<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1997
REGISTRATION NO. 333-16751
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
INTERNATIONAL CABLETEL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 4899 52-1822078
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 906-8440
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD J. LUBASCH, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
INTERNATIONAL CABLETEL INCORPORATED
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 906-8440
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
THOMAS H. KENNEDY, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At such
time or times on and after the Registration Statement becomes effective as the
Selling Holders may determine.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
FORM S-3
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
----------------------- ---------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus.... Registration Statement Cover; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus... Inside Front and Outside Back Cover Pages
of Prospectus; Available Information
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges... Prospectus Summary; Risk Factors; Selected
Consolidated Financial Information
4. Use of Proceeds.............. Use of Proceeds
5. Determination of Offering
Price....................... *
6. Dilution..................... *
7. Selling Security Holders..... Selling Stockholders
8. Plan of Distribution......... Registration Statement Cover Page; Selling
Stockholders; Plan of Distribution
9. Description of Securities to
be Registered............... *
10. Interests of Named Experts
and Counsel................. Legal Matters; Experts
11. Material Changes............. *
12. Incorporation of Certain
Information by Reference.... Available Information; Incorporation of
Certain Documents by Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................. *
</TABLE>
- --------
* Omitted as inapplicable.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JANUARY 30, 1997
PROSPECTUS
(ART)
3,365,000 SHARES
INTERNATIONAL CABLETEL INCORPORATED
COMMON STOCK
This Prospectus relates to the resale of up to 3,365,000 shares of Common
Stock, par value $0.01 per share (together with the Series A Junior
Participating Preferred Stock Purchase Rights (the "Rights") associated with
such shares, the "Common Stock") of International CableTel Incorporated, a
Delaware corporation (the "Company"). An aggregate of 1,415,000 of such shares
are issued and outstanding shares of Common Stock (the "ECE Shares") which were
issued on August 30, 1996 in a private placement undertaken in connection with
the Company's acquisition of the 30% minority interest in English Cable
Enterprises, Inc. that the Company did not already own (the "ECE Acquisition").
An aggregate of up to 1,950,000 of such shares (the "Swalec Shares") are
issuable upon conversion of the Company's issued and outstanding 5% Non-voting
Convertible Redeemable Preferred Stock, Series A, par value $0.01 per share
(the "Series A Preferred Stock"). The Series A Preferred Stock was issued on
October 7, 1996 in a private placement undertaken in connection with the
Company's acquisition of the 40% minority interest in CableTel Newport that the
Company or its subsidiaries did not already own (the "Newport Acquisition").
For a summary of the ECE Acquisition and the Newport Acquisition, see "Recent
Developments." The ECE Shares and the Swalec Shares (collectively, the
"Shares") may be offered and sold from time to time by the holders named in
this Prospectus or by their transferees, pledgees, donees or their successors
(collectively, the "Selling Stockholders") pursuant to this Prospectus. See
"Selling Stockholders."
The Shares may be offered or sold by the Selling Stockholders from time to
time directly to purchasers or through agents, underwriters or dealers on terms
to be determined at the time of sale. See "Plan of Distribution." If required,
the names of any such agents or underwriters involved in the sale of the Shares
in respect of which this Prospectus is being delivered and the applicable
agent's commission, dealer's purchase price or underwriter's discount, if any,
will be set forth in an accompanying supplement to this Prospectus.
The Selling Stockholders will receive all of the net proceeds from the sale
of the Shares and will pay all underwriting discounts and selling commissions,
if any, applicable to the sale of Shares. The Company will not receive any
proceeds from the sale of the Shares by the Selling Stockholders. See "Use of
Proceeds."
The Selling Stockholders and any broker-dealers, agents or underwriters which
participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them or any profit received by them on the resale of Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act of 1933, as amended (the "Securities Act"). See "Plan
of Distribution."
The Common Stock is traded on the Nasdaq Stock Market's National Market (the
"NNM") under the symbol "ICTL." On January 29, 1997 the last reported sale
price of the Common Stock on the NNM was $24.25 per share. Prospective
purchasers of the Common Stock are urged to obtain current information as to
market prices of the Common Stock.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE>
AVAILABLE INFORMATION
The Company is currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements
and other information with the Securities and Exchange Commission (the
"Commission"). Any reports, proxy statements, information statements and other
information filed by the Company with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and 13th Floor, Seven
World Trade Center, New York, New York 10048, and copies of such material may
also be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a site on the World Wide Web, the address of which is
http://www.sec.gov, that contains reports, proxy and information statements and
other information regarding issuers, such as the Company, that file
electronically with the Commission. Such reports, proxy statements and other
information concerning the Company also may be inspected at the offices of the
Nasdaq Stock Market, Reports Section, at 1735 K Street, Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form S-
3 (herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits filed or incorporated as a part thereof, which are
on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission. Statements contained in this Prospectus as to the
contents of any documents referred to are not necessarily complete, and, in
each such instance, are qualified in all respects by reference to the
applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1995, dated March 22, 1996;
(b) the Company's Quarterly Reports on Form 10-Q for the period ended March
31, 1996, dated May 22, 1996 (as amended by Form 10-Q/A-1 dated May 24,
1996); for the period ended June 30, 1996, dated August 14, 1996; and for
the period ended September 30, 1996, dated November 12, 1996 (as amended by
the Company's 10-Q/A-1 dated January 30, 1997);
(c) the Company's Current Reports on Form 8-K dated January 8 (filed
January 16) 1996, January 16 (filed January 16) 1996, January 17 (filed
January 18) 1996, January 23 (filed January 24) 1996, January 30 (filed
January 31) 1996, February 5 (filed February 8) 1996, March 19 (filed March
20) 1996, March 28 (filed March 30) 1996, May 9 (filed May 23) 1996 (as
amended by Form 8-K/A-1 dated May 9 (filed May 30) 1996 and Form 8-K/A-2
dated and filed January 16, 1997), June 11 (filed June 18) 1996, September
3 (filed September 4) 1996, October 1 (filed October 1) 1996, October 8
(filed October 9) 1996, December 19 (filed December 20) 1996, January 23
(filed January 28) 1997 and January 27 (filed January 29) 1997; and
(d) the description of the Common Stock of the Company contained in its
Registration Statement on Form S-1 (File No. 33-63570), dated May 28, 1993,
its report on Form 8-B, dated October 14, 1993 and any amendment or report
filed with the Commission for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of securities hereunder shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing
thereof. Any
3
<PAGE>
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference (other than certain exhibits).
Requests for such copies should be directed to: International CableTel
Incorporated, 110 East 59th Street, 26th Floor, New York, New York 10022.
Attention: Richard J. Lubasch, Esq., telephone (212) 906-8440.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
In this Prospectus, references to "pounds sterling," "(Pounds)," "pence" or
"p" are to the lawful currency of the United Kingdom and references to "U.S.
dollars," "dollars," "$" or "c" are to the lawful currency of the United
States. Solely for the convenience of the reader, this Prospectus contains
translations of certain pound sterling amounts into U.S. dollars. These
translations should not be construed as representations that the pound sterling
amounts actually represent such U.S. dollar amounts or could have been or could
be or will be converted into U.S. dollars at the rate indicated or at any other
rate. Unless otherwise indicated, the translations of pounds sterling into U.S.
dollars have been made at $1.5650 per (Pounds)1.00, the noon buying rate in The
City of New York for cable transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of New York (the "Noon Buying
Rate") on September 30, 1996. See "Exchange Rates" for information regarding
the Noon Buying Rate for the past five fiscal years. On January 29, 1997, the
Noon Buying Rate was $1.6207 per (Pounds)1.00.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements incorporated herein by reference.
Prospective investors should carefully consider the factors set forth under the
caption "Risk Factors." As used in this Prospectus, the term: (i) "Company"
means International CableTel Incorporated and, unless the context otherwise
requires, its consolidated subsidiaries and partnerships including NTL (as
defined below); (ii) "CableTel" means International CableTel Incorporated and
its consolidated subsidiaries and partnerships excluding NTL; and (iii) "NTL"
means NTL Group Limited and, unless the context otherwise requires, its
consolidated subsidiaries.
THE COMPANY
The Company entered the cable telephony/television and telecommunications
market in the United Kingdom in 1993 and is the third largest operator of cable
telephony/television systems in the United Kingdom in terms of the number of
homes in the franchise areas operated by the Company. In the past twelve
months, the Company has expanded its local telecommunications ("telecoms") and
television services business to include a national telecoms network, national
television and radio broadcast transmission services, and internet service
provision as well as other related communications businesses.
In its franchise areas, CableTel is constructing an integrated, high
capacity, high speed, full-service network which allows the Company to offer
customers residential telephone, cable television ("CATV") and business
telecommunications services. CableTel's local networks provide a two-way
communications pathway which is also capable of delivering new services which
may emerge from the convergence of telecommunications, information services and
entertainment.
In May 1996, the Company purchased NTL which provides broadcast and broadband
transmission and communications services on a nationwide basis in the United
Kingdom. NTL's core business has been the transmission of television
programming for the Independent Television ("ITV") (Channel 3) companies,
Channel 4 and the Welsh Fourth Channel ("S4C"). NTL has also recently been
awarded the contract for the transmission of the Channel 5 signal for Channel 5
Broadcasting Limited. Under contracts with those companies, NTL is responsible
for operating, monitoring and maintaining a broadcast transmission service. NTL
has enhanced its national infrastructure of over 1,200 owned and shared
transmission sites throughout the United Kingdom to diversify beyond its core
business and has expanded its national network to enter into the
telecommunications and radio sectors. NTL now operates a national broadband
microwave communications network which it uses to provide carrier and trunk
services to telecommunications companies, provides independent radio signal
transmission, leases and manages cell sites for wireless telephony operators,
commissions and maintains emergency service radio systems, operates satellite
earth stations that uplink video signals to satellites and designs and builds
studio and broadcast facilities. Management believes that the combination of
CableTel's local, high capacity, full-service networks and NTL's national
diversified network creates a variety of strategic benefits for the Company.
In October 1996, the Company announced a new organizational structure
integrating CableTel, and its local telephone, cable television and internet
businesses, with NTL, and its national telecommunications and television
transmission businesses. Five business divisions were created for the combined
CableTel/NTL: Local Telecoms and Television Services, National Telecoms
Services, Broadcast Services, Internet and Information Services and National
Media Services.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Shares.
USE OF PROCEEDS
The Selling Stockholders will receive all of the net proceeds from the Shares
sold pursuant to this Prospectus. The Company will not receive any of the
proceeds from sales by the Selling Stockholders of the Shares.
5
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The summary historical and pro forma consolidated financial information
presented below is derived from the Company's consolidated historical financial
statements which are incorporated herein by reference and the Company's pro
forma statements of operations which are included herein.
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS NINE MONTHS ENDED PRO FORMA
ENDED SEPTEMBER 30, YEAR ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------- DECEMBER 31, ----------------------------
1996(1) 1996 1995 1995(1) 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT
DATA(2):
Revenues............... $ 204,768 $ 143,473 $ 19,053 $ 206,331 $ 33,741 $ 13,745 $ 10,078
Costs and expenses
Operating expenses.... 130,394 98,941 14,289 129,105 24,415 7,827 4,441
Selling, general and
administrative
expenses............. 97,628 90,092 41,683 91,118 72,629 27,890 5,042
Depreciation and
amortization......... 68,536 60,764 19,320 57,284 29,823 17,916 6,206
--------- --------- -------- --------- -------- -------- --------
Total costs and
expenses........... 296,558 249,797 75,292 277,507 126,867 53,633 15,689
--------- --------- -------- --------- -------- -------- --------
Operating loss........ (91,790) (106,324) (56,239) (71,176) (93,126) (39,888) (5,611)
Other income (expense)
Interest, dividend and
other income......... 29,353 28,669 16,055 22,231 21,185 18,403 5,182
Interest expense...... (113,787) (105,368) (24,322) (54,624) (28,379) (11,410) (2,950)
Foreign currency
transactions gains
(losses)............. 432 432 567 84 84 2,062 (7,052)
--------- --------- -------- --------- -------- -------- --------
Loss before income
taxes and minority
interests............. (175,792) (182,591) (63,939) (103,485) (100,236) (30,833) (10,431)
Income tax benefit
(provision)........... (5,183) (5,183) 1,824 (7,169) 2,477 (1,630) (645)
--------- --------- -------- --------- -------- -------- --------
Loss before minority
interests............. (180,975) (187,774) (62,115) (110,654) (97,759) (32,463) (11,076)
Minority interests..... 11,822 11,822 4,637 6,974 6,974 2,890 --
--------- --------- -------- --------- -------- -------- --------
Net loss............... $(169,153) $(175,952) $(57,478) $(103,680) $(90,785) $(29,573) $(11,076)
========= ========= ======== ========= ======== ======== ========
Net loss per common
share(3).............. $ (5.51) $ (5.73) $ (1.90) $ (3.43) $ (3.01) $ (.98) $ (.83)
========= ========= ======== ========= ======== ======== ========
Weighted average number
of common shares used
in computation of net
loss per share(3)..... 30,717 30,717 30,186 30,190 30,190 30,175 13,327
========= ========= ======== ========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 639,082
Working capital............................................ 360,355
Fixed assets, net.......................................... 1,176,421
Total assets............................................... 2,271,827
Long-term debt............................................. 1,682,956
Shareholders' equity....................................... 228,065
</TABLE>
- --------
(1) As adjusted to give pro forma effect to the following events as if each had
occurred at the beginning of the respective periods: (i) the acquisition of
NTL; and (ii) the borrowing of approximately (Pounds)200 million pursuant
to the NTL Facilities (as defined) to finance a portion of the NTL
acquisition. The pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results
that would have occurred if the foregoing events had occurred at the
beginning of the respective periods or the future operating results of the
Company.
(2) Operating expenses includes franchise acquisition fees. Selling, general
and administrative expenses includes corporate expenses.
(3) After giving retroactive effect to the four-for-three stock split by way of
stock dividend paid in August 1995.
6
<PAGE>
RISK FACTORS
Ownership of the Shares involves certain risks. Prospective owners of the
Shares, prior to engaging in any transaction which would result in the
ownership thereby of the Shares, should consider carefully the following
factors, in addition to all other information contained in this Prospectus or
incorporated herein by reference.
POTENTIAL ADVERSE CONSEQUENCES OF LEVERAGE
The Company is, and following the consummation of the Proposed Offering (as
defined) will continue to be, highly leveraged. At September 30, 1996, after
giving effect to the issuance of the Securities (as defined) and the Series A
Preferred Stock, the Company's total long-term indebtedness would have been
approximately $2.0 billion, representing 84.0% of total capitalization,
including the Company's: (i) $647.0 million accreted value of 11 1/2% Series B
Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes"); (ii) $179.4
million accreted value of 12 3/4% Series A Senior Deferred Coupon Notes Due
2005 (the "12 3/4% Notes"); (iii) $170.7 million accreted value of 10 7/8%
Senior Deferred Coupon Notes Due 2003 (the "10 7/8% Notes" and, collectively
with the 11 1/2% Notes and the 12 3/4% Notes, the "Senior Notes"); (iv) $191.8
million principal amount of 7 1/4% Convertible Subordinated Notes Due 2005
(the "7 1/4% Convertible Notes"); (v) $275 million principal amount of 7%
Convertible Subordinated Notes due 2008 (the "7% Convertible Notes" and,
together with the 7 1/4% Convertible Notes, the "Convertible Notes"); and (vi)
$219.1 million outstanding under the Long Term Facility (as defined). As the
Company's subsidiaries draw down amounts expected to be available under the
Revolving Credit Facility (as defined), the Potential Credit Facilities (as
defined) and other possible future financings, the amount of debt outstanding
will increase further. The indentures governing the Senior Notes and the
Convertible Notes permit the Company and its subsidiaries to incur substantial
additional indebtedness. The ability of the Company and its subsidiaries to
make scheduled payments under present and future indebtedness (including the
Proposed Notes (as defined) and cash dividends in respect of the Proposed
Preferred Stock (as defined)) will depend on, among other things, the
Company's and its subsidiaries' ability to complete the build out of the
franchises on a timely and cost effective basis, the Company's ability to
access the earnings of its subsidiaries (which may be subject to significant
contractual and legal limitations), the future operating performance of the
Company and its subsidiaries and the Company's ability to refinance its
indebtedness when necessary. Each of these factors is to a large extent
subject to economic, financial, competitive, regulatory and other factors that
are beyond the Company's and its subsidiaries' control. See "--Uncertainty of
Construction Progress and Costs," "--Need for Additional Financing" and "--
Dependence Upon Cash Flow from Subsidiaries."
The agreements and debt instruments in respect of the Company's indebtedness
(including the NTL Facilities; see "Description of Certain Indebtedness--The
NTL Facilities") contain, and the Potential Credit Facilities and other
possible future financings are expected to contain, various covenants which,
among other things, require the Company to maintain certain financial ratios,
restrict or prohibit the payment of dividends and other distributions to the
Company by its subsidiaries, restrict asset sales and dictate the use of
proceeds from the sale of assets. Although the Company believes that it and
its subsidiaries are in compliance with their respective covenants and
restrictions, continued compliance with these restrictions, in combination
with the leveraged nature of the Company, could limit the ability of the
Company to respond to market conditions or meet extraordinary capital needs or
otherwise could restrict corporate activities and the ability of certain
subsidiaries of the Company to make payments to the Company which might
otherwise fund the Company's present and future obligations as they fall due.
See "--Dependence Upon Cash Flow from Subsidiaries." There can be no assurance
that such restrictions will not adversely affect the Company's ability to
finance its future operations or capital needs, to service and repay
indebtedness, or to engage in other business activities, such as acquisitions,
which may be in the interest of the Company.
The degree to which the Company is leveraged could have important
consequences to holders of the Shares, including the following: (i) increasing
the Company's vulnerability to adverse changes in general economic conditions
or increases in prevailing interest rates; (ii) limiting the Company's ability
to obtain additional financing for working capital, capital expenditures,
acquisitions and general corporate purposes, including the build out of the
networks in the franchises and the development and expansion of NTL's
business; (iii) requiring a substantial portion of the Company's and its
subsidiaries' cash flow from operations to be dedicated to debt service
requirements, thereby reducing the funds available for dividends, operations
and future business
7
<PAGE>
opportunities; and (iv) increasing the Company's and its subsidiaries'
exposure to increases in interest rates given that certain of the Company's
and its subsidiaries' borrowings may be at variable rates of interest. In
addition, the Company may under certain circumstances be obligated to offer to
repurchase certain outstanding securities prior to maturity and there can be
no assurance that the Company will have the financial resources necessary or
otherwise be able to repurchase those securities in such circumstances.
NEED FOR ADDITIONAL FINANCING
The development, construction and operation of the Company's cable
television and telecommunications network will require substantial capital.
The proceeds of the Proposed Offering alone would not be sufficient to fund
the Company's projected requirements through completion of the network. Based
on the information currently available to the Company, the Company currently
estimates that, from September 30, 1996 through December 31, 2002 (the date by
which the Company currently estimates that its network will have passed the
total of 2,090,000 homes required by its regulatory build schedules): (i) the
aggregate cost of network construction (including the license payments in
respect of the Northern Ireland LDL and the Glamorgan and Gwent LDL) will be
approximately (Pounds)915 million (approximately $1.432 billion) and (ii) that
scheduled cash interest payments on and principal repayments of indebtedness
of the Company and its subsidiaries (assuming no conversion of convertible
debt or refinancing of existing indebtedness) will be approximately $639
million and $217 million, respectively. In addition, the Company will require
significant amounts of capital to finance the other capital expenditures and
the cost of operations of the Company, its subsidiaries and joint ventures and
meet all their other obligations as they fall due. The Company intends to fund
the requirements referred to in this paragraph from cash on hand ($639 million
as of September 30, 1996), further equity and/or debt financings (including,
but not limited to, the Proposed Offering and the Potential Credit Facilities)
and funds internally generated by the operations of the Company's subsidiaries
(including from the revenues receivable by NTL under contracts). See
"Description of Certain Indebtedness--The Potential Credit Facilities."
The Company currently expects that cash on hand and cash equivalents as of
September 30, 1996 of approximately $639 million and the anticipated net
proceeds of the Proposed Offering should be sufficient to meet those
obligations of the Company and its subsidiaries falling due in 1997 (including
the costs of network construction, development and expansion of NTL's
business, debt service, joint venture obligations and the payment of up to
(Pounds)35 million deferred consideration in respect of NTL due in May 1997).
