasing, broadcasting services and wireless communications. A large
number of the towers were built for broadcast purposes before 1990. Between
1996 and 1999, we have constructed 241 towers at an aggregate cost of
approximately (pound)17 million ($25.5 million ). Although current tower
construction is not significant, it is anticipated that development of a
large number of sites available to us as part of recent acquisitions will
result in increased construction. Portfolio growth is currently achieved
primarily through acquisition.
The U.K. sites portfolio includes large hilltop transmission
structures of heights ranging from under 30m to 385m (1270 ft).
TOWERS OVER 50M IN HEIGHT
Over 300m 10
200-300m 14
100-200m 12
50-100m 73
These sites together afford the capability of line of sight microwave
interconnection, as well as ideal locations for the operation of broadcast
& two-way communications systems. Typical figures for key applications'
coverage afforded by these sites is given below.
MARKET POPULATION COVERAGE
------ -------------------
TV Broadcast 99%
Cellular communications 75%
Paging 97%
PMR 97%
Population coverage is determined by the Independent Television
Commission, the U.K.'s commercial television regulatory authority. For
cellular communications, coverage is based on an estimate of U.K.
population coverage for a 7.5 km cell radius based on the U.K. government
1991 census. For paging and PMR, coverage is based on an estimate of U.K.
population coverage for a 20 km cell radius based on the U.K. government
1991 census.
It is our business policy to develop sites for any of our key markets
in any area of the U.K. not currently served by good radio sites. As such,
the effective coverage achievable from our sites is 100% in all key
markets. We have extensively marketed our sites and have attracted a
significant number of users on our existing site portfolio. Given current
growth trends in mobile communications and the rollout across the U.K. of
digital broadcast services, we anticipate significant continued growth in
installations of new tenants.
In addition to our owned and managed sites, we also have access to a
further 678 additional sites in the U.K. to provide 99% national TV
coverage through a site-sharing agreement. As a result of a number of
factors which include the historical structure of the industry, a natural
shortage of potential transmission sites and the difficulties in obtaining
planning permission for erecting further towers, we have made arrangements
with CCI to share a large number of tower sites.
Satellite and Fiber
We also own and operate a satellite communication network, which we
use to provide services to our customers. This network consists of two
uplink sites in Winchester and London which currently include 30 satellite
dishes with sizes up to 52ft (16m) with the ability to transmit directly to
over 50 satellites between 30 degrees West and 69 degrees East.
In order to meet expanded demand for these services, we are also
constructing an additional uplink site near Winchester which is planned to
include up to 20 additional satellite dishes and will significantly
increase our capacity. All required approvals have been granted and
construction of this site is under way with the first services expected in
the third quarter of 2000.
All of our uplink sites are connected using a fiber network which
provides our customers with connectivity to studios, facility houses,
playout centers and, via our partnership with Williams Vyvx in the U.S., 48
cities in the U.S.
We also own and operate a fleet of satellite news gathering trucks
and portable "flyaway" terminals with which we are able to provide a range
of services to our customers in association with our fixed uplinking and
fiber infrastructure.
AUSTRALIA
In 1999, as part of our strategy of international expansion, we
acquired NTN, the provider of broadcast transmission services to ABC and
SBS, Australia's national public TV and radio broadcasters.
The acquisition includes a broadcast site portfolio of 410 sites that
are owned or leased and operated by us, and allows us to provide both new
services to our existing customers and to grow site utilization by adding
wireless and mobile communication customers. In addition, we have access to
a further 151 sites to service our existing broadcast business.
Our strategy is to grow the site portfolio through individual and
portfolio acquisition and 'build to suit' construction.
SALES & MARKETING
In anticipation of continued growth and in order to enhance
decentralized management, our business is structured as customer focused
business units including Media Solutions (comprised of Broadcast Television
and Radio, Satellite and Media Services); Towers & Sites; and Australia.
Each unit addresses and implements our sales and marketing requirements to
meet its own needs and also benefits from corporate marketing activity
undertaken along with the NTL Group.
A key objective is to understand our customers' requirements to a
level which will enable us to provide the best solution within their budget
to support their business plan, from coverage growth to penetration of new
markets. Our history of pioneering new approaches, operating flexibility
and utilizing state-of-the-art technology should position us well in the
partnership added value environment.
Our site portfolio, and details of structure heights and locations,
have been identified as critical information in our customers' decision to
use our facilities and services. To this end we deliver our site portfolio
information via state of the art electronic communication techniques
providing our customers with the most up to date information to support and
develop their businesses.
