SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ To ______
COMMISSION FILE NUMBER: 0-26840
TELEWEST COMMUNICATIONS PLC
(Exact Name of Registrant as Specified in Its Charter)
---------------------
ENGLAND AND WALES N/A
(State or Other (I.R.S. Employer
Jurisdiction of Identification Number)
Incorporation or
Organization)
GENESIS BUSINESS PARK
ALBERT DRIVE
WOKING, SURREY GU21 5RW
UNITED KINGDOM
011-44-1483-750-900
(Address of Principal Executive Offices)
Securities Registered Pursuant to Section 12(b)
of the Act:
NONE
Securities Registered Pursuant to Section 12(g)
of the Act:
AMERICAN DEPOSITARY SHARES EVIDENCED BY
AMERICAN DEPOSITARY RECEIPTS, EACH REPRESENTING
TEN ORDINARY SHARES OF 10p EACH
(Title of Class)
ORDINARY SHARES OF 10p EACH
(Title of Class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
AT MARCH 2, 1998, 927,567,600 ORDINARY SHARES OF 10P EACH WERE OUTSTANDING
AND THE AGGREGATE MARKET VALUE OF THE ORDINARY SHARES ON THE LONDON STOCK
EXCHANGE ON SUCH DATE HELD BY NON-AFFILIATES OF THE REGISTRANT WAS APPROXIMATELY
(POUND)194,764,583.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1997 ARE INCORPORATED BY REFERENCE INTO PART II.
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT, DATED MARCH 31, 1998,
TO BE DELIVERED TO SHAREHOLDERS IN CONNECTION WITH THE 1998 ANNUAL GENERAL
MEETING OF SHAREHOLDERS, ARE INCORPORATED BY REFERENCE INTO PART III.
<PAGE>
FORM 10-K
TABLE OF CONTENTS
PART I
<TABLE>
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Page
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Item 1. Business Proceedings.................................................................................. 3
Item 2. Properties Proceedings.................................................................................47
Item 3. Legal Proceedings......................................................................................47
Item 4. Submission of Matters to a Vote of Security Holders....................................................47
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..................................49
Item 6. Selected Financial Data................................................................................56
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................56
Item 7A. Quantitative and Qualitative Disclosure About Market Risk..............................................56
Item 8. Financial Statements and Supplementary Data............................................................56
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................56
PART III
Item 10. Directors and Executive Officers of the Registrant....................................................56
Item 11. Executive Compensation................................................................................57
Item 12. Security Ownership of Certain Beneficial Owners and Management........................................57
Item 13. Certain Relationships and Related Transactions........................................................57
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................57
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PART I
INTRODUCTORY NOTES:
Telewest Communications plc, formerly known as Telewest plc (the
"Company"), was formed for the purpose of acquiring the issued share capital of
Telewest Communications plc ("Old Telewest") and SBC CableComms (UK) ("SBCC") in
connection with the merger of Old Telewest and SBCC on October 3, 1995 (the
"Merger"). Prior to the Merger with SBCC, Old Telewest was a publicly traded
company traded on the London Stock Exchange and SBCC was a private company owned
by affiliates of SBC Communications, Inc. ("SBC") and an affiliate of Cox
Communications, Inc. ("Cox"). In connection with the Merger (a) all of the
issued share capital of Old Telewest and SBCC were exchanged for shares of the
Company, (b) Old Telewest and SBCC became wholly-owned subsidiaries of the
Company (and currently are indirect wholly-owned subsidiaries), and (c) the
Company became a publicly traded company (with its Ordinary Shares traded on the
London Stock Exchange under the symbol "TWT" and American Depositary Shares
("ADSs") representing its Ordinary Shares traded on the Nasdaq National Market
under the symbol "TWSTY"). All references to the Company prior to completion of
the Merger are to Old Telewest or its predecessor business, TCI/U S WEST Cable
Communications Group (a joint venture (the "Joint Venture") between affiliates
of Tele-Communications, Inc. ("TCI") and affiliates of U S WEST, Inc. ("U S
WEST") that owned and operated cable television and telephony businesses in the
U.K. and was contributed to Old Telewest in connection with its initial public
offering (the "Initial Public Offering") in November 1994.
References in this document to homes "passed" are to homes in respect
of which network construction has been completed, and references to homes
"passed and marketed" are to homes passed where marketing has commenced.
References in this document to the number of "equity homes," "equity homes
passed," "equity homes passed and marketed," "equity businesses," equity
customers" and "equity lines" are to the number of homes, businesses, customers
or lines, respectively, within franchises owned by a company multiplied by such
company's effective equity interest in such franchises (e.g., a franchise with
100 homes in which such company has an effective interest of 25% would represent
25 equity homes for such company). Unless otherwise indicated in this document,
"equity homes," "equity homes passed," "equity homes passed and marketed,"
"equity businesses," "equity customers" and "equity lines" are calculated for
the purposes of this document for all periods on the basis of a company's
effective interest in its franchises as at the date of this document.
Unless the context requires otherwise, references in this document to
the Company include its direct and indirect subsidiaries but do not include the
Affiliated Companies (as defined herein). All information with respect to the
number of homes and businesses in a franchise area is based on the most recent
published U.K. census data (1991) with respect to homes and the relevant
company's estimates with respect to businesses. All information with respect to
the number of homes "passed" or "passed and marketed" is based on physical
counts made by the relevant company during the network construction or marketing
phases (or in the case of homes acquired after network construction or marketing
was completed by another operator, based on the records of such operator). All
information with respect to the number of homes in an Affiliated Franchise (as
defined herein) is based on the most recent published U.K. census data (1991),
and all other information concerning the Affiliated Companies has been provided
by (or derived from data provided by) the Affiliated Companies.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS:
All statements other than statements of historical fact included in
this document, including without limitation the statements incorporated herein
from the Company's 1997 Annual Report and 1998 Proxy Statement are, or may be
deemed to be, forward-looking statements within the meaning of Section 21E of
the U.S. Securities Exchange Act of 1934, as amended. Important factors that
could cause actual results to differ materially from those discussed in such
forward-looking statements include, among other things, the extent consumer
preference develops for cable television over other methods of providing in-home
entertainment and for the Company as a viable alternative to British
Telecommunications plc ("BT") and others as a provider of telephony service; the
ability of the Company to manage growth and expansion; the ability of the
Company to improve operating efficiencies (including through cost reductions);
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the ability of the Company to construct its network in a cost efficient and
timely manner; the ability of the Company to raise additional financing if there
is a material adverse change in the Company's anticipated revenues or expenses
or to finance new initiatives; the ability of the Company to respond to changes
or increases in competition (including the introduction of digital services by
BSkyB (as defined) or other operators) and adverse changes in government
regulation; the extent programming is available at reasonable costs; adverse
changes in the price of telephony interconnection; disruptions in supply of
services and equipment, and the performance of the Affiliated Companies (which
are not controlled by the Company). All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by such
cautionary statements.
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ITEM 1. BUSINESS
OVERVIEW
The Company is a leading provider of cable television and residential
and business cable telephony services in the U.K. The Company owns and operates
28 cable franchises (the "Owned and Operated Franchises") and has minority
equity interests in three U.K. cable operators (the "Affiliated Companies"),
which own and operate seven additional franchises (the "Affiliated Franchises").
As of December 31, 1997, the Owned and Operated Franchises and the Affiliated
Franchises covered approximately 25.7% of the homes in the U.K. in areas for
which cable franchises have been awarded. The Owned and Operated Franchises and
the Affiliated Franchises together include approximately 5.2 million homes and
approximately 344,000 businesses, of which approximately 4.4 million and
approximately 290,000 are the Company's equity homes and equity businesses,
respectively. As of December 31, 1997, the Company's network in such franchises
had passed approximately 3,318,000 of the Company's equity homes (approximately
3,097,000 of which had been passed and marketed) and the Company had
approximately 687,000 equity cable television customers, 923,000 equity
residential telephone lines and 117,000 equity business telephone lines.
The Company's 28 Owned and Operated Franchises, which include
approximately 4.0 million homes, are managed in four Regional Franchise Areas:
London South and the South East (including Croydon, Kingston, Richmond,
Basildon, Chelmsford and Gravesend), Scotland and the North East (including
Dundee, Edinburgh, Perth, Gateshead and Newcastle upon Tyne), Avon, Cotswolds
and the Midlands (including Bath, Bristol, Cheltenham, Gloucester, Telford,
Dudley, Wolverhampton, Walsall, Worcester and Kidderminster) and the North West
(including St. Helens and Knowsley, Wigan, Preston, Southport, North and South
Liverpool and Blackpool). The seven Affiliated Franchises include approximately
1.2 million homes and provide the Company with an additional 401,000 equity
homes. The Affiliated Franchise areas include Birmingham, parts of North London
and Windsor.
The Company provides a wide variety of cable television, cable
telephony and on line services. Such services are provided over a hybrid
fibre-coaxial network (i.e., high capacity broadband) which has been designed to
enable the Company to provide customers with a wide range of interactive and
integrated entertainment, telecommunications and information services as they
become available in the future. The Company currently provides analogue services
over the network, and expects to begin introducing digital services over the
network in one franchise by the end of 1998. Such digital services may include
pay-per-view programming, near-video-on-demand ("NVOD"), cable television
Internet access, electronic mail, home shopping and banking.
As of December 31, 1997, network construction was completed for
approximately 75.0% of the homes in the Owned and Operated Franchises and 89.4%
of the Affiliated Franchises and approximately (pound)1,973 million had been
invested in the construction of the network of the Owned and Operated Franchises
and (pound)753 million had been invested in the construction of the networks of
the Affiliated Franchises (in each case including the costs of cable, ducting,
network electronic equipment and subscriber connections). The Company
anticipates that network construction will be completed for more than 77% of the
homes in the Owned and Operated Franchises and 92% of the Affiliated Franchises
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by December 31, 1998 and expects that the remaining construction of the networks
will be substantially completed by the end of year 2003.
In addition to the construction of a hybrid fibre-coaxial network in
each of its franchises, the Company is developing an inter-franchise network to
link the individual networks of the Owned and Operated Franchises and the
Affiliated Franchises (the "Interfranchise Network"), carrying voice, data and
video traffic between the franchises. The Interfranchise Network is expected to
provide a number of benefits to the Company, including increased telephony
margins resulting from reduced payments of interconnection fees to national
carriers for domestic long distance calls. The Interfranchise Network is
scheduled to be completed by the middle of 1998.
The following table sets forth certain data concerning the Owned and
Operated Franchises and Affiliated Franchises at and for the years ended
December 31, 1995, 1996 and 1997. Except as otherwise noted in the footnotes to
this table, all information with respect to SBCC is included only from and after
October 3, 1995 (the date of completion of the Merger).
<TABLE>
<CAPTION>
Owned and Operated Affiliated
Franchises Franchises(1) Total(1)
---------- ------------- --------
1995 1996 1997 1995 1996 1997 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
Homes passed.......... 1,987,344 2,575,142 2,970,168 242,415 316,878 347,563 2,229,759 2,892,020 3,317,731
Homes passed and
marketed.............. 1,831,458 2,335,953 2,760,184 235,196 290,882 336,398 2,066,654 2,626,835 3,096,582
Basic customers....... 401,469 528,142 605,988 56,003 71,457 81,364 457,472 599,599 687,352
Basic penetration
rate (2).............. 21.9% 22.6% 22.0% 23.8% 24.6% 24.2% N/A N/A N/A
Average monthly
revenue per
customer (3)........(pound)21.32(4) (pound)22.95(pound)23.40 (pound)19.16(pound)20.35(pound)21.27 N/A N/A N/A
Average churn rate ... 41.0%(5) 33.4%(6) 34.0%(6) 31.5%(5) 28.9%(6) 37.0%(6) N/A N/A N/A
RESIDENTIAL TELEPHONY
Homes passed.......... 1,750,288 2,396,658 2,791,684 237,940 299,603 347,913 1,986,228 2,696,261 3,139,597
Homes passed and
marketed.............. 1,652,604 2,254,734 2,725,154 229,956 288,307 337,173 1,882,560 2,543,041 3,062,327
Residential customers. 429,405 620,377 810,358 48,250 65,724 84,324 477,655 686,101 894,682
Penetration rate (7).. 26.0% 27.5% 29.7% 21.0% 22.8% 25.0% N/A N/A N/A
Residential lines
connected............. 430,926 627,009 836,168 48,549 66,512 86,372 479,475 693,521 922,540
Average monthly
revenue per
line (8)............(pound)20.48(9) (pound)20.26(pound)19.19 (pound)27.25(pound)27.05(pound)24.86 N/A N/A N/A
Average churn rate
per line ............. 21.8%(10) 19.6%(6) 20.0%(6) 23.8%(10) 25.8%(6) 29.9%(6) N/A N/A N/A
BUSINESS TELEPHONY
Business customers.... 14,225 20,882 25,475 1,760 2,416 2,856 15,985 23,298 28,331
Business lines
connected............. 40,021 67,823 100,989 7,496 10,746 15,684 47,517 78,569 116,673
Average number of
business lines
per customer
(11).................. 2.8 3.2 4.0 4.3 4.4 5.5 N/A N/A N/A
Average monthly
revenue per
line (12)...........(pound)58.92(13) (pound)54.50(pound)43.62(pound)75.39(13)(pound)71.95(pound)71.29 N/A N/A N/A
Average churn rate
per line ............. 12.4%(14) 14.5%(6) 15.0%(6) 25.0%(14) 24.8%(6) 23.1%(6) N/A N/A N/A
</TABLE>
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Notes:
"N/A" means not applicable.
(1) Information with respect to Affiliated Franchises reflects the Company's
equity interest therein.
(2) Cable television basic penetration rate at a specified date represents (i)
the total number of cable television basic customers at such date, divided
by (ii) the total number of homes passed and marketed for cable television
at such date.
(3) Average monthly revenue per customer for each period represents (i)
one-twelfth of the total cable television revenue for such period, divided
by (ii) the average number of basic cable television customers in such
period.
(4) If the Merger had been completed on January 1, 1995, the average monthly
revenue per subscriber would have been (pound)21.11 in 1995.
(5) Average cable television churn rate for the period represents (i) the
total number of cable television customers who terminated basic service or
whose service was terminated by the Company during such period, divided by
(ii) the average number of basic cable television customers in such
period. If the Merger had been completed on January 1, 1995, the average
cable television churn rate for the Owned and Operated Franchised would
have been 44.5% in 1995.
(6) Prior to 1996, the calculation of churn included those customers who moved
homes and reconnected elsewhere in one of the Owned and Operated or
Affiliated Franchises and consequently overstated customer dissatisfaction
with the service provided. From 1996, the Company revised the basis on
which "churn" is calculated to exclude those customers who moved their
cable service from one premises to another within one of the Owned and
Operated Franchises. Average churn rate for 1996 and 1997 represents (i)
the total number of customers who voluntarily or involuntarily terminated
service during such period, divided by (ii) the average number of
customers in such period.
(7) Residential telephony penetration rate at a specified date represents (i)
the total number of residential cable telephony customers at such date,
divided by (ii) the total number of homes passed and marketed for
residential cable telephony at such date.
(8) Average monthly revenue per residential line for each period represents
(i) one-twelfth of the total residential cable telephony revenue for such
period, divided by (ii) the average number of residential cable telephony
lines in such period.
(9) If the Merger had been completed on January 1, 1995, the average monthly
revenue per line would have been (pound)20.69 in 1995.
(10) Average residential telephony churn rate per line for the period
represents (i) the total number of residential cable telephony lines
terminated by customers or the Company during such period, divided by (ii)
the average number of residential cable telephony lines in such period. If
the Merger had been completed on July 1, 1995, the average residential
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telephony churn rate per line for the Owned and Operated Franchises would
have been 21.8% in 1995.
(11) Average number of business lines per customer at a specified date
represents (i) the number of business cable telephony lines at such date,
divided by (ii) the number of business cable telephony customers at such
date.
(12) Average monthly revenue per business line for each period represents (i)
one-twelfth of the total business cable telephony revenue for such period,
divided by (ii) the average number of business cable telephony lines in
such period.
(13) If the Merger had been completed on December 1, 1995, the average monthly
revenue per line would have been (pound)59.39 in 1995.
(14) Average business telephony churn rate per line for each period represents
(i) the total number of business cable telephony lines terminated by
customers or the Company during such period, divided by (ii) the average
number of business cable telephony lines in such period. If the Merger had
been completed on January 1, 1995, the average churn rate per line for the
Owned and Operated Franchises would have been 13.1% in 1995.
RECENT DEVELOPMENTS
The Owned and Operated Franchises and Affiliated Franchises now include
more than 25.7% of the U.K. homes in areas covered by cable licenses. One of
every three homes passed by the networks of the Owned and Operated Franchises
subscribe for one or more of the Company's services and more than 50% of the
Company's customer's subscribe for both cable television and cable telephony
services.
Over the past few years, the Company has devoted substantial resources
to rapidly constructing its network in accordance with licence construction
milestones, while also actively developing and marketing various cable
telephony, television and Internet products and servicing its customers. In the
second quarter of 1997, with the Company's network approximately 69.8% complete,
the Company decided to significantly reduce the pace of its network construction
and increase its focus on developing and marketing attractive product offerings
and enhancing customer service.
The Company has reduced the pace of its network construction from
passing an average of approximately 35,000 new premises per month in 1997 to
passing approximately 5,000 new premises per month in 1998. In addition, to
improve operating and management efficiencies, during 1997 the Company
streamlined its franchise operations by consolidating the management of its
franchises into four regional franchise areas, rather than the previous seven.
In connection with the consolidation of franchise management and other
initiatives to improve operating efficiencies, in the second half of 1997 the
Company announced and implemented a 25% reduction in the size of its work force.
The reduction in the pace of network construction is expected to significantly
reduce the Company's capital expenditure and the reduction of the work force and
the introduction of various operating efficiencies are expected to result in
significant on-going operating cost reductions.
During 1997 the Company also implemented various initiatives to
strengthen its product offering and enhance its customer services. For example,
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the Company trialed a further development of its Teleplus combined cable
television and telephony package, offering customers a "mini basic" package with
smaller number of channels, telephone line rental, free local calling within the
Company's Regional Franchise Areas at certain times and access to premium
television channels for a cost lower than that of the Company's traditional
basic package. Based on the success of these trials, in early 1998 the Company
introduced a variety of new combination packages (including the "mini basic"
package), marketed as Millennium, into all of its franchises.
In March 1997 the Company entered into a consortium with other U.K. cable
operators to provide a pay-per-view movie service for their cable television
subscribers, marketed as "Front Row". The joint venture has entered into
contracts with Columbia Tristar, Warner Brothers and Buena Vista International
and additional contracts are under negotiation. The Company expects the Front
Row service to be available in all of its franchises starting in the second
quarter of 1998 at a cost of approximately (pound)3 per movie. All of the
Company's cable television customers will have access to the Front Row service,
with most being able to order programs directly from their television remote
controls.
As part of its initiative to improve customer service and provide
improved information to management about the Company's customers that can be
used to develop new product offerings to meet customer needs and more
effectively market its services, the Company has committed to invest
approximately (pound)30 million for a comprehensive new customer management
system throughout the Company. Parts of the system were completed in 1997 system
is expected to be substantially complete by the end of 1998.
In 1997, the number of Company customers increased by more than 22.8%,
from 790,349 at December 31, 1996 to 970,173 at December 31, 1997, and during
the year the number of cable television customers increased by 14.7%, the
number of residential telephony lines increased by 33.4% and the number of
business telephone lines increased by 48.9%. Residential telephony penetration
increased by 2.2% in 1997 to 29.7% but churn increased from 19.6% to 20% and
revenues from the Company's expanding business telephony service increased by
27% to (pound)43.8 million. Cable television penetration remained stable for
most of the year at 22.0% but declined from 22.6% in 1996. Cable television
churn increased slightly from 33.4% to 34%.