The Company has recently resumed discussions with commercial banks regarding
the arrangement of certain proposed credit facilities in varying amounts up to
an aggregate amount of (Pounds)500 million (approximately $782 million) (the
"Potential Credit Facilities") to further fund the anticipated construction
and working capital needs of the Company's subsidiaries after the beginning of
the third quarter of 1997. See "Description of Certain Indebtedness--The
Potential Credit Facilities."
The Company estimates that, even after the issuance of the Securities and
whether or not the Potential Credit Facilities are obtained and fully drawn,
significant amounts of additional funding will be required to meet obligations
of the Company and its subsidiaries falling due after 1997. The Company
currently intends to obtain such additional funding from further debt and/or
equity financings and funds internally generated by the operations of the
Company's subsidiaries. The Company does not have any firm plans for any such
further financings at this time.
The information in the preceding paragraphs and elsewhere in this Prospectus
includes projections; in reviewing such information it should be kept in mind
that actual results may differ materially from those in such projections.
These projections were based on various factors and were derived utilizing
numerous assumptions. Important assumptions and factors that could cause
actual results to differ materially from those in these projections include
the Company'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
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customer acceptance, churn rates, overall market penetration and competition
from providers of alternative services. The Company assumes no obligation to
update these projections to reflect actual funding requirements, capital
expenditures and results, changes in assumptions or in the factors affecting
such projections. There can be no assurance that: (i) the Potential Credit
Facilities or any other financings will be obtained when required, on
acceptable terms or at all; (ii) the Company or its subsidiaries will be able
to access all amounts available under the terms of the Potential Credit
Facilities or other financings; (iii) actual amounts required to complete the
Company's planned build out will not exceed the amount estimated above (see
"--Uncertainty of Construction Progress and Costs") or that additional
financing substantially in excess of that amount will not be required; (iv)
conditions precedent to advances under any such credit facility will be
satisfied when funds are required; (v) the Company will not acquire additional
franchises, licenses or other new businesses that would require additional
capital; (vi) operating cash flow will meet expectations or that the Company
will be able to access such cash from its subsidiaries' operations to meet any
unfunded portion of its capital requirements when required or to satisfy the
terms of the Securities, Senior Notes or the Company's other debt instruments
and agreements for the incurrence of additional debt financing (see "--
Dependence Upon Cash Flow from Subsidiaries"); (vii) the Company's
subsidiaries will not incur losses from their exposure to exchange rate
fluctuations or be adversely affected by interest rate fluctuations (see "--
Currency Risk"); or (viii) that there will not be changes in applicable United
States or United Kingdom tax laws.
The inability of the Company to obtain the Potential Credit Facilities or
secure additional financings could result in the Company and/or its
subsidiaries defaulting on their respective obligations, all the indebtedness
of the Company and its subsidiaries becoming immediately due and repayable and
failure to comply with the minimum build milestones set forth in its licenses
leading to the revocation of those licenses. See "--Requirement to Meet Build
Milestones."
The Company will continue to consider strategic acquisitions and
combinations involving businesses operating, or owning licenses to operate,
cable, telephone, television or telecommunications systems or services and
related businesses principally in the United Kingdom, as attractive
opportunities arise. The Company is currently involved in various stages of
exploration, development and negotiation of certain transactions, some of
which, if completed, would be significant and may involve the incurrence of
substantial indebtedness or the raising of additional equity by the Company
and its subsidiaries to finance such transactions. There can be no assurances
that such transactions will occur. The indentures governing the Company's
Senior Notes permit indebtedness to be incurred to finance acquisitions only
if such acquisitions are acquisitions of either tangible or intangible assets,
licenses and computer software used in connection with a Cable Business (as
defined in the indentures governing the Senior Notes) or certain entities,
directly or indirectly, engaged in a Cable Business if such entities meet
certain qualifying criteria specified in such indentures.
DEPENDENCE UPON CASH FLOW FROM SUBSIDIARIES
The Company is a holding company that conducts its operations through its
direct and indirect wholly-owned subsidiaries and affiliated joint ventures.
As a holding company, the Company holds no significant assets other than its
investments in and advances to its subsidiaries and affiliated joint ventures.
The Company is, therefore, dependent upon its receipt of sufficient funds from
its subsidiaries and affiliated joint ventures to meet its own obligations.
The ability of the Company and its creditors to benefit in the distribution of
any assets of any of the Company's subsidiaries and affiliated joint ventures
upon any liquidation of any such subsidiary or joint venture will be subject
to the prior claims of the subsidiary's or joint venture's creditors,
including trade creditors and, to the extent that such subsidiary or joint
venture is not directly owned by the Company, to the prior claims of any other
persons directly or indirectly owning such subsidiary or joint venture.
Each of the Company's subsidiaries that is a Delaware corporation may pay
dividends, under the Delaware General Corporation Law (the "DGCL"), only out
of its surplus, or, in the circumstances prescribed by the DGCL, out of its
net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. Each of the Company's subsidiaries that is a United
Kingdom company is, under applicable United Kingdom
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law, prohibited from paying dividends unless such payments are made out of
profits available for distribution (which consist of accumulated, realized
profits, so far as not previously utilized by distribution or capitalization,
less accumulated, realized losses, so far as not previously written off in a
reduction or reorganization of capital duly made). Other statutory and general
English law obligations also affect the ability of directors of the Company's
subsidiaries to declare dividends and the ability of the Company's
subsidiaries to make payments to the Company on account of intercompany loans.
In addition, the United Kingdom may impose a withholding tax on payments of
interest and advance corporation tax on distributions (of interest, dividends
or otherwise) by United Kingdom subsidiaries of the Company.
In addition, the terms of existing and future indebtedness of the Company's
subsidiaries (including the Potential Credit Facilities) may limit the payment
of dividends, loans or other distributions to the Company. In particular, the
loan facilities (the "NTL Facilities") arranged to finance approximately
(Pounds)200 million of the purchase price of NTL prohibit NTL Investment
Holdings Limited, the wholly-owned subsidiary of the Company which purchased
NTL (the "Purchaser"), from paying dividends to the Company unless certain
cash flow targets are met and, if such targets are met, require that 50% of
all Excess Cash Flow of the Purchaser and its subsidiaries (including the NTL
group) must be applied to prepay amounts outstanding under the long term
facility of (Pounds)140 million (the "Long Term Facility") comprised in the
NTL Facilities. See "Description of Certain Indebtedness--The NTL Facilities--
The A Facilities."
Borrowings under the NTL Facilities are, and a substantial portion of the
Company's and its subsidiaries' existing and future indebtedness (including
borrowings under the Potential Credit Facilities) is expected to be, secured
by liens and other security interests over the assets of the Company's
subsidiaries and the Company's equity interests in the Company's subsidiaries.
In addition, the ability of the Company and its creditors to benefit from
distributions of assets of the Company's subsidiaries may be limited to the
extent that the outstanding shares of any of its subsidiaries and such
subsidiary's assets are pledged to secure other debt of the Company or its
subsidiaries. Any right of the Company to receive assets of any subsidiary
upon such subsidiary's liquidation or reorganization will be structurally
subordinated to the claims of that subsidiary's creditors, except to the
extent that the Company is itself recognized as an unsubordinated creditor of
such subsidiary. However, to the extent that the Company is so recognized, the
claims of the Company would still be subject to any security interests in the
assets of such subsidiary and any liabilities of such subsidiary senior to
those held by the Company and may otherwise be challenged by third parties in
a liquidation or reorganization proceeding. In addition, loan agreements may
require, as in the case of the NTL Facilities, the Company to subordinate its
right to repayment of indebtedness outstanding between it and the borrower
under such agreement or any subsidiary of the Company to the rights of the
lenders under the agreement. In particular the rights of the Company and other
subsidiaries to repayment of principal and interest lent by them to the
borrower under the NTL Facilities have been and will be subordinated to the
rights of the lenders under the NTL Facilities pursuant to subordination
agreements with such lenders.
The principal fixed assets of the Company's subsidiaries are cable headends,
cable television and telecommunications distribution equipment,
telecommunications switches and customer equipment. The value of a substantial
portion of these fixed assets is derived from their employment in the
Company's and its subsidiaries' cable television and telecommunications
businesses. In the case of NTL, its principal fixed assets are transmission
towers, masts and antennas and the sites on which they are located. These
assets are highly specialized and, taken individually, can be expected to have
limited marketability. Consequently, in the event that secured creditors seek
to realize on the collateral securing debt of the Company's subsidiaries,
these creditors would be likely to seek to sell the business as a going
concern (possibly through a sale of pledged shares of subsidiaries), either in
its entirety, or by franchise or other business unit, in order to maximize the
proceeds realized.
As a result of the restrictions referred to in the preceding paragraphs,
there can be no assurance that the Company will be able to gain access to the
cash flow of its subsidiaries in a timely manner or in amounts sufficient to
pay interest on and to pay the principal of the Company's indebtedness when
due.
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Even if the Company is able to gain access to the cash flow of its
subsidiaries, its ability to meet cash debt service and repayment obligations
of the Company and its subsidiaries will depend on the future operating
performance and financial results of those subsidiaries, which will be
subject, in part, to factors beyond the control of such subsidiaries, such as
prevailing economic conditions and financial, business and other factors. In
any event, management does not anticipate that the Company and its
subsidiaries will generate sufficient cash flow from operations to repay the
entire principal amount of the indebtedness of the Company and its
subsidiaries as it falls due at maturity. Accordingly, the Company will be
required to consider a number of measures, including (i) refinancing all or a
portion of such indebtedness, (ii) seeking modifications of the terms of such
indebtedness or (iii) seeking additional debt financing, each of which would
be subject to obtaining necessary lender consents, (iv) additional equity
financing, or (v) a combination of the foregoing. The particular measures the
Company may undertake and the ability of the Company to accomplish those
measures will depend on the financial condition of the Company and its
subsidiaries at the time, as well as a number of factors beyond the control of
the Company and subsidiaries, including prevailing economic and market
conditions and financial, business and other factors. No assurance can be
given that any of the foregoing measures can be accomplished, or can be
accomplished in sufficient time to make timely payments of cash interest and
principal on the Company's indebtedness. In addition, there can be no
assurance that any such measures can be accomplished on terms which are
favorable to the Company and its subsidiaries.
THE NTL ACQUISITION
Unknown Acquisition Liabilities. The acquisition of NTL was structured as a
share purchase, which may result in the Purchaser having acquired NTL
companies with unknown liabilities. The Company obtained from NTL's former
shareholders certain representations and warranties concerning the commercial
and financial position of NTL and contingent liabilities and other obligations
of NTL to reduce the risk that the Company will be subject to unknown
liabilities of NTL. Approximately (Pounds)35 million of the purchase price for
NTL payable in May 1997 (the "Further Payment") is subject to reduction if
such representations and warranties are proved to be untrue or inaccurate. Any
such reduction will be determined in accordance with, and subject to the
limitations set forth in, the Deed of Adjustment dated March 28, 1996 either
by agreement reached between the parties or, failing agreement, by the
determination of an appropriately qualified expert or a court of law. As the
amount of reduction can not, in any event, exceed an aggregate of (Pounds)35
million, the Purchaser has no further rights or recourse against the sellers
for claims for damages for breaches of the representations and warranties in
excess of (Pounds)35 million. There may be circumstances in which a reduction
of the Further Payment does not provide the Company with protection from
contingent or other obligations of the NTL companies or breaches of the
representations and warranties, to the extent that they exceed
(Pounds)35 million. The Deed of Adjustment also provides for the Further
Payment to be reduced in accordance with a formula relating to the outcome of
the review by the Office of Telecommunications ("OFTEL") of the price cap
applicable to NTL's regulated businesses (the "Price Cap Review"). Given the
outcome of the Price Cap Review, the Further Payment will not be reduced as a
result of the Price Cap Review. See "The Company--Broadcast Services."
Dependence Upon Site Sharing Arrangement. As a result of, among other
factors, a natural shortage of potential transmission sites and the
difficulties in obtaining planning permission for erection of further masts,
the British Broadcasting Corporation (the "BBC") and NTL have made
arrangements to share a large number of sites. Under the present arrangements,
one of the parties (the "Station Owner") is the owner, lessee or licensee of
each site and the other party (the "Sharer") is entitled to request a license
to use certain facilities at that site. Each site license granted pursuant to
the site sharing agreement is for an initial period expiring on December 31,
2005 (subject to title and to the continuation in force of the site sharing
agreement) and provides that, if requested by the Sharer, it will be extended
for further periods. The site sharing agreement and each site license provide
for the Station Owner to be paid a commercial license fee and for the Sharer
to be responsible, in normal circumstances, for the costs of accommodation and
equipment used exclusively by it. These arrangements continue between the BBC
and NTL notwithstanding the acquisition. 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 31, 2005. Although the Company does not anticipate that the site
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sharing agreement or the site licenses will be terminated, there can be no
assurance that such a termination will not occur. Termination of the site
sharing arrangements would have a material adverse effect on NTL's business
and would also result in an event of default under the NTL Facilities and the
acceleration of the indebtedness outstanding thereunder. Each such event could
have a material adverse effect on the Company. In particular, an acceleration
of the indebtedness under the NTL Facilities could lead to defaults under the
indentures governing the Convertible Notes, the Senior Notes, the 7 1/4%
Convertible Notes and under the terms of other existing indebtedness of the
Company and its subsidiaries. There can be no assurance that the Company would
have sufficient resources to repay such indebtedness should it be accelerated.
Dependence Upon ITV and Other Contracts. NTL's business is substantially
dependent upon contracts with the ITV contractors, Channel 4/S4C and Vodafone
for the provision of transmission services. The prices that NTL may charge
these companies for television transmission services is subject to regulation
by OFTEL. See "--Possible Changes in Government Regulation." The contracts
with the ITV contractors and Channel 4/S4C terminate on December 31, 2002.
Although, historically, the ITV contractors and Channel 4/S4C have renewed
their contracts with NTL, there can be no assurance that they will do so upon
expiration of the current contracts, that they will not negotiate terms for
NTL's provision of transmission services on a basis less favorable to NTL or
that they would not seek to obtain from third parties a portion of the
transmission services currently provided by NTL. The loss of any one of these
contracts could have a material adverse effect on the business of the Company.
BBC Privatization. The United Kingdom Government has announced its intention
to privatize the BBC's transmission business upon expiration of the BBC's
Royal Charter in December 1996. On January 3, 1997, the BBC announced that the
preferred bidders for its Home Service and World Service transmission
businesses were a consortium led by Castle Tower Corporation and Merlin
Communications International, a management and employee buy-out team,
respectively. There can be no assurance that NTL will not encounter
significant competition from these bidders for its transmission business from
expiration of NTL's current contracts with the ITV contractors and Channel
4/S4C. See "--Dependence Upon ITV and Other Contracts."
General. The benefits of the acquisition of NTL could be less than
anticipated and potential risks could be greater than expected. While the
Company believes the acquisition of NTL will be beneficial to the Company and
its stockholders, there can be no assurance that: (i) the expected benefits
will be realized; (ii) the potential risks will not occur; or (iii) the risks
can be managed without adversely affecting the Company.
OPERATING LOSSES; LIMITED FINANCIAL HISTORY
The Company had net income (loss) for the nine months ended September 30,
1996 and 1995 and years ended December 31, 1995, 1994, 1993, 1992 and 1991 of
$(176.0 million) and $(57.5 million), $(90.8 million), $(29.6 million), $(11.1
million), $1.2 million and $(0.9 million), respectively. As of September 30,
1996, the Company's accumulated deficit was $305.5 million. The development of
the Company's business to date has resulted in significant expenditures and
the continued construction and expansion of its network will require
considerable additional expenditures. Construction and operating expenditures
have resulted in negative cash flow, which is expected to continue at least
until an adequate customer base is established. The Company also expects to
incur substantial additional operating losses, and there can be no assurance
that the Company will achieve or sustain profitability in the future. Failure
to become profitable could adversely affect the Company's ability to sustain
operations and obtain additional required funds. See "--Need for Additional
Financing." Moreover, such a failure would adversely affect the Company's
ability to pay the required interest payments on the Company's indebtedness.
See "--Potential Adverse Consequences of Leverage," "--Need for Additional
Financing" and "--Dependence Upon Cash Flow from Subsidiaries."
REQUIREMENT TO MEET BUILD MILESTONES
The telecommunications license for each franchise contains specific
construction milestones. Under the terms of its current telecommunications
licenses, from September 30, 1996 until the end of 2003, CableTel is required
to construct cable television systems passing an aggregate of approximately
1,296,000 additional
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premises (residential and business). OFTEL and the Department of Trade and
Industry ("DTI") are the only bodies with the authority to modify the
construction milestones in the licenses other than the Northern Ireland and
Gwent and Glamorgan local delivery operator licenses ("LDLs") (in respect of
which the Independent Television Commission (the "ITC") is the relevant
authority for modifying construction milestones). Historically, CableTel has
constructed its network in accordance with and ahead of these construction
milestones. As of September 30, 1996, the 1996 milestones have been met and
exceeded. Based on current network construction scheduling, the Company
believes it will be able to satisfy CableTel's milestones in the future, but
there can be no assurance that such milestones will be met. See "--Need for
Additional Financing" and "--Uncertainty of Construction Progress and Costs."
If the Company is unable to meet the construction milestones required by any
of its licenses and is unable to obtain modifications to the milestones, the
relevant license or licenses could be revoked, which would have a material
adverse effect on the Company and which could affect the continued
availability of funding to the Company and its operating subsidiaries.
UNCERTAINTY OF CONSTRUCTION PROGRESS AND COSTS
At September 30, 1996, construction of CableTel's network had passed
approximately 38% of its final regulatory milestone requirements for all its
franchises (including the Northern Ireland and Gwent and Glamorgan
franchises). Successful construction and development of CableTel's network
will depend on, among other things, CableTel'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. The exact amounts and timing of all of these expenditures are
subject to a variety of factors which may vary greatly by market and be beyond
the control of the Company. Accordingly, there can be no assurance that the
actual costs of network construction will not exceed the aggregate cost of
network construction estimated under "--Need for Additional Financing" above
or that additional funding substantially in excess of that amount will not be
required.
In building its network, CableTel is generally required by its licenses to
use underground construction, which is more expensive and time consuming than
aerial construction. Mechanized construction methods often cannot be used to
install network infrastructure in CableTel's franchise areas due to existing
underground utility infrastructure. In addition, CableTel is responsible for
restoring the surface area after its underground construction is completed.
Although CableTel has recently been able to negotiate construction contracts
at rates which it believes are competitive relative to the cable industry as a
whole, construction costs could increase significantly over the next few years
as existing contracts expire and as demand for cable construction services
grows due to anticipated increases in the cable industry's overall
construction activity. Accordingly, there can be no assurance that the Company
will be able to construct its network in a timely manner or at a reasonable
cost.
UNCERTAINTY OF CUSTOMER ACCEPTANCE
The cable telephony/television and telecommunications industry has a limited
operating history in the United Kingdom. Although initial acceptance of cable
telephony/television services provided by the Company has been encouraging,
the Company is unable to predict with certainty how consumer demand for
CableTel's services may develop over time. The Company's future revenue growth
depends in large measure on (i) the development of significant consumer
preference for cable television over other types of in-home entertainment and
(ii) customer acceptance of CableTel as an attractive alternative to its
competitors as a provider of telephone and other telecommunications services.
Since December 31, 1994, the Company has, through the acquisition of the
Northern Ireland and Gwent and Glamorgan LDLs increased the total number of
homes in its franchises by almost 50%. The Company's future success will
depend on customer acceptance of its services and its ability to extend
CableTel's brand name in these new franchise areas. See "--Significant
Competition." The inability of the Company to generate demand for its services
could have a material adverse effect on the Company.
To date, unlike other United Kingdom operators, CableTel has not experienced
significant churn in its franchise areas although the Company expects churn
rates to increase. There can be no assurance as to CableTel's future churn
rates. Higher levels of churn could have a material adverse effect on the
financial condition and results of operations of the Company.
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SIGNIFICANT COMPETITION
The Company faces significant competition from established and new
competitors in the areas of cable television, residential telephone and
business telecommunications services. The Company believes that competition
will intensify in each of these business areas, particularly business
telecommunications.