We also undertake extensive proactive sales and marketing of our
tower and site portfolio, including:
o Direct sales through a dedicated national sales force that
specializes in long term relationships with major customers
o Dedicated resources to support and drive our customers' growth
via virtual teams from strategic account development to after
sales care
o Development of close operational links with customers to better
understand their site requirements and ensure awareness of our
portfolio
o Database marketing of our existing customer base
o A range of marketing communications activities including
promotional brochures, newsletters, press liaison activities
and regular industry exhibition attendance
o Attendance at relevant trade shows and conferences
o Public and community related conferences and meetings to enhance
our customers understanding of our current and future products
and markets
In order to support our international business development strategy,
we also maintain sales offices in Singapore and Australia. These offices
are able to draw on our global experience and knowledge to identify
opportunities and generate revenues.
Finally, in support of our international acquisition strategy, a
dedicated team based in the U.K. monitors and identifies potential
partnership, merger and acquisition activity and undertakes activities
required to bring these opportunities to conclusion.
CUSTOMERS
In both our site rental and network services businesses, we work with
multiple customers in a variety of industries including those identified
below.
UNITED KINGDOM
BUSINESS UNIT PRIMARY CUSTOMERS INDUSTRY/MARKET
------------- ----------------- ---------------
Media Solutions Channel Four and Five; 17 Broadcasters
regional ITV companies;
BBC
Turner, Flextech, Programers
Discovery, QVC
Reuters, APTN News Agencies
Broadcast Radio BBC; Classic FM and parent Radio
company GWR plc; Digital
One; Capital Radio plc;
EMAP Radio; Chrysalis
Radio
Towers & Site Leasing Vodafone plc; Orange plc; Cellular / Paging / PCS
(Cellular / Paging) One2One; BTCellnet; and
Dolphin
Vodafone Airtouch, Cellnet, Telecommunications,
One 2 One, Orange, Dolphin, point to point links
BT N&S, Cable & Wireless,
Highway One, and MLL.
AUSTRALIA
BUSINESS UNIT PRIMARY CUSTOMERS INDUSTRY
------------- ----------------- --------
Television Broadcast ABC; SBS Broadcasting
Radio Broadcast ABC, SBS and DMG Radio
Services
Towers & Site Leasing Telstra, Vodafone, C&W Cellular / Paging / PCS /
(Cellular Paging/ Optus, WIN television, Broadcasting
broadcast) Prime Television
Only two customers, Channel Four in the U.K. and ABC in Australia, are
expected to account for more than 10% of 2000 revenues of the Broadcast
Group. Our ITV customers are made up of a federation of 17 individual
franchises of which none individually make up more than 10% of revenues of
the Broadcast Group. However, control of most of these 17 rests in the
hands of three consolidated companies and the 17 negotiate with us
collectively for contract renewal and pricing. Collectively, the 17 ITV
companies contribute in excess of 10% of revenues of the Broadcast Group.
COMPETITION
UNITED KINGDOM
CCI is our primary competition in the terrestrial broadcast
transmission market in the United Kingdom. CCI provides transmission
services to the BBC. It also has been awarded the transmission contract for
the new DTT multiplex service for the BBC and OnDigital. CCI has
diversified from its core television broadcasting business using its
transmission infrastructure to enter into the radio transmission and
telecommunications sectors.
Although CCI is a direct competitor, each of us and CCI have
reciprocal rights to use the others' sites for broadcast transmission
services in order to enable each of us to achieve the necessary
country-wide coverage. This relationship is formalized by the site-sharing
agreement entered into in 1991 when the IBA's towers portfolio was
privatized and sold to us.
CCI also offers site rental on a significant number of sites (some of
which are managed on behalf of third parties) and has a range of
site-related services, including installation and maintenance. There is
little overlap between the portfolios and we believe our towers to be
as well situated as those of CCI and that we will be able to continue
expanding our own third-party site-sharing penetration.
Tower & Site leasing also has CCI as its key competitor but also
competes against Aerial Group plc which owns a smaller portfolio of towers,
and cellular operators Vodafone Airtouch, Cellnet and Orange who own tower
infrastructure. All of the U.K. mobile operators own site infrastructure
and lease space to other users. The openness to sharing with direct
competitors varies by operator. BTCellnet and Vodafone Airtouch have agreed
to cut site costs by jointly acquiring and developing sites in the Scottish
Highlands. BT and Cable & Wireless Communications are both major
site-sharing customers but also compete by leasing their own sites to third
parties. BT's position in the market is even larger when considered in
combination with its interest in Cellnet.
Several other companies compete in the market for site rental. These
include British Gas, Racal Network Systems, Aerial Sites Plc, Relcom Aerial
Services and the Royal Automobile Club. Some companies own sites initially
developed for their own networks, while others are developing sites
specifically to exploit this market.
We face competition from a large number of companies in the provision
of network services. The companies include CCI, speciality consultants and
equipment manufacturers such as Nortel and Ericsson. Alice Soundtech,
Radica and Sound Broadcast Systems all compete in our radio transmission
market.