The Company's revenues increased significantly in 1997 to (pound)386.5
million from (pound)290.3 million in 1996, reflecting primarily an increase in
customers resulting from the Company's continued network construction and
aggressive marketing efforts. In addition, the Company achieved positive EBITDA
(earnings before share of net losses of affiliates, interest, taxes,
depreciation and amortization) of (pound)49.6 million for the period ended
December 31, 1997.
On February 5, 1998, NTL Incorporated ("NTL") and Comcast UK Cable
Partners Limited ("Comcast") announced a proposed merger of their U.K. cable
interests. Comcast's assets include a 50% interest in Cable London plc ("Cable
London") and a 27.5% interest in Birmingham Cable Corporation Limited
("Birmingham Cable"). The Company currently has a 50% and 27.5% interest in
Cable London and Birmingham Cable, respectively. Pursuant to existing
arrangements between Comcast and the Company, the Company has the right to
acquire Comcast's interest in both Cable London and Birmingham Cable as a result
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of the proposed change of ownership of Comcast. The Company currently is
considering its options with respect to Cable London and Birmingham Cable.
On March 29, 1998 the boards of the Company and General Cable plc
("General Cable") announced that merger discussions between their two companies
were at an advanced stage which may result in a recommended offer being made by
the Company for the outstanding ordinary shares of General Cable.
General Utilities Holdings Limited ("GUHL"), a subsidiary of Compagnie
Generale des Eaux ("CGE"), has entered into an agreement with the Company on
March 29, 1998 whereby it has agreed that, if the Company announces a firm
intention to make an offer within prescribed terms on or before 3.00 p.m. on
April 15, 1998 (or such later time or date as shall be agreed), GUHL will
irrevocably accept such offer in respect of its entire holding of 146,785,916
General Cable ordinary shares (representing approximately 40 per cent of General
Cable's issued share capital). The prescribed terms referred to above include
the following:
o an offer of 1.243 new Ordinary Shares and 65 pence in cash for
every General Cable share and 0.622 new ADSs and the
equivalent in U.S. dollars of 325 pence in cash for each
General Cable ADS; and
o a reorganisation of the board of directors of the Company so
that it will initially consist of seven non-executive
directors (designated by U S WEST, TCI, Cox, SBC and CGE),
four executives (to include one executive member of the
General Cable board) and three independent non-executive
directors (to include a nomination from the board of General
Cable).
The Company announced that it is intended that the cash component of
the offer would, if made, be provided by means of an issue of up to 259 million
new Ordinary Shares, to be underwritten by major shareholders of the Company at
92.5 pence per share. It is envisaged that arrangements will be made to enable
the Company's public shareholders to participate in this issue.
The board of General Cable has indicated that it will recommend the
proposed offer if made. Likewise, U S WEST, TCI, SBC and Cox have indicated
their support for the proposed offer.
There can be no assurance that these discussions will result in any
proposal being put to General Cable's shareholders, or if so put, would be
accepted. Any offer would be made only by means of formal offer documentation,
which in the United States would include a prospectus.
CABLE TELEVISION
Overview
The Company, through its predecessor companies, began offering cable
television in the U.K. in 1985. The Company derives its cable television
revenues from connection charges, monthly basic and premium service fees,
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"pay-per-view" program fees, cable publications and advertising charges. As at
December 31, 1997 the Company had passed and marketed approximately 2,760,184 of
the 2,970,168 homes passed in the Company Owned and Operated Franchises and had
a cable television penetration rate of approximately 22.0%.
Programming
The Company currently offers more than 50 channels to its customers as
part of its basic service and 14 channels as part of its premium service
offering (including bonus channels provided in connection with the subscription
for certain premium channels). The Company obtains its programming from a
variety of sources, including BSkyB, terrestrial broadcasters and other
programming suppliers. The Company generally arranges its programming so that
the same programming appears on the same channel number in each of the Regional
Franchise Areas, thereby facilitating the use of the same marketing materials
(including monthly programming guides such as "The Cable Guide") across the
Regional Franchise Areas.
Customers can choose to receive basic service programming alone or
together with premium programming. The following table sets out the basic and
premium service programming currently offered by the Company (most of which is
carried on dedicated channels and some of which is carried on shared channels):
<TABLE>
<CAPTION>
PROGRAMMING DESCRIPTION
----------- -----------
BASIC SERVICE
- -------------
NEWS AND INFORMATION
<S> <C>
Arcade Local text advertisements
Bloomberg Information Television Business news
BBC News 24 24 hour news channel from the BBC
Cable 17 Local information, lifestyle and news
Channel One News and information for the London area
Channel One Avon News and information for the Avon area
Channel One Liverpool News and information for the Liverpool area
CNN International (1) 24-hour international news service
EBN(1)(2) European business news
The Parliamentary Channel (1)(3a) Live coverage of Parliamentary proceedings
Sky News (2)(4) 24-hour U.K. news service
The Channel Guide Summary of programming schedule
GENERAL INTEREST
BBC1 Terrestrial television
BBC2 Terrestrial television
Bravo (1)(2) Cult films and television series
Challenge TV (1)(2) Game shows
Channel 4 Terrestrial television
9
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PROGRAMMING DESCRIPTION
----------- -----------
Channel 5 Terrestrial television
Eurosport International sporting events
ITV Terrestrial television
Live TV (5) Live entertainment and local programming
Liverpool Live Live entertainment and local programming
Living (1)(2) Lifestyle programming
Edinburgh Live Live entertainment and local programming
NBC U.S. programming
QVC (2) Home shopping
Sci Fi Channel (2) Science fiction programming
Carlton Food Network Culinary programming
Carlton Select Comedy and drama
Sky One (2)(4) General entertainment
Sky Soap (2)(4) Soap operas
Sky Travel (2)(4) Travel programming
The Discovery Channel (1)(2) Documentary programming
Discovery Home and Leisure (1)(2) Lifestyle programming
Travel Travel programming
TNT (1) Classic films
UK Gold (1)(2) Classic U.K. television programming
UK Style (1) Lifestyle channel
UK Horizons (1) Documentary programming
UK Arena (1) Arts and drama
Granada Plus (2) General entertainment and classic U.K. programming
Granada Men and Motoring (2) Automotive programming
Granada Good Life (2) Leisure programming
The Paramount Comedy Channel (2) Comedy channel
CHILDREN
Nickelodeon (2) Children's entertainment
The Cartoon Network (1) Children's cartoons
Trouble/TCC (1)(2) Teenage and children's programming
Rapture (3b) Teenage and educational programming
INTERNATIONAL
Asianet Programming relating to the Asian subcontinent
Deutsche Welle German language programming
RAI UNO Italian language programming
TVE International Spanish language programming
TV5 French language programming
CNE Chinese language programming
MUSIC
Country Music Television Europe (2) Country music videos
MTV (2) Music videos
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<PAGE>
PROGRAMMING DESCRIPTION
----------- -----------
Performance - The Arts Channel Classical music and opera
The Box Music videos selected by customer requests
The Landscape Channel Classical music accompanying scenic videos
VH-1 (2) Music videos
PREMIUM SERVICE
GENERAL INTEREST
The Disney Channel (2) Family and children's programming
SPORTS
Sky Sports (2)(4) U.K. and international sports
Sky Sports 2 (2)(4) U.K. and international sports
Sky Sports 3(2)(4) U.K. and international sports
The Racing Channel Live horse racing
MOVIES
HVC Adult action, adventure and horror films
Playboy Television (1)(2) Adult entertainment
Sky Movies (2)(4) * 24-hour feature films
Sky Movies Gold (2)(4) * Classic films
Television X Adult entertainment
The Adult Channel Adult entertainment
The Movie Channel (2)(4)(6) 24-hour feature films
</TABLE>
- -------------------------
Notes:
(1) TCI, U S WEST or Cox (or their affiliates) own interests in or manage the
provider of this programming.
(2) Programming distributed or marketed by British Sky Broadcasting Group or
its affiliates ("BSkyB").
(3a) The Company owns an interest of approximately 27% in the provider of this
programming.
(3b) The Company owns an interest of approximately 4% in the provider of this
programming.
(4) Programming acquired from BSkyB.
(5) Live TV is provided by Live TV Ltd., whose ultimate owner is part of The
Mirror Group plc, a leading U.K. newspaper publisher. Lord Borrie QC (a
director of the Company) is a director of The Mirror Group plc. CPP-1, a
joint venture of affiliates of TCI, U S WEST and SBC, together with three
other U.S. companies with interests in U.K. cable operators, has a 10%
interest in Live TV.
(6) Now known as Sky Screen 1 and Sky Screen 2.
11
<PAGE>
The Company's basic service also includes a wide range of terrestrial
and satellite radio stations and, where available, NICAM stereo audio feeds for
television channels. In addition, the Company also offers multi-channel,
digital, audio-only services to business customers (including one service in
which an affiliate of TCI has a 49% interest).
As part of its strategy to offer customers a broader range of
entertainment programs, the Company intends to introduce a "pay-per-view"
analogue movie service, to be marketed as "Front Row". This service is to be
provided by a cable industry consortium ("Front Row") owned by Telewest (40%),
CableTel Programming Inc (40%), General Cable (13%) and Diamond Cable
Communications Ltd. (7%). The consortium has entered into contracts with
Columbia Tristar, Warner Brothers and Buena Vista International which entitle
the consortium members to distribute movies on a pay-per-view basis to their
customers. The pay-per-view window is generally six months in advance of the
time movies are released for pay television premium channels. This service is
expected to launch in the Company's franchises in the second quarter of 1998.
The Company intends to carry other "pay-per-view" services as and when they
become available.
Source of Programming. The Company obtains most of its programming from
suppliers pursuant to arrangements that run for periods from six months to ten
years. The arrangements generally provide for payments by the Company based on
the number of its customers subscribing to that particular channel. In many
cases, the per subscriber charges for the Company decrease as the number of its
customers subscribing to that channel increases. The Company and the Affiliated
Companies contract together for some program channels, which increases the
aggregate number of contract customers and thereby reduces the cost per
subscriber. Under the terms of its PDSLs (as defined herein), the Company is
also required to provide its customers with certain specified terrestrial
television services without charge.
The Company obtains a significant amount of its programming from BSkyB,
a leading supplier of cable programming in the U.K. and the exclusive supplier
of certain programming. Its programming generally is popular in the U.K. and is
important in terms of attracting and retaining cable television customers. In
April 1995, Old Telewest entered into a seven-year contract with BSkyB (the
"BSkyB Contract") that will expire in April 2002. Pursuant to the terms of the
BSkyB Contract, BSkyB provides the Old Telewest franchises with 10 BSkyB
channels. The former SBCC franchises have, since February 16, 1996, been
provided with BSkyB programming pursuant to an industry rate card, which sets
out the terms and conditions for the supply of programming by BSkyB to those
operators in the U.K. cable industry who do not have separate agreements with
BSkyB. BSkyB also offers this programming (together with additional programming)
to its DTH satellite customers, in competition with the Company and all other
cable operators throughout the U.K. The BSkyB Contract grants to Old Telewest a
non-exclusive right and license to receive BSkyB's channels and "pay-per-view"
services (which, for the purposes of the BSkyB Contract, will include (when
available in the U.K.) NVOD but not video-on-demand) and, subject to available
capacity and certain other conditions, to distribute the channels to
residential, commercial and public premises customers and distribute the
"pay-per-view" services to residential customers. The agreement provides for the
parties to negotiate in good faith for the provision of "pay-per-view" services
for commercial customers, subject to the acquisition of programming for such
services.
12
<PAGE>
Under the BSkyB Contract, and in respect of the industry rate card for
the former SBCC franchise areas, customer fees payable to BSkyB for each
customer are different for residential, commercial and public premises customers
and vary according to the channels subscribed for and, in the case of commercial
customers, according to the number of rooms for which the service is provided.
Fee arrangements for "pay-per-view" programs are negotiated separately for each
event. The monthly fees for basic channels under the BSkyB Contract and the
industry rate card are subject to annual increases which are equal to the
greater of 7% or the amount of the annual change in the U.K. Retail Price Index
under the contract and the industry rate card. Customer fees for premium
channels are linked to BSkyB's DTH satellite subscription prices. Old Telewest
has the option to bring the former SBCC franchise areas into the contract
subject to the satisfaction of certain conditions. The aggregate amount paid by
the Company to BSkyB with respect to the year ended December 31, 1997 was
(pound)67.5 million.
In July 1995, the Office of Fair Trading ("OFT") declared that the
BSkyB Contract was registerable under the Restrictive Trade Practices Act of
1976 and that certain of the provisions in the agreement were significantly
anti-competitive. As a result, BSkyB submitted proposals to the OFT amending the
relevant provisions, and the Company, in principle, accepted such proposals. The
OFT has opined that the proposals address its concerns on the anti-competitive
provisions. However, the European Commission has indicated that certain of the
remaining provisions may contravene European competition law. If the parties are
unable to persuade the European Commission to the contrary, and the parties do
not modify the provisions in issue, the European Commission may initiate formal
proceedings. If at the end of those formal proceedings the European Commission
maintains its original position, it may issue a decision declaring that such
provisions infringe European competition law and are therefore void. The Company
does not anticipate that any such decision would impose any other sanction.
The Company also obtains a significant amount of its programming 13
programming channels) from providers which Flextech plc ("Flextech"), a publicly
quoted U.K. company (approximately 36.8% of which is owned by an affiliate of
TCI and approximately 6.7% of which is owned by an affiliate of U S WEST and
approximately 13.2% of which is owned by Cox), and other affiliates of TCI
either own interests in or manage. In addition, affiliates of U S WEST, TCI and
SBC are partners in CPP-1, a joint venture with three other U.S. cable operators
which has a 10% interest in Live TV. Live TV is carried by the Company's
network. The Company believes that programming obtained from all the affiliated
programming suppliers is obtained on terms no less favorable than those
available to unrelated third parties.
Advertising
In the twelve months ended December 31, 1996 and 1997, the Company's
revenue from advertising was approximately (pound)1,326,000 and
(pound)1,729,000, respectively. The Company has allocated one channel on its
network for local advertising (typically text and still graphics). In addition,
with the programming provided to the Company by a number of suppliers (not
including programming supplied by BSkyB or terrestrial broadcasters, which
together currently account for the vast majority of television viewing time by
cable customers in the U.K.), the Company typically is allocated time (usually
one or two minutes per channel per hour) during which the Company can insert
13
<PAGE>
advertising. The Company has entered into a contract with a subsidiary of The
Mirror Group plc which acts as the Company's agent for the sale of such
advertising time.
CABLE TELEPHONY
Overview
The Company, through its predecessor companies, began offering cable
telephony in the U.K. in 1992. The Company derives its cable telephony revenues
from connection charges, monthly line rental charges, call charges, residential
service charges (e.g., call waiting), business service charges (e.g., private
business line and centrex) and interconnection fees payable to the Company by
other operators. As at December 31, 1997, the Company had passed and marketed
approximately 2,725,154 homes for cable telephony, had 836,168 residential lines
for 810,358 customers (representing a residential cable telephony penetration
rate of approximately 29.7%) and had installed an aggregate of 100,989 business
lines for 25,475 customers.
Services
The Company seeks to offer residential and business customers reliable
and high-quality telephony services over its broadband network at competitive
prices.
Residential Services. The Company offers local, long distance and
international cable telephony service as well as a broad range of additional
services to its residential customers. The Company's additional services
include: call waiting, call barring (prevents unauthorized outgoing calls), call
diversion (call forwarding), three-way calling and fully itemized monthly
billing. In addition, the Company is currently introducing voice mail and caller
identification throughout its Regional Franchise Areas. The Company's network
architecture provides a flexible platform that will enable it to offer a wide
range of other telephony services as they become available in the future.
Business Services. The Company markets its cable telephony services to
selected businesses and institutions within its franchise areas. The Company
believes that these targeted businesses and institutions represent attractive
potential customers because (a) they have a high volume of calls, many of which
are high-margin local calls that can be switched and delivered entirely by the
Company, (b) the Company generally can serve these needs with its existing
technology and network and without investing in costly research and development
of new networks and products, (c) the persons making the decisions with respect
to selecting telephony service are usually located in the Company's Regional
Franchise Areas and (d) by targeting specific segments, the Company directs
significant advice and support to a specific, targeted customer base. As of
December 31, 1997, the Company served approximately 25,000 business customers
and had installed 101,000 business lines.
The Company offers a range of special business services that it
believes are particularly attractive to small- and medium-sized businesses and
institutions. For example, the Company provides high-capacity private lines to
carry voice and data between two or more locations within a Regional Franchise
Area (e.g., between two branch offices) and now provides high-capacity private
lines to connect voice and data between locations in different Regional
14
<PAGE>
Franchise Areas and other areas of the U.K. through the Interfranchise Network
to the extent completed. This ability will increase substantially when the
network is fully operational. See "New Initiatives -- The Interfranchise
Network". In addition, the Company offers a "CENTREX" service, which provides
the switching of internal and outside calls for multi-line businesses from
outside the customer's premises, thus saving the customer the cost of purchasing
or leasing its own switching equipment. The Company currently also offers ISDN
service to its business customers in certain Regional Franchise Areas, which
permits the high speed, simultaneous transmission of voice, data and video over
the telephone line. The Company currently anticipates rolling-out the ISDN
service over time to the other Regional Franchise Areas. See "On-Line Service --
Internet Access."
With the introduction of "number portability" in the U.K. in September
1996, the Company began offering BT customers the opportunity to transfer their
service to the Company without changing their existing telephone number. As of
December 31, 1997, the Company had implemented number portability in all
Regional Franchise Areas for residential and business customers of all service
providers (as required by the Company's Telecommunications Licenses).
Internet Access. In 1996, the Company began offering customers Internet
access through its own Internet service provider, Cable Internet Limited. This
access had been extended to all Regional Franchise Areas by the end of 1997. The
Company currently provides three Internet access services: dial-up services
primarily for residential customers, leased lines for business customers and
network access for wholesale customers. The Company also intends to offer higher
speed Internet access to business customers using ISDN lines. The Company has
completed a technical trial of high speed Internet access using cable modems and
intends to develop this opportunity further in 1998 as international standards
develop.
Digital Services. The Company intends to introduce digital technology
in the U.K. in one franchise area in the second half of 1998. Digital technology
allows operators to provide more channels (through digital compression of
analogue signals), and higher quality pictures and sounds. Through the
introduction of digital technology, the Company expects to be able to offer
customers up to 240 programming channels (as compared to the 52 channels
currently offered by the Company through its analogue service), which will
enable the Company to provide services such as NVOD and digital pay per view. It
will also enable the Company to use its broadband network to provide additional
services such as cable television Internet access, electronic mail, home
shopping and banking. The Company believes that digital technology will enable
it to offer customers substantial additional choice and flexibility in selecting
the services desired.
The Company's digital head-end will be built at its Knowsley franchise,
where the programming and services will be received by satellite, terrestrial
broadcast or videotape and converted into a digital signal for transmission over
the Company's broadband franchise networks and into customer homes and
businesses. The Interfranchise Network will enable the Company to use a single
digital head-end to transmit the digital signal to remote units in each of the
Company's franchises, thereby avoiding the need to install a separate digital
head-end in each franchise and maintain personnel at each such head-end. See
15
<PAGE>
"The Interfranchise Network." The Company intends to continue to offer customers
analogue services, as it rolls out the digital services.
The Interfranchise Network
In 1996 the Company commenced construction of the Interfranchise
Network, which will link the 28 Owned and Operated Franchises and the seven
Affiliated Franchises. The Interfranchise Network is on schedule to be completed
by the middle of 1998.