CATV. CableTel's CATV systems compete with direct reception over-the-air
broadcast television, direct-to-home ("DTH") satellite services and satellite
master antenna systems ("SMATV"). Pay television and pay-per-view ("PPV")
services anticipated to be offered by CableTel will compete to varying degrees
with other communications and entertainment media, including DTH services,
home video, cinema exhibition of feature films, live theater and newly
emerging multimedia services. The Company expects that, in the future,
CableTel may face competition from programming provided by video-on-demand
services, including those that may be provided by public telephone operators
("PTOs") with national licenses (i.e. national PTOs). The extent of such
competition depends upon, among other factors, the quantity and quality of the
programming offered, the price (including the amount of up-front and service
costs) and, with respect to broadcast services, the quality of the broadcast
signal.
National PTOs such as British Telecommunications plc ("BT") and Mercury
Communications Limited ("Mercury") were restricted from holding licenses to
provide CATV until March 31, 1994. Since then, national PTOs have been allowed
to bid for the award of cable licenses in respect of areas of the United
Kingdom that have not already been licensed. Certain companies associated with
BT and Mercury hold licenses to provide cable telephone/television systems
that cannot, under current ITC policy, be in any of the Company's franchises.
This position results from regulations promulgated under the Broadcasting Act
1990 and it may be changed by further regulations which reflect changes in
policy of relevant governmental authorities. Any such change in policy could
have a material adverse effect on the Company. It was recently announced that
Mercury would be merged with three cable operators that hold such licenses--
Nynex CableComms, Bell Cablemedia plc and Videotron Holdings plc--to form a
new company to be known as Cable & Wireless Communications ("C&WC").
On September 29, 1993, the ITC issued a statement pursuant to which it took
the position (shared by OFTEL and DTI) that BT and the other national PTOs may
provide "video-on-demand" service under their existing licenses. No assurance
can be given that video-on-demand will not provide substantial competition to
the Company within its markets in the future.
The Broadcasting Act 1996 was enacted in August 1996. It provides for the
future regulation of digital terrestrial television ("DTT") that is expected
to provide an additional 18 or more new terrestrial channels serving between
60% and 90% of the United Kingdom's population. Some of the channels will be
reserved for digital simultaneous broadcasting by the existing terrestrial
broadcasters. The introduction of DTT, as well as digital satellite television
will provide both additional programming opportunities as well as increased
competition for the Company and its subsidiaries. For example, British Sky
Broadcasting Limited ("BSkyB") is proposing to launch a digital satellite
service in 1997 either by itself or in conjunction with other partners
including, possibly, BT (see "--Residential Telephony"). There can be no
assurance that satisfactory (or any) terms of carriage will be obtained by
CableTel for digital satellite programs or channels.
The full extent to which existing or future competitors using existing or
developing media will compete with cable television systems may not be known
for several years. There can be no assurance, however, that existing, proposed
or as yet undeveloped technologies will not become dominant in the future and
render cable television systems less profitable or even obsolete.
Residential Telephony. The Company competes primarily with BT in providing
telephone services to residential customers. BT, formerly the only major
national PTO in the United Kingdom, has an established
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market presence, fully built networks and resources substantially greater than
those of the Company. According to OFTEL, at December 1995, nearly 95% of
United Kingdom residential telephone exchange line customers are customers of
BT. The Company's growth in telecommunications services, therefore, depends
upon its ability to convince BT's customers to switch to the Company's
telecommunications services. The Company believes that price is currently one
of the most important factors influencing the decision of United Kingdom
customers to switch to a cable telecommunications service. BT has, however,
introduced price reductions in certain categories of calls and, due to
regulatory price controls, BT will be making further reductions in its
telecommunications prices. Accordingly, although the Company intends to remain
competitive, in the future it may be unable to offer residential telephone
services at rates lower than those offered by BT. In such case, the Company
may experience a decline in its average per line residential
telecommunications revenues, may not achieve desired penetration rates and may
experience a decline in total revenues. There can be no assurance that any
such decline in revenues or penetration rates will not adversely affect the
financial condition and results of operations of the Company and its
subsidiaries.
In addition to BT, other telecommunications competitors which may have
substantially greater resources than those of the Company could prevent the
Company from increasing its share of the residential telecommunications
market. AT&T Communications (U.K.) Ltd. ("AT&T U.K.") was awarded a national
PTO license in December 1994 and has announced an intention to enter both the
business and residential markets. It has been proposed that C&WC, if formed,
will also offer its services in both such markets. In addition, IONICA L3
Limited ("IONICA"), began to offer telecommunications services via a fixed
radio network in 1996. IONICA announced in November 1995 an arrangement with
Scottish Power Telecommunications Limited ("Scottish Telecom"), a subsidiary
of Scottish Power PLC, whereby Scottish Telecom will provide IONICA's service
in Scotland. Liberty Communications Limited, the U.K.'s other licensed
wireless local loop operator, is expected to launch its residential telephone
service during 1997. In addition, on February 8, 1996, the DTI announced the
award of two licenses to operate radio fixed access services in the 2 GHz
band. These new licenses enable the two licensees, BT and RadioTEL Systems, to
provide telecommunications services to customers living in defined remote
rural areas mainly in Scotland, Wales and Northern Ireland and create
potential additional competition for the Company's residential telephony
services in certain remote rural areas of the Company's Northern Ireland
franchise. The Company also competes with mobile networks such as those
provided by Telecom Securicor Cellular Radio Limited (marketed under the name
"Cellnet") (in which BT has a 60% interest) and Vodafone Group Plc, and with
personal communications networks such as those provided by a joint venture
between Cable & Wireless PLC and U S WEST, Inc. (marketed under the name
"Mercury One-2-One") and Orange Personal Communications Services Limited
(marketed under the name "Orange"). This technology could grow to become a
competitive threat to the Company's networks, particularly if call charges are
reduced further on the mobile networks. NTL's Radio Communications Division
may enable the Company to benefit from the growth in this technology. There
can be no assurance, however, that the Company will be able to compete
successfully with BT or such other telecommunications operators.
The Company believes that it has a competitive advantage in the residential
market because of its ability to offer integrated telephone, CATV,
telecommunications services (including interactive and on line services) and
dual product packages designed to encourage customers to subscribe to both
services. However, there can be no assurance that this competitive advantage
will continue. Indeed, BT, Mercury and other national PTOs will be entitled to
convey CATV services from 2001 and, subject to a review by the Director
General, possibly from as early as 1998. Moreover, if C&WC is formed, it is
proposed that it will offer integrated telephone, CATV, telecommunications and
multimedia services.
BSkyB is currently marketing telecommunications services on behalf of BT,
which enables BSkyB's customers to earn additional discounts on BT's
residential telecommunications volume discount plans. In addition, it is
reported from time to time that BT and BSkyB are discussing the formation of
cooperative arrangements. For example, press reports have indicated that the
two companies are in advanced discussions regarding the formation of a joint
venture to promote digital satellite television and interactive services in
the United Kingdom. Given the respective market positions of BT and BSkyB, the
Company believes that, if the two companies successfully combine their
respective marketing strengths, the resulting combination may provide
15
<PAGE>
significant competition to cable operators including CableTel. At present,
however, it remains to be seen whether cooperative arrangements, such as the
proposed joint venture, can be established successfully. Based on press
reports, the Company believes that significant issues remain to be resolved
between the parties. The Company cannot currently predict the effect that
competition from joint BT/BSkyB ventures would have on CableTel's business
until further details are available as to how it is proposed that these and
other issues are to be resolved.
Business Telecommunications. BT also is the Company's principal competitor
in providing business telecommunications services. In addition, the Company
competes with Mercury (a majority owned subsidiary of Cable & Wireless PLC
which is proposed to be merged into C&WC), Energis Communications Limited
("Energis") (a subsidiary of the National Grid Company plc), Scottish Telecom
in Scotland and with other companies that have recently been granted
telecommunications licenses such as MFS Communications Limited. In the future,
the Company may compete with additional entrants to the business
telecommunications market, such as AT&T U.K. Competition is based on price
range and quality of services and the Company expects price competition to
intensify if Mercury (or C&WC), Energis and other new market entrants compete
aggressively. Most of these competitors have substantial resources and there
can be no assurance that these or other competitors will not expand their
businesses in the Company's existing markets or that the Company will be able
to continue to compete successfully with such competitors in the business
telecommunications market.
Broadcast Services. The Broadcast Services division of the Company may face
increased competition for its business, particularly following the
privatization of the BBC's transmission business. See "--The NTL Acquisition--
BBC Privatization."
LIMITED ACCESS TO PROGRAMMING
The Company's ability to make a competitive offering of cable television
services is dependent on CableTel's ability to contract for and obtain access
to programming at a reasonable cost. While various sources of programming are
available to cable system operators in the United Kingdom, BSkyB is currently
the most important supplier of cable programming and the exclusive supplier of
certain programming. BSkyB provides the industry with a range of programming,
including the most popular mainstream premium movie channels available in the
United Kingdom and, currently, exclusive English premier league soccer games.
BSkyB also competes with CableTel by operating a DTH satellite service that
provides programming, including programming that is also offered by CableTel,
to approximately 3.6 million subscribers in the United Kingdom. BSkyB's
programming is important in attracting and retaining cable television
subscribers and, in the absence of more alternative programming sources, BSkyB
may be able to set and raise prices for its programming without significant
competitive pricing pressure.
On August 18, 1995, the Office of Fair Trading ("OFT") announced that the
Director General of Fair Trading ("DGFT") had reviewed and approved a revision
by BSkyB of its wholesale price list (industry rate card) for the supply of
programming to cable operators. The revised rate card sets wholesale primary
discounts based upon the cable operator's pay-to-basic ratio and market
penetration. This review was supplemented by a further review announced in
December 1995 by the DGFT of BSkyB's position in the pay-TV market, including
issues relating to the supply of programming and related services at the
wholesale level. The DGFT announced the results of his review on July 24, 1996
when he received new undertakings from BSkyB as to its future behavior and
announced that a new industry rate card would be approved after consultation
with the cable industry. This consultation ended on November 5, 1996. On
December 16, 1996, the OFT approved the structure of the ratecard and made
only minor amendments in response to the submissions made by the Cable
Communications Association on behalf of the cable industry. BSkyB will bring
the new ratecard into effect on February 16, 1997. The Company estimates that,
since the introduction of the revised ratecard in March 1995 through February
16, 1997, the overall aggregate increase in BSkyB's wholesale prices will have
been between approximately 23% and 26% (although BSkyB has provided additional
basic and bonus premium channels during this period). However, notwithstanding
the OFT's approval of the ratecard structure, changes to the ratecard may
occur before or after February 16, 1997 as a result of commercial negotiations
between BSkyB and the cable operators regarding the pricing levels within the
ratecard structure or following further regulatory developments.
16
<PAGE>
In addition, the OFT found in its review that there was no evidence that the
linkage between the direct-to-home ("DTH") retail price and its wholesale
price charged to cable operators was anti-competitive and that no action was
required on this issue. Additionally, the OFT said that it had reviewed
BSkyB's accounts and will continue to do so every six months, to ensure that
BSkyB is not cross-subsidizing its retail DTH business from revenues of its
wholesale cable supply business to the detriment of competition.
The OFT also found that BSkyB's requirement that cable operators carry its
basic channels to 100% of their subscribers inhibited cable operators in their
ability to offer tailored packages and inhibited the growth of cable industry.
BSkyB has accepted an undertaking not to require carriage in excess of 80% in
the future, although BSkyB will be permitted to increase the prices of its
basic channels by 1.25% for each percentage point by which carriage of the
channels falls short of 100%. BSkyB also accepted an undertaking not to bundle
bonus programs (such as occurred in respect of the Disney Channel) with
premium channels in the future (the ITC is currently investigating a complaint
concerning the terms of supply of the Disney Channel).
No assurance can be given, therefore, that, notwithstanding BSkyB's
undertakings to the OFT and the OFT's regulatory role, BSkyB will not exploit
its dominant market position in a manner which may have a material adverse
effect on the Company's operating results.
In addition, BSkyB announced in 1995 the conclusion of programming supply
agreements with the two largest cable operators in the United Kingdom. Under
these agreements, these two cable operators accepted significantly restrictive
provisions in return for more favorable rates than those contained in the new
BSkyB ratecard. BSkyB has, however, undertaken to suspend operation of certain
anti-competitive restrictions contained in these agreements, while the DGFT
considers further whether the agreements warrant investigation by the
Restrictive Practices Court. The Company anticipates that, as these two cable
operators together control approximately 40% of homes under franchise in the
United Kingdom, the consequences of these agreements will make it
substantially less viable for other cable operators (including CableTel) to
reduce their dependence on BSkyB as the principal source of programming supply
by developing, through cooperative ventures among cable operators, their own
PPV services, sports or movie channels and cable-exclusive programming.
CableTel, like many other cable operators, obtains most of its programming
through arrangements with BSkyB and other programming suppliers which are not
reflected in signed written agreements. To date, CableTel has not had a formal
contract with BSkyB, although it has been in discussions with BSkyB for some
time. There can be no assurance that CableTel will be able to enter into a
definitive agreement with BSkyB, that the terms of such definitive agreement
will not be less favorable to CableTel than the current arrangement, or that
BSkyB will continue to supply programming to CableTel on reasonable commercial
terms or at all. Moreover, CableTel has not, to date, entered into written
contracts with many of its other program suppliers. The loss of BSkyB or other
programming, a deterioration of the perceived quality of BSkyB or other
programming, or a material increase in the price that CableTel is required to
pay for BSkyB or other programming could have a material adverse effect on the
Company and its subsidiaries.
CableTel has recently introduced a new packaging and pricing structure to
more attractively package its CATV and telephony offerings to customers. See
"The Company--Local Telecommunications and Television Services." It has been
reported that several of the Company's programming suppliers have objected to
this new structure and such objections may lead to the loss of existing
program supply arrangements. In addition, although preliminary sales results
are favorable, there can be no assurance that there will be sufficient
subscriptions for the genre-based packages to allow for favorable margins.
Because of the factors described in the preceding paragraphs, there can be
no assurance that its current programming will continue to be available to the
Company on acceptable commercial terms, or at all.
POSSIBLE CHANGES IN GOVERNMENT REGULATION
The principal business activities of the Company in the United Kingdom are
regulated and supervised by various governmental bodies, the ITC, the
Department of National Heritage, the Radio Communications Agency and OFTEL
under the directions of the Director General and the DTI on behalf of the
Secretary of State for
17
<PAGE>
Trade and Industry. Changes in laws, regulations or governmental policy (or
the interpretations of such laws or regulations) affecting the Company's
activities and those of its competitors, such as licensing requirements,
increased price regulation, deregulation of interconnection arrangements,
acceleration of the date (which is scheduled for 2001 but is subject to review
in 1998) from which BT, Mercury and other national PTOs can convey broadcast
entertainment services over their existing national networks or a change in
policy allowing more than one cable licensee in the franchise area could have
a material adverse effect on the Company's financial condition and results of
operations. In particular, if there were a change of government or government
policy in the United Kingdom, existing restrictions on the eligibility of BT,
Mercury or certain other national PTOs to compete with CableTel's CATV
business might be removed or significantly weakened. The United Kingdom's
opposition party, the Labour Party, has stated its intention to review these
restrictions if it is elected as the governing party. A general election is
required to be held by May 22, 1997 but may be called earlier.
A substantial portion of NTL's business is also subject to regulation. In
particular, the prices that NTL may charge the ITV companies and Channel 4 and
S4C for television transmissions services are subject to price controls
imposed by OFTEL. On December 24, 1996, the Director General of OFTEL issued
the formal modification to NTL's Telecommunications Act License to deal with
the new price control for the television transmission services provided by NTL
to the ITV companies, Channel 4 and S4C. Under the new arrangements, the total
revenues receivable by NTL for such services (leaving aside some minor
excluded items) may not exceed (Pounds)53.15 million in 1997 and, thereafter
through 2002, will be reduced annually by the Retail Prices Index (RPI) minus
4%. There is no assurance that these price controls will not be reviewed again
by OFTEL prior to 2002 or that price controls for the years following December
31, 2002 will not have a material adverse effect on the revenues receivable
from the ITV companies, Channel 4 and S4C.
As the United Kingdom is a member of the European Union ("EU"), the Company
may be subject to regulatory initiatives of the European Commission ("EC").
Changes promulgated in EU Directives, particularly to the extent that they
require an EU television "production" and "programming" quota, which may
reduce the range of programs which can be offered and increase the costs of
purchasing television programming. In addition, EU Directives may introduce
provisions requiring the Company and its subsidiaries to provide access to its
cable network infrastructure to other service providers, which could have a
material adverse effect on its business.
MANAGEMENT OF GROWTH AND EXPANSION
The Company has experienced rapid growth and development in a relatively
short period of time and will continue to do so to meet its strategic
objectives and regulatory milestones. The management of such growth will
require, among other things, stringent control of construction and other
costs, continued development of the Company's financial and management
controls, increased marketing activities and the training of new personnel.
Failure to manage its rapid growth and development successfully could have a
material adverse effect on the Company's financial condition and operating
results.
DEPENDENCE ON KEY PERSONNEL
The Company's businesses are managed by a small number of key executive
officers, the loss of certain of whom, such as Mr. George S. Blumenthal and
Mr. J. Barclay Knapp, could have a material adverse effect on the Company. The
Company believes that its future success will depend in large part on its
continued ability to attract and retain highly skilled and qualified
personnel. The Company has not entered into written employment contracts or
non-compete agreements with, nor has it obtained life insurance policies
covering, such key executive officers. Certain senior managers of the Company
also serve as members of senior management of other companies in the
telecommunications business.
RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology. While the Company believes that for the foreseeable future
these changes will neither materially affect the continued use
18
<PAGE>
of fiber optic, coaxial or copper cabling technologies nor materially hinder
the Company's ability to acquire necessary technologies, the effect of
technological changes on the businesses of the Company cannot be predicted.
The Company believes that its advanced network design is sufficiently
flexible to permit it to deliver a wide variety of existing entertainment,
telecommunications and information services and will enable it to offer
anticipated new services in the future without incurring significant
additional construction costs to adapt its existing underground network.
However, the cost of implementation of emerging and future technologies could
be significant and the Company's ability to fund such implementation will
depend on its ability to obtain additional financing. See "--Need for
Additional Financing."
In the future, digital compression techniques may allow terrestrial
broadcasters to offer approximately eight digital channels on a frequency
which currently carries one analog channel. The Company believes that if
digital terrestrial broadcast or digital satellite television services are
introduced successfully in the United Kingdom, at competitive prices, the
Company, as well as its competitors, will be able to increase significantly
the number of channels they are able to offer to their customers. However, the
effect of any emerging and future technological changes on the viability or
competitiveness of the Company's network and services cannot be accurately
predicted.
CURRENCY RISK
To the extent that the Company obtains financing in United States dollars
and incurs construction and operating expenses in British pounds sterling, it
will encounter currency exchange rate risks. In addition, the Company's
revenues are generated primarily in British pounds sterling while its interest
and principal obligations with respect to most of the Company's existing
indebtedness are payable in United States dollars. While the Company may
consider entering into transactions to hedge the risk of exchange rate
fluctuations, there can be no assurance that the Company will engage in such
transactions, or, if the Company decides to engage in such transactions, that
they will be successful and that shifts in the currency exchange rates will
not have a material adverse effect on the Company.
INSURANCE COVERAGE
The Company obtains insurance of the type and in the amounts that it
believes are customary in the United Kingdom for similar companies. Consistent
with this practice, the Company does not insure the underground portion of its
cable network. Any catastrophe affecting a significant portion of the
Company's underground cable network could result in substantial uninsured
losses.
ANTI-TAKEOVER MATTERS
Certain provisions of the indentures governing the Senior Notes and the
Convertible Notes may have the effect of delaying or preventing transactions
involving a Change of Control (as defined in the indentures) of the Company,
including transactions in which stockholders might otherwise receive a
possible substantial premium for their shares over then current market prices,
and may limit the ability of stockholders to approve transactions that they
may deem to be in their best interest.
A Change of Control would require the Company to make an offer to purchase
all the Convertible Notes and Senior Notes and may require the Company to
refinance substantial amounts of its indebtedness. The inability of the
Company to purchase all or some of the Convertible Notes and the Senior Notes
tendered for purchase would also constitute an event of default under the
Indenture and the indentures governing the Senior Notes and the Convertible
Notes, which would have certain adverse consequences to the Company. In
addition, a Change of Control would cause the Series A Preferred Stock to be
converted into Common Stock, may trigger or accelerate the exercise of
warrants, options and other rights issued by the Company (including the Rights
described in the next paragraph) and may require various regulatory
notifications and/or approvals pursuant to the terms of the Company's
licenses.