AUSTRALIA
In the provision of broadcasting transmission services, CCI is
potentially a prime competitor and have recently acquired a portfolio of
predominantly telecommunications towers, although they do not currently
share broadcast infrastructure with us nor do they have an existing
broadcast customer base. In addition, "TX Australia" has been formed as a
joint venture by the three commercial metropolitan networks as an alternative
supplier of sites, but not transmission services, in the five capital city
markets. In the telecommunications market, there are approximately 40
carriers that are potential competitors.
BARRIERS TO ENTRY
The key barriers to entry for any competitor are the limitation on a
new entrants' ability to gain access to a sufficient number of sites to
provide a competitive service. These limitations include:
o Customers' transmission licences and technical frequency
planning restrictions often specify the location from which the
transmission can take place. Our facilities are often the only
available structures at the location. This is also a barrier to
customers switching between transmission providers.
o Planning/Zoning approval is becoming increasingly difficult and
as such new entrants may often be precluded from building
additional sites.
o The capital-intensive nature of building transmission
infrastructure. In addition the supporting broadcast
infrastructure such as transmission control and monitoring
systems must meet broadcaster requirements and the cost and
complexity of replicating these would be very high. These costs
are expected to increase with the migration to digital systems.
PROPERTIES
We operate our business from a number of premises, all of which are
shared to varying degrees with other parts of the NTL Group. Key premises
are the head office at Crawley Court in Hampshire and the operations center
at Emley Moor in Yorkshire which are both owned freehold and are largely
devoted to our business.
The 2,032 towers and sites in the U.K., and additional operational
sites contain freehold owned sites (229), long leasehold sites (1,545),
managed and licensed sites (258). The duration of these leases range from
one to 20 years. We also have two satellite uplink facilities at Crawley
Court and Morn Hill, both in Hampshire, which are both owned freehold.
We do not believe that the short leasehold status of some of our
sites poses any material threat to our revenues or plans.
In Australia, we have access to 561 sites. We manage and can develop
410 transmission sites which are owned (240 freehold, 170 leasehold),
leased or operated under licence. For 151 sites, we share under license and
operate under restricted rights. We also lease offices in Sydney and
Canberra.
EMPLOYEES
Our services and infrastructure are provided using a combination of
our employees and service delivery, support and maintenance from the NTL
Group's operations division.
As of April 30, 2000, our Broadcast Group employees numbered 601 of
which 77 are based in Australia, 16 in Asia and 508 in the U.K. This
includes the business management, commercial, project and technical support
functions.
Additionally, approximately 750 operations employees are dedicated to
delivering, maintaining and operating the broadcast transmission services
through managed service level agreements. On a short-term basis, additional
employees are also used from other parts of NTL for specific projects.
We recognize a single union, the Broadcast Entertainment
Cinematography and Theatrical Trade Union ("BECTU"). Approximately 20% of
core staff (120) and approximately 90% of technical and operational staff
(630) are represented by BECTU with whom we have a formal collective
bargaining agreement. We enjoy excellent relationships with our employees
and there have been no significant labor disputes in the last five years.
SITE SHARING AGREEMENT
Our site sharing agreement with Crown Castle enables us to provide
close to 100% coverage of the UK for the broadcast of television or radio.
Under the present site sharing agreements, each party has reciprocal rights
to use each others' sites for broadcasting usage. Each site license granted
pursuant to this site sharing agreement is for an initial period expiring
on December 31, 2005, subject to title to the site and to the continuation
in force of the site sharing agreement. Each site sharing agreement
provides that, if requested by the sharing party, it will be extended for
further periods. Either party may terminate the agreement by 5 years'
notice in writing to the other expiring on December 31, 2005 or at any date
which is a date 10 years or a multiple of 10 years after December.
LEGAL PROCEEDINGS AND REGULATORY
We are not currently a party to any material litigation.
REGULATION
U.K.
Through our activities in broadcasting television and radio, we are
required under U.K. legislation to hold Telecommunications Act licences.
INDEPENDENT TELEVISION COMMISSION ("ITC") AND RADIO AUTHORITY ("RA")
The ITC and RA are the regulatory bodies that oversee the entire
commercial broadcast television and radio industry in the U.K. They are
concerned both with content suitability and broadcast quality.
Several of our customers have legal obligations to the ITC in these
areas under their individual program licences. As the transmission service
provider to most of the television and radio broadcasters in the industry
we also have certain quality requirements to meet in order to enable its
customers to meet their obligations to the ITC.
TRANSMISSION LICENCE
The Transmission License enables us to run telecommunications systems
for the provision of television and radio transmission services. It permits
us to carry out our core business of providing transmission services to
television and radio broadcasters. The Transmission License was granted on
December 20, 1990 for a period of 25 years from January 1, 1991. It is
subject to revocation thereafter on 10 years' written notice from the
Radiocommunications Agency. No notice may be given before the end of the
fifteenth year. The transmission license also requires us to hold Wireless
Telegraphy Act licenses in respect of each element of wireless telegraphy
comprising our system.