The Company anticipates that construction of the Interfranchise Network
will increase telephony margins by reducing the payment of interconnection fees
to national carriers for long distance calls between locations in different
franchise areas. The Company expects that construction of the Interfranchise
Network also will create new business telephony revenue opportunities by
enabling the Company to create private networks for businesses with multiple
sites located throughout the various Company and Affiliate Company franchise
areas.
When complete, the Interfranchise Network is expected to include
approximately 2,250km of high capacity multi-fibre optic cable, as well as
various high capacity electronics. The Company is seeking to build the network
in a cost effective manner, using a combination of parts of the existing
networks of the Company and the Affiliated Companies, parts newly built by the
Company or built and shared with other service providers and parts consisting of
leased lines (with electronics in place) and leased fibre (without electronics
in place).
PRICING
The Company offers a variety of pricing options, including single
service pricing and pricing for combinations of the Company's services.
In 1996, the Company began offering combined pricing packages under the
brand name "Teleplus". In 1997, the Company trialed a further development of
Teleplus, offering customers a "mini basic" package with smaller number of
channels, telephone line rental, free local calling within the Company's
Regional Franchise Areas at certain times and access to premium television
channels, for a lower cost than that of the Company's traditional basic package.
Based on the success of these trials, in early 1998 the Company introduced a
variety of new packages, marketed as "Millennium", into all of its franchises.
All of the packages provide access to the Company's Front Row pay-per-view movie
service. The Millenium packages were initially principally targetted at former
customers and homes which have never subscribed for a service from the Company.
Cable TV
The Company currently charges either (pound)17.99 (if the customer
elects the direct debit payment option) or (pound)18.99 per month for its
standard basic cable television only service (approximately 50 channels and one
converter box which provides cable service to one television). Premium channels
range in price from (pound)4.00 per month per channel to (pound)9.00 per month
per channel, depending on the channels selected. Customers receive discounts for
the purchase of multiple premium channels. An additional monthly fee of
(pound)4.49 is charged for each additional converter box. All converter boxes
remain the property of the Company and a refundable (pound)20.00 deposit may be
charged for each box. Typically, the Company charges a one-time cable television
connection fee of (pound)30.00, although the Company often offers reduced or no
connection charges for cable television when service is first provided in an
area or an area is remarketed. All prices indicated above include U.K. value
added tax ("VAT").
16
<PAGE>
Cable Telephony
The Company currently seeks to provide its telephony customers with
savings on the cost of calls as compared to BT, its principal competitor. The
Company intends to maintain such savings, although there can be no assurance
that the Company will be able to continue to provide its residential customers
with lower call prices than BT without adverse effects on its profitability,
particularly in light of continued regulatory downward pressure on BT's charges.
See "Certain Regulatory Matters -- Cable Telephony -- Price Regulation".
For residential telephony customers, the Company offers a three-tier
price structure for line charges (which is in addition to the call charges
discussed above). The monthly charge for customers subscribing for the telephony
service only is (pound)7.89 per line, providing a saving of (pound)1.00 per
month over BT's equivalent charge. The monthly charges for special services such
as call waiting or call diversion vary between (pound)1.00 and (pound)2.00 per
service. Initial installation charges are (pound)30.00 as compared to BT's
equivalENT charge of (pound)116.33. However, because most telephony customers
already have an existing BT line, the Company's installation fees are often
discounted to encourage customers to switch service providers.
The Company's line charges for business customers (which are in
addition to the call charges discussed above) are also competitive with those of
BT and Mercury Communications Limited ("Mercury") and other suppliers. The
Company's monthly line rental charge for a business customer as at December 31,
1997 varies by service from (pound)10.99 and its line installation charge varies
according to the number of lines installed (from (pound)50 for the first line to
(pound)30 for each subsequent line). All prices indicated above exclude VAT.
As a consequence of owning its own switching equipment (as discussed
below), the Company can provide more pricing and feature options to its
customers. For example, the Company currently offers business telephony
customers various discount plans based on usage and other factors.
Millennium Package Pricing
In order to encourage customers to subscribe for both television and
telephony service and based on the successful trials of the mini basic package
in two franchises in 1997, in early 1998 the Company introduced the combined
cable television and telephony Millennium packages into all of its franchises.
The charge for the Millennium packages vary between (pound)12.99 and
(pound)21.99 per month, depending on the package selected. The packages provide
different combinations of basic telephony and television service together with
free local calls to other customers within the Company's Regional Franchise
Areas at certain times and the option to acquire one or more premium channels
for an additional (pound)8.00 to (pound)20.00 (depending upon the number of
premium channels selected) and access to the Company's Front Row pay-per-view
movie service. The (pound)12.99 Millennium package offers customers a low priced
entry point for a mini basic service of 14 channels (reduced from the
approximately 50 channels historically offered by the Company as part of its
basic service), telephone line rental, free local calls to other customers
within the Company's Regional Franchise Areas at certain times, plus access to
premium channels and Front Row. The installation charge for customers
subscribing for both cable television and telephony services at the same time is
(pound)30.00. Customer benefits from the Millennium packages include more
flexibility, choice and pricing as well as the convenience of dealing with a
single provider for two services. The Company believes that the
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Millennium product provides it with an effective way to cross-promote its
services and retain customers.
SALES AND MARKETING
The Director of Sales and Marketing leads the Company's residential
sales and marketing activities with a staff of sales and marketing
representatives in the field and in the corporate offices handling advertising,
promotion and related matters. In addition, there is a Head of Residential Sales
and Marketing at each Regional Franchise Area who directs the sales and
marketing for that area. A Managing Director of Business Services leads the
Company's business service operations, sales and marketing activities and is
supported by Directors of Business Services in the Regional Franchise Areas. The
corporate marketing staff and the field marketing directors and their staff meet
on a frequent basis to review sales and marketing results at each of the
franchises and to exchange ideas with respect to various sales and marketing
practices. From time to time, the Company also discusses sales and marketing
practices with the Affiliated Companies.
As the Company's business develops, the Company is focusing less on
door-to-door sales and more on integrated marketing strategies, which combine
direct sales, telemarketing, direct mail and retail. As part of this approach,
several campaigns were conducted during the year, spreading awareness of
"Telewest Communications" throughout the franchise areas. In communities where
the network is most built out, these integrated strategies are designed to
emphasize the Company's core strengths of value, choice and service.
Due to the specialized nature of the Company's business telephony
products and the competitive nature of the market, the Company has separate
sales and marketing groups to market, service and support business customers.
To maximize the productivity of its sales staff, the Company pays field
representatives on either a salary plus commission or a straight commission
basis. The commissions generally are based on various factors, including
penetration level and revenue from services sold. In order to minimize customer
churn, a portion of the commission may be withheld until a customer retains
service for a given period (typically four months).
CUSTOMER SERVICE
Customer service is primarily handled locally by each of the Regional
Franchise Areas. Approximately 600 customer service representatives report to
the Managing Director and Head of Customer Operations at each of the Regional
Franchise Areas.
The Company has introduced an eight week customer care training course
for telephone based customer service representatives. This program is now being
expanded for all sales staff, installers and repair technicians. The customer
service department is organized so that customers need call only one number to
reach the appropriate service provider to address their cable television and
cable telephone service, billing and repair questions. The Company seeks to
provide customers with prompt telephony and television service repair.
Generally, repair service is done by the Company's own employees and service
installations and terminations are done by a combination of its own employees
and independent contractors.
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One important measure of customer satisfaction is the service churn
rate among customers. A customer may terminate service by prior written notice
to the Company. The Company may terminate a customer's service when the customer
becomes delinquent in payment. The Company's experience to date is that the
churn rate is highest shortly after a customer first activates a service. The
Company's churn rates for basic cable television service increased from 33.4% in
1996 to 34.0% in 1997 and for residential telephony line service from 19.6% in
1996 to 20.0% in 1997. The Company believes that the increase in cable
television churn is primarily due to the significant increase in the pricing of
premium channels, resulting from an increase in their wholesale cost of
programming, which was implemented in November 1997, coupled with a temporary
decline in customer service standards as a result of the restructuring and
redundancy programme implemented in the fourth quarter of 1997. The Company
believes that the increase in the residential telephony churn is primarily due
to the temporary decline in customer service and increased competition. The
Company also believes that churn rates for business telephony line service
increased from 14.5% in 1996 to 15.0% in 1997 primarily due to the Company's
efforts to market its service to a broader range of business customers.
The Company seeks to minimize customer churn by providing customers
with a combination of attractive, competitively-priced programming and telephone
services and strong customer service. The Company also is introducing a new
customer management system to improve customer service and implementing strict
credit procedures to reduce terminations by the Company due to delinquent
payments. The Company regularly surveys its customers to determine their
satisfaction with the service provided and attempts to improve such service
based on the explanations offered by customers who cancel their service. In
order to reduce terminations by customers and improve debt collection, the
Company encourages customers to pay bills by direct debit by offering lower
prices to customers who pay with direct debit.
NETWORKS
Construction
Broadband Network. The Company expects that the broadband cable network
in the Owned and Operated Franchises will cover approximately 41,000 kilometers
and pass approximately 4.4 million homes when substantially completed. As at
December 31, 1997, the Company had completed construction of the network passing
approximately 75.0% of the homes in the Owned and Operated Franchises. The
Company anticipates that the remaining construction will be substantially
completed by the end of 2003. Construction of the broadband cable network has
commenced at all of the 28 Owned and Operated Franchises. The Company plans the
construction in the Owned and Operated Franchises based on various factors,
including construction milestone requirements (as discussed below), network
design considerations (e.g., location of head-end), franchise demographics and
facilitation of interconnection with other Owned and Operated Franchises.
Each Telecommunications License (as defined in "Certain Regulatory
Matters") prescribes build obligations ("milestones") that require the Company
to construct its network to pass a specified number of premises (which are
defined for the purposes of the Telecommunications Licenses as homes or
businesses passed for cable television service) by prescribed dates. Although in
the past the Company from time to time has not met certain milestones, it has
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<PAGE>
generally sought and received appropriate milestone modifications from the
Director General of OFTEL.
The following table sets out the aggregate future milestones for each
of the Company's seven franchise areas. The actual milestones that the Company
is required to meet are specified individually for each of the franchises within
the Regional Franchise Areas. Consequently, the Company could meet the aggregate
milestones for a given franchise area, but still fail to meet one or more
individual franchise milestones and therefore subject a Telecommunications
License to the risk of revocation or termination.
<TABLE>
<CAPTION>
LONDON SOUTH AVON AND NORTH NORTH
AS OF SOUTH EAST MIDLANDS COTSWOLDS SCOTLAND EAST WEST
DECEMBER 31,(1)MILESTONES MILESTONES MILESTONES MILESTONES MILESTONES MILESTONES MILESTONES
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 378,000 379,000 614,000 445,000 549,000 294,000 654,000
1999 - 424,000 614,000 456,000 549,000 340,000 654,000
2000 - - - 470,000 554,000 - 654,000
2001 - - - 484,000 562,000 - 695,000
2002 - - - 498,000 574,000 - 740,000
2003 - - - - 584,000 - 778,000
2004 - - - - - - 792,000
</TABLE>
- ----------------------------
(1) All milestone information is rounded to the nearest thousand.
In late 1997 the Company applied for, and the ITC granted, amendments
to the construction milestones in the LDSLs for two franchise areas to delay the
required construction. The Company currently is in the final stage of
discussions with OFTEL regarding amendments to the construction milestones in
the Telecommunications Licenses for four franchise areas. OFTEL has agreed to
the Company's proposed amendments and is proceeding with the required public
consultation with respect to the amendments. The Company expects final action on
the proposed amendments by the middle of 1998 and believes that the amendments
will be granted in view of the substantial network construction completed by the
Company to date and the compliance of the proposed amendments with the general
OFTEL amendment criteria. However, there can be no assurance that any amendments
will be granted or granted within the expected time period.
If the amendments are granted as requested, the Company will complete
construction passing the same total number of premises as provided under the
Telecommunication Licenses as currently in effect (3,630,000 premises) by the
same termination date currently provided in such licenses (December 31, 2004),
but with a different construction schedule. Under the amended milestones,
scheduled construction in 1998 would be reduced to approximately 5,000 premises
per month from approximately 21,000 premises under the current milestones and
construction in 1999 would also be lower than currently scheduled. Construction
levels under the amended licenses in the later years would be higher than those
under the current milestones.
The following table sets out the aggregate future milestones for each
of the three Affiliated Companies. The actual milestones that the Affiliated
Companies are required to meet are specified individually for each of the seven
franchises within the Affiliated Franchises. Consequently, the Affiliated
Companies could meet the aggregate milestones for a given Affiliated Franchise,
20
<PAGE>
but still fail to meet one or more individual franchise milestones and therefore
subject a Telecommunications License to the risk of revocation or termination.
<TABLE>
<CAPTION>
CABLE CABLE
MILESTONE BIRMINGHAM LONDON CORPORATION
DATE MILESTONE(1) MILESTONE(1) MILESTONE(1)
---- ------------ ------------ ------------
<S> <C> <C> <C>
December 31, 1997 275,000 257,000 264,000
December 31, 1998 325,000 287,000 264,000
January 31, 1999 400,000 409,000 264,000
December 31, 1999 450,000 - -
</TABLE>
- ----------------------
(1) The milestones for the Affiliated Companies are specified in
the Telecommunications Licenses for 12-month periods ending
on the last day of various months. All milestones are
presented on an annualized pro forma basis for 12-month
periods ending on December 31. All milestone information is
rounded to the nearest thousand.
Although the Company believes certain of the Affiliated Companies may
be seeking amendments to the construction milestones in their Telecommunications
Licenses, the Company does not have details of any such amendments and cannot
determine the likelihood that any such amendments will be granted or the timing
thereof.
Interfranchise Network. For information regarding the Company's
interfranchise network, see "Cable Telephony -- The Interfranchise Network".
Network Architecture
In the U.K., cable operators generally are required to install cable
underground. This significantly increases the cost of construction as compared
with above-ground installations and makes it more time-consuming, costly and
disruptive to customers and others for the Company to replace cable or
underground components in the cable network in order to upgrade and expand
service in the future. As a result, the Company designs its distribution network
(e.g., the fibre-optic cable and underground components) to permit network
upgrades and expansions to be accomplished whenever possible by installing or
replacing equipment at the head-end and/or the customers' premises and without
undertaking significant construction with respect to its existing underground
network and incurring substantial additional construction costs. The Company is
currently upgrading the network to carry digital services and is doing so almost
entirely through the addition of equipment at the head-ends and at customer
premises and without the need for significant network construction costs.
The network architecture of the Company's individual franchises varies
generally depending on when the construction was started. Initially, cable
systems in the U.K. were built to provide only cable television service.
Following the review undertaken by the U.K. government (when the U.K. government
changed the duopoly policy to permit cable operators to operate their networks
to provide cable telephony services and call switching as principals, rather
than only as agents for and under agreements with BT or Mercury (the "Duopoly
Review")) telephony service was often added to existing networks and plans for
21
<PAGE>
future networks were modified to carry both television and telephony services.
In some business areas the Company has built cable telephony only networks. As a
result, there are three types of networks in use or under construction by the
Company: cable television only; cable telephony only; and cable television with
a cable telephony overlay.
Currently, cable television only service is provided to residential
customers in part of the Scotland Regional Franchise Area franchise. The overlay
network is used in all of the Company's other franchises under construction or
previously installed and is being used to upgrade the parts of the Scotland
Regional Franchise Area that currently provides only cable television service.
In some predominantly commercial areas in the Company's franchises, only cable
telephony services are provided.
Switching
Digital telephony switches have been installed in all of the Company's
Regional Franchise Areas. The switches enable the Company to increase its
profitability and operating flexibility by (a) eliminating the need to pay third
parties for switching calls between its customers within a Regional Franchise
Area and reducing the cost of switching calls to other operators outside of a
Regional Franchise Area, (b) receiving revenues from other telephony operators
who use the Company's switches to complete calls to the Company's customers and
(c) eliminating the need to rely upon third parties for the administration of
new customer connections. In addition to the installation of its own switches,
the Company (together with certain other cable operators) has established a
central network service center in Woking that provides 24-hour-a-day centralized
switch engineering, interconnect access administration and related support
services. The costs of the service center are shared by the participating cable
operators. The Company believes that this centralized system is a cost-effective
approach to managing cable telephony networks with multiple switches.
By operating its own switches, the Company is able to gather
information about customer calling patterns and use this information in its
marketing program and to structure customized call pricing plans and discount
programs. The availability of this information also enables the Company to
reduce fraudulent activity by identifying unusual or excessive call activity at
an early stage.
The Company is building a broadband Interfranchise Network to carry
voice, data and video traffic between the franchises which is expected to be
completed in mid-1998. See "Cable Telephony -- Interfranchise Network."
In December 1996, the Company was awarded an international facilities
license under the Telecommunications Act 1984 by the Secretary of State for
Trade and Industry. This has enabled the Company to establish direct
relationships with international PTOs and further reduce the cost of
international carriage. In December 1996, the Company began connecting its
Regional Franchise Areas to Telstra (the Australian PTO) to carry a portion of
the Company's international telephony traffic. See "Certain Regulatory Matters
- -- Interconnection Arrangements."
22
<PAGE>
Sources of Supply
The Company obtains services and equipment for the construction and
operation of its cable systems from numerous independent suppliers. These
services, including civil engineering services, and equipment generally have
been purchased under short-term contracts (e.g., one year or less), although the
contracts for the Company's interconnect services are longer. As a result of its
increased operational size and purchasing needs, the Company seeks to use its
increased buying power to obtain more favorable contract terms covering longer
periods (e.g., one to three years).
The Company believes that it can purchase all of the services and
equipment it needs to operate its business from more than one source. However,
if one of the suppliers of a product which involves significant lead time for
production and delivery were to be unwilling or unable to supply the Company,
the Company could suffer disruptions in the operation of its business, which
could have an adverse effect on the Company.
The Company's principal suppliers include the following: McNicholas
Construction Company Limited, M&N Contractors Limited, AMEC Utilities Limited,
Moywest Limited, Ashbourne Communications U.K. Ltd, JP Fitzpatrick, J Murphy and
Sons Limited, Kelly Communications (civils and activations contractors); Nortel
Ltd and GPT Telecommunication U.K. Limited (telephony switching equipment);
General Instruments Inc. and Scientific-Atlanta Broadbank Europe Inc.
(addressable converter boxes); Antec International and Tratec U.K. Ltd (cable TV
distribution equipment); Nokia Telecommunications and DSC Technics Limited
(telephony transmission equipment); Times Fiber Communications Inc. and
Commscope (coaxial cable); GPT Telephone Cables (fibre-optic and copper cable);
and Eltek Limited and Alpha Technologies (power supply equipment).
The Company owns all of its cable network equipment other than its
Nortel switches. The Company leases these telephony switches under finance
leases from Nortel and the Royal Bank of Scotland.
The Company has experienced no significant difficulty in obtaining
timely deliveries of services and equipment within the past 12 months and
believes it maintains adequate inventories of significant equipment. In order to
reduce warehousing expenses, maximize inventory control and minimize the
possibility that the Company will not have the required inventory to proceed
with construction in a timely manner, the Company has centralized warehouse
operations through a third-party supplier of warehousing services.
FRANCHISES
Regional Franchise Areas
The Company owns 28 cable franchises in the U.K. and holds licenses to
provide cable television and cable telephony services within each of its
franchise areas. The Company's 28 franchises are managed in four Regional
Franchise Areas: (i) London South and South East; (ii) Scotland and North East;
(iii) Avon, Cotswolds and Midlands; and (iv) the North West. The franchises
within each Regional Franchise Area are clustered together, which provides the
Company with several benefits, including (a) providing economies of scale in the
23
<PAGE>
construction and marketing of the cable network and the management of the
franchises, (b) enabling the Company to provide local switching services for a
large number of customers without incurring the high costs of connecting
geographically dispersed areas, (c) providing a regional market for advertisers
that generally is not available through broadcast or satellite media and (d)
enabling the Company to offer local programming on a more cost-effective basis.