19
<PAGE>
The Restated Certificate of Incorporation of the Company as currently in
effect contains certain provisions which 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 the Company'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. See "Description of Capital Stock--
Certain Special Provisions." In particular, the Rights, which are issuable
pursuant to the stockholder rights plan of the Company, have certain anti-
takeover effects as they will cause substantial dilution to a person or group
that acquires a substantial interest in the Company without the prior approval
of the Board of Directors. The effect of the Rights may be to inhibit a change
in control of the Company (including through a third party tender offer at a
price which reflects a premium to then prevailing trading prices) that may be
beneficial to the Company's stockholders. See "Description of Capital Stock--
Certain Special Provisions--Stockholder Rights Plan." Under the Company's
Restated Certificate of Incorporation, holders of Common Stock and holders of
the Series A Junior Participating Preferred Stock (the "Junior Preferred
Stock") issued upon exercise of the Rights generally vote as a class, with
each share of Common Stock being entitled to one vote per share and each share
of Junior Preferred Stock being entitled to 100 votes per share. As a result
of the provisions of the Restated Certificate of Incorporation and the
ownership of the Company, no change of control requiring stockholder approval
is possible without the consent of the owners of the Junior Preferred Stock.
RESTRICTIONS ON DIVIDENDS
The indentures governing the Senior Notes impose certain limitations on the
payment of dividends. The Company's ability to pay cash dividends on the
Company's equity securities including the Common Stock and to make other
"restricted payments" is limited under the indentures governing the Senior
Notes to the sum of (i) the difference between Cumulative EBITDA (as defined
in the indentures governing the Senior Notes) and 1.5 times Cumulative
Interest Expense (also defined in the indentures governing the Senior Notes)
plus (ii) net proceeds from the sale of capital stock (excluding the proceeds
of the Company's offering of 10 million Common Stock in October 1993).
Further, the terms of the NTL Facilities restrict, and the terms of the
Proposed Credit Facilities or other future indebtedness of the Company's
subsidiaries may (subject to the terms of the indentures governing the Senior
Notes) restrict, the ability of certain of the Company's subsidiaries to
distribute earnings to the Company or make other payments to the Company. See
"--Dependence Upon Cash Flow from Subsidiaries." In addition, the Certificate
of Designations relating to the Company's Series A Preferred Stock imposes
certain restrictions on the payment of dividends and the making of other
distributions on shares of junior stock (including Common Stock) and parity
stock (see "Description of Capital Stock--The Series A Preferred Stock--
Dividends Rights" and the Certificate of Designations for the Proposed
Preferred Stock will likely contain similar restrictions. Neither the Company
nor its predecessor, OCOM Corporation, has ever paid cash dividends on its
Common Stock. In addition, the payment of any dividends by the Company in the
future will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company and its
subsidiaries and general business conditions. See "Dividend Policy" and "Risk
Factors--Operating Losses; Limited Financial History."
FLUCTUATIONS IN MARKET PRICE
There can be no assurance that the market prices for Company's securities
including the Common Stock will not be subject to substantial fluctuations.
Factors such as fluctuations in the operating results of the Company,
announcements of technological innovations or events affecting others in the
industries in which the Company operates, changes in governmental legislation
or regulation, currency and exchange rate fluctuations and general economic
conditions may have significant effect on the market prices of its securities.
CONSEQUENCES OF FURTHER EQUITY OFFERINGS
The Company could make additional public or private sales of equity
securities. Depending on market conditions and other factors, the effect of
such equity offering could be to cause a dilution with respect to the holders
of the Company's Common Stock.
20
<PAGE>
USE OF PROCEEDS
The Selling Stockholders will receive all of the net proceeds from the
Shares sold pursuant to this Prospectus. The Company will not receive any of
the proceeds from sales of the Shares by the Selling Stockholders.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the NNM under the symbol "ICTL." The
following table sets forth, for the periods indicated, the high and low last
sale prices on the NNM for the securities of the Company as traded during
these respective time periods. The prices in the table are adjusted to reflect
a four-for-three stock split effected in August 1995.
<TABLE>
<CAPTION>
LAST SALE PRICE
---------------
HIGH LOW
<S> <C> <C>
1994
First Quarter............................................... $ 19.13 $ 13.31
Second Quarter.............................................. 17.91 13.83
Third Quarter............................................... 24.00 15.19
Fourth Quarter.............................................. 24.75 20.35
1995
First Quarter............................................... 25.13 20.25
Second Quarter.............................................. 26.25 20.63
Third Quarter............................................... 28.31 24.75
Fourth Quarter.............................................. 27.38 23.75
1996
First Quarter............................................... 30.13 22.00
Second Quarter.............................................. 33.25 28.00
Third Quarter............................................... 30.00 22.63
Fourth Quarter ............................................. 28.00 23.13
1997
First Quarter (through January 29, 1997).................... 26.75 24.25
</TABLE>
On January 29, 1997, the last sale price for the Company's Common Stock, as
reported on the NNM, was $24.25. As of January 29, 1997, there were
approximately 590 record holders of the Common Stock. This figure does not
reflect beneficial ownership of shares held in nominee name.
21
<PAGE>
DIVIDEND POLICY
Neither the Company nor its predecessor, OCOM Corporation, has ever paid
cash dividends on its Common Stock. Pursuant to the indentures governing the
Senior Notes, certain limitations apply to the payment of cash dividends on
the Company's equity securities and other "restricted payments." See "Risk
Factors--Restrictions on Dividends." The NTL Facilities restrict, and the
Proposed Credit Facilities and the terms of other indebtedness of the
Company's subsidiaries may in the future restrict, the ability of certain of
the Company's subsidiaries to distribute earnings to the Company or make other
payments of funds to the Company. See "Risk Factors--Dependence Upon Cash Flow
from Subsidiaries" and "--Restrictions on Dividends." In addition, the
Certificate of Designations relating to the Company's Series A Preferred Stock
imposes certain restrictions on the payment of dividends and the making of
other distributions on shares of junior stock (including Common Stock) and
parity stock. See "Description of Capital Stock--The Series A Preferred
Stock--Dividends Rights." The Company does not currently intend to pay cash
dividends in the foreseeable future on the Company's Common Stock as it
intends to retain earnings to fund construction of the systems, working
capital needs, debt service and the growth of its businesses.
EXCHANGE RATES
The following table sets forth, for the periods indicated, the Noon Buying
Rate for pounds sterling expressed in U.S. dollars per (Pounds)l.00.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD END AVERAGE(1) HIGH LOW
<S> <C> <C> <C> <C>
1988................................... $1.81 $1.78 $1.91 $1.66
1989................................... 1.61 1.63 1.82 1.51
1990................................... 1.93 1.79 1.98 1.59
1991................................... 1.87 1.76 2.00 1.60
1992................................... 1.51 1.76 2.00 1.51
1993................................... 1.48 1.50 1.59 1.42
1994................................... 1.57 1.53 1.64 1.46
1995................................... 1.55 1.58 1.64 1.53
1996................................... 1.71 1.56 1.72 1.49
</TABLE>
---------------------
(1) The average of the Noon Buying Rates on the last day of
each month during the relevant period.
22
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents............................. $ 639,082
==========
Short-term borrowings, including current portion of
long-term debt....................................... $ 56,653
==========
Long-term debt (excluding current portion):
The 10 7/8% Notes................................... $ 170,747
The 12 3/4% Notes................................... 179,354
The 11 1/2% Notes................................... 647,005
The 7 1/4% Convertible Notes........................ 191,750
The Long Term Facility.............................. 219,100
The 7% Convertible Notes............................ 275,000
----------
Total long-term debt.............................. 1,682,956
Shareholders' equity:
Series preferred stock, $.01 par value, 2,500,000
shares authorized, none issued or outstanding(1)... --
Common stock, $.01 par value, 100,000,000 shares
authorized, 32,007,000 actual, pro forma, and pro
forma as adjusted issued and outstanding(2)........ 320
Additional paid-in capital.......................... 499,315
Cumulative translation adjustment................... 33,923
(Deficit)........................................... (305,493)
----------
Total shareholders' equity........................ 228,065
----------
Total capitalization.................................. $1,911,021
==========
</TABLE>
- ---------------------
(1) Does not include 780 shares of Series A Preferred Stock issued by the
Company on October 7, 1996 in connection with the Newport Acquisition.
(2) Does not include an aggregate of 23,858,000 shares of Common Stock,
consisting of (i) 6,679,000 shares of Common Stock subject to options,
(ii) 1,011,000 shares of Common Stock subject to warrants (including
164,000 shares of Common Stock issuable upon exercise of 164,000 warrants
which were issued pursuant to the terms of the solicitation of the
consents of the holders of the 10 7/8% Notes in January 1996); (iii)
6,957,000 shares of Common Stock issuable upon conversion of the 7 1/4%
Convertible Notes; (iv) 7,261,000 shares of Common Stock issuable upon
conversion of the 7% Convertible Notes; and (v) up to 1,950,000 shares of
Common Stock issuable upon conversion of the Series A Preferred Stock.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information presented below under the
captions Income Statement Data for the years ended December 31, 1995, 1994,
1993, 1992 and 1991 and Balance Sheet Data as of December 31, 1995, 1994,
1993, 1992 and 1991, were derived from Consolidated Financial Statements of
the Company audited by Ernst & Young LLP. The accompanying unaudited interim
financial information as of September 30, 1996 and for the periods ended
September 30, 1996 and 1995 include all adjustments (consisting only of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of the results of operations for such interim periods.
Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. The following information should be read in conjunction
with the Consolidated Financial Statements incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ---------------------------------------------
1996 1995 1995 1994 1993(1) 1992 1991
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA(2):
Revenues................ $ 143,473 $ 19,053 $ 33,741 $ 13,745 $ 10,078 $12,220 $7,801
Costs and expenses
Operating expenses..... 98,941 14,289 24,415 7,827 4,441 4,171 3,448
Selling, general and
administrative
expenses............... 90,092 41,683 72,629 27,890 5,042 2,899 1,320
Depreciation and 60,764 19,320 29,823 17,916 6,206 4,495 4,059
amortization........... --------- -------- -------- -------- -------- ------- ------
Total costs and 249,797 75,292 126,867 53,633 15,689 11,565 8,827
expenses............ --------- -------- -------- -------- -------- ------- ------
Operating income
(loss)................ (106,324) (56,239) (93,126) (39,888) (5,611) 655 (1,026)
Other income (expense)
Interest, dividend and
other income........... 28,669 16,055 21,185 18,403 5,182 1,594 604
Interest expense....... (105,368) (24,322) (28,379) (11,410) (2,950) -- --
Foreign currency
transactions gains
(losses)............... 432 567 84 2,062 (7,052) -- --
--------- -------- -------- -------- -------- ------- ------
Income (loss) before
income taxes and
minority interests..... (182,591) (63,939) (100,236) (30,833) (10,431) 2,249 (422)
Income tax benefit
(provision)............. (5,183) 1,824 2,477 (1,630) (645) (1,028) (504)
--------- -------- -------- -------- -------- ------- ------
Income (loss) before
minority interests...... (187,774) (62,115) (97,759) (32,463) (11,076) 1,221 (926)
Minority interests...... 11,822 4,637 6,974 2,890 -- -- --
--------- -------- -------- -------- -------- ------- ------
Net income (loss)....... $(175,952) $(57,478) $(90,785) $(29,573) $(11,076) $ 1,221 $ (926)
========= ======== ======== ======== ======== ======= ======
Net income (loss) per
common share(3)........ $ (5.73) $ (1.90) $ (3.01) $ (.98) $ (.83) $ .13 $ (.10)
========= ======== ======== ======== ======== ======= ======
Weighted average number
of common shares used
in computation of net
income (loss) per share
including common stock
equivalents(3)......... 30,717 30,186 30,190 30,175 13,327 9,367 8,833
========= ======== ======== ======== ======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, AS OF DECEMBER 31,
------------- ---------------------------------------------
1996 1995 1994 1993(1) 1992 1991
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 639,082 $ 175,283 $294,602 $400,097 $ 9,113 $ 4,571
Working capital......... 360,355 76,128 251,544 410,421 28,750 5,016
Fixed assets, net....... 1,176,421 639,674 191,725 36,422 14,065 16,104
Total assets............ 2,271,827 1,010,669 664,366 594,976 45,647 43,276
Long-term debt ......... 1,682,956 513,026 143,488 130,553 -- --
Shareholders' equity.... 228,065 339,257 436,534 452,402 43,260 42,034
</TABLE>
- --------
(1) In 1993, the Company acquired certain of its United Kingdom subsidiaries
in exchange for $3.1 million in cash, 5,831,416 shares of common stock,
options to purchase an aggregate of 44,832 shares of common stock and the
assumption of certain liabilities of Insight Communications Company U.K.,
LP. ("Insight U.K."). The aggregate purchase price including expenses was
$127.8 million. In addition, the Company sold 15,333,333 shares of common
stock, receiving proceeds of $290.0 million after expenses, and the
Company issued $212.0 million principal amount of its 10 7/8% Notes,
receiving proceeds of $119.9 million after original issue discount and
expenses.
(2) Operating expenses includes franchise acquisition fees. Selling, general
and administrative expenses includes corporate expenses.
(3) After giving retroactive effect to the four-for-three stock split by way
of stock dividend paid in August 1995.
The Company did not declare or pay any cash dividends during the years
indicated.
24
<PAGE>
THE COMPANY
The Company entered the telephony/cable and telecommunications market in the
United Kingdom in 1993 and is the third largest operator of telephony/cable
systems in the United Kingdom in terms of the number of homes in the franchise
areas managed by the Company, its subsidiaries and affiliated joint ventures.
The Company offers customers residential telephone, CATV, business
telecommunications services and internet access services, thereby generating
four sources of revenue from an integrated, high capacity, high speed, full-
service network. The Company's network provides a two way communications
pathway which is capable of delivering new services which may emerge from the
convergence of telecommunications, information services and entertainment.
In May 1996, the Company, through an indirect wholly-owned subsidiary,
acquired NTL. NTL, formerly the engineering division of the Independent
Broadcasting Authority of the United Kingdom (the "IBA"), was formed in 1990
and privatized by the United Kingdom Government in 1991. NTL's core business
has been the transmission of television programming for the ITV (Channel 3)
companies and Channel 4/S4C. NTL has also successfully bid for the
transmission of the Channel 5 signal for Channel 5 Broadcasting Limited. Under
contracts with those companies, NTL is responsible for operating, monitoring
and maintaining a transmission service. Transmission is carried out by means
of a network of transmitters located at over 1,200 transmission sites
throughout England. In addition to its core business, NTL broadcasts signals
for Teletext and independent local radio broadcasters. Since its
privatization, NTL has also diversified into non-regulated telecommunications
transmission via microwave links between its towers, entered the satellite
earthstation business, acquired DTELS Limited ("DTELS"), a company which
installs and services radio systems for emergency services and businesses, and
developed capabilities to install turnkey television facilities in the
international market.
In October 1996, the Company announced a new organizational structure
integrating CableTel, and its local telephone, cable television and internet
businesses, with NTL, and its national telecommunications and television
transmission businesses. Five business divisions were created for the combined
CableTel/NTL: Local Telecoms and Television Services, Broadcast Services,
National Telecoms Service, Internet and Information Services and National
Media Services.
LOCAL TELECOMS AND TELEVISION SERVICES
Based on operating results and experience gained by management in the United
States telecommunications market, CableTel has developed marketing strategies
that it believes will maximize customer subscription rates, customer retention
and operating profitability. For example, on November 1, 1996 CableTel
announced the introduction of a new pricing and packaging structure for its
telephony and CATV service. In this new structure, CableTel is offering a
First Choice package which includes residential telephone service, all the
terrestrial channels and three popular CATV channels for a monthly access
charge of (Pounds)7.95, which is less than typical telephone line rental alone
and is the same as the CableTel charge for telephone line rental. The customer
may choose from eight genre-based tiers of mini packages called Choice
Collections. Prices range from a total of (Pounds)12.50 for two additional
Choice Collections to (Pounds)19.50 if the customer elects to take all eight.
These prices include the (Pounds)7.95 access charge. CableTel has introduced
the packaging structure in all of its franchises following trials it conducted
in its South Bedfordshire franchise in the first six months of 1996. CableTel
believes that the tiering of its services should increase CATV penetration in
its franchises and decrease customer churn. There is no assurance, however,
that this will be the case. See "Risk Factors--Limited Access to Programming."
The Company's strategies also include a focus on geographic regions with
distinct cultural characteristics, which allows CableTel to tailor its
marketing and product offerings to meet local needs and preferences.
25
<PAGE>
CableTel is developing its franchises in the United Kingdom, where it has
clustered 16 separate franchises into five distinct geographic regions (the
"Regional Areas"). A summary of CableTel's Regional Areas as of December 31,
1996 is outlined below.
<TABLE>
<CAPTION>
OWNERSHIP TOTAL HOMES
REGIONAL AREA MAJOR CITIES/TOWNS PERCENTAGE IN FRANCHISE(1)
<S> <C> <C> <C>
Central Scotland........ Glasgow 100.0% 499,000
South Wales............. Cardiff, Newport and Swansea 100.0 540,000(2)
Suburban London:
Surrey and Hampshire... Guildford and Woking 100.0 136,000
Hertfordshire and
Bedfordshire.......... Luton and Stevenage 100.0 348,600
West Yorkshire.......... Huddersfield 100.0 138,400
Northern Ireland........ Belfast and Londonderry 100.0 428,000(3)
---------
FRANCHISE TOTALS...... 2,090,000
=========
</TABLE>
- ---------------------
(1) Total homes in Franchise represents the Company's regulatory milestones
which were derived from the 1981 census (being the census statistics at
the date each license was granted).
(2) Includes the final regulatory build milestone of 230,000 homes in the
Gwent and Glamorgan LDL of the total of 330,000 homes in the LDL.
(3) The final regulatory milestone for the Northern Ireland LDL is 428,000
homes of the total of 530,000 homes in the LDL.
Operating Results
CableTel continues to outperform the cable industry's overall customer
penetration averages for the United Kingdom telephony and CATV business. As of
December 31, 1996, CableTel had constructed its integrated full-service
network past 779,100 homes and had 302,000 revenue generating units ("RGUs")
from its newly constructed integrated full-service network. An RGU is one
telephone account or one CATV account; a dual customer counts as two RGUs. As
of December 31, 1996, RGU penetration in CableTel's newly constructed dual
(telephone and CATV) network was 64.6% of homes marketed and CableTel's
penetration was 32.0% for telephone and 32.6% for CATV. By comparison, based
on the latest available published statistics of the ITC dated October 1, 1996,
the Company estimates that United Kingdom cable customer penetration averaged
approximately 22.0% for telephone, and approximately 21.2% for television.
During the fourth quarter of 1996, CableTel's annualized churn (subscriber
termination) rate was approximately 10.0%. Although this rate is better than
estimates of the average United Kingdom churn rates, the Company expects its
churn rate to increase as its customer base increases.
26
<PAGE>
The following table illustrates the number of homes passed, the number of
homes marketed and the total number of customers as of September 30, 1996 and
December 31, 1996 and 1995 for the dual network constructed by CableTel since
1993:
NEWLY CONSTRUCTED DUAL NETWORK
<TABLE>
<S> <C> <C> <C>
DECEMBER 31 SEPTEMBER 30
---------------- ------------
<CAPTION>
1996 1995 1996
<S> <C> <C> <C>
Homes Passed(/1/)............................... 779,100 463,000 694,400
Homes Marketed.................................. 467,300 176,200 390,800
Total Customers................................. 168,200 57,700 135,300
Dual.......................................... 133,800 44,630 105,155
CATV-Only..................................... 18,450 6,620 15,600
Telephone-Only................................ 15,900 6,450 14,545
Total RGUs(/2/)................................. 302,000 102,330 240,455
RGU Penetration(/3/)............................ 64.6% 58.1% 61.5%
CATV Penetration................................ 32.6% 29.1% 30.9%
Telephone Penetration........................... 32.0% 29.0% 30.6%
</TABLE>
- --------
(1) "Homes passed" is the expression in common usage in the cable industry as
the measurement of the size of a cabled area, meaning the total number of
residential premises which have the potential to be connected to
CableTel's network. Homes passed does not include CATV-only homes which
are included in CableTel's 794,000 homes passed for the purposes of its
OFTEL milestones.
(2) An RGU (revenue generating unit) is one telephone account or one CATV
account; a dual customer counts as two RGUs.
(3) RGU Penetration is the number of RGUs per 100 homes marketed.
Network Construction
As of December 31, 1996, the Company had constructed its dual network passed
approximately 779,100 homes. As of September 30, 1996, the Company had
constructed its dual network passed approximately 694,400 homes and had
invested approximately $908.4 million in the construction of the network and
associated property, plant and equipment.