WIRELESS TELEGRAPHY LICENCES
We hold a number of Wireless Telegraphy Act licenses throughout our
business. Our core business of providing transmission services for
television and radio broadcasting requires one of these, a License for the
Transmission of Broadcasting Services. This license was granted on January
1, 1991 and permits us to operate wireless telegraphy stations at those
sites, and at specified mast heights, power, polarization and frequency as
set out in a schedule to the License.
This license continues in force from year to year unless revoked by
the Secretary of State or unless we do not pay the license fees.
In addition, we provide transmission services for a large number of
radio stations pursuant to our License for the Transmission of Broadcasting
Services dated January 1, 1991. In respect of two radio stations, Classic
FM and Virgin Radio, we have been issued licenses that are specific for
those radio stations. In both cases, the radio station pays the license
fees direct to the Radio Communications Agency.
PRICE REGULATION
Our Price Regulated Business consists of the television transmission
service provided to the ITV (Channel 3) companies and Channel 4/S4C,
including the operation and maintenance of transmission equipment and the
provision to third party transmission operators of the accommodation, masts
and antennae necessary for the operation of broadcast transmission
services.
On December 24, 1996, the Director General of OFTEL issued the formal
modification to our Telecommunications Act Licenses to effect the price
controls that are to apply to us for the period from January 1, 1997 to
December 31, 2002. The Price Cap Review had two purposes: (1) to establish
a new "P0" (allowable revenues for the first year of the next control
period, 1997, in respect of our Maximum Price Regulated Business) and (2)
to establish a new "X" (the percentage by which such revenues must, after
allowing for consumer price inflation, be reduced each year thereafter).
The Director General's review concluded that, on assumptions valid at the
time, the new P0 was set at (pound)53.15 million ($79.73 million) and the
new "X" was 4.
AUSTRALIA
Legislation concerning media and telecommunications is the
responsibility of the Department of Communication and Arts. Media
regulation and broadcasting spectrum planning is handled by the Australian
Broadcasting Authority (ABA). Responsibility for the other, non-military
spectrum falls under the Australian Communication Authority. Additional
competition issues are determined by the Australian Consumer and
Competition Commissions.
As owner of broadcast intrastructure, the Broadcast Group is subject
to certain legislative access obligations including the provision of analog
broadcast and digital television transmission services and facilities
access.
------------------------------------------------------------------------------
PROXY
NTL INCORPORATED
110 EAST 59TH STREET, NEW YORK, NEW YORK 10022
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING ON [ ], 2000
The undersigned hereby appoints George S. Blumenthal, Barclay Knapp
and Richard J. Lubasch, and each of them, with full power of substitution,
proxies to represent the undersigned at the Special Meeting of Stockholders
of NTL Incorporated (the "Company") to be held at 10:00 a.m., local time,
on [ ], 2000, at the Essex House Hotel, located at 160 Central Park South,
New York, New York 10019, and at any adjournment or postponement thereof
and thereat to vote all of the shares of stock which the undersigned would
be entitled to vote, with all the powers the undersigned would possess if
personally present.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. Unless otherwise specified in the boxes provided below, this Proxy
will be a vote FOR proposal 1, FOR proposal 2, and in the discretion of the
above named persons as to any other matter that may properly come before
the Special Meeting.
1. The approval of the charter amendment proposal as described in the
accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The approval of the incentive plan proposal as described in the
accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In the discretion of persons named above, to act upon such other
business as may properly come before the Special Meeting or any adjournment
or postponement thereof.
THE PROXY HOLDERS WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN THE
MANNER INDICATED ON THE REVERSE SIDE HEREOF. UNLESS A CONTRARY DIRECTION IS
INDICATED, THE PROXY HOLDERS WILL VOTE SUCH SHARES "FOR" PROPOSALS 1 AND 2
SET FORTH ON THE REVERSE SIDE HEREOF. IF ANY FURTHER MATTERS PROPERLY COME
BEFORE THE ANNUAL MEETING, IT IS THE INTENTION OF THE PERSONS NAMED ABOVE
TO VOTE SUCH PROXIES IN ACCORDANCE WITH THEIR BEST JUDGMENT.
________________________
Signature
________________________
Signature
Dated: __________________, 2000
In case of joint owners, each joint owner must sign.
If signing for a corporation or partnership or an
agent, attorney or fiduciary, indicate the capacity
in which you are signing.
PLEASE MARK, DATE AND SIGN YOUR NAME AS IT APPEARS ON THIS CARD
AND RETURN IN THE ENCLOSED ENVELOPE