Each of the Owned and Operated Franchises are wholly-owned by the Company.
The following table sets forth certain data concerning the Company's
seven franchise areas at and for the twelve-month period ended December 31,
1997:
<TABLE>
<CAPTION>
LONDON SOUTH AVON AND NORTH NORTH
SOUTH EAST MIDLANDS COTSWOLDS SCOTLAND EAST WEST TOTAL
----- ---- -------- --------- -------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Franchise homes......... 420,703 493,140 634,839 564,069 666,461 354,098 828,694 3,962,004
Franchise businesses.... 29,706 35,690 47,581 42,891 28,584 14,450 61,612 260,514
CABLE TELEVISION
Homes passed............ 381,389 262,146 493,833 412,931 561,179 227,228 631,462 2,970,168
Homes passed and 364,264 245,674 451,724 379,254 519,085 215,364 584,819 2,760,184
marketed ...........
Basic customers......... 80,243 63,353 95,385 78,450 113,138 48,827 126,592 605,988
Penetration rate (1).... 22.0% 25.8% 21.1% 20.7% 21.8% 22.7% 21.6% 22.0%
Additional Outlets...... 32,398 32,778 22,959 37,364 61,552 25,164 28,574 240,789
Average monthly revenue
per
customer (1)..........(pound)25.00(pound)23.47(pound)21.87(pound)22.85(pound)25.04(pound)23.13(pound)22.41(pound)23.40
Average churn rate (1).. 34.1% 33.7% 34.9% 34.5% 38.6% 26.9% 31.6% 34.0%
RESIDENTIAL TELEPHONY
Homes passed............ 365,115 262,146 466,963 410,228 455,751 223,945 607,536 2,791,684
Homes passed and marketed 357,357 245,694 451,724 379,371 494,891 212,135 583,982 2,725,154
Residential customers (2) 73,397 79,031 151,183 114,264 143,906 69,646 178,931 810,358
Penetration rate (1).... 20.5% 32.2% 33.5% 30.1% 29.1% 32.8% 30.6% 29.7%
Residential lines 78,158 82,121 152,626 119,435 149,097 70,901 183,830 836,168
connected...............
Average monthly revenue
per
line (1)..............(pound)25.09(pound)20.02(pound)16.95(pound)19.68(pound)18.81(pound)17.76(pound)18.68(pound)19.19
Average churn rate
per line (1).......... 15.2% 18.1% 20.6% 14.8% 21.0% 15.2% 21.4% 20.0%
BUSINESS TELEPHONY
Business customers...... 4,736 1,430 3,364 5,037 4,232 1,603 5,073 25,475
Business lines connected 22,991 5,360 16,440 20,670 13,346 4,111 18,071 100,989
Average number of
business
lines per customer (1) 4.9 3.7 4.9 4.1 3.2 2.6 3.6 4.0
Average monthly revenue
per
line (1)..............(pound)51.50(pound)50.23(pound)36.32(pound)38.68(pound)47.16(pound)56.51(pound)37.91(pound)43.62
Average churn rate
per line (1).......... 5.8% 37.3% 3.2% 17.2% 23.2% 19.5% 21.1% 15.0%
</TABLE>
- ----------------------------
Notes:
(1) For the definitions of these terms, see the footnotes to the table on page
2.
(2) The information set forth under "Residential Customers" represents the
number of residential lines connected, which is greater than the actual
number of residential customers.
Description of Regional Franchise Areas
The following is a brief description of each of the Company's four
Regional Franchise Areas:
London South and South East. The London South and South East Regional
Franchise Area includes the franchise areas formerly designated as London South
and South East. The London South portion of this franchise area covers
24
<PAGE>
approximately 360 square kilometers and includes three franchise areas (Croydon,
Sutton and Merton, and Kingston and Richmond). The London South area has
approximately 421,000 homes and approximately 30,000 businesses and includes a
suburban section of Greater London as well as the large business center of
Croydon. The Croydon franchise was awarded in 1983 and is the oldest one owned
by the Company. Construction of the Croydon network began in 1985. Much of the
Croydon network was constructed before cable telephony generally was offered by
cable operators in the U.K. However, the Company has provided cable telephony
service to business customers in the Croydon business center over its
telephony-only network since 1991 and now offers telephony service to its
residential customers in Croydon. Construction in Croydon for cable television
was substantially completed in 1990 and construction for telephony was completed
in 1996. Construction in the Sutton and Merton franchise began in 1990 and in
the Kingston and Richmond franchise in 1991 and are now both complete.
The South East portion of this franchise area covers approximately
1,600 square kilometers and includes two franchise areas (North Thames Estuary
and South Thames Estuary) covering the areas of Basildon, Chelmsford, Gravesend
and Maidstone. The South East area has approximately 493,000 homes and
approximately 36,000 businesses. Construction in the South East area began in
February 1994 and is ongoing.
Avon, Cotswolds and Midlands. The Avon, Cotswolds and Midlands Regional
Franchise Area includes the franchise areas formerly designated as Avon and
Cotswolds, and the Midlands. The Avon and Cotswolds portion of this franchise
area covers approximately 2,120 square kilometers and includes Bath, Bristol,
Cheltenham, Gloucester, Frome, Warminster, Taunton & Bridgewater and
Weston-super-Mare. The Avon and Cotswolds area has approximately 564,069 homes
and approximately 43,000 businesses. Construction in the Avon Area began in 1990
and construction in the Cotswolds area began in July 1994 and construction in
both areas is ongoing.
The Company granted to Trans-Global a carried interest in respect of
the Avon, Cotswolds and South East areas in connection with the Company's
acquisition of those franchise areas in consideration for services provided by
Trans-Global to the Company in connection with such acquisitions. The carried
interest entitles Trans-Global to certain payments in respect of each such
franchise areas either (a) within 60 days after the fifth anniversary of the
date when 50% of the homes within a given franchise area are passed or (b) at
Trans-Global's option, at any time prior to such date upon 60 days' notice. The
carried interest payments will equal 0.75% of the product of ten times the
annual operating income of such franchise areas (subject to certain
adjustments), after deducting outstanding debt and equity financing and interest
and adding an amount equal to the working capital of such franchise areas (or
subtracting an amount equal to their working capital deficit). The Company does
not expect any such payments to have a material impact on the liquidity or
capital resources of the Company.
The Midlands portion of this franchise area includes the areas of
Telford, Dudley, Wolverhampton, Worcester, Walsall and Kidderminster. The
Midlands area includes approximately 635,000 homes and approximately 48,000
businesses. Construction for cable television service began in 1991. In 1993, a
retrofit program was undertaken to make both cable television and cable
25
<PAGE>
telephony services available to all homes previously passed in the Midlands area
and, since then, all new construction provides both cable television and cable
telephony services. This retrofit program was completed by the end of 1994, and
all homes passed in the Midlands area are capable of receiving both television
and telephony services. Construction of the Telford franchise was completed in
1994 and construction of the Dudley, Wolverhampton, Walsall and Kidderminster
franchise is ongoing.
Scotland and North East. The Scotland and North East Regional
Franchise Area includes the franchise areas formerly designated as Scotland and
the North East. The Scotland portion of this franchise area covers approximately
3,000 square kilometers and includes nine franchise areas (Edinburgh, the second
largest financial center in the U.K., as well as Cumbenauld and Monklands,
Dumbarton, Dundee, Falkirk and Livingston, Fife and East Lothian, Glenrothes and
Kirkcaldy, Motherwell and Perth) in the southern region of Scotland. The
Scotland Area covers approximately 666,461 homes and approximately 29,000
businesses. Construction in the Edinburgh franchise began in March 1992 and
construction of the broadband networks in all the other franchises in the
Scotland Area was begun in 1990 by the prior owner of such franchises and is
ongoing by the Company.
The North East portion of this franchise area covers approximately
640 square kilometers and includes Gateshead, Newcastle upon Tyne, North
Tyneside and South Tyneside. The North East area has approximately 354,000 homes
and approximately 14,000 businesses. Construction in the North East area was
commenced by the previous owner in 1990 but was halted by that owner in 1991.
Construction was restarted by the Company in May 1993 and is ongoing.
North West. The North West Regional Franchise Area includes the areas
of St. Helens and Knowsley, Wigan, Preston, Southport, North and South Liverpool
and Blackpool. The North West area includes approximately 829,000 homes and
approximately 62,000 businesses. Construction in the North West area began in
1990 and is ongoing.
Management of Regional Franchise Areas
The Company manages its Regional Franchise Areas from its corporate
headquarters in Woking, Surrey, England. The Company provides a number of
services on a centralized basis, including finance, legal, management
information services, network design (including switching, centralized planning
and engineering), network service center operations, purchasing of programming
and negotiation and administration of procurement and construction contracts.
Most other matters are handled by the management of the Regional Franchise Areas
under the direction of their Managing Directors. Although marketing programs,
pricing and programming generally are standardized throughout the Company, the
management of each Regional Franchise Area may modify them in order to reflect
local factors.
AFFILIATED COMPANIES
The Company owns minority equity interests in three Affiliated
Companies: Birmingham Cable, Cable London and Cable Corporation. The Affiliated
Companies own an aggregate of seven cable franchises in the U.K. As of December
31, 1997, the aggregate amount invested by the Company in the Affiliated
Companies was approximately (pound)135.7 million. Of the Company's 4.4 million
26
<PAGE>
equity homes, approximately 400,500 represent the Company's equity interest in
the approximately 1.2 million homes owned and operated by the Affiliated
Companies. These investments have enabled the Company to grow by acquiring
interests in a number of franchises and homes. For information concerning the
implications of the proposed merger of NTL and Comcast on the Company's
interests in Birmingham Cable and Cable London, see "Recent Developments."
The Company believes that it benefits by the regular exchange of
information with the Affiliated Companies. Although the Company has certain
shareholder rights discussed below and a representative on the board of
directors of each of the Affiliated Companies, the Company does not control the
day-to-day management operations of the Affiliated Companies.
The following table sets out, unless otherwise indicated, as at and for
the year ended for December 31, 1997, certain information concerning the
Affiliated Companies:
<TABLE>
<CAPTION>
BIRMINGHAM CABLE LONDON CABLE CORPORATION
---------- ------------ -----------------
COMPANY'S COMPANY'S COMPANY'S
EQUITY EQUITY EQUITY
TOTAL INTEREST TOTAL INTEREST TOTAL INTEREST
(100%) (27.5%) (100%) (50.0%) (100%) (16.5%)
-------- ----------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
FRANCHISE HOMES.............. 471,094 129,551 444,978 222,489 293,720 48,464
FRANCHISE BUSINESSES......... 31,200 8,580 35,000 17,500 17,500 2,888
CABLE TELEVISION
Homes passed................. 444,069 122,119 358,707 179,354 279,337 46,091
Homes passed and marketed.... 429,638 118,150 345,163 172,582 276,761 45,666
Basic customers.............. 116,995 32,174 82,655 41,328 47,652 7,863
Penetration rate (1)......... 27.2% 27.2% 23.9% 23.9% 17.2% 17.2%
Additional Outlets........... 35,652 9,804 32,811 16,406 13,694 2,260
Average monthly revenue per
customer (1)............... (pound)19.22 (pound)19.22(pound)22.92 (pound)22.92(pound)23.71 (pound)23.71
Average churn rate (1) 37.6% 37.6% 36.6% 36.6% 37.1% 37.1%
RESIDENTIAL TELEPHONY
Homes passed................. 444,069 122,119 358,707 179,354 281,459 46,441
Homes passed and marketed.... 429,638 118,150 345,163 172,582 281,459 46,441
Residential customers........ 123,354 33,922 80,193 40,097 62,458 10,306
Penetration rate (1)......... 28.7% 28.7% 23.2% 23.2% 22.2% 22.2%
Residential lines connected.. 123,354 33,922 84,289 42,145 62,458 10,306
Average monthly revenue per
line (1)................... (pound)20.98 (pound)20.98(pound)28.21 (pound)28.21(pound)29.01 (pound)29.01
Average churn rate
per line (1)............... 28.1% 28.1% 32.1% 32.1% 28.3% 28.3%
BUSINESS TELEPHONY
Business customers........... 3,748 1,031 2,961 1,481 2,087 344
Business lines connected..... 19.379 5,329 12,713 6,357 24,230 3,998
Average lines per customer 5.2 5.2 4.3 4.3 11.6 11.6
........
Average monthly revenue per
line (1)................... (pound)56.55 (pound)56.55(pound)61.23 (pound)61.23(pound)86.37 (pound)86.37
Average churn rate
per line (1)............... 33.1% 33.1% 23.7% 23.7% 11.1% 11.1%
</TABLE>
(1) For the definitions of the terms, see the footnotes to the table on page 2.
27
<PAGE>
Description of Affiliated Companies
The following is a brief description of each of the Affiliated
Companies, including a description of the terms of the Company's investments
therein.
Birmingham Cable. Birmingham Cable covers approximately 400 square
kilometers and operates in Birmingham and Solihull. Birmingham Cable has
approximately 471,000 franchise homes and approximately 31,200 businesses
(representing approximately 130,000 equity homes and approximately 8,600 equity
businesses based on the Company's current share ownership of Birmingham Cable).
The Birmingham cable franchise is one of the largest in the U.K. in terms of the
number of franchise homes.
Telewest Communications (Holdings) Limited ("TWH") (a wholly owned
subsidiary of the Company) and Comcast U.K. Cable Partners Limited ("Comcast")
jointly own 54.9% of the issued share capital of Birmingham Cable. General Cable
PLC ("General Cable") owns the remaining 44.9%. TWH and Comcast hold their
interests pursuant to a co-ownership agreement (the "Co-ownership Agreement"),
which allocates beneficial ownership of the jointly owned shares between TWH and
Comcast based on the amount each has contributed for the purchase of the shares.
Beneficial ownership of the shares currently is divided equally between TWH and
Comcast. Each party has the right to direct the voting of the shares
beneficially owned by it. TWH and General Cable also own interests in Cable
Corporation.
Telewest Communications Group Limited, a wholly-owned subsidiary of the
Company ("TWG"), General Cable and an affiliate of Comcast have entered into
consulting agreements with Birmingham Cable and one of its affiliates
(collectively, the "Birmingham Cable Companies") pursuant to which TWG provides
consulting services relating to cable telephony operations, the Comcast
affiliate provides consulting services relating to cable television operations
and General Cable provides consulting services relating to business telephony
operations. Each consultant also provides consulting services relating to the
financial management of the Birmingham Cable Companies. Under TWG's consulting
agreement, the Birmingham Cable Companies have agreed to pay TWG an annual fee
based on the greater of (a) the number of dwelling units in the Birmingham Cable
franchise area and (b) a percentage of the Birmingham Cable companies
consolidated gross revenues. Each consulting agreement terminates in April 2000,
subject to the Birmingham Cable Companies' right to extend the term of each
agreement by two successive five-year periods and a final three-year period. The
Birmingham Cable Companies have the right to terminate the agreements with TWG
and the Comcast affiliate after April 2000 if TWH and Comcast and their
affiliates together cease to be the holder of the largest percentage of the
issued share capital of Birmingham Cable (constituting the "Principal
Shareholder") and the management agreement referred to below is terminated for
the same reason.
TWG and a Comcast affiliate have entered into a management agreement
with Birmingham Cable that gives TWG and Comcast the right, subject to the
overall direction and control of the directors of the Birmingham Cable
Companies, to manage the day-to-day business and affairs of the Birmingham Cable
Companies. Pursuant to the Co-ownership Agreement, the Comcast affiliate is
entitled to make all the decisions of the co-owners under the management
agreement until the completion of construction passing 90% of the homes in the
Birmingham Cable franchise area and Comcast and its affiliates beneficially own
28
<PAGE>
less than 20% of the shares jointly owned by TWH and Comcast and its affiliates.
Notwithstanding this, TWG retains control over approval of budgets and business
plans relating to cable telephony operations and Comcast retains control over
the budgets and business plans relating to cable television operations.
Under Birmingham Cable's articles of association, the consent of
holders of 50% or more in aggregate of its issued ordinary share capital
("Majority Investor") and, in certain cases, the holders of 33-1/3% or more (in
aggregate) of its issued ordinary share capital ("Significant Investors") is
required before Birmingham Cable and any of its subsidiaries can take certain
actions relating to themselves or their businesses. Currently, TWH and Comcast
are jointly a Majority Investor and General Cable is a Significant Investor. The
Co-ownership Agreement generally requires TWH and Comcast to agree with respect
to the exercise of their rights relating to their jointly-owned shares.
TWH and Comcast (as Majority Investors) have the right to appoint four
directors to Birmingham Cable's board of directors and General Cable has the
right to appoint three directors. TWH and Comcast have the right to nominate the
managing director of Birmingham Cable and General Cable has the right to
nominate its Chief Financial Officer. Under the Co-ownership Agreement, the
directors whom TWH and Comcast are entitled to designate by virtue of their
jointly-owned shares will be designated by TWH and Comcast in proportion to the
number of shares beneficially owned by each. As a result, currently TWH has the
right to appoint two directors. The number of directors that TWH and Comcast
have the right to appoint and maintain decreases in stages as their joint
shareholding falls below 50% of the issued ordinary shares of Birmingham Cable.
TWH and the other shareholders have also agreed to certain restrictions with
respect to their right to apply for Cable Television Licenses and
Telecommunications Licenses in areas adjacent to the Birmingham Cable franchise
area.
The articles of association of Birmingham Cable generally prohibit a
shareholder from transferring legal or beneficial ownership of its shares
without giving each other shareholder a right of first refusal to acquire its
proportionate amount of such shares. The Co-ownership Agreement also generally
provides that neither party thereto shall transfer (including by virtue of
certain changes of control (as defined therein)) its interest in shares of
Birmingham Cable without first offering the other party a right of first refusal
to purchase such shares in accordance with the terms of the agreement. The
Co-ownership Agreement requires a party intending to make such a transfer to
notify the other party of its intention to make such transfer, to participate in
an appraisal of its shares of Birmingham Cable and to offer such shares to the
other party at the appraised value. See "Recent Developments."
In February 1995, Birmingham Cable entered into a ten-year (pound)175
million loan facility to finance the construction of its network and operations
(the "Birmingham Credit Facility"). Pursuant to the terms of the Birmingham
Credit Facility, payments or distributions to the shareholders of Birmingham
Cable, including payments of management fees, dividends, interest and principal
on loans to Birmingham Cable from its shareholders, are restricted based on
certain conditions related to the financial performance of Birmingham Cable and
its subsidiaries. Certain financial covenants in the Birmingham Credit Facility
were amended by a Supplemental Agreement dated March 12, 1997. The shareholders
of Birmingham Cable contributed an aggregate of (pound)7 million in equity in
January 1997 and contributed an additional (pound)7 million of equity in the
first quarter of 1998.
29
<PAGE>
Cable London. Cable London covers approximately 160 square kilometers
and operates in the Camden, Haringey, Enfield, and Hackney and Islington
franchise areas. Cable London has approximately 445,000 franchise homes and
approximately 35,000 businesses (representing approximately 222,000 equity homes
and approximately 17,500 equity businesses based on the Company's current share
ownership of Cable London).
The Company and Comcast each own 50.0% of the issued share capital of
Cable London. There is no voting arrangement between the Company and Comcast
with respect to Cable London.
The articles of association of Cable London generally prohibit a
shareholder from transferring legal or beneficial ownership of its shares
without giving each other shareholder a right of first refusal to acquire its
proportionate amount of such shares. A change of control in the shareholding
company will cause the issue by Cable London of a transfer notice in respect of
that company's shares in Cable London to the other shareholder in Cable London.
See "Recent Developments."