The Company has a total of 2,090,000 homes in its franchise areas. By
September 30, 1996, the Company had a total of approximately 794,000 homes
passed (or 38% of its total franchise homes) for the purposes of its OFTEL
milestones. By September 30, 1996, the Company had, therefore, met and
exceeded its OFTEL milestone for total homes passed in 1996. The homes passed
which count towards the Company's OFTEL milestone requirements exceed the
694,000 homes passed by the Company's full-service dual network stated above
because, among other things, OFTEL's definition of "homes passed" includes
CATV-only homes inherited by the Company through prior acquisitions which are
not considered by the Company to be full-service network passings.
As a result of its current build progress and the retrofitting of its CATV-
only networks, the Company expects to complete approximately 57% of its
integrated full-service network in its franchises (including the recently
awarded Northern Ireland and Gwent and Glamorgan franchises) by December 31,
1997, and approximately 94% by December 31, 2000.
The following table summarizes CableTel's construction activities as of
September 30, 1996 and the future network construction progress projected by
the Company:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------------------------------------
1994 1995 1996(1) 1997(2) 1998(2) 1999(2) 2000(2) 2001(2) 2002(2) 2003(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total homes........ 1,432,000 1,432,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000 2,090,000
Total homes
passed(3)......... 229,000 548,000 794,000 1,191,300 1,525,700 1,797,400 1,964,600 2,027,300 2,090,000 2,090,000
Percent of homes... 16% 38% 38% 57% 73% 86% 94% 97% 100% 100%
OFTEL milestone.... 210,500 465,500 779,500 1,124,000 1,445,000 1,714,500 1,909,000 2,024,000 2,082,000 2,090,000
</TABLE>
- ---------------------
(1) Total homes passed is as of September 30, 1996. OFTEL milestone is for
December 31, 1996.
(2) The figures presented are based on the Company's projections of its
construction activities; in reviewing such information it should be noted
that actual results may differ materially from those in such projections.
These projections were based on various factors and were derived utilizing
numerous assumptions. Important assumptions and factors that could cause
actual results to differ materially from those
27
<PAGE>
in these projections include the Company's ability to continue to design
network routes, install facilities, obtain and maintain any required
government licenses or approvals and finance construction and development,
in a timely manner, at reasonable costs and on satisfactory terms and
conditions and the absence of weather or labor difficulties and civil
disturbance. These assumptions are subject to a variety of factors which
may vary greatly by market and be beyond the control of the Company. See
"Risk Factors--Uncertainty of Construction Progress and Costs." Failure of
the Company to comply with build schedules contained in a license could
result in revocation of such license, which could have a material adverse
effect on the Company.
(3) The number of homes passed which count toward the Company's OFTEL
milestones exceeds the Company's 694,400 full-service passings's stated
above because OFTEL definition of "homes passed" is different from the
Company's definition of homes passed by its newly constructed dual
network. For example, the homes which count towards the Company's OFTEL
requirements include, among other things, CATV-only homes inherited by the
Company through prior acquisitions which are not considered by the Company
to be full-service network passings. None of the figures presented include
171,500 homes passed of Metro Cable TV Limited acquired in 1995 which, due
to technological limitations of the network connecting those homes, cannot
be counted towards the Company's OFTEL build milestones.
Based on current network construction scheduling, the Company believes it
will be able to satisfy its milestones in the future, but there can be no
assurance that such milestones will be met or that any application to OFTEL to
modify those milestones would be accepted. See "Risk Factors--Requirement to
Meet Build Milestones" and "--Uncertainty of Construction Progress and Costs."
BROADCAST SERVICES
The Company's Broadcast Services division (formerly NTL's Network Services
division) provides television and radio broadcasters with broadcast services.
This division designs, installs, operates and maintains new transmitter
networks and has a spectrum planning service to plan the coverage of
television and radio networks. It operates a national infrastructure in the
United Kingdom of over 1,200 owned and shared transmission sites which deliver
broadcast signals for ITV, Channel 4/S4C, Teletext and many of the United
Kingdom's independent radio broadcasters. In addition, NTL has a ten-year
contract to build the transmission system and broadcast the signal for Channel
5, the United Kingdom's fifth terrestrial channel.
On December 24, 1996, the Director General of OFTEL issued the formal
modification to NTL's Telecommunications Act License to deal with the new
price control for the television transmission services provided by the
Broadcast Services Division to the ITV Companies and Channel 4/S4C. Under the
new arrangements, the total revenues receivable by NTL for such services
(leaving aside some minor excluded items) may not exceed (Pounds)53.15 million
in 1997 and, thereafter through 2002, will be reduced annually by the Retail
Prices Index (RPI) minus 4%. There is no assurance that these price controls
will not be reviewed again by OFTEL prior to 2002 or that price controls for
the years following December 31, 2002 will not have a material adverse effect
on the revenues receivable from the ITV Companies, Channel 4/S4C.
The Broadcast Services division also offers a range of services to radio
broadcasting licensees in the United Kingdom including: target service area
planning; site location, installation and construction; and equipment
selection, procurement, operation, monitoring and maintenance. This division
offers total broadcast contract services ("TBCs"), where it designs, builds,
owns and maintains the operator's transmission facilities, and facility
management contract services ("FMCs"), where it maintains customer-owned
equipment and administers the operation of the transmission service. It
maintains over 50 TBCs and 40 FMCs. Classic FM is one of two national
independent radio networks served by NTL. In 1994, NTL was successful in
winning eight-year transmission contracts with all of the five new independent
regional radio licensees that commenced service in 1994. NTL also renewed, for
periods of up to ten years, all but one of the 24 expiring contracts of NTL's
existing customers.
The Broadcast Services division also includes Nexus, which provides services
associated with the design and construction of radio and television studio
centers and technical facilities. These services include installation,
commissioning, equipment procurement, training and consultancy for projects
ranging from production and post production studio facilities to full turnkey
systems involving transmitter network planning and installation. Nexus was
responsible for designing and constructing the international broadcast
facility for NBC at the Barcelona Olympic Games. Nexus also designed and built
a 60 channel digital audio play-out center for Music-Choice-Europe, a digital
music supplier which is uplinked by the National Telecoms division and
distributed throughout Europe by satellite.
28
<PAGE>
NATIONAL TELECOMS SERVICES
The Company believes that it can maximize its return on its investment in
its integrated full-service network by successfully combining CableTel's
strategies for developing, operating and marketing "last mile" telephony/cable
systems and NTL's national transmission network and expertise in the broadcast
and communications business to provide high-quality voice, data and
communications services throughout the United Kingdom.
The first CableTel local switch has already been connected to the NTL
network. The Company expects all seven CableTel local switches to be connected
to the NTL network during 1997 and early 1998. The Company will begin carrying
a portion of its own traffic and will begin offering switched telecoms
services to other carriers early in 1997. The Company has also implemented a
microwave-to-fiber network enhancement program as a result of increased
customer demand.
The National Telecoms Services division includes the Company's
telecommunications and satellite services groups. The Telecom Services
division builds and operates digital networks for customers covering
capacities of 2 Mbit/sec. to 155 Mbit/sec., and provides managed bandwidth for
video, audio, voice and data signals to various regions of the United Kingdom.
The network infrastructures are separate from those of BT and Mercury and are
capable of delivering national long distance services in the United Kingdom.
The Company also offers a range of satellite uplinking services including
uplink for a variety of entertainment channels to a number of satellites
including ASTRA 1C, Intelset, Eutelsat and Orion and an international gateway
service, which is capable of providing long distance and corporate
communications. The Company provides connections to a number of satellites for
clients requiring video, digital audio and data services. Customers include
CBS, United Artists, Turner Broadcasting Systems and Virgin. This division
operates three teleports, in Winchester, Croydon and central London, providing
uplink services to a number of United Kingdom cable television programming
suppliers. In addition, under the terms of its contract with Channel 5
Broadcasting, this division expects to distribute the Channel 5 program signal
to the terrestrial transmission network via satellite links. This service is
traditionally provided via terrestrial links secured from BT, NTL or another
telecommunications services provider.
The National Telecoms Services division also includes the Company's Radio
Communications group ("RadioComms") which offers the provision of
infrastructure and support services to customers with "mission critical"
communication needs. RadioComms is involved in two main activities--mobile
communications maintenance support and facilities leasing. RadioComms includes
the business operations of DTELS, the emergency services communications
business that NTL acquired from the Home Office of the United Kingdom
Government in 1994. In addition to network maintenance, the Company provides a
range of installation and commissioning services for new network design and
build projects. The Company has recently been engaged by Ericsson
Telecommunications Ltd. to assist in the design, planning and procuring of
mobile radio sites for the Mercury One-2-One mobile telephone network in the
United Kingdom.
INTERNET AND INFORMATION SERVICES
On November 20, 1995, CableTel launched its internet access service, Cable
Online, as a national service throughout the United Kingdom. This service
provides access to the World Wide Web, via the Company's telephone switches,
to customers in and outside its Regional Areas. Cable Online provides internet
service on a wholesale basis to other internet service providers as well as on
a retail basis. On May 13, 1996, CableTel announced the establishment of the
Virgin Net joint venture with Virgin Communications Limited ("Virgin") which
began offering service in November 1996 under the name Virgin.net. The joint
venture is owned 49% by a CableTel subsidiary and 51% by the Virgin Group and
is intended to offer Internet access and interactive services to United
Kingdom consumers and small office/home users. In addition, Virgin Net has
contracted Cable Online to provide the dial-up national network and back
office structure necessary for access to Virgin Net and the internet.
29
<PAGE>
During the third quarter and early fourth quarter of 1996, Cable Online
launched residential internet access service under the Cable Online brand name
in all of its local franchises and launched business internet access service
nationally under the Enablis brand name. Cable Online has signed agreements to
provide internet network services to Virgin, Diamond Cable and Telecential,
among others. Internet network services cover a range of services which allow
the customer to act as an internet service provider.
NATIONAL MEDIA SERVICES
The most developmental of the Company's new divisions, National Media
Services, combines Company-wide efforts in programming, content, digital
technology and interactive services. For example,this division will oversee
the weekly television listing guides inserted in local newspapers in the
Surrey franchise and, if current positive trends continue, will launch similar
guides in other franchise areas. This division will also coordinate the
Company's efforts in the areas of digital terrestrial television, local cable
channels, digital cable and alternative interactive service opportunities for
the United Kingdom.
The Company is a Delaware corporation formed in April 1993. The Company's
principal executive office in the United States is located at 110 East 59th
Street, 26th Floor, New York, New York 10022 (telephone number: (212) 906-
8440).
30
<PAGE>
RECENT DEVELOPMENTS
THE ECE ACQUISITION
On August 30, 1996 the Company entered into a share exchange agreement (the
"Share Exchange Agreement") with Booth American Company, a Michigan
corporation, Columbia Management, Inc., an Indiana corporation and Robert T.
Goad, an Indiana resident (collectively, the "ECE Selling Stockholders") and
B/G Co., an Indiana partnership. The Share Exchange Agreement provides for,
among other things, the purchase by the Company of the 30% minority interest
in English Cable Enterprises, Inc., a Delaware corporation ("ECE"), held by
B/G Co. Pursuant to the Share Exchange Agreement, the Company issued 1,415,000
shares of Common Stock to the ECE Selling Stockholders in exchange for such
interest in ECE. The Registration Statement of which this Prospectus is a part
has been filed by the Company pursuant to certain registration rights granted
to the ECE Selling Stockholders in the Share Exchange Agreement in respect of
the ECE Shares. ECE owns and operates, through subsidiaries, four
telecommunications and CATV franchises to the north of London (Central and
East Hertfordshire and South and North Bedfordshire) which comprise
approximately 348,600 homes. As a result of the consummation of the
transactions contemplated by the Share Exchange Agreement, ECE became a
wholly-owned subsidiary of the Company.
THE NEWPORT ACQUISITION
On October 7, 1996, the Company entered into a share purchase agreement (the
"Share Purchase Agreement") with South Wales Electricity plc, a public limited
company registered in England and Wales ("SWALEC"), and Swalec Telco
Investments Limited, a private limited liability company registered in England
and Wales which is a wholly-owned subsidiary of SWALEC ("Telco"). Pursuant to
the Share Purchase Agreement the Company purchased from Telco the 40% minority
interest (comprising shares and loan notes) in CableTel Newport, an unlimited
company having a share capital registered in England and Wales, that the
Company did not already own in exchange for 780 shares of the Company's Series
A Preferred Stock. The Series A Preferred Stock has an aggregate Stated Value
of $100,000 per share and is convertible into and redeemable for shares of
Common Stock pursuant to the terms of the Certificate of Designations dated
October 7, 1996. See "Description of Capital Stock--The Series A Preferred
Stock." The Registration Statement of which this Prospectus is a part has been
filed by the Company pursuant to certain registration rights given to SWALEC
and Telco in the Share Purchase Agreement in respect of the Common Stock
issuable pursuant to the terms of the Series A Preferred Stock. CableTel
Newport owns and operates, through subsidiaries, telecommunications and CATV
franchises in South Wales which together comprise 540,000 homes. As a result
of the consummation of the transactions contemplated by the Share Purchase
Agreement, CableTel Newport became a wholly-owned subsidiary of the Company.
PROPOSED OFFERING
On January 27, 1997, the Company announced that it proposes to make a
concurrent offering (the "Proposed Offering") of Senior Notes Due 2007 (the
"Proposed Notes") and Senior Redeemable Exchangeable Preferred Stock with a
maturity in 2009 (the "Proposed Preferred Stock" and, together with the
Proposed Notes, the "Securities"). The Company intends to raise approximately
$400 million of gross proceeds from the Proposed Offering for the
construction, working capital requirements and other corporate purposes of the
Company. The Securities will not have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or any state securities laws and
may not be offered or sold in the United States absent registration or
applicable exemption from the registration requirements of the Securities Act
and applicable state securities laws.
31
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company does
not purport to be complete and is qualified in its entirety by reference to;
(i) the Company's Restated Certificate of Incorporation, as amended, (the
"Charter"), a copy of which was filed as an exhibit to the Registration
Statement on Form S-3 (File No. 333-07879), filed with the Commission on
September 13, 1996; (ii) to the Company's By-laws and the Rights Agreement (as
defined), copies of which have been filed as exhibits to the Registration
Statement on Form S-1 (File No. 33-63570), filed with the Commission on
October 6, 1993; and (iii) the Company's Certificate of Designations in
respect of the Series A Preferred Stock dated October 7, 1996, a copy of which
was filed as an exhibit to the Company's Current Report on Form 8-K filed with
the Commission on October 9, 1996. Each of the foregoing may be obtained as
described under "Available Information."
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 102,500,000 shares,
of which 2,500,000 are shares of preferred stock, par value $.01 per share
(the "Preferred Stock"), and 100,000,000 are shares of Common Stock.
As of September 30, 1996 there were approximately 32,007,000 shares of
Common Stock outstanding. As of September 30, 1996 approximately 6,957,000
additional shares of Common Stock were reserved for issuance upon the
conversion of the 7 1/4% Convertible Notes, approximately 7,261,000 additional
shares of Common Stock were reserved for issuance upon the conversion of the
7% Convertible Notes, approximately 6,679,000 additional shares of Common
Stock were reserved for issuance upon exercise of options and approximately
1,011,000 additional shares of Common Stock were reserved for issuance upon
exercise of warrants. In addition, up to 1,950,000 shares of Common Stock are
issuable upon conversion of the Series A Preferred Stock issued by the Company
on October 7, 1996 in connection with the Newport Acquisition.
As of October 31, 1996, 2,000 shares of Series A Preferred Stock have been
authorized for issuance, 780 of which were issued in connection with the
Newport Acquisition. See "--The Series A Preferred Stock." No shares of Junior
Preferred Stock have been issued, although one million shares of Junior
Preferred Stock have been designated and reserved for issuance in connection
with a Rights Agreement, dated as of October 13, 1993 (the "Rights
Agreement"), between the Company and Continental Stock Transfer & Trust
Company, as rights agent (the "Rights Agent"). See "--Stockholder Rights
Plan."
COMMON STOCK
The Common Stock is traded on the NNM under the symbol "ICTL." All issued
and outstanding shares of Common Stock are fully paid and nonassessable, and
the holders thereof do not have preemptive rights.
Subject to Delaware law and the Charter, all shares of Common Stock
participate equally in dividends payable to holders of Common Stock when, as
and if declared by the Board of Directors. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share rateably in all assets remaining after the payment of
liabilities and preferred distribution to any class of preferred stock. Each
share of Common Stock has one vote per share on all matters submitted to a
vote of the Company stockholders and do not have cumulative voting rights in
the election of directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
PREFERRED STOCK
The Board of Directors is authorized to provide for the issuance of shares
of Preferred Stock in one or more series, and to fix for each such series such
voting powers, full or limited, or no voting powers, and such
32
<PAGE>
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as are stated in a
resolution or resolutions adopted by the Board of Directors providing for the
issue of such series and as are permitted by the DGCL.
THE SERIES A PREFERRED STOCK
On October 7, 1996, the Board of Directors created and authorized for
issuance, pursuant to the authority referred to in the immediately preceding
paragraph, 2,000 shares of 5% Non-voting Convertible Preferred Stock, Series A
(the "Series A Preferred Stock"), of which 780 such shares were initially
issued to Swalec Telco
Investments Limited in exchange for all the interests in CableTel Newport that
the Company did not already own. The powers, preferences and rights of the
Series A Preferred Stock are set forth in a Certificate of Designations of
Preferred Stock dated October 7, 1996. Each share of the Series A Preferred
Stock has a stated value of $100,000 (the "Stated Value"), subject to certain
exceptions.
Voting Rights. The holders of the Series A Preferred Stock do not have any
voting rights, except as required by law and except that the consent of
holders representing not less than a majority of the Series A Preferred Stock
is required before the Company can (i) amend any provision of the Certificate
of Designation or the Charter so as to adversely affect the preferences,
rights or powers of the Series A Preferred Stock or (ii) reclassify the
outstanding shares of the Series A Preferred Stock into another class or
series of capital stock. In particular, no such consent is necessary for the
creation of any class or series of capital stock of the company ranking senior
to or on a parity with the Series A Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation.
Dividend Rights. The holders of the Series A Preferred Stock are entitled to
receive cumulative dividends, in preference to dividends on any junior stock
(which include any shares of Common Stock and any shares of Junior Preferred
Stock issuable upon exercise of the Rights), from the fifth anniversary of
their issue date at the rate per annum of 5% of the Stated Value, payable
semi-annually in arrears, subject to certain exceptions. Dividends on the
outstanding shares of Series A Preferred Stock accrue on a daily basis
(without interest or compounding). Accrued but unpaid dividends accrue
additional dividends, from the dividend payment date on which they were due,
at the rate of 7% per annum.
Dividends on the Series A Preferred Stock may be paid, in the sole
discretion of the Board of Directors: (i) in cash out of funds legally
available for such cash dividends; (ii) through the delivery of shares of
Common Stock; or (iii) through the delivery of additional shares of Series A
Preferred Stock. If the Board does not declare any dividend payment in cash,
then the Board is required to declare and pay that dividend through the
delivery of Common Stock or additional Series A Preferred Stock. If the
Company elects to pay any dividend payment by delivery of shares of Common
Stock, the number of shares of Common Stock deliverable is determined by
reference to the average closing price of the Common Stock for the period of
20 consecutive trading days ending on the second trading day immediately
preceding the calculation date (the "Average Market Price").
Subject to certain exceptions specified in the Certificate of Designations,
as long as any shares of Series A Preferred Stock are outstanding, no
dividends may be paid or declared in cash on junior stock, nor may any shares
of junior stock be purchased, redeemed or otherwise acquired by the Company
unless, among other things, full dividends have been paid, or declared and set
aside for payment, on the Series A Preferred Stock and any other class or
series of the Company's capital stock with ranks on a parity basis with the
Series A Preferred Stock (collectively, "Parity Stock"). In addition, subject
to certain exceptions specified in the Certificate of Designations, as long as
any shares of Series A Preferred Stock are outstanding, dividends or other
distributions may not be paid or declared on any Parity Stock, nor may any
shares of Parity Stock be purchased, redeemed or otherwise acquired by the
Company unless, among other things, full dividends on all Parity Stock have
been paid, or declared and set aside for payment, pro rata on the Series A
Preferred Stock and each other share of Parity Stock.