TWG and an affiliate of Comcast have entered into consulting agreements
with Cable London pursuant to which TWG provides consulting services relating to
telephony operations and the Comcast affiliate provides consulting services
relating to cable television operations. Under TWG's consulting agreement, Cable
London has agreed to pay TWG an annual fee based on the greater of (a) the
number of dwelling units in the Cable London franchise areas or (b) a percentage
of the gross revenues of Cable London from telecommunications services. The term
of the consulting agreement expires in accordance with its terms in August 1998.
The consulting agreement may be terminated by TWG upon a change of control of
Cable London.
In May 1997, Cable London entered into a (pound)170,000,000 loan
facility (the "Cable London Facility") to finance capital expenditure, working
capital and costs of construction and operation of all cable telephony and
television franchises of Cable London and its subsidiaries, general corporate
purposes and to re-finance the (pound)60,000,000 loan facility entered into by
Cable London in June 1995. Pursuant to the terms of the Cable London facility,
payments or distributions to the shareholders of Cable London, including
payments of dividends, loans or other payments or interest on them, or payments
of principal or interest on subordinated debt are restricted. Certain payments
are permitted if made in the ordinary course and payment of dividends or
payments on subordinated debt are only permitted after June 30, 2001 provided
that certain financial covenants are met. Management fees accruing at the rate
of (pound)55,000 per month may be paid from time to time provided that certain
financial covenants are met. As a condition precedent to the completion of Cable
London Facility, the Company and Comcast UK Cable Partners Limited, the
principal shareholders of Cable London, entered into deeds of subordination
which provide that prohibited payments otherwise due to the shareholders from
Cable London and its subsidiaries would accrue and would not be paid until all
sums due under the Cable London facility has been satisfied. Cable London will
be required to repay (pound)40,000,000 of the Cable London Facility on June 30,
1999 and the remainder of the facility will be repaid commencing on December 31,
2001 in six monthly instalments, to be completely repaid by June 30, 2006.
Voluntary prepayment is permitted. The facility has been secured by a cross
guarantee and debentures by Cable London and its subsidiary companies, and each
of the Company and Comcast UK Cable Partners Limited have granted a mortgage
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over the shares they hold in Cable London in favor of the CIBC Wood Gundy Plc as
security agent for the banks, CIBC Wood Gundy Plc, The Bank of New York and
Banque Paribas.
Cable Corporation. Cable Corporation covers approximately 490 square
kilometers and operates in the Windsor franchise area (including Windsor,
Slough, Maidenhead, Staines, Ashford and Iver) and the Middlesex franchise area
(including the London boroughs of Hounslow and Hillingdon). Cable Corporation
has approximately 294,000 franchise homes and approximately 17,500 businesses
(representing approximately 49,000 equity homes and approximately 3,000 equity
businesses based on the Company's current share ownership of Cable Corporation).
TWH owns 16.5% of the issued share capital of Cable Corporation. The
remaining 83.5% is owned by General Cable.
TWG has entered into a consulting agreement with Cable Corporation and
certain of its affiliated companies (the "Cable Corporation Companies") pursuant
to which TWG provides consulting services relating to telephony operations.
Under this agreement, the Cable Corporation Companies have agreed to pay TWG an
annual fee based on the greater of (a) the costs incurred in providing
consulting services to the Cable Corporation Companies or (b) a percentage of
the gross revenues of the Cable Corporation Companies from cable telephony
business. The consulting agreement continues in effect until December 31, 1998
and thereafter is renewable from year to year unless terminated on one year's
notice by either party.
Under Cable Corporation's articles of association, the consent of the
holders of not less than 15% of its issued ordinary share capital ("Significant
Investors") is required before Cable Corporation and any of its subsidiaries can
take certain actions in relation to themselves or their businesses. The Company
is a Significant Investor. Each Significant Investor has the right to appoint up
to two directors to Cable Corporation's board of directors.
The articles of association of Cable Corporation generally prohibit a
shareholder from transferring legal or beneficial ownership of its shares
without giving each other shareholder a right of first refusal to acquire its
proportionate amount of such shares. Transfers by certain corporate shareholders
to affiliates generally are excluded from this restriction.
In March 1996, the Cable Corporation entered into financing
arrangements, including a nine-year (pound)16 million loan facility and certain
finance leases to finance the construction of its network and operations (the
"Cable Corporation Credit Facility"). The Cable Corporation Credit Facility was
terminated in December 1997 when the Cable Corporation was party to a
re-financing of General Cable Holdings Limited ("GCHL"), under which GCHL
received a revolving and term credit facility of up to (pound)500 million.
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EMPLOYEES
At December 31, 1997, the Company had 4,408 employees. None of these
employees is covered by collective bargaining agreements. The Company believes
that its relationship with its employees is good.
COMPETITION
The Company's cable television and cable telephony businesses compete
with a wide range of companies using a variety of technologies.
Cable Television
General
Broadband cable franchise licenses currently are awarded in the U.K. on
an exclusive basis for each prescribed area. However, the current Labor
Government in the U.K. stated in its election manifesto in 1997 that it intended
to review the Conservative Government's position supporting the exclusive
franchise regime. The Company believes that such review will begin soon,
although there can be no assurance if or when any such review will be commenced,
what the scope or conclusions of such a review will be or what the impact of any
such conclusions will be on the Company.
The Company currently compete with television programming provided by
terrestrial stations, DTH satellite services, video cassette rental stores,
satellite master antenna television systems and certain narrowband cable system
operators, and will compete with digital terrestrial services and may in the
future compete with programming provided by video-on-demand and other
entertainment services provided by PTOs. The Company also competes with other
companies (which may include PTOs and other cable operators) for the award of
new franchises, the purchase of existing franchises and new sources of capital.
The principal current and potential competitors for the cable
television business of the Company are the following:
Broadcast
Television viewing in the U.K. has long been one of the most popular
forms of entertainment and daily viewing time in the U.K. has been among the
highest in the world (weekly average of more than 26 hours per person during the
fourth quarter of 1997). Five broadcast channels are the predominant source of
television programming. Although the terrestrial television channels in the U.K.
generally are perceived as providing high-quality programming, an independent
market research study indicates that viewers have a desire for a wider variety
of television programming. This study indicates that in the U.K., more than
one-third of all viewing in homes with cable television or satellite services
was of cable or satellite channels. The Company believes that acceptance of
alternative programming, together with the relatively high penetration of DTH
satellite services and VCRs (discussed below) evidences a willingness by many
consumers in the U.K. to pay for additional programming.
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The Company believes that its primary competitive advantages over
terrestrial television are significantly more programming options, access in the
future to interactive and integrated entertainment, communication and
information services and, in some areas, improved television reception. The
Company believes that the principal competitive advantage of terrestrial
television is its historical position as the leading source of in-home
entertainment in the U.K.
DTH Satellite
In a DTH satellite system, a satellite television service provider
obtains programming from a variety of sources (including most of those used by
the Company) and transmits the programming signal up to a satellite which then
retransmits the signal down to customers. In order to receive satellite service
in the U.K., the customer must have an outdoor reception dish, which generally
is smaller and less expensive than the "C-band dish" typically used in the U.S.,
and some form of decoder.
DTH satellite services are widely available in the U.K. and are
becoming increasingly popular. DTH satellite penetration has increased from
approximately 500,000 homes in 1989 to 4,000,000 at December 31, 1997. BSkyB is
the leading supplier of satellite programming in the U.K. The "Sky Multi
Channels" package provided by BSkyB (which includes ten channels provided by
Flextech or a provider in which an affiliate of TCI has an interest) offers
customers 30 basic channels, four premium channels and three bonus channels.
BSkyB is the principal competitor of the Company in pay television as
well as one of its most important sources of programming. The Company purchases
most of the channels provided by BSkyB to its DTH satellite customers.
The Company believes that DTH satellite services will continue to be
significant competitors of the Company in the future. However, the Company
believes that cable television has a number of competitive advantages over DTH
satellite service, including the following: (a) DTH satellite service involves
up-front or ongoing costs for the purchase or rental of a dish and related
equipment, which are substantially higher than the up-front or ongoing equipment
costs for cable television, (b) satellite dishes are considered to be unsightly
by many and are prohibited by some U.K. planning guidelines, (c) cable offers a
sophisticated two way physical link, and in the future will offer interactive
and integrated entertainment, telecommunications and information services in
addition to television programming and (d) DTH satellite television generally
does not provide local programming. The Company believes that the principal
competitive advantage of DTH satellite service is the generally lower monthly
service charges for basic services and premium services than comparable services
provided by cable operators.
BSkyB has indicated that it intends to launch a digital service in late
1998 which may provide up to 200 channels including mulitplexed movies,
interactive services such as home shopping, home banking and "pay-per-view"
sports and movies. The Company intends to launch a digital service in one
franchise in the second half of 1998 although there can be no assurance that
this will be achieved and a delay may have a negative impact on the Company's
offering if it is launched after the satellite digital offering. BSkyB intends
to offer digital services through an alliance with British Interactive
Broadcasting (BIB). BIB intends to subsidise BSkyB digital set top boxes. BIB,
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whose shareholders include BT, BSkyB and Midland Bank and Matsushita, has yet to
be approved by the European Commission.
Digital Terrestrial Television Broadcasting
Under the Broadcasting Act 1996, the ITC has been given responsibility
for the licensing and future regulation of digital terrestrial television which,
on introduction, is expected to provide 30 or more terrestrial channels serving
between 60% and 90% of the U.K. population. Existing terrestrial broadcasters
are given guaranteed capacity to simulcast their existing analogue services. In
1997, Carlton Communications and Granada Group formed a joint venture and
acquired a licence from the ITC for three transmission frequencies to initially
provide 15 digital terrestrial television channels. These channels are expected
to broadcast programming that may include BSkyB programming currently available
only through DTH satellite or cable television as well as programming from the
BBC. Digital terrestrial television will broadcast from land-based transmitters
and will be receivable by consumers with conventional aerials. A digital decoder
box or integrated digital television set would be needed to view the new
channels, which are expected to have digital picture and sound quality. The
introduction of digital terrestrial, as well as digital satellite television
will provide additional competition for the Company. See "Certain Regulatory
Matters -- Future Developments -- Digital Broadcasting."
Video Cassette Rentals
In 1997, approximately 88% of the homes in the U.K. owned at least one
VCR. The Company believes that this penetration evidences a willingness by many
consumers in the U.K. to pay for programming in addition to that provided by the
terrestrial broadcasters. The Company believes that the principal competitive
advantages of cable television over videotape rentals include elimination of the
need for consumers to leave their premises to pick up and return the video
cassette and cost (cable programming is significantly less expensive on a
per-program basis than rental of videotapes). The principal advantages of
videotape rental over cable television are that it provides the consumer with
more flexibility in selecting specific programming and the timing of the
delivery of such programming and films generally are released earlier for video
cassette rentals than for satellite and cable television. This advantage may be
reduced by the development by cable operators of pay-per-view programming, which
would give cable customers more control over the specific programming viewed and
the timing of such programming.
Video-on-Demand/Pay-Per-View
Video-on-demand will provide individual customers with the ability to
request a specific program for viewing at specified times. Currently, no
video-on-demand service is commercially available in the Company's franchises.
BT has undertaken a pilot program for this service to the homes of a limited
number of BT employees. However, the successful introduction of a
video-on-demand service in the Company's franchise areas, particularly by a PTO,
would result in the services of the Company being subject to increased
competition. In the event a video-on-demand service is offered before the
Company's service is offered, the Company's service could be adversely affected.
In addition, to the extent that any future video-on-demand services offer more
flexibility than the Company's services, the Company's services could be
adversely affected.
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BSkyB currently offers its DTH satellite service customers pay-per-view
services throughout the U.K., including in the Company's franchises. Cable &
Wireless Communications plc ("CWC") (successor to a merger with Mercury
Communications and certain U.K. cable operators) currently offers BSkyB's
pay-per-view service to its customers over its cable network. The Company
currently offers a limited pay-per-view service for selected sporting events and
intends to offer its "Front Row" comprehensive pay-per-view movie service
starting in the first half of 1998.
SMATV and Narrowband Systems
SMATV systems receive television signals from either broadcast or
satellite sources and then distribute them by cable to a discrete area of
customers, typically within a limited geographic area (such as a block of flats)
to less than 1,000 homes. Narrowband systems, which typically serve more than
1,000 homes, are underground cable distribution systems that have significantly
less channel capacity than the broadband systems used by the Company. The
narrowband systems carry only a limited range of broadcast and satellite
programming and provide no voice telephony services. Most narrowband systems are
relatively old and serve only limited geographical areas within certain of the
Regional Franchise Areas (i.e., the Avon and Cotswolds, North East and South
East franchise areas). The Company believes that currently there are only a few
SMATV systems licensed for or operating in the franchise areas of the Company
and the Company has a right of first refusal on any new SMATV systems license
issued for its franchise areas. There also are a number of old narrowband
systems that are licensed for or operating in the franchise areas of the
Company.
Other Cable Operators
Although cable operators in the U.K. generally co-operate on a variety
of technical, programming and marketing matters, the operators do compete for
the award of new franchises, the purchase of existing franchises and sources of
capital. Certain cable operators that compete with the Company now or in the
future may have greater financial resources or other advantages which may
increase their likelihood of obtaining desirable franchises.
New Technologies
The extent to which new media and technologies will compete with cable
television systems in the future cannot be predicted and such media or
technologies may become dominant in the future and render cable television
systems less profitable or even obsolete. For example, the U.K. Government
recently announced that it intends to release additional frequencies of the
radio spectrum (via auction) for use in the provision of advanced mobile
services. Certain of such frequencies would be used for broadband and broadcast
applications which could provide increased competition for the Company.
Cable Telephony
General
BT is the largest provider of telephony services for residences and
businesses in the U.K. Historically, CWC, (successor to the merger with Mercury
Communications Limited) has focused on the business market and long-distance and
international telephony services, and has attempted to increase its share of the
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business telephony market. Cable operators have started to expand into the
telephony market and, according to the ITC, there were approximately 3,442,200
cable telephony lines in the U.K. as at January 1, 1997, as compared to
approximately 2,039,100 as at December 31, 1996.
BT
BT is the principal competitor of the Company in providing telephony
services to residential and small- and medium-sized business customers. BT has
an established market presence, fully-built network and resources substantially
greater than those of the Company.
The Company seeks to compete with BT primarily by emphasizing the
competitive cost and, to a lesser extent, service advantages of its cable
telephony services.
To date, the Company generally has been able to price its cable
telephony call charges below those of BT. There can, however, be no assurance
that it will be able to continue to do so in the future. BT currently is subject
to regulatory controls over the prices it may charge customers. See "Certain
Regulatory Matters -- Cable Telephony -- Price Regulation." As a result of these
controls, BT has in the past implemented and will in the future be required by
its Telecommunications License to reduce its prices further in each of the next
few years. The Company has modified its rates in order to maintain its price
advantage over BT. There can be no assurance, however, that any such price cuts
will not adversely impact the profitability of the telephony operations of the
Company.
The Company believes that BT's competitive strength has been enhanced
until recently by the lack of number portability in the U.K. The Company
believes that many consumers have been reluctant to transfer their telephony
service away from BT or Mercury service until number portability was available.
The Company has rolled out number portability to all of its Regional Franchise
Areas. See "Certain Regulatory Matters --Cable Telephony -- Number Portability."
CWC
The Company also competes with CWC in providing business telephony
services and, to a lesser extent, residential telephony services. The Company
competes with CWC primarily based on price and services offered. CWC has
resources substantially greater than those of the Company, and there can be no
assurance that CWC will not expand its business or residential telephony
services in the Company's existing markets or that the Company will be able to
continue to compete successfully with CWC. See "Industry Background and Company
History -- Industry Background."
Energis Communications
Energis has substantially finished construction of a national broadband
network along existing electrical power pylons to provide telephony services. To
date, Energis has not marketed residential telephony lines and generally has
concentrated on the smaller business telephony market. The Company expects to
compete with Energis primarily based on price and services offered.
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Other Competitors
The Company also competes in its telephony business with over 160
licensed operators including service providers such as Ionica L3 and Colt
Communications. Mobile cellular telephony networks such as Cellnet (in which BT
has a 60% interest), Vodafone, Mercury One2One (in which affiliates of U S WEST
have a 50% interest) and Hutchison Microtel's "Orange" service, also provide
telephony service to customers. Currently, there are a number of competitors who
either are offering national services or are looking to offer national services.
The Company believes that this increased competition will lead to a broad range
of new packages and promotions, thereby resulting in a decrease in the price of
U.K. calls. For smaller customers, these new suppliers are likely to offer
indirect services as they may not be able to justify direct connection.
ACQUISITIONS AND DISPOSALS
Although the Company's strategy currently is to build on its existing
customer base and increase penetration and revenues per customer, in order to
increase revenues and economies of scale, the Company may from time to time
acquire one or more new or existing franchises either in public tenders by the
ITC, acquisitions from other cable operators or acquisitions of other cable
operators. The Company believes that there may be attractive acquisition
opportunities in the future as some of the existing franchise holders decide to
divest all or a portion of their U.K. for strategic or other reasons or
shareholders of other operators determine that their prospects would be enhanced
as part of a larger group with the Company. In that regard, the Company has in
the past, currently is and may in the future, engage in discussions regarding
acquisitions and business combinations in the U.K., some of which may be
significant and any of which may ultimately lead to acquisitions or business
combinations. Any such acquisitions or combinations may be funded, to the extent
available, from internally generated funds, the incurrence of indebtedness or
the issuance of equity, or a combination thereof.
For information concerning certain discussions between the Company and
General Cable, see "Recent Developments".
CERTAIN REGULATORY MATTERS
General
Cable television and cable telephony operators in the U.K. are governed
by legislation, regulations and licenses issued under the Cable and Broadcasting
Act 1984 as construed by the Broadcasting Act 1990 (as amended by the
Broadcasting Act 1996) (the "Broadcasting Act") and the Telecommunications Act
1984 (the "Telecommunications Act"). An operator of a cable television and cable
telephony franchise in the U.K. covering more than 1,000 homes requires the
following two licenses for each franchise area:
(a) a telecommunications license (a "Telecommunications License"),
granted under the Telecommunications Act by the Secretary of State for Trade and
Industry (the "Secretary of State"), which authorizes the installation and
operation of the telecommunications network used to provide cable television and
telecommunications services, and
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(b) a cable television license (a "Cable Television License"), which
authorizes the provision of cable television services within a defined
geographical area and which may be either:
(i) a prescribed diffusion service license ("PDSL"), granted
under the Cable and Broadcasting Act 1984 prior to
January 1, 1991 by the Cable Authority and continued in
effect by virtue of provisions of the Broadcasting Act,
which allows an operator to provide cable television
services by means of a cable network; or
(ii) a local delivery service license ("LDSL"), granted since
January 1, 1991 under the Broadcasting Act by the ITC
which allows an operator to deliver television and other
licensed programming services by means of a licensed
telecommunications network, including a cable network or
microwave distribution system.
The Telecommunications Licenses and Cable Television Licenses contain
various conditions concerning the operation of the licensed telecommunication
system and the provision of broadcast services, respectively and, in the event
that such conditions are breached, the Director General or the ITC, as
appropriate, may take action to enforce compliance with such licenses. The ITC
or the Secretary of State has the power ultimately to revoke such licenses.
Cable Television
The Broadcasting Act
The Broadcasting Act 1990 established the ITC to license and regulate
commercial television services (terrestrial and satellite) and the Radio
Authority to regulate radio services. The ITC's functions are, among other
things, to grant licenses for television broadcasting activities and to regulate
the commercial television sector by issuing codes on programming, advertising
and sponsorship, monitoring programming content and enforcing compliance with
the Broadcasting Act and license conditions. The ITC has the power to vary
licenses and impose fines and revoke licenses in the event of a breach of the
license conditions. The ITC also enforces ownership restrictions on those who
hold or may hold an interest in licenses issued under the Broadcasting Act. The
Broadcasting Act 1990 has been amended by the Broadcasting Act 1996. The
licensing provisions remain substantially the same, although some amendments
were made with regard to broadcast and radio services, including ownership
restrictions (see below).
Cable Television Licenses
General. As at December 31, 1997, Cable Television Licenses had been granted
for franchise areas covering approximately 17.0 million homes in the U.K. The
ITC is also advertising and awarding LDSLs to extend coverage to those areas not
otherwise licensed. To date, the Company has been awarded four (for the
Southport, East Lothian, Taunton and Blackpool franchises). LDSLs are awarded
under competitive bids to the applicant submitting the highest cash bid (payable
annually over the 15-year term of the LDSL), unless it appears to the ITC that
there are "exceptional circumstances" (primarily geographic coverage) which make
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it appropriate to award the license to another applicant. In addition, all
applicants must undertake to pay a percentage of qualifying revenue ("PQR") to
the ITC in each year of the license together with an annual sum equal to the
cash bid indexed against inflation plus certain other payments.
Under the Broadcasting Act, cable operators may carry certain licensed
services on their networks. Cable Television Licenses also require cable
operators to ensure that advertising and certain foreign satellite programs
carried by them as part of their services conform to the restrictions set forth
in the codes on advertising, sponsorship and programming issued by the ITC.
All new LDSLs awarded to the Company since December 1994 include build
milestone obligations.
Term, Renewal and Revocation of Broadcasting Licenses. The Company holds both
PDSLs and LDSLs. The terms and renewals of such licenses are governed by the
Broadcasting Act as follows:
(a) Each of the Company's PDSLs was issued for a 15-year term but
applications may be made to the ITC for supplemental licenses which have the
effect of extending the term of the PDSLs for up to an additional eight years if
the cable operator holds a 23-year Telecommunications License. Fees continue to
be payable on the same basis as the PDSLs, but no PQRs or sums equal to the cash
bids will be payable during this extended term. If the Company elects to extend
the PDSL (as the Company has done in certain cases), upon expiration of such
PDSLs as so extended, the Company would be required to apply for a new LDSL
under the competitive bid procedures described above. If the Company elects not
to extend a PDSL, the Company may apply to the ITC (no earlier than five years
prior to the expiration of the PDSL) for a 15-year LDSL with respect to which it
must agree with the ITC on the amount of the cash bid and the PQR payments that
will be payable over the term of the LDSL.
(b) Each of the Company's LDSLs was issued for a 15-year term and this
term corresponds to the term of the predecessor PDSL or to a term commencing on
December 31, 1990, whichever is later. The term of the Company's LDSLs may not
be extended, but the Company may apply to the ITC (no earlier than five years
prior to the expiration of the LDSL) for a new 15-year LDSL, with respect to
which it must agree with the ITC on the amount of cash and PQR payments that
will be payable over the term of the LDSL.
The ITC can, after consultation with the Department of Trade and
Industry (the "DTI") and the Director General, revoke a Cable Television License
if an operator fails to comply with its conditions or with any direction of the
ITC and the ITC considers revocation to be in the public interest. If there is
any change in either the nature or characteristics of an operator that is a
corporate entity, or any change in the persons controlling or having an interest
in it, the ITC can revoke the license if it would not have awarded the license
had the new ownership or control existed at the time the application for the
license originally was considered. The ITC also can impose fines and shorten the
license period for licenses issued under the Broadcasting Act.
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A Cable Television License is transferable with the consent of the ITC.
Ownership Restrictions. The ITC has a general duty to ensure that Cable
Television Licenses are held by "fit and proper" persons and may exercise
control over who may hold a license where financial assistance is provided to,
or influence is exercised over, a licenseholder which may produce results
adverse to the public interest. The Broadcasting Act also contains specific
restrictions on the types of entities which may hold Cable Television Licenses
or interests therein. Cable Television Licences may not be held by, among
others, the BBC, a local authority, a religious or political body (or one of its
officers) or any advertising agency or any entity controlled by it.
The Secretary of State is also empowered to control accumulations of
interests in different licensed activities.
Price Regulation. Cable television pricing in the U.K. is not subject
to pricing restrictions, including pricing limitations, rate of return
assumptions or similar mechanisms of the kind imposed under U.S. cable
regulations. However, cable television pricing is subject to fair trading
regulation by the ITC and to the application of general competition law.
Digital Broadcasting
The Broadcasting Act 1996 introduced provisions for the licensing of
digital terrestrial broadcasting and introduced a "must carry" requirement on
cable companies where both program provider and cable operator use digital
technology to ensure the universal availability of designated free-to-air
service channels. Must carry obligations concerning public service channels
already apply to holders of PDSLs.
The Broadcasting Act 1996 permitted the initial availability of six
television multiplexes, or frequency bands giving substantial national
terrestrial coverage, each with the ability to carry several television
channels. The legislation included provisions for the ITC's licensing of
"multiplex providers", who were allocated, in aggregate, the six multiplexes for
12-year license periods. Each multiplex provider will contract with broadcasters
for the transmission of the broadcasters' television services via its allocated
frequency band. The initial capacity available for DTT is divided into six
transmission networks, each of which will be able to carry a number of different
television channels. These networks are known as "multiplexes". Of these six
multiplexes, two are wholly reserved for existing broadcasters who are
guaranteed places on the multiplexes under the Broadcasting Act 1996. The first
will be used by the BBC to transmit existing programmes in digital form and
develop new digital services. The second is reserved for channel 3, channel 4
and Teletext Ltd. This multiplex will be licensed and regulated by the ITC.
Licences to operate the remaining four were advertised and 3 have now been
awarded to British Digital Broadcasting plc (BDB). The fourth multiplex has been
awarded S4C Digital Networks Ltd. It will carry the new channel 5 and S4C in
Wales
The Advanced Television Services Regulations, which implemented the
Advanced Television Services Directive (Council Directive 95/47/EC on the use of
standard for the transmission of television signals) (the "ATS Regulations")
came into effect on January 7, 1997. The ATS Regulations cover the provision of
digital television services by means of conditional access systems (e.g., by
encryption and subscription management systems). They also amend the
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Telecommunications Act 1984 to include subscriber management services as
telecommunications services, and the systems over which these services are
provided as telecommunication systems, in each case subject to the general
telecommunications licensing and regulatory regime. The ATS Regulations amended
existing telecommunications licences so that conditional access services may
only be provided under the Class License for the running of telecommunications
systems for the provision of conditional access services (the "Conditional
Access Class License"). The ATS Regulations impose an enforceable statutory duty
on the provider of conditional access services to ensure that the system used to
provide those services has the necessary technical capability for cost effective
transcontrol at cable head-ends allowing for the possibility for full control by
cable television operators at local or regional level of the services using that
conditional access system. "Transcontrol" is the process by which the
conditional access operator's control data is removed and replaced so as to
enable the rebroadcast of the programming using the cable operator's own
conditional access system. There is also a supplemental duty on the conditional
access service provider to co-operate with the cable television operator
(including by provision of information on a timely basis) to ensure that the
latter can take advantage of the primary duty. The ATS Regulations impose duties
on the operators of conditional access services who do not simply self-provide
(i.e., who do not produce and market those services to third parties) to offer
technical services to broadcasters of digitally transmitted services on fair
reasonable and non-discriminatory terms so that viewers can receive the
broadcasters' services over their own networks.
Apart from the effect of the ATS Regulations, the provision of
conditional access services is regulated under the Conditional Access Class
License, issued on January 7, 1997. The Conditional Access Class License
regulates the provision of encryption services, subscriber authorization
services, subscriber management services and any other conditional access
service in connection with digital television services. The provider of such
services is required, unless it is only a self-provider, to offer them to
broadcasters on a fair, reasonable and non-discriminatory basis and to
co-operate to ensure the interconnectivity and interoperability of its system so
that the relevant services can be provided. Where a cable operator retransmits a
broadcaster's digital television services, the operator of a conditional access
service who provides conditional access services to the broadcaster must
co-operate with the cable operator so that the cable operator can transcontrol
and re-transmit those services cost-effectively and without incurring
unnecessary and unreasonable expense. The Conditional Access Class License also
incorporates the "fair trading" condition and other conditions including those
relating to prohibition on undue preference and undue discrimination, linked
transactions, publication of charges, essential interfaces, intellectual
property rights and separation of financial accounts. Access control provisions
relating to the provision of digital interactive services were included in U.K.
telecommunications class licences as of December 31, 1997. The same provisions
will be included in all U.K. telecommunications licences (including the
Company's Telecommunications Licenses) following the DTI consultation with the
industry during 1998. These Access Control provisions allow for OFTEL to
regulate digital interactive services. The Director General recently published
guidelines on the conditional access licence and on conditional access pricing.
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Media Ownership
The Broadcasting Act 1996 amends the media ownership rules contained in
the Broadcasting Act 1990. It relaxes the earlier rules limiting ownership
between terrestrial television, satellite and cable broadcasters, except for
those broadcasters which are already more than 20% owned by a newspaper with
more than 20% national newspaper circulation. Qualifying terrestrial
broadcasters are now allowed to have controlling interests in cable and
satellite companies, provided their total interests do not exceed 15% of the
total television market (defined by audience share including public service
broadcasters) and qualifying cable companies will be able to control terrestrial
television companies, subject to the 15% total television market limit and
certain restrictions on the number of terrestrial licenses held. Newspaper
groups with less than 20% national newspaper circulation are now able to control
television broadcasters constituting up to 15% of the total television market,
subject to a limit on the number of terrestrial licenses held, unless the ITC
decides that such control would be against the public interest. Newspaper
companies, the license holders of Channel 3 and Channel 5 and satellite and
cable broadcasters, are to have the ability to control any number of digital
terrestrial television licenses, in addition to any analogue licenses.
Previous U.K. Government proposals have also contemplated a more
integrated system of media ownership and control in the longer term, to take
account of the increasing number of broadcasters and technological convergence,
and involving regulation of the media-market as a whole. The Company can give no
assurance as to whether these proposals for regulation will be enacted or, if
they were enacted, as to what their content would be or what effect they might
have on the Company's business.
Cable Telephony
Telecommunications Act
The Telecommunications Act provides a licensing and regulatory
framework for telecommunications activities in the U.K. and established the
office of the Director General (supported by OFTEL), as an independent
regulatory authority. Telecommunications policy is overseen by the DTI. The
Secretary of State also has primary licensing authority under the
Telecommunications Act, although he may delegate that authority to the Director
General. The principal functions of the Director General are, among other
things, to monitor and enforce compliance with Telecommunications License
conditions, establish and administer standards for telecommunications equipment
and contractors, investigate complaints and exercise certain functions to
promote or ensure competition in telecommunications markets. The Director
General may modify Telecommunications Licenses either with the agreement of the
licensee following a statutory period of public consultation or following a
report of the MMC. The Director General is also empowered to issue enforcement
orders requiring compliance with Telecommunications License conditions which
have been breached.
Telecommunications Licenses
General. A Telecommunications License authorizes a cable operator to install
and operate the physical network used to provide cable television and
telecommunications services. It also authorizes the operator to connect its
system to other television and telecommunications systems, including those
operated by the terrestrial broadcasting authorities, satellite broadcasters and
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PTOs. Although the Telecommunications License granted to a cable operator is for
a particular franchise area, it is not exclusive and, as a result, a cable
telephony operator is subject to competition in its franchise area with respect
to the provision of telephony services from PTOs (such as BT, CWC and Colt) and
other telephony service providers.
A cable operator's Telecommunications License contains conditions
regulating the manner in which the licensee operates its telecommunications
system, provides telecommunications services, connects its systems to others and
generally operates its business. A cable operator's Telecommunications License
also contains a number of detailed provisions relating to the technical aspects
of the licensed system (e.g., numbering, metering and the use of technical
interfaces) and the manner in which the licensee conducts its business (e.g.,
publicity of certain prices, terms and conditions). In addition, a cable
operator's Telecommunications License contains prohibitions on undue preference
and discrimination in providing service. The cable operator's Telecommunications
License also requires the licensee to comply with certain codes of practice and
to provide information which the Director General may require to carry out his
statutory functions.
All the Company's Telecommunications Licences have been amended by the
Director General of OFTEL to replace a number of existing conditions dealing
with specific forms of anti-competitive behavior with a "fair trading"
condition. This will enable the Director General to act against anti-competitive
behavior such as predatory pricing and undue cross-subsidization. The Director
General has published guidelines on the types of behavior which he considers to
be anti-competitive and on the enforcement procedure to be used. In addition all
Telewest telecommunications licences have been modified, resulting in some
obligations (e.g., Consumer Code of Practice), being removed but with others,
(e.g., an obligation to provide number portability) being implemented. In
addition to those Telecommunications Licenses obtained for its cable franchise
areas, the Company was also awarded Telecommunication Licenses on January 14,
1997 for all those geographic areas for which it does not hold Broadcasting
Licenses and an International Facilities Licence on December 17, 1996,
permitting the Company to provide full international telecommunications
facilities and services.
The fees payable for the Telecommunications License consist of an
initial fee payable on the grant of the license and annual fees thereafter. The
fees are based on a proportion of the costs of the Director General in
exercising his functions under the Telecommunications Act. OFTEL recently
established a consultation with the industry on a new framework for licence
fees.
A Telecommunications License is not transferable. However, a change of
control of a licensee may be permitted subject to compliance with a notification
requirement, provided the proposed change is not, in the opinion of the
Secretary of State, against the interests of national security or relations with
the government of a country or territory outside the U.K.
Network Construction. Other than for LDSL licenses granted since December
1994, each Telecommunications License prescribes milestones that require the
licensee to construct its network to pass a specified number of premises by
certain dates. All but the final milestones may be varied by the Director
General "if he considers it to be in the interests of sound commercial
development" of the system. The final milestone can be modified only following a
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public comment period and with the approval of the Director General. If the
milestones are not met, the Director General may take enforcement action which,
if not complied with, could result in the revocation of the Telecommunications
License by the Secretary of State. For a discussion of the Company's current
milestones and certain amendments being sought with respect thereto, see
"Broadband Network".
A cable operator is not required to provide voice telephony services,
but where it does so and achieves a 25% or more share of the relevant market (as
determined by the Director General) within its licensed area, the licensee may,
at the direction of the Director General, be required to ensure that voice
telephony services are available to anyone in the licensed area who reasonably
requests them. No such direction has been received by the Company.
Under a Telecommunications License, the cable operator is subject to
and has the benefit of the Telecommunications Code promulgated under the
Telecommunications Act. The Telecommunications Code provides certain rights and
obligations with respect to installing and maintaining equipment such as ducts,
cables and cabinets on public or private land (including the installation of
equipment on public highways). Cable operators also have the benefit of the New
Roads and Street Works Act 1991 which provides them with the same rights and
responsibilities with respect to construction on public highways as other public
utilities. Cable operators generally are required to post bonds with local
authorities in respect of their obligation to ensure reinstatement of roads and
streets in the event the operators becomes insolvent, ceases to carry on
business or has its Telecommunications Licenses terminated. In order to install
equipment on private property, cable operators must obtain the agreement of
occupiers, property owners and others.
Term, Renewal and Revocation of Telecommunications Licenses.
Telecommunications Licenses for cable operators originally were granted for an
initial period of either 15 or 23 years (depending on the technology used by the
licensee), commencing on the date service was first provided to customers. In
July 1992, following the Duopoly Review, technology-related discrimination in
license length was abandoned. The U.K. government invited all holders of 15-year
Telecommunications Licenses to apply for new 23-year licenses. However, a
licensee also had the right to extend a 15-year Telecommunications License to 23
years if it provided certain technical undertakings within five years of the
date of the original license grant. To date, the Company has given such
undertakings with respect to all of its Telecommunications Licenses and,
consequently, the Company's Telecommunications Licenses will expire at various
times between 2008 and 2017.
Upon expiration, a Telecommunications License cannot be renewed and
application must be made for a new license.
A Telecommunications License may be revoked if the licensee fails to
pay the license fees when due, if the licensee fails to comply with an
enforcement order, upon the occurrence of certain insolvency-related events or
if any Cable Television License relating to a licensee's system is revoked. A
Telecommunications License may also be revoked if, among other things, the
licensee fails to give the required notification to the DTI of changes in
shareholdings and agreements affecting control of the licensee or if the DTI
concludes that any such change would be against the interests of national
security or the U.K. government's international relations.
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Duopoly Review
In 1991, the U.K. government concluded in its Duopoly Review that the
termination of the duopoly policy (which permitted only BT and Mercury to
operate local, national or international fixed-link networks in the U.K. to
provide public telephony services) might increase competition and benefit
consumers in the U.K. telecommunications market. As a result, the U.K.
government revised its policy and determined that applications for licenses
would be considered from any person seeking to operate new telecommunications
networks over local or national fixed links within the U.K. Such licenses
normally would be granted subject to the general statutory duties of the
Director General to ensure the provision of telecommunications services, to
satisfy all reasonable demands for them, and the ability of a person providing
the services to finance their operations. At the time of the Duopoly Review, the
exclusive right of BT and Mercury to provide international fixed links within
the U.K. was maintained. On December 17, 1996, the Government removed this
protection and licensed more than 40 companies (including the Company) to
provide full international telecommunications facilities.
Interconnect Arrangements
The ability of cable operators to provide viable voice and other
telecommunications services is dependent on their ability to interconnect
cost-effectively with the telecommunications networks of the other PTOs in order
to complete calls that originate from a customer on their cable network but that
terminate off their network or that originate from a customer off their cable
network and terminate on their network. Since the Duopoly Review, cable
operators have been able to connect their networks without regard to whether
they are under common ownership without using the services of BT or Mercury, and
with national telecommunications licenses, cable operators are able to link
non-contiguous franchises over their private networks (such as the Company's
Interfranchise Network).
PTOs are required under their telecommunications licenses to enter into
interconnection agreements with other PTOs such as the Company (if requested to
do so by such a PTO), and the Company has interconnection agreements with BT,
Mercury, ACC UK Long Distance Limited and Telstra, as well as certain other
cable operators. The BT agreements may be terminated by either party upon two
years' notice, the Mercury agreement may be terminated by either party upon one
years' notice and, the Telstra Agreement may be terminated by either party on 90
days notice. If the Company is unable to negotiate acceptable terms (including
pricing) with BT, Mercury or Telstra in connection with any continuation or
extension of these agreements or scheduled reviews of these agreements, the
Company may request that the Director General determine such terms. A recent
case has established that it is possible for a regulated company to challenge a
determination by the Director General of terms of interconnection agreements in
the U.K. courts. The Director General also has the power to make determinations
in respect of certain obligations of any party under an interconnection
agreement.
Through October 1997, OFTEL determined standard interconnect charges.
The first interim charge determination covered the period from April 1, 1995 to
March 31, 1996. Interim charges were based on forecast financial statements (on
a fully allocated costs basis). Final charges may involve a readjustment of
charges made under the interim determination where appropriate. Interim and
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final charges for the period from April 1, 1996 to September 30, 1997 currently
are being determined by OFTEL. Since October 1997, a network change CAP of RPI -
8% is imposed by OFTEL across various baskets of BT interconnect services. Price
movements within the baskets are regulated through a system of "ceilings" and
"floors", the latter being based on BT's long run average incremental costs.