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The Company's Redemption Rights. The Company has the right, exercisable at
any time, to redeem all or some of the Series A Preferred Stock at a price
equal to the aggregate Stated Value of the shares to be redeemed, together
with an amount equal to all dividends accrued but unpaid thereon (the
"Redemption Price"). The Company may satisfy the Redemption Price by
delivering a number of shares of Common Stock equal to the product of the
Redemption Price divided by the Average Market Price of the Common Stock on
the redemption date.
Conversion Rights. A holder of Series A Preferred Stock has the right, prior
to 5 days before a redemption date, to convert shares of the Series A
Preferred Stock into such number of shares of Common Stock as is equal to the
aggregate Stated Value of the shares of Series A Preferred Stock surrendered
for conversion divided by the greater of (i) $40.00 (as adjusted pursuant to
the antidilution provisions of the Series A Preferred Stock, the "Fixed
Price") and (ii) the Average Market Price of the Common Stock on the
conversion date.
Mandatory Conversion. If a change of control of the Company occurs, then all
the Series A Preferred Stock shall be deemed to have automatically converted,
effective immediately preceding such change of control, into such number of
shares of Common Stock as is equal to the aggregate Stated Value of the Series
A Preferred Stock divided by the amount per share of Common Stock, equal to
the lesser of (i) the Fixed Price and (ii) the value of the consideration per
share of Common Stock receivable by a holder of Common Stock by reason of the
change of control or, if no such consideration is receivable, then the closing
price of a share of Common Stock as of such time.
Liquidation Rights. If there is any liquidation, dissolution, or winding up
of the Company (other than a Non-Change Reorganization (as defined below)),
then the holders of Series A Preferred Stock, after payment, or provision for
payment of the debts and other liabilities of the Company and the payment or
provision for payment of any distribution on any shares of senior preferred
stock, and before any distribution to the holders of junior preferred stock,
are entitled to be paid out of the assets of the Company available for
distribution to its stockholders an amount per share of Series A Preferred
Stock in cash equal to the amount equal to (i) Stated Value per share of the
Series A Preferred Stock plus (ii) all dividends accrued but unpaid (the
"Liquidation Preference"). If the assets of the Company available for
distribution to the holders of Series A Preferred Stock upon any dissolution,
liquidation or winding up of the Company are insufficient to pay in full the
Liquidation Preference payable to the holders of outstanding shares of Series
A Preferred Stock and the liquidation preference payable to all other parity
preferred stock, then the holders of Series A Preferred Stock and of all other
shares of parity preferred stock shall share ratably in such distribution of
assets.
Antidilution Adjustments. The Fixed Price is subject to adjustment from time
to time upon the occurrence of certain events specified in the Certificate of
Designations for the Series A Preferred Stock. Such events include, subject to
the limitations of the Certificate of Designations: (i) dividends or
distributions on the Common Stock in shares of Common Stock, splits,
subdivisions or combinations of the Common Stock, (ii) certain issuances of
options or convertible securities to substantially all the holders of Common
Stock, (iii) distributions of stock other than Common Stock, indebtedness or
other assets to holders of Common Stock, and (iv) distributions of cash to
holders of Common Stock in excess of the aggregate amount of 10% of the
product of the Average Market Price of the Common Stock times the number of
shares of Common Stock (excluding treasury shares).
Non-Change Reorganizations. If a Non-Change Reorganization occurs, and there
is determinable for the entirety of each Reorganization Unit (as defined in
the Certificate of Designations) an Applicable Price (that is, in brief, an
average trading price on an established market), then the Company is required
to make, as a condition precedent to such Non-Change Reorganization, proper
provision so that each share of Series A Preferred Stock, or each share of
convertible preferred stock (having the same Stated Value and substantially
the same rights, benefits and privileges as a share of Series A Preferred
Stock) of the Company or its successor by merger or consolidation which is
issuable to each holder of Series A Preferred Stock in exchange or
substitution therefor, becomes convertible or redeemable upon and from and
after the occurrence of such Non-Change Reorganization into, instead of Common
Stock: (i) upon conversion at the option of the holder, that number of
Reorganization
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Units determined by dividing the Stated Value of such share by the higher of
(x) the Fixed Price on the conversion date and (y) the Applicable Price of a
Reorganization Unit on the conversion date; (ii) upon conversion resulting
from a change of control, that number of Reorganization Units determined by
dividing the Stated Value of such share by the lesser of (x) the Fixed Price
as of the change of control; and (y) the Applicable Price of a Reorganization
Unit as of the time of the change of control; and (iii) upon redemption, that
number of Reorganization Units determined by dividing the Stated Value of such
share by the Applicable Price of a Reorganization Unit on the redemption date.
If a Non-Change Reorganization occurs, and any Reorganization Unit issuable
in connection with that Non-Change Reorganization does not have in whole or in
part a determinable Applicable Price, then the Company must redeem all the
shares of Series A Preferred Stock prior to the occurrence of such Non-Change
Reorganization and on a basis such that the holders of Series A Preferred
Stock shall be holders of Common Stock for all purposes of the Non-Change
Reorganization.
A "Non-Change Reorganization" includes the following events which do not
also constitute a change of control of the Company: (i) a consolidation or
merger of the Company with another entity (other than a merger or
consolidation in which the Company is the surviving corporation and in which
the Common Stock outstanding immediately prior to the merger or consolidation
remains unchanged), (ii) the sale or other transfer of all or substantially
all of its assets, (iii) certain reorganizations or reclassifications of the
Common Stock or other equity securities of the Company, or (iv) a statutory
exchange of any shares of capital stock of the Company with another
corporation (other than a merger or consolidation in which the Company is the
surviving corporation and in which the Common Stock outstanding immediately
prior to the merger or consolidation remains unchanged).
CERTAIN SPECIAL PROVISIONS
The Charter of the Company as currently in effect contains the provisions
described below. Such 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 the Company'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 the
Board of Directors that may occur between annual meetings may be filled by the
Board of Directors. In addition, this provision specifies that any director
elected to fill a vacancy on the Board 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 the combined voting power of the
Company.
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 the voting power of the Company
shall be necessary to approve any "Business Combination" (as defined) proposed
by an "Interested Stockholder" or any affiliate of an Interested Stockholder
(as defined). The additional voting requirements will not apply, however, if:
(i) the Business Combination was approved by not less than a majority of the
Continuing Directors (as defined) or (ii) a series of conditions are satisfied
requiring (in summary) (a) that the consideration to be paid to the Company's
stockholders in the Business Combination must be at least equal to the higher
of (i) 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 (the "Determination Date"), whichever is
higher or (ii) the fair market value
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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 (non-cash
consideration is treated similarly) and (b) certain "procedural" requirements
are complied with, such as the solicitation of proxies pursuant to the rules
of the Securities and Exchange Commission 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 the
Company and any employee stock plans sponsored by the Company, 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: (a) merger or
consolidation of the Company or any subsidiary 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; (b) the
sale or other disposition by the Company or a subsidiary of assets having a
fair market value of $5,000,000 or more if an Interested Stockholder (or an
affiliate thereof) is a party to the transaction; (c) the adoption of any plan
or proposal for the liquidation or dissolution of the Company or for any
amendment to the Company's By-laws (or an affiliate thereof); or (d) 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 the outstanding stock (or securities
convertible into stock) of the Company or a subsidiary owned by an Interested
Stockholder (or an affiliate thereof). 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 the Board of Directors
of the Corporation, while such person is a member of the Board of Directors,
who is not an affiliate or representative of the Interested Stockholder and
was a member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a
Continuing Director while such successor is a member of the 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 Restated Certificate of
Incorporation. The Charter provides that the provisions set forth in the
Charter relating to the Business Combinations described above may not be
repealed or amended in any respect, unless such action is approved by the
affirmative vote of the holders or not less than two-thirds of the voting
power of the Company. The requirement of an increased stockholder vote is
designed to prevent a stockholder who controls a majority of the voting power
of CableTel from avoiding the requirements of the provisions discussed above
by simply amending or repealing such provisions.
Stockholder Rights Plan. The following description of the Rights Agreement
is qualified in its entirety by reference to the Rights Agreement, a copy of
which may be obtained as described under "Available Information."
On August 27, 1993, the Board of Directors adopted the Rights Agreement. The
Rights Agreement provides that one right (a "Right") will be issued with each
share of the Common Stock issued (whether originally issued or from the
Company's treasury) on or after the date of the Merger and prior to the Rights
Distribution Date (as hereinafter defined). The Rights are not exercisable
until the Rights Distribution Date and will expire at the close of business on
the date which is 10 years from the date of the Merger unless previously
redeemed by the Company as described below. When exercisable, each Right
entitles the owner to purchase from the Company one one-hundredth of a share
of Series A Junior Participating Preferred Stock at a purchase price of
$100.00.
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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 (i) 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 percent or more of the outstanding shares of the
Company Common Stock (the "Stock Acquisition Date") and (ii) 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. The Rights Agreement
exempts Insight U.K. and its partners (including Sidney R. Knafel) from the
definition of Acquiring Person provided Insight U.S. or such partners, as the
case may be, do not acquire additional shares of Common Stock.
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
thereafter the separate Rights certificates alone will represent the Rights.
The Junior Preferred Stock issuable upon exercise of the Rights will be
entitled to a minimum preferential quarterly dividend payment of $.01 per
share and will be entitled to an aggregate dividend of 100 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 Junior Preferred Stock
will be entitled to a minimum preferential liquidation payment of $1 per share
plus accrued and unpaid dividends and will be entitled to an aggregate payment
of 100 times the payment made per share of the Common Stock. Each share of
Junior Preferred Stock will have 100 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
Junior Preferred Stock will be entitled to receive 100 times the amount
received per share of the Company Common Stock. These rights are protected by
customary antidilution provisions. Because of the nature of the Junior
Preferred Stock's dividend, liquidation and voting rights, the value of one
one-hundredth of a share of Junior 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
the Board of Directors who are not officers of the Company and who are not
representatives, nominees, affiliates or associates of an Acquiring Person, to
be (i) at a price which is fair to the Company stockholders and (ii) otherwise
in the best interests of the Company and its stockholders (a "Qualifying
Offer")), each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price, the Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) 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 certain circumstances specified in the
Rights Agreement) were beneficially owned by any Acquiring Person (or certain
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 the Company as set forth below.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company 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 (ii) 50 percent or more of the
Company'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 thereafter have the right to receive, upon the exercise
thereof 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, the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right.
Immediately upon the action of the 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 $.01 redemption price.
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Until a Right is exercised, the holder thereof, as such, shall have no
rights as a stockholder of the Company, 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 the Company, 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 the Board of
Directors prior to the Rights Distribution Date. After the Rights Distribution
Date, the provisions of the Rights Agreement may be amended by the 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.
The Rights have certain anti-takeover effects as they will cause substantial
dilution to a person or group that acquires a substantial interest in the
Company without the prior approval of the Board of Directors. The effect of
the Rights may be to inhibit a change in control of the Company (including
through a third party tender offer at a price which reflects a premium to then
prevailing trading prices) that may be beneficial to the Company's
stockholders.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Each of the following summaries of existing debt instruments of the Company
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of each such debt instrument.
Capitalized terms used and not defined below have the meanings set forth in
such debt instruments.
THE 10 7/8% NOTES
In October 1993, the Company issued its 10 7/8% Notes at a discount to their
aggregate principal amount to generate gross proceeds to the Company of
approximately $125 million. The 10 7/8% Notes accrued at a rate of 10 7/8%
compounded semi-annually to an aggregate principal amount of $212 million by
October 15, 1998. Interest does not accrue on the 10 7/8% Notes prior to
October 15, 1998. Thereafter, the 10 7/8% Notes accrete interest in cash at
the rate of 10 7/8% per annum on the principal amount and will be payable
semiannually on October 15 and April 15, commencing on April 15, 1999 to
holders of record on the immediately preceding October 1 and April 1. The 10
7/8% Notes mature on October 15, 2003. Except as described below, the 10 7/8%
Notes will not be redeemable prior to October 15, 1998. Thereafter, the 10
7/8% Notes will be redeemable, in whole or in part, at the option of the
Company, at the redemption prices set forth in the indenture pursuant to which
the 10 7/8% Notes were issued (the "10 7/8% Notes Indenture"), plus accrued
and unpaid interest to the date of redemption. In the event of a Change in
Control (as defined in the 10 7/8% Notes Indenture), each holder of 10 7/8%
Notes will have the right to require the Company to repurchase its 10 7/8%
Notes at a purchase price equal to 101% of the Accreted Value thereof on any
purchase date prior to October 15, 1998, or 101% of the principal amount
thereof plus accrued and unpaid interest to any purchase date on or after
October 15, 1998. Subject to certain conditions, the Company will be obligated
to offer to purchase the 10 7/8% Notes with the Excess Proceeds of certain
Asset Sales at a redemption price of 100% of the Accreted Value or, as the
case may be, principal amount thereof plus accrued and unpaid interest. The 10
7/8% Note Indenture contains certain restrictions with respect to, among other
things, the payment of dividends, the repurchase of stock and the making of
certain other Restricted Payments, the incurrence of additional Indebtedness,
the creation of certain Liens, certain Assets Sales, transactions with
subsidiaries and other Affiliates and mergers and consolidations.
In January, 1996, the Company received the necessary consents of registered
holders of the 10 7/8% Notes to amend the 10 7/8% Notes Indenture so as to
allow the Company and its subsidiaries to take certain actions that were
previously prohibited under the 10 7/8% Notes Indenture, particularly
regarding the financing of the Company's and its subsidiaries' business and
future acquisitions. In addition, the amendment eliminated some, but not all,
of certain differences between the covenants in the 10 7/8% Notes Indenture
and the existing 12 3/4% Notes Indenture. On January 23, 1996, the Company and
Chemical Bank, now known as The Chase Manhattan Bank, as Trustee, executed a
first supplemental indenture to effect such amendment.
THE 12 3/4% NOTES
In April 1995, concurrently with the offering of the 7 1/4% Convertible
Notes summarized below, the Company issued $277,803,500 aggregate principal
amount at maturity of its 12 3/4% Senior Deferred Coupon Notes Due 2005 (the
"Old 12 3/4% Notes") at a discount to their aggregate principal amount to
generate gross proceeds to the Company of approximately $150,000,000. The Old
12 3/4% Notes were issued and sold in a transaction exempt from the
registration requirement of the Securities Act pursuant to Rule 144A under the
Securities Act or in transactions complying with Regulation S under the
Securities Act. On August 18, 1995 the Company issued $277,803,500 aggregate
principal amount at maturity of the 12 3/4% Series A Senior Deferred Coupon
Notes Due 2005 (the "12 3/4% Notes") in exchange for the Old 12 3/4% Notes
pursuant to the Indenture. The terms of the 12 3/4% Notes are identical in all
material respects to the Old 12 3/4% Notes except for certain transfer
restrictions and registration rights applicable to the Old 12 3/4% Notes. The
Old 12 3/4% Notes were cancelled on August 18, 1995 on consummation of the
exchange offer which was made pursuant to the Company's Prospectus dated July
18, 1995, forming part of the Registration Statement on Form S-4 (File No. 33-
92794) filed with the Commission on May 26, 1995.
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The 12 3/4% Notes accrete at a rate of 12 3/4% computed on a semiannual bond
equivalent basis to an aggregate principal amount at maturity of $277,803,500.
Cash interest on the 12 3/4% Notes does not accrue until prior to April 15,
2000. Thereafter, the 12 3/4% Notes accrue interest in cash at the rate of 12
3/4% per annum on the principal amount and will be payable semiannually on
April 15 and October 15 of each year, commencing October 15, 2000 to holders
of record on the immediately preceding April 1, and October 1. The 12 3/4%
Notes mature on April 15, 2005. The 12 3/4% Notes will be redeemable, at the
option of the Company at any time, in whole or in part, on or after April 15,
2000 at the redemption prices set forth in the indenture pursuant to which the
12 3/4% Notes were issued (the "12 3/4% Notes Indenture"), plus any unpaid
interest, if any, to the date of redemption. The 12 3/4% Notes may also be
redeemed at the option of the Company in whole but not in part in certain
circumstances where Additional Amounts (as defined in the 12 3/4% Notes
Indenture) are payable under the 12 3/4% Notes. In such circumstances the 12
3/4% Notes to be repurchased must be repurchased at 100% of Accreted Value or,
as the case may be, principal amount thereof. Upon a Change of Control (as
defined in the 12 3/4% Notes Indenture), holders of the 12 3/4% Notes will
have the right to require the Company to repurchase all or any part of the 12
3/4% Notes at a repurchase price equal to 101% of the Accreted Value thereof
plus accrued and unpaid interest, if any. Subject to certain conditions, the
Company will be obligated to offer to purchase the 12 3/4% Notes and other
Qualified Senior Notes (as defined in the 12 3/4% Notes Indenture) with the
Excess Proceeds of certain Asset Sales at a redemption price of 100% of the
Accreted Value or, as the case may be, principal amount thereof plus accrued
and unpaid interest. The 12 3/4% Notes Indenture contains certain restrictions
with respect to, among other things, the payment of dividends, the repurchase
of stock and the making of certain other Restricted Payments, the incurrence
of additional Indebtedness, the creation of certain Liens, certain Asset
Sales, transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
The 12 3/4% Notes are senior unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest with all other
existing and future senior unsecured obligations of the Company and rank
senior to all other existing and future subordinated debt of the Company,
including, without limitation, the 7% Convertible Notes and the 7 1/4%
Convertible Notes.
In January 1996, the Company obtained the necessary consents of the
registered holders of the 12 3/4% Notes to certain proposed amendments to the
12 3/4% Notes Indenture. On January 22, 1996, the Company and Chemical Bank,
now known as The Chase Manhattan Bank, as Trustee, executed a first
supplemental indenture to effect those amendments. In general, the amendments
modify the 12 3/4% Notes Indenture by amending the covenant entitled
"Limitations on Dividend and Other Payment Restrictions Affecting
Subsidiaries" and other provisions to facilitate the arrangement of the
Potential Credit Facilities and other financings and make certain conforming
and other changes to the 12 3/4% Notes Indenture.
THE 11 1/2% NOTES
In January 1996, the Company issued $1,050,000,000 aggregate principal
amount at maturity of its 11 1/2% Series A Senior Deferred Coupon Notes Due
2006 (the "Old 11 1/2% Notes") at a discount to their aggregate principal
amount to generate gross proceeds to the Company of approximately
$600,127,500. The Old 11 1/2% Notes were issued and sold in a transaction
exempt from the registration requirement of the Securities Act pursuant to
Rule 144A under the Securities Act. On May 23, 1996 the Company issued
$1,050,000,000 aggregate principal amount at maturity of the 11 1/2% Series B
Senior Deferred Coupon Notes Due 2006 (the "11 1/2% Notes") in exchange for
the Old 11 1/2% Notes pursuant to the Indenture. The terms of the 11 1/2%
Notes are identical in all material respects to the Old 11 1/2% Notes except
for certain transfer restrictions and registration rights applicable to the
Old 11 1/2% Notes. The Old 11 1/2% Notes tendered for exchange were cancelled
on May 23, 1996 on consummation of the exchange offer made pursuant to the
Company's Prospectus dated April 22, 1996, forming part of the Company's
Registration Statement on Form S-4 (File No. 333-1010) filed with the
Commission on April 16, 1996.
The 11 1/2% Notes accrete at a rate of 11 1/2% computed on a semiannual bond
equivalent basis to an aggregate principal amount at maturity of
$1,050,000,000. Cash interest on the 11 1/2% Notes does not accrue until
February 1, 2001. Thereafter, the 11 1/2% Notes accrue interest in cash at the
rate of 11 1/2% per annum on
40
<PAGE>
the principal amount and will be payable semiannually on February 1 and August
1 of each year, commencing August 1, 2001 to holders of record on the
immediately preceding January 15, and July 15. The 11 1/2% Notes mature on
February 1, 2006. The 11 1/2% Notes will be redeemable, at the option of the
Company at any time, in whole or in part, on or after February 1, 2001 at the
redemption prices set forth in the indenture pursuant to which the 11 1/2%
Notes were issued (the "11 1/2% Notes Indenture"), plus any accrued unpaid
interest to the date of redemption. The 11 1/2% Notes may also be redeemed at
the option of the Company in whole but not in certain circumstances where
"Additional Amounts" (as defined in the 11 1/2% Notes Indenture) are payable
under the 11 1/2% Notes. In such circumstances, the 11 1/2% Notes to be
repurchased must be repurchased at 100% of Accreted Value or, as the case may
be, principal amount thereof plus accrued and unpaid interest. Upon a Change
of Control (as defined in the 11 1/2% Notes Indenture), holders of the 11 1/2%
Notes will have the right to require the Company to repurchase all or any part
of the 11 1/2% Notes at a repurchase price equal to 101% of the Accreted Value
or, as the case may be, principal amount thereof plus accrued and unpaid
interest, if any. Subject to certain conditions, the Company will be obligated
to offer to purchase the 11 1/2% Notes and other Qualified Senior Notes (as
defined in the 11 1/2% Notes Indenture) with the Excess Proceeds of certain
Asset Sales at a redemption price of 100% of the Accreted Value or, as the
case may be, principal amount thereof plus accrued and unpaid interest, if
any. The 11 1/2% Notes Indenture contains certain restrictions with respect
to, among other things, the payment of dividends, the repurchase of stock and
the making of certain other Restricted Payments, the incurrence of additional
Indebtedness, the creation of certain Liens, certain sales of assets,
transactions with Subsidiaries and other Affiliates and mergers and
consolidations.