Price Regulation
Although to date the Company generally has been able to price its cable
telephony call charges below those of BT, there can be no assurance that it will
be able to continue to do so in the future. BT currently is subject to controls
over the prices it may charge customers, including a requirement that the
overall charges it makes for a basket of services, including local,
long-distance and international calls, which for the period up to July 31, 1997
could not be increased by more than (or must be reduced by) an amount equal to
the change in the Retail Price Index ("RPI") less 7.5% per annum. As part of its
ongoing review of BT's pricing, in February 1996 OFTEL removed the price
controls on BT's line charges, thus enabling BT to rebalance line and call
charges. For the period July 31, 1997 to July 31, 2001, OFTEL has implemented a
new price cap on BT of RPI-4.5%. This price cap is to be applied to BT
residential customer prices only, and all BT business prices are excluded. In
general, the price controls impose downward pricing pressure in the U.K.
telephony market, and any change in such controls may influence the Company's
pricing policies.
BT's license has also now been modified to include the fair trading
conditions which prohibits BT from engaging in anti-competitive activity. This
provision gives OFTEL broad powers to stop anti-competitive activity by BT,
including with respect to pricing. Procedural guidelines have been issued
regarding the application of the condition.
The level of cable telephony service prices charged by the Company and
other service providers other than BT currently are not regulated by the
Director General, but only in the context of the Fair Trading condition in all
PTO licences.
Number Portability
In September 1996, with the introduction of "number portability" in the
U.K., the Company began offering BT customers the opportunity to transfer their
service to the Company without changing their existing telephone number. The
Company has now introduced number portability in all of its franchises for
residential and business customers of all service providers (as required by the
Company's Telecommunications Licenses).
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Europe Regulation
The U.K. Government has implemented the European Directives on
Licensing and Interconnection. The Company believes that the interconnection
directive will be amended to include pre-carrier selection "equal access," which
is expected to apply to operators with significant market power in the first
instance. The U.K. cable industry is currently negotiating with the UK
Government on the obligation for accounting separation as provided by the
European Interconnection Directive.
The European Commission currently is consulting with member states on
amendments to the Voice Telephony and Cable Directives. The European Commission
has published a Green Paper on Convergence, this being the first stage of a
consultation on the regulation needed across telecommunications, broadcasting
and IT in the long term.
Restrictions on National PTOs
The Duopoly Review maintains restrictions upon BT and other national
PTOs (except Ionica and Liberty) which prevent BT from conveying or providing
entertainment services (such as the cable television services currently provided
by the Company) over their national telecommunications networks. The previous
U.K. Government stated that the restrictions upon the conveyance of such
services may be reviewed in 1998, but the restrictions regarding provision by
the PTOs themselves would not be reviewed until at least 2001. The Duopoly
Review policy did not, however, prevent the national PTOs from providing cable
television services of the kind currently provided by the Company so long as
such services are provided by separate subsidiaries of the national PTOs under
separate licenses similar to those held by the Company.
ITEM 2. PROPERTIES
The Company's principal properties consist of numerous offices,
technical facilities, warehouses, customer services centers and retail outlets
in the various Regional Franchise Areas and Woking, Surrey. As of March 1, 1998,
the Company owned and leased an aggregate of approximately 750,000 square feet
(258,000 square feet of which was owned and 492,000 square feet of which was
leased). The Company's headquarters and network service center occupy
approximately 80,000 square feet of leased space located in Woking, Surrey. The
Company believes that its current properties are adequate for its current needs
and additional space can be obtained on reasonable terms to accommodate future
growth, if needed.
ITEM 3. LEGAL PROCEEDINGS
The Company has not been involved in any legal or arbitration
proceedings which have had during the 12 months preceding the date of this
Report, or which are reasonably likely to have, a significant effect on the
Company's financial position, nor, so far as the Company is aware, is any such
proceeding pending or threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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* * * * *
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instructions G(3), the following information is
included as an additional item in Part I:
<TABLE>
<CAPTION>
Name Age(1) Position Held
---- ------ -------------
<S> <C> <C>
Stephen J. Davidson 42 Chief Executive
Charles J. Burdick 46 Group Finance Director
David R. Van Valkenburg 55 Group Operations Director
Richard H. Evans 55 Group IT Director
Samuel V. Howe 43 Director of Marketing
Adrian T. Howe 36 Group Financial Controller
Victoria M. Hull 35 General Counsel and Company Secretary
J. Howard Watson 34 Managing Director of Network Services
Glenn V. Tookey 40 Managing Director of Business Services
</TABLE>
- ----------------------
(1) As of March 1, 1998
Mr. Davidson has served as a director of the Company since April 1994.
He was appointed Chief Executive of the Company in February 1997 and had been
Acting Chief Executive since August 1996. Mr. Davidson served as the Finance
Director of the Company from January 1993 until August 1996. Previously, he
worked for four years at Bankers Trust Company in London where he was a Managing
Director with responsibility for clients in the media business throughout
Europe.
Mr. Burdick was appointed Group Finance Director in February 1997 and
had been Acting Group Finance Director since September 1996. He was Vice
President Finance and Assistant Treasurer at U S WEST Inc. from 1990 to October
1996. Prior to joining U S WEST Mr. Burdick worked in Treasury and Corporate
Development positions at Time Warner and Carnation International.
Mr. Van Valkenburg has served as a director of the Company and as Group
Operations Director since June 1997. He is also Executive Vice President for U S
WEST International Inc. in London and, prior to commencing work at the Company,
was responsible for overseeing the development of U S WEST International's
broadband cable interests in mainland Europe and South America from January 1996
to June 1997. Previously, from December 1994 until December 1995 he was a Senior
Vice President for the Multimedia Group of U S WEST Media Group, Inc. Prior to
this he was President and Chief Operating Officer for MultiVision Cable TV Corp.
(a partnership with Merrill Lynch and General Capital Corp.) from April 1990
until December 1994.
Mr. Evans has served as Group IT Director of the Company since July
1996. Previously he worked with Pearl Assurance plc as General Manager from 1992
through June 1996.
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Mr. S. Howe has served as Director of Marketing since June 1995.
Previously he worked for SBCC as Group Director - Marketing from July 1993 to
May 1995 and for Cox as Director - Finance and Administration from April 1992 to
June 1993.
Mr. A. Howe has served as Group Financial Controller since May 1995.
Previously he worked for BT for four years, his last role being Acting Finance
Director of the Personal Communications Division of BT.
Ms. Hull has served as General Counsel and Company Secretary since July
1994. Prior to joining the Company she was a solicitor in the corporate
department of Clifford Chance, where she qualified in 1987.
Mr. Watson has served as Managing Director of Network Services of the
Company since November 1995. Previously, he was Director of Engineering from
June 1995 until October 1995. Prior to joining the Company he was Engineering
Manager of Cablecom Group of GPT from 1991 until June 1993.
Mr. Tookey has served as Managing Director of Business Services of the
Company since August 1997. He joined the Company in March 1996 as Business
Services Director of the South East franchise area. Previously he worked for BT
for twenty years, most recently working as in Product Marketing, Marketing and
Development.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE OF ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES; RECORD HOLDERS;
DIVIDENDS
The information required by this item is included in the 1997 Annual
Report to shareholders under the headings, "Share and ADS Information,"
"Registrar and Depositary" and "CREST - Share Settlement System" on pages 78 and
79 and is incorporated herein by reference.
CERTAIN TAX CONSEQUENCES OF OWNERSHIP OF ORDINARY SHARES AND ADSs.
GENERAL
The following generally summarizes the principal U.K. and U.S. federal
income tax consequences of the purchase, ownership and disposition of Ordinary
Shares or ADSs (evidenced by ADRs) that are residents or citizens of the U.S.
and hold the Ordinary Shares or ADSs as capital assets ("U.S. Holders"). BECAUSE
THIS IS A GENERAL SUMMARY, PROSPECTIVE PURCHASERS OF ORDINARY SHARES OR ADSS WHO
ARE U.S. HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE U.S. FEDERAL, STATE AND LOCAL TAX CONSEQUENCES, AS WELL AS TO THE U.K. TAX
CONSEQUENCES, OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES OR
ADSS APPLICABLE IN THEIR PARTICULAR TAX SITUATIONS.
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The statements of U.S. federal income tax and U.K. tax law set out below
are based (a) on the laws in force, and as interpreted by the relevant taxation
authorities, as of the date of this Proxy Statement, and are subject to any
changes (which may apply retroactively) in U.S. or U.K. law, or in the
interpretation thereof by the relevant taxation authorities, or in the
conventions between the U.S. and the U.K. relating to income and capital gains
(the "Income Tax Convention") and estate and gift taxes (the "Estate and Gift
Tax Convention"), occurring after such date and (b) in part, on representations
of the Depositary and on the assumption that each obligation in the Deposit
Agreement and any related agreement will be performed in accordance with its
terms.
This summary does not address the laws of any state or locality or any
foreign government (other than the U.K.). Further, this summary does not address
the tax consequences to particular classes of taxpayers that are subject to
special rules including, without limitation, dealers in securities or
currencies, insurance companies, tax exempt organizations, financial
institutions, persons that hold their Ordinary or ADSs as part of a straddle,
hedging or "conversion transaction", persons whose functional currency is other
than the U.S. dollar, tax-exempt investors or persons owning directly,
indirectly or constructively, 10% or more of the Company's stock. This summary
does not address the U.K. or U.S. tax treatment of persons who hold Ordinary
Shares or ADSs through a partnership or other pass-through entity. Except to the
limited extent discussed below, it does not consider the U.K. tax or U.S. tax
consequences to a person other than a U.S. Holder (a "Non-U.S. Holder").
For purposes of the Conventions and the Code, U.S. Holders will be treated
as the owners of the Ordinary Shares represented by ADSs evidenced by ADRs.
Accordingly, and except as noted below, the U.K. tax and U.S. federal income tax
consequences discussed below apply equally to beneficial owners of both Ordinary
Shares and ADSs that are U.S. Holders.
TAXATION OF DIVIDENDS
For the purposes of this summary, the term "Eligible U.S. Holder" means a
beneficial owner of an ADS or an Ordinary Share (a) that derives and
beneficially owns the cash dividend paid thereon, (b) that is an individual, a
corporation, a trust or estate resident in the U.S. (and, in the case of a
corporation, not also resident in the U.K. for U.K. tax purposes) for the
purposes of the Income Tax Convention and (c) whose holding is not effectively
connected with a "permanent establishment" through which the Eligible U.S.
Holder carries on business in the U.K. with a "fixed base" in the U.K. from
which the Eligible U.S. Holder performs independent personal services. Such term
excludes, however, (a) a beneficial owner who owns at least 10% of the Ordinary
Shares in respect of which the dividend is paid, (b) under certain
circumstances, a corporation 25% or more of the capital of which is owned
directly or indirectly by one or more persons who are not individual residents
or nationals of the U.S. and (c) a U.S. corporation that controls, directly or
indirectly (either alone or with one or more associated corporations), 10% or
more of the voting stock of the Company.
The Company is required, when paying a dividend in respect of the Ordinary
Shares, to account to the U.K. Inland Revenue for a payment known as advance
corporation tax ("ACT"). The rate of ACT at present is equal to 25% of any
dividend paid to shareholders, which is equivalent to 20% of the sum of the
dividend and the related ACT. It was recently proposed that the duty to account
for ACT in respect of dividends paid will be abolished from 1999.
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An Eligible U.S. Holder is entitled under the Income Tax Convention and
current U.K. law to claim from the U.K. Inland Revenue a refund of an amount
equal to the ACT paid by the Company in respect of the dividend (the "Tax Credit
Amount"), but subject to a 15% U.K. withholding tax on the combined sum of the
dividend paid and the related Tax Credit Amount. For example, assuming
continuance of ACT at the rate of 25% of a dividend paid, a dividend of
(pound)8.00 paid to such an Eligible U.S. Holder would generally entitle the
Eligible U.S. Holder to claim (pound)0.50 (a Tax Credit Amount of (pound)2.00
less a withholding of (pound)1.50) from the U.K. Inland Revenue, giving a total
cash received, after U.K. taxes but before U.S. taxes, of (pound)8.50. Under
current proposals the rate of tax credits will be reduced from 20% of the sum of
the dividend and tax credit to 10% of such amount on dividends paid on or after
April 6, 1999 with the result that an Eligible U.S. Holder would not be entitled
to claim any refund of an amount attributable to a Tax Credit Amount.
If the Eligible U.S. Holder is a U.S. trust or estate, the Tax Credit
Amount will be available only to the extent that the income derived by such
trust or estate is subject to U.S. tax as the income of a resident either in its
hands or in the hands of its beneficiaries, as the case may be.
In respect of dividends paid before April 6, 1999 for U.S. federal income
tax purposes, the gross amount of a dividend plus the Tax Credit Amount,
including the 15% U.K. withholding tax thereon, (a) will be included in gross
income by a U.S. Holder and (b) will be treated as foreign source dividend
income to the extent paid out of current or accumulated earnings and profits as
determined for U.S. federal income tax purposes. Subject to certain limitations,
including certain holding period requirements with respect to the Ordinary
Shares or ADSs, the 15% U.K. withholding tax will be treated as a foreign income
tax eligible for credit against such Eligible U.S. Holder's federal income tax
(or, alternatively, a deduction in computing such U.S. Holder's taxable income).
The consequences of these limitations will depend on the nature and sources of
each Eligible U.S. Holder's income and the deductions appropriately allocated or
apportioned thereto. In general, no dividends received deduction will be allowed
with respect to dividends paid by the Company. The amount of the dividend will
be the U.S. dollar spot value of the dividend on the date of receipt, regardless
of whether the payment is in fact converted into U.S. dollars on such date.
Exchange gain or loss, if any, recognized by an Eligible U.S. Holder on a sale
or other disposition of pounds received pursuant to the dividend will generally
be U.S. source ordinary income or loss.
For dividends paid on or after April 6, 1999 (assuming that the current
proposals are enacted) an Eligible U.S. Holder who receives the (pound)8
dividend in the above example for U.S. federal income tax purposes would be
considered to receive a dividend of (pound)8.89 ((pound)8 dividend plus the 89p
tax credit) and would include that amount in income. Such U.S. Holder also would
be considered to have paid 89p of U.S. tax that, subject to the limitations
described above, would be creditable against such Eligible U.S. Holder's US
federal income tax liability.
Arrangements exist with the U.K. Inland Revenue under which certain
Eligible U.S. Holders of ADSs (i.e., (a) a U.S. corporation, (b) an individual
resident in the U.S. and not resident in the U.K. or (c) a trust or estate all
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the beneficiaries of which are resident in the U.S. or Canada) generally will
receive directly from the Company together with the payment of the associated
dividend payment of the Tax Credit Amount to which such Holder is entitled, net
of the applicable U.K. withholding tax, without the need to file a claim for
refund. To claim the benefit of the arrangements, the registered holder must
complete the declaration on the reverse of the dividend check confirming the
Eligible U.S. Holder's entitlement to the Tax Credit Amount and present the
check for payment within three months from the date of issue of the check. These
arrangements can be terminated or altered without notice by the U.K. Inland
Revenue.
In addition, arrangements exist with the U.K. Inland Revenue under which an
Eligible U.S. Holder of Ordinary Shares will receive payment of the U.K. tax
credit at the same time as and together with the payment of the associated
dividend. In order to receive such payment, the Eligible U.S. Holder must have
the Ordinary Shares registered in the name of a nominee approved by the U.K.
Inland Revenue for such purpose, and the nominee must follow certain procedural
requirements. In addition, the qualifying holder must be either: (a) an
individual who: (i) is not resident in the U.K. and does not retain the use of
any accommodation in the U.K., (ii) has not during the previous four years been
in the U.K. for as much as three months a year on average, or for a period or
periods amounting in the aggregate to six months in the relevant U.K. income tax
year; (iii) has not been absent from the U.S. for a complete U.S. tax year in
any of the previous four years; (iv) does not have a permanent establishment in
the U.K. and (v) does not own 10% or more of the class of shares in respect of
which the dividend is paid; or (b) a corporation: (i) which is managed and
controlled in the U.S. and does not have a permanent establishment in the U.K.;
(ii) which does not, either alone or together with one or more associated
corporations, control, directly or indirectly, 10% or more of the voting power
in the Company; (iii) which does not own 10% or more of the class of shares in
respect of which the dividend is paid; (iv) which is liable to U.S. tax on the
dividend and (v) at least 75% of the capital of which is owned directly or
indirectly by persons who are U.S. residents. These arrangements will be
extended to trusts, estates in the course of administration, pension funds,
foundations and similar bodies only with the prior approval of the U.K. Inland
Revenue.
Certain Eligible U.S. Holders who are not entitled to receive payment of
the U.K. Tax Credit Amount from the Company with payment of the associated
dividend but who, nevertheless, are entitled to a refund of the Tax Credit
Amount, net of the U.K. withholding tax, must file a claim for the Tax Credit
Amount in the manner described in U.S. Revenue Procedure 80-18, 1980-1 C.B. 623,
as modified by U.S. Revenue Procedures 81-58, 1981-2 C.B. 678; 84-60, 1984-2
C.B. 504, and 90-61, 1990-2 C.B. 657. Claims for tax refund must be made within
six years of the U.K. year of assessment (generally the 12-month period ending
April 5 in each year) in which the related dividend was paid. The first claim by
a claimant for a tax credit under these procedures is made by sending the
appropriate U.K. form (FD/13) in duplicate to the Director of the Internal
Revenue Service Center with which the holder's last U.S. federal income tax
return was filed. Forms may be available from the U.S. Internal Revenue Service
Assistant Commissioner (International), 950 L'Enfant Plaza South, S.W.,
Washington, D.C. 20024, Attention: Taxpayers Service Division. Because a refund
claim is not considered made until the U.K. tax authorities receive the
appropriate form from the U.S. Internal Revenue Service, forms should be sent to
the U.S. Internal Revenue Service well before the end of the applicable
limitation period. Any claim by a claimant after the first claim by such a U.S.
52
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Holder for payment under these procedures should be filed directly with the U.K.
Financial Intermediaries and Claims Office, Fitz Roy House, P.O. Box 46,
Nottingham, England, NG2 1BD.
Under Section 812 of ICTA 1988, the U.K. government has the power to deny
the payment of associated U.K. tax credits under the Income Tax Convention to a
corporation that controls, directly or indirectly, either alone or together with
one or more corporations, which are treated as associated for the purposes of
the Income Tax Convention, at least 10% of the voting power of the Company, if
it or an "associated company" (as defined in Section 416 ICTA 1988) has a
"qualifying presence" (as defined in Section 812 ICTA 1988) in a state in the
U.S. which operates a unitary system of corporation taxation. These provisions
will come into force only if the U.K. government so determines by statutory
instrument. No such instrument has yet been made.
Subject to the discussion below regarding backup withholding tax, a
Non-U.S. Holder of Ordinary Shares or ADSs generally will not be subject to U.S.
federal income or withholding tax on dividends received on Ordinary Shares or
ADSs, unless such income is effectively connected with the conduct of a trade or
business in the U.S. and, in general, in the case of a Non-U.S. Holder entitled
to benefits under a tax treaty, attributable to a permanent establishment or
fixed base in the U.S.
TAXATION OF CAPITAL GAINS
A U.S. Holder who is not resident or ordinarily resident in the U.K. for
U.K. tax purposes will not be liable for U.K. tax on capital gains realized or
accrued on the sale or other disposal of Ordinary Shares or ADSs unless the
Ordinary Shares or ADSs are held in connection with a trade, profession or
vocation carried on by such U.S. Holder in the U.K. through a branch or agency
which constitutes a permanent establishment or fixed base and the Ordinary
Shares or ADSs are or have been used, held or acquired for the purposes of such
trade, profession or vocation of such branch or agency. A U.S. Holder will be
liable for U.S. federal income tax on such gains to the same extent as on any
other gains from sales or disposition of stock.
Assuming that gain on the disposition of Ordinary Shares or ADSs would not
be subject to U.K. tax, such gain would be U.S. source income for U.S. foreign
tax credit limitation purposes. Deposits and withdrawals of Ordinary Shares by
U.S. Holders in exchange for ADSs will not result in the realization of gain or
loss for U.K. capital gains tax or U.S. federal income tax purposes.