The 11 1/2% Notes are senior unsecured obligations of the Company ranking
pari passu in right of payment of principal and interest with all other
existing and future senior unsecured obligations of the Company and rank
senior to all other existing and future subordinated debt of the Company,
including, without limitation, the 7% Convertible Notes and the 7 1/4%
Convertible Notes.
THE 7 1/4% CONVERTIBLE NOTES
In April 1995, concurrently with the original offering of the 12 3/4% Notes
and in May 1995 the Company issued and sold an aggregate principal amount of
$191,750,000 of its 7 1/4% Convertible Notes Due 2005 in transactions exempt
from, or not subject to, the registration requirements of the Securities Act.
Cash interest on the 7 1/4% Convertible Notes will be paid semiannually on
April 15 and October 15 of each year, commencing October 15, 1995. The 7 1/4%
Convertible Notes will mature on April 15, 2005. The 7 1/4% Convertible Notes
are convertible at the option of the holder thereof at any time after 90 days
following the date of the original issuance thereof and prior to maturity,
unless previously redeemed, into shares of Common Stock of the Company, at a
conversion price of $27.56 per share (as adjusted for the four-for-three stock
split by way of dividend paid in August 1995), subject to further adjustment
in certain events. The 7 1/4% Convertible Notes are redeemable, in whole or in
part, at the option of the Company, at any time on or after April 15, 1998, at
the redemption prices set forth in the indenture pursuant to which the 7 1/4%
Convertible Notes were issued (the "7 1/4% Convertible Notes Indenture"). Upon
a Change of Control (as defined in the 7 1/4% Convertible Notes Indenture)
holders of the 7 1/4% Convertible Notes will have the right to require the
Company to purchase all or any part of the 7 1/4% Convertible Notes at a
purchase price equal to 101% of the principal amount thereof and any accrued
and unpaid interest to the date of purchase. The 7 1/4% Convertible Notes
Indenture contains certain restrictions with respect to, among other things,
certain Asset Sales, payment of Additional Amounts and mergers and
consolidations.
The 7 1/4% Convertible Notes are unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt of the
Company (as defined in the 7 1/4% Convertible Notes Indenture) including,
without limitation, the 10 7/8% Notes, the 12 3/4% Notes and the 11 1/2%
Notes.
The 7 1/4% Convertible Notes were issued and sold in transactions exempt
from the registration requirement of the Securities Act pursuant to Rule 144A
under the Securities Act or in transactions complying with Regulation S under
the Securities Act. On July 18, 1995 the Commission declared effective the
Company's shelf registration statement relating to the resale of the 7 1/4%
Convertible Notes and the Common Stock issuable upon conversion thereof by the
holders thereof.
41
<PAGE>
THE 7% CONVERTIBLE NOTES
In June 1996 the Company issued and sold an aggregate principal amount of
$275,000,000 of its 7% Convertible Subordinated Notes Due 2008 in transactions
exempt from, or not subject to, the registration requirements of the
Securities Act. Cash interest on the 7% Convertible Notes will be paid
semiannually on June 15 and December 15 of each year, commencing December 16,
1996. The 7% Convertible Notes will mature on June 15, 2008. The 7%
Convertible Notes are convertible at the option of the holder thereof at any
time after 90 days following the date of the original issuance thereof and
prior to maturity, unless previously redeemed, into shares of Common Stock of
the Company, at a conversion price of $37.875 per share subject to further
adjustment in certain events. The 7% Convertible Notes are redeemable, in
whole or in part, at the option of the Company, at any time on or after June
15, 1999, at the redemption prices set forth in the indenture pursuant to
which the 7% Convertible Notes were issued (the "7% Convertible Notes
Indenture"). Upon a Change of Control (as defined in the 7% Convertible Notes
Indenture) holders of the 7% Convertible Notes will have the right to require
the Company to purchase all or any part of the 7% Convertible Notes at a
purchase price equal to 101% of the principal amount thereof and any accrued
and unpaid interest to the date of purchase. The 7% Convertible Notes
Indenture contains certain restrictions with respect to, among other things,
certain Asset Sales, payment of Additional Amounts and mergers and
consolidations.
The 7% Convertible Notes are unsecured obligations of the Company,
subordinated in right of payment to all exiting and future Senior Debt of the
Company (as defined in the 7% Convertible Notes Indenture) including, without
limitation, the 10 7/8% Notes, the 12 3/4% Notes and the 11 1/2% Notes.
The 7% Convertible Notes were issued and sold in transactions exempt from
the registration requirement of the Securities Act pursuant to Rule 144A under
the Securities Act or in transactions complying with Regulation S under the
Securities Act. On September 13, 1996 the Commission declared effective the
Company's shelf registration statement relating to the resale of the 7%
Convertible Notes and the Common Stock issuable upon conversion thereof by the
holders thereof.
THE NTL FACILITIES
The following summaries do not purport to be complete and are qualified in
their entirety by reference to the agreements described herein, copies of
which have been filed with the Commission as exhibits to the Company's
Registration Statement on Form S-4 (File No. 333-1010) filed with the
Commission on April 16, 1996.
THE A FACILITIES
General. On March 28, 1996, the Purchaser entered into an agreement (the "A
Facilities") with Chase Investment Bank Limited as arranger of a syndicate of
lenders (the "Lenders") and The Chase Manhattan Bank, N.A., a predecessor of
The Chase Manhattan Bank (the "Facility Agent"), pursuant to which the Lenders
agreed, subject to the terms thereof, to lend the Purchaser up to (Pounds)165
million aggregate principal amount. The A Facilities are comprised of the
Short Term Facility (of (Pounds)50 million), the Long Term Facility (of
(Pounds)90 million) (collectively, the "Term Loan Facilities" and any loans
thereunder, the "Term Loans") and a revolving credit facility (the "Revolving
Credit Facility") (of up to (Pounds)25 million). The Term Loan Facilities are
available to finance the acquisition of NTL and to refinance monies used to
pay a portion of the Initial Payment including acquisition costs and expenses;
the Revolving Credit Facility may be used to finance capital expenditure and
working capital requirements of NTL. Up to (Pounds)2 million is available
under the Revolving Credit Facility by way of stand by letters of credit to
guarantee overdraft and other working capital facilities made available by any
clearing bank to the Purchaser. The Revolving Credit Facility is subject to
certain drawdown conditions including, in particular, the receipt of matching
subordinated debt or equity from the Company or any of its subsidiaries or any
other person (other than a member of the Purchase group) and, in the case of
cash advances (other than cash advances made by the Purchaser to repay any
sums paid by The Chase Manhattan Bank pursuant
42
<PAGE>
to any standby letters of credit issued by it in accordance with terms of the
A Facilities), the repayment of the Bridge Facility. The Bridge Facility was
repaid in full on August 16, 1996.
Repayment and Interest. Any amounts outstanding under the Revolving Credit
Facility on December 31, 1997 (the end of the availability period) will be
converted to Term Loans. As a result of the announcement by the Director
General of OFTEL on September 23, 1996 regarding the new price control
arrangements applicable to NTL's television transmission services, all amounts
outstanding under the Short Term Facility have been automatically converted
into, and are deemed to be, amounts outstanding under the Long Term Facility
(and, therefore, were not required to be prepaid on December 31, 1996).
The Company is obligated to fund the Further Payment by way of equity or
subordinated debt up to (Pounds)35 million by no later than May 9, 1997. The
Company plans to finance the Further Payment with cash on hand available for
that purpose. The undertaking in relation to the Further Payment is subject to
certain reductions.
All amounts outstanding under the Long Term Facility must be repaid at the
rate of a quarter of: (i) 5% of the amounts outstanding on each quarterly
payment date during 1998; (ii) 20% of the amounts outstanding on each
quarterly payment date during 1999; (iii) 22% of the amounts outstanding on
each quarterly payment date during 2000; (iv) 25% of the amounts outstanding
on each quarterly payment date during 2001; and (v) 28% of the amounts
outstanding on each quarterly payment date during 2002.
Loans under the A Facilities bear interest at an annual rate equal to LIBOR
plus a margin that varies from 0.75% per annum to 1.75% per annum, based on
certain financial ratios of the Purchaser and certain of its subsidiaries.
The A Facilities require that amounts outstanding thereunder be prepaid and
the commitment of its Lenders thereunder be reduced in certain circumstances.
In particular, the A Facilities require that 50% of any Excess Cash Flow (as
defined in the A Facilities) of the Purchaser and its subsidiaries shall be
applied to prepay amounts outstanding under the Term Loan Facility. The
Purchaser may prepay the Term Loan Facilities any time subject to certain
notice requirements and reimbursing the Lenders for any funding losses and
certain breakage costs.
Security. All principal, interest and other obligations of the Purchaser in
respect of loans under the A Facilities will be secured by, among other
things, guarantees given by NTL and certain of its subsidiaries and first
ranking fixed and floating charges over present and future assets (subject to
certain exceptions) of the Purchaser, NTL and certain of its subsidiaries. The
A Facilities do not, therefore, provide for the Lenders to have recourse to
the assets of the Company other than the assets of the Purchaser and its
subsidiaries including without limitation, an unsecured right of the Purchaser
against the Company under the undertaking relating to the Further Payment
referred to above under "--Repayment and Interest" and the rights of the
Lenders under the Short Term Facility pursuant to the undertaking of the
Company relating to the Reduction Amount payable pursuant to the Short Term
Facility. Based on the Interim Statement, however, the Company believes that
no Reduction Amount will become payable pursuant to the Short Term Facility.
See "--Repayment and Interest."
Covenants. The A Facilities contain various financial and other covenants,
including covenants with respect to the Purchaser and certain of its
subsidiaries relating to minimum total debt to Operating Cash Flow (as defined
in the A Facilities), fixed charge coverage, net worth and pro-forma debt
service ratios. The A Facilities also include covenants which restrict the
ability of the Purchaser to pay dividends or make other distributions to its
shareholders to 50% of Excess Cash Flow, provided no event of default or
potential event of default has occurred or remains unremedied. The covenants
further include other customary restrictions for facilities of this nature
including a requirement for all amounts invested by the Company or any of its
subsidiaries in the Purchaser's group to be subordinated on the terms of
subordination agreements to the claims of the A Facilities' and B Facilities'
Lenders. The Purchaser's ability to borrow under the A Facilities is subject
to, among other things, its compliance with such covenants and the failure to
comply with such covenants could result in all amounts under the A Facilities
becoming immediately due and payable.
43
<PAGE>
Conditions Precedent. The Purchaser's ability to draw under the Revolving
Credit Facility is subject to the satisfaction of certain conditions precedent
including, among other things, no breach of representation, no event of
default or potential event of default by certain members of the Purchaser's
group. In addition, subject to certain exceptions, cash advances under the
Revolving Credit Facility may not be drawn down until the Bridge Facility has
been paid in full and matching funding has been obtained by the Purchaser in
the form of equity or subordinated debt. On August 16, 1996, the Bridge
Facility was repaid in full using proceeds from the 7% Convertible Notes.
Events of Default. The A Facilities contain various events of default for,
among other things, non-payment of amounts due under the facilities, breach of
covenants or representations, cross default to certain other indebtedness,
breach of the covenants regarding the financial condition of the Purchaser and
certain of its subsidiaries, termination of the BBC site sharing license
agreements and certain material commercial contracts, or failure by the
Company to comply with its undertakings to the Lenders and the Purchaser. The
occurrence of any event of default could result in all amounts outstanding
under the A Facilities becoming immediately due and payable.
THE BRIDGE FACILITY
Contemporaneously with its execution of the A Facilities, The Chase
Manhattan Bank agreed to lend to the Purchaser up to (Pounds)60 million
aggregate principal amount under a secured term loan facility (the "Bridge
Facility"). The proceeds of the Bridge Facility were primarily used to finance
a portion of the NTL acquisition and associated expenses. On August 16, 1996,
the Bridge Facility was repaid in full using a portion of the net proceeds
from the 7% Convertible Notes.
THE POTENTIAL CREDIT FACILITIES
The Company has recently resumed discussions with commercial banks regarding
the arrangement of certain potential credit facilities in varying amounts up
to an aggregate of (Pounds)500 million (approximately $782 million) (the
"Potential Credit Facilities"). The arrangement of the Potential Credit
Facilities is subject to the satisfaction of a number of significant
conditions, including, among other things, (i) reaching an agreement in
principle regarding the terms of the Potential Credit Facilities, (ii) the
banks' credit committee approval, (iii) the negotiation and execution of
definitive credit agreements and related documents satisfactory to the Company
and the banks, (iv) the completion of due diligence satisfactory to the banks
and (v) nothing occurring or arising which might adversely affect the banks'
ability to syndicate the Potential Credit Facilities. The Company can give no
assurance that any such conditions will be satisfied or that the Potential
Credit Facilities will be entered into on acceptable terms or at all. See
"Risk Factors--Potential Adverse Consequences of Leverage" and "--Need for
Additional Financing."
The Company expects that the Potential Credit Facilities will contain
various covenants, including financial covenants restricting changes of
control (or making such an event an event of default) and limiting various
other activities that the borrowing group may otherwise engage in, in
particular, restricting the payment of dividends or distributions by the
borrowing group to the Company and its other Subsidiaries if an event of
default under the Potential Credit Facilities has occurred and continuing and
restricting the payments of such dividends to a portion of excess cash flow.
Indebtedness under each of the Potential Credit Facilities is expected to be
incurred by each member of the relevant borrowing group and to be secured and
guaranteed in a manner to be agreed with the banks.
44
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders (which term includes their transferees, pledgees,
donees or their successors) may from time to time offer and sell pursuant to
this Prospectus any or all of the Shares. The following table shows the number
of shares of Common Stock beneficially owned by each Selling Stockholder as of
the date of this Prospectus (subject to the assumption described in footnote
(5) below) and the number of Shares that may be offered for the account of
such Selling Stockholder pursuant to this Prospectus, assuming that all of the
Shares indicated below as being beneficially owned by each Selling Stockholder
are to be offered pursuant to this Prospectus. The information about each
Selling Stockholder has been obtained from that Selling Stockholder. Except as
described in the footnotes below, none of the Selling Stockholders holds any
position or office with, has been employed by, or has otherwise had a material
relationship with the Company or any of its predecessors or affiliates within
the past three years. Because the Selling Stockholders may offer all or some
portion of the Shares pursuant to this Prospectus, no estimate can be given as
to the amount of the Shares that will be held by the Selling Stockholders upon
termination of any such offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY NUMBER OF SHARES
NAME OF OWNED PRIOR TO TO BE OFFERED
SELLING STOCKHOLDERS THIS OFFERING HEREUNDER
-------------------- ---------------- ----------------
<S> <C> <C>
Booth American Company(1)(2).................. 817,488 817,488
Columbia Management, Inc.(1).................. 570,953 570,953
Robert T. Goad(3)............................. 26,559 26,559
Swalec Telco Investments Limited(4)........... 1,950,000(5) 1,950,000(5)
</TABLE>
- --------
(1) ECE Management Company, a partnership of affiliates of Booth American
Company and Columbia Management, Inc., performed services under a
management agreement with ECE from March 15, 1994, until August 30, 1996.
Booth American Company and Columbia Management, Inc., were partners in B/G
Co., a partnership which owned a 30% minority interest in ECE from March
15, 1994 until August 30, 1996.
(2) Ralph H. Booth II, an officer and director of Booth American Company, was
a director of ECE from March 15, 1994 until August 30, 1996.
(3) Robert T. Goad, an officer and director of Columbia Management, Inc., was
an officer and director of ECE from March 15, 1994 until August 30, 1996.
(4) Swalec Telco Investments Limited owned a 40% minority interest (comprising
shares and loan notes) in CableTel Newport from December 15, 1993 until
October 7, 1996 and nominated directors and alternate directors of
CableTel Newport and its subsidiaries during that period.
(5) Such number represents the maximum number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock assuming that
Swalec Telco Investments Limited exercises its option to convert all the
Series A Preferred issued and outstanding on the date of this Prospectus.
As of the date of this Prospectus, Swalec Telco Investments Limited does
not beneficially own any Shares.
PLAN OF DISTRIBUTION
The Shares covered hereby may be offered and sold from time to time by the
Selling Stockholders. The Selling Stockholders will act independently of the
Company in making decisions with respect to the timing, manner and size of
each sale except that the Shares are subject to certain contractual
restrictions on transfer. The Share Exchange Agreement restricts transfers of
the ECE Shares and the Share Purchase Agreement restricts transfers of the
Swalec Shares for certain periods specified therein.
Subject to those restrictions, the Shares may be sold from time to time in
one or more transactions to purchasers either directly by the Selling
Stockholders, through agents designated by the Selling Stockholders or
45
<PAGE>
to or through brokers, dealers or underwriters to be designated by the Selling
Stockholders, at such prices (whether at fixed offering prices, prevailing
market prices, varying prices determined at the time of sale or otherwise) and
on such terms as may be determined by the Selling Stockholders at the time of
sale; additionally, such sales may be made on the NNM or in the over-the-
counter market or otherwise. Such agents, brokers, dealers or underwriters
will likely receive commissions or discounts from the Selling Stockholders
which may exceed customary and ordinary amounts to be negotiated immediately
prior to the sale. The Selling Stockholders and any agents, dealers or
underwriters that participate with the Selling Stockholders in the
distribution of the shares of Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed underwriting commissions or discounts under the Securities Act.
To the extent required under the Securities Act, the aggregate amount of
Shares being offered and the terms of the offering, the names of any such
agents, brokers, dealers or underwriters and any applicable commission with
respect to a particular offer will be set forth in an accompanying Prospectus
supplement. The aggregate proceeds to the Selling Stockholders from the sale
of the shares of Common Stock offered hereby will be the selling price of the
shares of Common Stock sold less the aggregate commissions and discounts
thereon, if any, and other expenses of issuance and distribution. None of the
proceeds from the sale of the shares of Common Stock offered hereby will be
received by the Company.
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares may be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may be limited in its ability to
engage in market activities with respect to such Shares. In addition and
without limiting the foregoing, each Selling Stockholder will be subject to
(i) applicable provisions of the Exchange Act and the rules and regulations
thereunder and (ii) the provisions of the Share Exchange Agreement or, as the
case may be, the Share Purchase Agreement applicable to such Selling
Stockholder, which provisions may limit the timing of purchases and sales of
the Shares by the Selling Stockholders (including pursuant to an underwritten
offering). All of the foregoing may affect the marketability of the Shares.
LEGAL MATTERS
The validity of the shares of Common Stock and the associated Rights offered
hereby will be passed upon for the Company by Richard J. Lubasch, Senior Vice
President, General Counsel and Secretary of the Company. Mr. Lubasch owns
shares of the Company's capital stock and options to acquire additional shares
of the Company's capital stock.
EXPERTS
The consolidated financial statements of International CableTel Incorporated
included in its Annual Report (on Form 10-K) for the year ended December 31,
1995 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of NTL Group Limited at December 31,
1995 and 1994, and for each of the years then ended appearing in International
CableTel Incorporated's Current Report (on Form 8-K/A-1) dated May 9, 1996
have been audited by Ernst & Young, independent auditors as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
46
<PAGE>
INDEX TO PRO FORMA STATEMENTS OF OPERATIONS
<TABLE>
<S> <C>
Pro forma Condensed Consolidated Statements of Operations (Unaudited)...... F-2
Pro forma Condensed Consolidated Statement of Operations for the nine
months ended September 30, 1996 (Unaudited)............................... F-3
Pro forma Condensed Consolidated Statement of Operations for the year ended
December 31, 1995
(Unaudited)............................................................... F-4
Notes to Pro forma Condensed Consolidated Statements of Operations (Unau-
dited).................................................................... F-5
</TABLE>
F-1
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
In May 1996, a wholly owned subsidiary of International CableTel
Incorporated ("CableTel"), entered into agreements (the "Agreements") to
acquire all of the issued and outstanding stock of NTL Group Limited ("NTL")
in exchange for (i) cash of approximately (Pounds)200,000,000, (ii) an
additional cash payment of (Pounds)17,100,000 in October 1996, and (iii) an
agreement to pay (Pounds)35,000,000, subject to reduction, one year from
closing. A substantial portion of the purchase price was financed (the
"Financing") through (i) a bank facility of (Pounds)140,000,000 and (ii) a
(Pounds)60,000,000 short term bank loan. The acquisition has been accounted
for as a purchase. Accordingly, the excess of the purchase price over the fair
value of the net assets acquired has been recorded as goodwill and is being
amortized over 30 years.
The Company obtained from the former shareholders of NTL representations and
warranties concerning the commercial and financial position of the NTL group
and certain contingent liabilities and other obligations of NTL. The Company
has the right to reduce the payment of (Pounds)35,000,000 to the former NTL
shareholders in the event that these representations and warranties are found
to be untrue or inaccurate. Any such reduction will be determined in
accordance with, and subject to the limitations set forth in, the Agreements
either by agreement being reached between the parties or, failing agreement,
by the determination of an appropriately qualified expert or a court of law.
As the aggregate amount of such reductions can not exceed (Pounds)35,000,000,
the Company has no further rights or recourse against the sellers for claims
for damages for breaches of representations and warranties in excess of
(Pounds)35,000,000. The Company is not currently aware of any reason that the
payment will be reduced. In the event that the payment to the former
shareholders of NTL is reduced because of claims under the representations and
warranties, or in the event that unknown liabilities exceed (Pounds)35,000,000
or arise after the (Pounds)35,000,000 payment is made, such events will be
accounted for in accordance with Statement of Financial Accounting Standards
("SFAS") No. 38, "Accounting for Pre-acquisition Contingencies of Purchased
Enterprises."
The following unaudited pro forma condensed consolidated statements of
operations of CableTel give effect to the Agreements and the Financing. In
accordance with SFAS No. 52, the statement of operations has been translated
into dollars using the average exchange rate for the nine months ended
September 30, 1996 ((Pounds)1 = $1.5363) and for the year ended December 31,
1995 ((Pounds)1 = $1.5782).
The NTL historical statements of operations have been adjusted to reflect
U.S. GAAP . The NTL condensed consolidated statement of operations for the
year ended December 31, 1995 has also been adjusted to eliminate the gain on
the sale of its Advanced Products Division of approximately (Pounds)86,471,000
and the operating profit of (Pounds)3,295,000 of that division. Such items
have been excluded because they are not part of the operations of NTL acquired
by CableTel.
The unaudited pro forma condensed consolidated statement of operations for
the nine months ended September 30, 1996 and for the year ended December 31,
1995 gives effect of the Agreements and Financing as if they had occurred at
the beginning of the respective periods.
The pro forma statements of operations have been prepared by CableTel's
management. These pro forma statements of operations may not be indicative of
the results that actually would have occurred if the transactions had been in
effect on the dates indicated or which may be obtained in the future. The pro
forma statements of operations should be read in conjunction with the
consolidated financial statements and notes of CableTel and NTL.
F-2
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CABLETEL NTL ADJUSTMENTS PRO FORMA
--------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues.......................... $ 143,473 $61,295 $ 204,768
Costs and expenses:
Operating expenses.............. 98,941 31,453 130,394
Selling, general and
administrative................. 90,092 7,536 97,628
Depreciation and amortization... 60,764 3,878 $ 3,894 (a) 68,536
--------- ------- ------- ---------
Total costs and expenses.......... 249,797 42,867 3,894 296,558
--------- ------- ------- ---------
Income (loss) from operations..... (106,324) 18,428 (3,894) (91,790)
Interest (expense)................ (105,368) (1,670) (6,749)(b) (113,787)
Interest income................... 28,669 684 -- 29,353
Other............................. 432 -- -- 432
--------- ------- ------- ---------
Income (loss) before provision for
income taxes and minority
interests........................ (182,591) 17,442 (10,643) (175,792)
Benefit (provision) for income
taxes............................ (5,183) (3,255) 3,255 (c) (5,183)
--------- ------- ------- ---------
Income (loss) before minority
interests........................ (187,774) 14,187 (7,388) (180,975)
Minority interests................ 11,822 -- -- 11,822
--------- ------- ------- ---------
Income (loss) from continuing
operations....................... $(175,952) $14,187 $(7,388) $(169,153)
========= ======= ======= =========
Net (loss) per share.............. $ (5.73) -- -- $ (5.51)
========= ======= ======= =========
Weighted average number of shares
used in calculation of earnings
per share........................ 30,717 -- -- 30,717
========= ======= ======= =========
</TABLE>
F-3
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CABLETEL NTL ADJUSTMENTS PRO FORMA
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues......................... $ 33,741 $172,590 $ 206,331
Costs and expenses:
Operating expenses............. 24,415 104,690 129,105
Selling, general and
administrative................ 72,629 18,489 91,118
Depreciation and amortization.. 29,823 15,421 $ 12,040 (a) 57,284
--------- -------- -------- ---------
Total costs and expenses......... 126,867 138,600 12,040 277,507
--------- -------- -------- ---------
Income (loss) from operations.... (93,126) 33,990 (12,040) (71,176)
Interest (expense)............... (28,379) (3,278) (22,967)(b) (54,624)
Interest income.................. 21,185 1,046 22,231
Other............................ 84 84
--------- -------- -------- ---------
Income (loss) before provision
for income taxes and minority
interests....................... (100,236) 31,758 (35,007) (103,485)
Benefit (provision) for income
taxes........................... 2,477 (9,998) 352 (c) (7,169)
--------- -------- -------- ---------
Income (loss) before minority
interests....................... (97,759) 21,760 (34,655) (110,654)
Minority interests............... 6,974 -- -- 6,974
--------- -------- -------- ---------
Income (loss) from continuing
operations...................... $ (90,785) $ 21,760 $(34,655) $(103,680)
========= ======== ======== =========
Net (loss) per share............. $ (3.01) -- -- $ (3.43)
========= ======== ======== =========
Weighted average number of shares
used in calculation of earnings
per share....................... 30,190 -- -- 30,190
========= ======== ======== =========
</TABLE>
F-4
<PAGE>
INTERNATIONAL CABLETEL INCORPORATED
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
For purposes of determining the effect of the Agreements and Financing on
CableTel's Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1996 and the year ended December 31, 1995 the following
pro forma adjustments have been made:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, 1995 1996
------------------ ----------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
(a) Amortization of goodwill over 30
years and the depreciation of the
excess of the fair value over book
value of property and equipment
acquired........................... $(12,040) $(3,894)
(b) Interest expense on debt at 9.25%
per annum for the short term debt
and 7.91% per annum for the long
term debt (the rates in effect at
the consummation of the
Financing)(1)...................... $(26,245) $(8,488)
Less interest on NTL debt retired.... 3,278 1,739
-------- -------
(22,967) (6,749)
(c) Estimated tax benefit from filing
for group relief................... 352 3,255
-------- -------
$(34,655) $(7,388)
======== =======
</TABLE>
The excess of the fair value over the book value of the property and
equipment of approximately (Pounds)64,000,000 is being depreciated over the
estimated lives of such property (50 years for the tower structures and 10
years for equipment).
<TABLE>
<S> <C>
The goodwill was computed as follows:
Cash paid to shareholders and to financial institutions
((Pounds)203,601,000)...................................... $318,636,000
Cost and expenses of acquisition............................ 3,543,000
Additional payment (October 1996) ((Pounds)17,100,000)...... 26,762,000
Further additional payment (May 1997) ((Pounds)35,000,000).. 54,775,000
------------
Total..................................................... 403,716,000
Book value of net assets acquired........................... 133,939,000
Excess of fair value of property and equipment over book
value...................................................... 99,598,000
------------
Goodwill.................................................. $170,179,000
============
</TABLE>
The allocation of the purchase price is subject to revision. The Company
does not expect that there will be any material adjustment to the allocation
of the purchase price.
- --------
(1) Each 1/8% per annum change in the interest rate would change interest
expense by $395,000 and $128,000 for the year ended December 31, 1995 and
for the nine months ended September 30, 1996, respectively.
F-5
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF ITS AGENTS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UN-
DER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN
THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AU-
THORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATIONS IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITA-
TION.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Prospectus Summary......................................................... 5
Risk Factors............................................................... 7
Use of Proceeds............................................................ 21
Price Range of Common Stock................................................ 21
Dividend Policy............................................................ 22
Exchange Rates............................................................. 22
Capitalization............................................................. 23
Selected Consolidated Financial Information................................ 24
The Company................................................................ 25
Recent Developments........................................................ 30
Description of Capital Stock............................................... 32
Description of Certain Indebtedness........................................ 39
Selling Stockholders....................................................... 45
Plan of Distribution....................................................... 45
Legal Matters.............................................................. 46
Experts.................................................................... 46
Index to Pro Forma Statements of Operations................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,365,000 SHARES
[ICT LOGO]
COMMON STOCK
----------------
PROSPECTUS
----------------
DATED JANUARY , 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in
connection with the Offering.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 25,620
Nasdaq Listing Fee.............................................. 17,500
Legal fees and expenses......................................... 100,000
Accounting fees and expenses.................................... 60,000
Printing and engraving fees..................................... 85,000
Miscellaneous expenses.......................................... 11,880
--------
Total....................................................... $300,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Company's Restated Certificate of Incorporation eliminates a
director's personal liability for monetary damages to the Company and its
stockholders arising from a breach or alleged breach of a director's fiduciary
duty except for liability under Section 174 of the DGCL or liability for a
breach of the director's duty of loyalty to the Company or its stockholders,
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law or for any transaction in which the
director derived an improper personal benefit. The effect of this provision in
the certificate of incorporation is to eliminate the rights of the Company and
its stockholders (through stockholders, derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described above.
The Company's By-laws provide that directors and officers of the Company
shall be indemnified against liabilities arising from their service as
directors and officers to the full extent permitted by law. Section 145 of the
DGCL empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 145 also empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of
the capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless, and only to the extent that, the Court of Chancery or the
court in which such action was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
II-1
<PAGE>
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation is empowered to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
The Company has entered into a director and officer indemnity agreement
("Indemnity Agreement") with each officer and director of the Company (an
"Indemnitee"). Under the By-laws and these Indemnity Agreements, the Company
must indemnify an Indemnitee to the fullest extent permitted by the DGCL for
losses and expenses incurred in connection with actions in which the
Indemnitee is involved by reason of having been a director or officer of the
Company. The Company is also obligated to advance expenses an Indemnitee may
incur in connection with such actions before any resolution of the action.
ITEM 16. EXHIBITS.
The following exhibits are filed as part of this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1. Amended and Restated Agreement of Reorganization and Plan of Merger
Agreement, dated as of May 28, 1993, by and between the Company and
OCOM(1)
2.2. Deed of Irrevocable Undertaking dated March 28, 1996 by and among
Addroute Limited, certain shareholders in the NTL Group Limited, NTL
Group Limited and the Registrant(2)
2.3. Form of Offer Document dated March 28, 1996, of Addroute Limited for
NTL Group Limited(2)
2.4. Deed of Adjustment dated March 28, 1996, by and among Addroute Limited
and Mercury Asset Management plc(2)
2.5. Share Exchange Agreement dated as of August 30, 1996, among the
Registrant, B/G Co., Booth American Company, Columbia Management, Inc.
and Robert T. Goad*
2.6. Share Purchase Agreement dated October 7, 1996 by and among the
Registrant, South Wales Electricity plc and Swalec Telco Investments
Limited*
4.1. Restated Certificate of Incorporation of the Registrant, as amended by
Certificate of Amendment, dated June 5, 1996(3)
4.2. Restated Bylaws of the Registrant(1)
4.3. Rights Agreement, dated as of October 1, 1993, by and between the
Registrant and Continental Stock Transfer and Trust Company, as Rights
Agent(1)
4.4. Specimen of Common Stock Certificate of the Registrant(1)
5.1. Opinion of Richard J. Lubasch, General Counsel to the Registrant, as
to the legality of the securities being registered hereby
23.1. Consent of Ernst & Young LLP
23.2. Consent of Ernst & Young
23.3. Consent of Richard J. Lubasch, General Counsel to the Registrant
(included in Exhibit 5.1)
24. Powers of Attorney (included in the signature pages to the
Registration Statement)
99.1. Certificate of Designations dated October 7, 1996 in respect of the
Registrant's Series A Preferred Stock(4)
</TABLE>
- --------
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1, File No. 33-63570.
(2) Incorporated by reference from Amendment No. 2 to the Registrant's
Registration Statement on Form S-4, File No. 333-1010.
(3) Incorporated by reference from the Registrant's Registration Statement on
Form S-3, File No. 333-07879.
(4) Incorporated by reference from the Registrant's Current Report on Form 8-K
filed on October 9, 1996.
* Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement;
(2) That for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY AUTHORIZED THIS AMENDMENT TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE
30TH DAY OF JANUARY, 1997.
International CableTel Incorporated
By: /s/ Richard J. Lubasch
----------------------------------
RICHARD J. LUBASCH SENIOR VICE
PRESIDENT--GENERAL
COUNSEL AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the January 30,
- ------------------------------------ Board and 1997
GEORGE S. BLUMENTHAL Treasurer
* President, Chief January 30,
- ------------------------------------ Executive and 1997
J. BARCLAY KNAPP Financial Officer
and Director
* Vice President-- January 30,
- ------------------------------------ Controller 1997
GREGG GORELICK
* Director January 30,
- ------------------------------------ 1997
SIDNEY R. KNAFEL
* Director January 30,
- ------------------------------------ 1997
TED H. MCCOURTNEY
* Director January 30,
- ------------------------------------ 1997
ALAN J. PATRICOF
* Director January 30,
- ------------------------------------ 1997
WARREN POTASH
* Director January 30,
- ------------------------------------ 1997
MICHAEL S. WILLNER
*By: /s/ Richard J. Lubasch
--------------------------------
RICHARD J. LUBASCH
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
2.1. Amended and Restated Agreement of Reorganization and Plan of
Merger Agreement, dated as of May 28, 1993, by and between the
Company and OCOM(1)
2.2. Deed of Irrevocable Undertaking dated March 28, 1996 by and
among Addroute Limited, certain shareholders in the NTL Group
Limited, NTL Group Limited and the Registrant(2)
2.3. Form of Offer Document dated March 28, 1996, of Addroute
Limited for NTL Group Limited(2)
2.4. Deed of Adjustment dated March 28, 1996, by and among Addroute
Limited and Mercury Asset Management plc(2)
2.5. Share Exchange Agreement dated as of August 30, 1996, among the
Registrant, B/G Co., Booth American Company, Columbia
Management, Inc. and Robert T. Goad*
2.6. Share Purchase Agreement dated October 7, 1996 by and among the
Registrant, South Wales Electricity plc and Swalec Telco
Investments Limited*
4.1. Restated Certificate of Incorporation of the Registrant, as
amended by Certificate of Amendment, dated June 5, 1996(3)
4.2. Restated Bylaws of the Registrant(1)
4.3. Rights Agreement, dated as of October 1, 1993, by and between
the Registrant and Continental Stock Transfer and Trust
Company, as Rights Agent(1)
4.4. Specimen of Common Stock Certificate of the Registrant(1)
5.1. Opinion of Richard J. Lubasch, General Counsel to the
Registrant, as to the legality of the securities being
registered hereby
23.1. Consent of Ernst & Young LLP
23.2. Consent of Ernst & Young
23.3. Consent of Richard J. Lubasch, General Counsel to the
Registrant (included in Exhibit 5.1)
24. Powers of Attorney (included in the signature pages to the
Registration Statement)
99.1. Certificate of Designations dated October 7, 1996 in respect of
the Registrant's Series A Preferred Stock(4)
</TABLE>
- --------
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1, File No. 33-63570.
(2) Incorporated by reference from Amendment No. 2 to the Registrant's
Registration Statement on Form S-4, File No. 333-1010.
(3) Incorporated by reference from the Registrant's Registration Statement on
Form S-3, File No. 333-07879.
(4) Incorporated by reference from the Registrant's Current Report on Form 8-K
filed on October 9, 1996.
* Previously filed.
<PAGE>
EXHIBIT 5.1
January 30, 1997
International CableTel Incorporated
110 East 59th Street
New York, New York 10022
Re: International CableTel Incorporated
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
I am General Counsel of International CableTel Incorporated, a
Delaware corporation (the "Company"), and I am familiar with proceedings taken
by the Company in connection with the preparation of a registration statement on
Form S-3 (File No. 333-16751) (the "Registration Statement") relating to the
registration for resale of 3,365,000 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), of which: (a) 1,415,000 shares (the
"Issued Shares") of Common Stock were issued by the Company on August 30, 1996
pursuant the Share Exchange Agreement (as defined in the Registration
Statement); and (b) up to 1,950,000 shares (the "Issuable Shares") of Common
Stock are issuable upon conversion or redemption of, or otherwise pursuant to
the terms of, the 780 shares of the Company's Series A Non-voting Convertible
Preferred Stock, par value $.01 per share (the "Preferred Stock"), issued
pursuant to the Share Purchase Agreement (as defined in the Registration
Statement).
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to our satisfaction, of: (a) the Registration
State-
<PAGE>
International CableTel Incorporated
January 30, 1997
Page 2
ment as filed with the Securities and Exchange Commission (the "Commission") on
November 25, 1996 under the Act, Amendment No. 1 thereto filed with the
Commission on January 16, 1997 and Amendment No. 2 thereto filed with the
Commission on the date hereof (such Registration Statement, as so amended, being
hereafter referred to as the "Registration Statement"); (b) the Certificate of
Designations of Preferred Stock of the Company dated as of October 7, 1996
pursuant to which the rights and preferences of the Preferred Stock were
designated; (c) certain resolutions of the Board of Directors of the Company and
the Preferred Stock Committee of the Board of Directors of the Company, in each
case relating to the issuance of the Issued Shares, the Preferred Stock and the
Issuable Shares and related matters; (d) the Restated Certificate of
Incorporation of the Company, as presently in effect; (e) the Restated By-Laws
of the Company, as presently in effect; (f) the Share Exchange Agreement; and
(g) the Share Purchase Agreement. I have also examined originals or copies,
certified or otherwise identified to my satisfaction, of such records of the
Company and such agreements, certificates of public officials, certificates of
officers or other representatives of the Company and others, and such other
documents, certificates and records as I have deemed necessary or appropriate as
a basis for the opinions set forth herein.
In my examination, I have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making my
examination of documents executed by parties other than the Company, I have
assumed that such parties had the power, corporate and other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate and other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof.
I am admitted to the bar in the State of New York, and I am opining
herein as to the effect of only the laws of the State of New York and the
General Corpo-
<PAGE>
International CableTel Incorporated
January 30, 1997
Page 3
ration Law of the State of Delaware. I express no opinion as to the laws of any
other jurisdiction.
Based upon and subject to the foregoing, I am of the opinion that: (a)
the Issued Shares are validly issued, fully paid and nonassessable; and (b) the
Issuable Shares, when the shares of Preferred Stock are converted into, or
redeemed in exchange for, shares of Common Stock in accordance with the terms of
the Certificate of Designations, will be validly issued, fully paid and
nonassessable.
I hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. I also consent to the reference to
me under the caption "Legal Matters" in the Registration Statement.
Very truly yours,
/S/ Richard J. Lubasch
Richard J. Lubasch
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Information" in the Registration Statement
(Form S-3) and related Prospectus of International CableTel Incorporated for
the registration of 3,365,000 shares of the Company's Common Stock and to the
incorporation by reference therein of our report dated March 15, 1996, with
respect to the consolidated financial statements and schedule of International
CableTel Incorporated included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
Ernst & Young LLP
New York, New York
January 30, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of International
CableTel Incorporated for the registration of 3,365,000 shares of the Company's
Common Stock and to the incorporation by reference therein of our report dated
March 15, 1996, with respect to the consolidated financial statements of NTL
Group Limited included in International CableTel Incorporated's Form 8-K/A-1
dated May 9, 1996, filed with the Securities and Exchange Commission.
Ernst & Young
London, England
January 30, 1997