Subject to the discussion below of backup withholding, a Non-U.S. Holder of
Ordinary Shares or ADSs will not be subject to U.S. federal income or
withholding tax on gain realized on the sale of Ordinary Shares or ADSs unless
(i) such gain is effectively connected with the conduct by the Non-U.S. Holder
of a trade or business in the U.S. and, in general, in the case of a Non-U.S.
Holder entitled to benefits under a tax treaty, such gain is attributable to a
permanent establishment or fixed base in the U.S. or (ii) in the case of gain
realized by an individual Non-U.S. Holder, the Non-U.S. Holder is present in the
U.S. for 183 days or more in the taxable year of the sale and certain other
conditions are met.
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U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders are generally subject to information reporting requirements
with respect to dividends paid in the U.S. on Ordinary Shares or ADSs. Under
existing regulations, such dividends are not subject to back up withholding.
However, under regulations generally effective January 1, 1999, such dividends
paid in the United States would be subject to back up withholding. Non-U.S.
Holders will not be subject to information reporting or back up withholding with
respect to dividends on Ordinary Shares or ADSs, unless payment is made through
a paying agent (or office) in the U.S. Non-U.S. Holders generally will be
subject to information reporting (and, under regulations generally effective
from January 1, 1999, to back up withholding at a rate of 31%) with respect to
the payment within the U.S. of dividends on Ordinary Shares or ADSs, unless the
holder provides a taxpayer identification number, certifies to its foreign
status, or otherwise establishes an exemption.
U.S. Holders generally will be subject to information and back up
withholding at 31% on proceeds paid from the disposition of Ordinary Shares or
ADSs unless the U.S. Holder provides an IRS Form W-9 or otherwise establishes an
exemption. Non-U.S. Holders generally will be subject to information reporting
and back up withholding at a rate of 31% on the payment to or through the U.S.
office of a broker, whether domestic or foreign, of proceeds from the
disposition of Ordinary Shares or ADSs, unless the holder provides a taxpayer
identification number, certifies to its foreign status or otherwise establishes
an exemption. Non-U.S. Holders will not be subject to information reporting or
back up withholding with respect to the payment by a foreign office of a broker
of proceeds from the disposition of Ordinary Shares or ADSs provided, however,
that, if the broker is a U.S. person or "U.S. related person," information
reporting (but not back up withholding) will apply, unless the broker has
documentary evidence in its records of the Non-U.S. Holder's foreign status, the
Non-U.S. Holder certifies to its foreign status under penalties of perjury or
otherwise establishes an exemption. For this purpose, a "U.S. related person" is
a foreign person who has one or more specific relationships with the U.S.
The amount of any back up withholding will be allowed as a credit against
such holder's U.S. federal income tax liability and may entitle such holder to a
refund, provided that the required information is furnished to the U.S. Internal
Revenue Service.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
The Company generally will be a passive foreign investment company ("PFIC")
for U.S. federal income tax purposes for any taxable year (i.e., the period from
January 1 to December 31) in which either (a) 75% or more of its gross income is
passive income or (b) on average for the taxable year, 50% or more of its assets
(measured by U S tax basis) produce or are held for the production of passive
income. The Internal Revenue Service has indicated that cash balances, even if
held as working capital, are considered to be passive assets that produce
passive income. As of the date of this Proxy Statement, the Company does not
believe it is a PFIC for U.S. federal income tax purposes, and, based on current
projections, the Company does not anticipate that it will become a PFIC. No
assurance can be given, however, that the Company will not become a PFIC in the
future.
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The Company will monitor its status and, promptly following the end of any
taxable year, will notify shareholders if it believes that it is properly
classified as a PFIC for that taxable year, in which case it will comply with
the reporting requirements necessary for U.S. Holders to elect to treat the
Company as a "qualified electing fund" (a "QEF election"). If the Company were a
PFIC, U S Holders of Ordinary Shares or ADSs may suffer unfavourable U S federal
income tax consequences. This summary does not address the consequences were the
Company determined to be a PFIC. U.S. Holders should consult their own tax
advisers concerning the U.S. tax consequences of holding Ordinary Shares or ADSs
if the Company were considered to be a PFIC, including the consequences of
making a QEF election.
U.K. ESTATE AND INHERITANCE TAX
An Ordinary Share or ADS beneficially owned by an individual U.S. Holder
who is domiciled in the U.S. for the purposes of the Estate and Gift Tax
Convention and is not domiciled in the U.K. for such purposes is not subject to
U.K. inheritance tax on the individual's death or U.K. gift tax on a gift made
by the individual during his lifetime except where the Ordinary Share or ADS is
part of the business property of a U.K. "permanent establishment" of the
individual or pertains to a U.K. "fixed base" of an individual used for the
performance of independent personal services. The Estate and Gift Tax Convention
generally provides for tax paid in the U.K. to be credited against any tax
payable in the U.S. and for tax paid in the U.S. to be credited against any tax
payable in the U.K., based on priority rules set forth in that Convention, in a
case where an Ordinary Share or ADS is subject both to U.K. inheritance tax and
to U.S. federal gift or estate tax. There are special individual rules applying
to trusts. Ordinary Shares or ADSs held in a trust created by a U.S. Holder who
is not domiciled in the U.K. normally will fall outside the scope of U.K.
inheritance tax.
STAMP DUTY AND STAMP DUTY RESERVE TAX
Stamp duty reserve tax at the then-applicable rate arises upon the deposit
with the Depositary of the Ordinary Shares. The current rate of stamp duty
reserve tax is (pound)1.50 per (pound)100 (or part thereof). The stamp duty
reserve tax on the initial deposit of the Ordinary Shares represented by the
ADSs was paid by the Company. On the transfer of further Ordinary Shares to the
Depositary, stamp duty reserve tax will be payable by the Depositary and under
the Deposit Agreement, holders of ADRs must pay an amount equal to such tax to
the Depositary.
Provided that the instrument of transfer is not executed in the U.K. and
remains at all subsequent times outside the U.K., no U.K. stamp duty will be
payable on the acquisition or transfer of ADSs evidenced by ADRs, nor will an
agreement to transfer ADSs evidenced by ADRs give rise to a liability to stamp
duty reserve tax.
A transfer of Ordinary Shares by the Depositary or its nominee to the
beneficial owner of the relevant ADS or its nominee when the beneficial owner is
not transferring beneficial ownership will give rise to U.K.
stamp duty at the rate of 50p per transfer.
Purchasing Ordinary Shares, as opposed to ADSs, will normally give rise to
a charge to U.K. stamp duty or stamp duty reserve tax at the rate of 50p per
(pound)100 (or part) of the price payable for the Ordinary Shares. Stamp duty
55
<PAGE>
and stamp duty reserve tax generally are the liabilities of the purchaser. Where
such Ordinary Shares are later transferred to the Depositary's nominee, further
stamp duty or stamp duty reserve tax will normally be payable at the rate of
(pound)1.50 per (pound)100 (or part thereof) of the value of the Ordinary Shares
at the time of transfer. However, where Ordinary Shares being acquired are
transferred directly to the Depositary's nominee, the only charge will generally
be the higher charge of (pound)1.50 per (pound)100 (or part) of the price
payable for the Ordinary Shares so acquired.
The U.K. government has announced its intention to abolish both stamp duty
and stamp duty reserve tax in respect of the transfer of securities from a date
which has not yet been announced.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included in the 1997 Annual
Report to Shareholders under the heading "Supplementary Financial Information --
Five Year Summary" on page 77 and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is included in the 1997 Annual
Report to Shareholders under the heading "Financial Review" on pages 14 to 21
and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included in the 1997 Annual
Report to Shareholders under the heading "Financial Statements under U.S. GAAP"
on pages 57 to 77 and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to executive
officers is set forth in Part I under the heading "Executive Officers of the
Registrant" on pages 48 to 49 hereto.
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The information required by this item with respect to directors is
included in the 1998 Proxy Statement under the headings "Reappointment of
Directors" and "Compliance with Section 16(a) of the U.S. Securities Exchange
Act of 1934" on pages 6 to 11 and page 22 and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included in the 1998 Proxy
Statement under the heading "Executive Compensation" on pages 15 to 19 and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included in the 1998 Proxy
Statement under the headings "Security Ownership of Principal Shareholders" on
pages 2 to 5 and "Security Ownership of Directors and Executive Officers" on
page 14 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included in the 1998 Proxy
Statement under the heading "Certain Relationships and Related Transactions" on
pages 19 to 20 and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
1. FINANCIAL STATEMENTS.
Included in Part II, Item 8 of this report (by incorporation by reference to the
1997 Annual Report to Shareholders) are the following:
Independent Auditors' Report
Consolidated Statement of Operations for the years ended December 31,
1997, 1996 and 1995
Consolidated Balance Sheet at December 31, 1997 and 1996
Consolidated Statement of Cash Flows for the years ended December 31,
1997, 1996 and 1995
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995
Notes to the Consolidated Financial Statements
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2. FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because the required information is not applicable or
is included in the financial statements or related notes.
3. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) Exhibits.
<S> <C>
3.1 -- Memorandum of Association of the Company. (Incorporated by reference to the
Company's Registration Statement on Form 8-B, filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
3.2 -- Articles of Association of the Company. (Incorporated by reference to the
Company's Registration Statement on Form 8-B, filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
4.1 -- Amended and Restated Deposit Agreement, dated as of November 30, 1994 (as amended
as of October 2, 1995), among the Company, The Bank of New York, as Depositary,
and the holders from time to time of American Depositary Receipts issued
thereunder. (Incorporated by reference to the Company's 1995 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 1, 1996).
4.2 -- Form of American Depositary Receipt (included in Exhibit 4.1).
4.3 -- Senior Debenture Indenture, dated as of October 3, 1995, between the Company and
The Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
April 1, 1996).
4.4 -- Senior Discount Debenture Indenture, dated as of October 3, 1995, between the
Company and The Bank of New York, as Trustee. (Incorporated by reference to the
Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996).
4.5 -- Form of Senior Debenture (included in Exhibit 4.3).
4.6 -- Form of Senior Discount Debenture (included in Exhibit 4.4).
4.7 -- Deposit Agreement, dated as of October 3, 1995, between the Company and The Bank
of New York, as Book-Entry Depositary. (Incorporated by reference to the Company's
1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on April 1, 1996).
58
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10.1 -- Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest,
certain subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by
reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995).
10.2 -- Shareholders Agreement, entered into as of November 22, 1994, between certain
subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by
reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995).
10.3 -- Registration Rights Agreement, dated October 3, 1995, among the Company, the TCI
Affiliate, the U S WEST Affiliates, the SBC Affiliates and the Cox Affiliate.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
10.4 -- Co-Operation Agreement, dated October 3, 1995, between the SBC Affiliates and the
Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 1, 1996).
10.5 -- Share Dealing Agreement, dated October 3, 1995, among the TCI Affiliate, the U S
WEST Affiliates, the Company and the SBC Affiliates. (Incorporated by reference to
the Company's 1995 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996).
10.6 -- Tax Deed, dated November 22, 1994, between TCI International Holdings, Inc., U S
WEST Holdings and Old Telewest. (Incorporated by reference to Old Telewest's 1994
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 31, 1995).
10.7 -- Trademark License Agreement, effective as of November 22, 1994, between Old
Telewest and U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 31,
1995).
10.8 -- Tradename Agreement, effective as of November 22, 1994, between Old Telewest, TCI
and TCI/U S WEST Cable Communications Group. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.9 -- Tax Deed, dated October 3, 1995, among the Company, the SBC Affiliates and the Cox
Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form
10-K filed with the Securities and Exchange Commission on April 1, 1996).
59
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10.10 -- Consultant Agreement for Operational Assistance, dated July 17, 1992, among
Birmingham Cable Corporation Limited ("BCCL"), Birmingham Cable Limited ("BCL")
and Telewest Communications Group Limited ("Telewest CGL"). (Incorporated by
reference to Old Telewest's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on April 29, 1994, as amended (Registration No.
33-78398)).
10.11 -- Supplemental Agreement, dated April 8, 1994, relating to the Consultant Agreement
referred to in Exhibit 10.5 (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.12 -- Management Agreement, dated April 25, 1990, among BCCL, BCL, US WEST Holdings and
Comcast Cablevision of Birmingham Inc. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.13 -- Assignment and Amendment Agreement, dated August 5, 1992, relating to the
Management Agreement referred to in Exhibit 10.7 (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.14 -- Consultant Agreement, dated August 16, 1989, between Cable London plc and U S WEST
Cable Communications Limited. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.15 -- Consultant Agreement for Technical Assistance, dated July 15, 1992, among Cable
Corporation, Windsor Television Limited, Middlesex Cable Limited and Telewest CGL.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.16 -- Cable Affiliation Agreement, dated December 14, 1993, between Cable Programme
Partners - Limited Partnership, Telewest CGL and other parties signatory thereto.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.17 -- Agreement, dated October 1, 1993, among Alan Stewart MacDonald Robinson, Jack
Forrest Gill, Raman Subba Row Limited and TUCCI. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
60
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10.18 -- Co-ownership Agreement, dated March 12, 1990, between U S WEST Holdings and
Comcast Cablevision of Birmingham, Inc. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.19 -- Letter, dated April 29, 1992, relating to the Co-ownership Agreement referred to
in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April
29, 1994, as amended (Registration No. 33-78398)).
10.20 -- Letter, dated November 27, 1992, relating to the Co-ownership Agreement referred
to in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April
29, 1994, as amended (Registration No. 33-78398)).
10.21 -- Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and an affiliate of U S WEST. (Incorporated by
reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995).
10.22 -- Agreement, dated December 4, 1987, between United Cable Television Corporation on
behalf of itself and United Artists Communications, Inc. and Trans-Global (U.K.)
Limited. (Incorporated by reference to Old Telewest's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)).
10.23 -- Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and TCI. (Incorporated by reference to Old Telewest's
1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 1995).
10.24 -- Novation Agreement relating to Birmingham Cable, dated November 21, 1994, among
General Cable, TUCCI, U S WEST Holding and other parties signatory thereto.
(Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1995).
10.25 -- Subscription and Shareholders Agreement, dated January 30, 1995, among Videotron
Corporation Limited, United Artists Communications (London South) Limited, Cable
London, Elt Acquisition Company Limited, Nynex CableComms Limited, Cable
Corporation, London Interconnect Limited, Independent Cable Sales Limited, London
Interconnect PPV Limited and London Interconnect Limited. (Incorporated by
reference to the Company's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on September 22, 1995, as amended).
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10.26 -- Form of BT Interconnect Agreement, a copy of which was executed by BT and various
of the Company's affiliated entities. (Incorporated by reference to the Company's
1997 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 1997)
10.27 -- Interconnection Agreement, dated July 15, 1994, between Mercury and United Artists
Communications (Scotland) Limited. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)). **
10.28 -- Mercury Marketing and Operations Agreement, dated August 10, 1993, between
Telewest CGL and Mercury. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)). **
10.29 -- Letter Agreement, dated August 23, 1995, between SBCC and Mercury. (Incorporated
by reference to the Company's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on September 22, 1995, as amended). ***
10.30 -- Programming Agreement, dated June 30, 1995, among British Sky Broadcasting
Limited, British Sky Broadcasting Group plc and Old Telewest. (Incorporated by
reference to Old Telewest's Quarterly Report on Form 10-Q for the six months ended
June 30, 1995).***
10.31 -- General Purchasing Agreement, dated March 1, 1993, among Telewest CGL, various
entities related to Telewest CGL, and Northern Telecom Europe Limited (the "General
Purchasing Agreement"). (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April
29, 1994, as amended (Registration No. 33-78398)).**
10.32 -- Purchase Agreement, dated August 27, 1993, between Southwestern Bell International
Holdings and GPT Limited. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended).
10.33 -- Network Services Center Agreement, dated May 16, 1994, among Telewest CGL, BCCL,
Cable London, and certain other signatories thereto. (Incorporated by reference to
Old Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
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10.34 -- The Old Telewest Restricted Share Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.35 -- The Telewest 1995 Restricted Share Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
10.36 -- The Old Telewest Sharesave Scheme. (Incorporated by reference to Old Telewest's
1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 1995).
10.37 -- The Telewest 1995 Sharesave Scheme. (Incorporated by reference to the Company's
Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on September 22, 1995, as amended).
10.38 -- The Old Telewest Executive Share Option Scheme No. 1. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
10.39 -- The Telewest 1995 Executive Share Option Scheme No. 1. (Incorporated by reference
to the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
10.40 -- The Old Telewest Executive Share Option Scheme No. 2. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
10.41 -- The Telewest 1995 Executive Share Option Scheme No. 2. (Incorporated by reference
to the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
10.42 -- The Old Telewest Share Participation Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.43 -- The Telewest 1995 Share Participation Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
63
<PAGE>
10.44 -- Executive Secondment Agreement, dated November 21, 1994, between
U S WEST Overseas and Telewest CGL (identical agreements were entered into between
an affiliate of TCI and Telewest CGL). (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.45 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company
and the SBC Affiliates. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended).
10.46 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company
and the Cox Affiliate. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended).
10.49 -- Employment Agreement, dated November 21, 1994, between Stephen J. Davidson and
Telewest CGL. (Incorporated by reference to Old Telewest's 1994 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 31, 1995).
10.53 -- Employment Agreement, dated March 7, 1996, between Roger Wilson and Telewest CGL.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
10.54 -- Employment Agreement, dated February 16, 1996, between Bruce Langham and the
Telewest CGL. (Incorporated by reference to the Company's 1996 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 28, 1997).
Add Charles Burdick and Von Valkenburg.
10.55 -- Letter Agreement, dated September 30, 1996, between Bruce Langham and Telewest
CGL. (Incorporated by reference to the Company's 1996 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 28, 1997).
10.56 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the
Company and Anthony W.P. Stenham. (Incorporated by reference to the Company's
1996 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 28, 1997).
10.57 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the
Company and Sir Gordon Borrie QC. (Incorporated by reference to the Company's 1996
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 28, 1997).
64
<PAGE>
10.58 -- Non-Executive Directors Appointment Letter, dated August 1, 1995, between the
Company and Lord Griffiths of Fforestfach. (Incorporated by reference to the
Company's 1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 28, 1997).
10.59 -- Loan Agreement, by and among Telewest Communications Networks Limited, as
borrower, The Bank of New York, CIBC Wood Gundy plc, Chase Investment Bank
Limited, NatWest Markets and The Toronto-Dominion Bank, as arrangers, and CIBC
Wood Gundy plc, as agent and security trustee, dated as of May 22, 1996, as
amended pursuant to an Amendment Agreement, dated as of May 31, 1996 and a Second
Amendment Agreement, dated as of August 2, 1996. (Incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the six months ended June 30,
1996).
10.60 -- Amendments number 1 through 9 to the General Purchasing Agreement filed as Exhibit
10.31.*+
10.61 -- Employment Agreement, dated August 7, 1997, between Charles Burdick and Telewest
CGL.*
13 -- The Company's 1997 Annual Report to Shareholders (only those portions of the
Company's 1997 Annual Report specifically incorporated by reference herein shall
be deemed filed by the Company herewith). *
21 -- List of Subsidiaries of the Company. (Incorporated by reference to the Company's
1996 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 28, 1997).
27 -- Financial Data Schedule. *
99 -- Only those portions of the Company's 1998 Proxy Statement expressly incorporated
by reference herein shall be deemed filed by the Company herewith.*
</TABLE>
- ---------------------------
* Filed herewith
** Portions of this agreement have been accorded confidential treatment
by the Securities and Exchange Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
*** Portions of this agreement have been accorded confidential treatment
by the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.
+ An application has been filed with the Securities and Exchange
Commission requesting confidential treatment for certain portions of
these Amendments.
65
<PAGE>
(b) Reports on Form 8-K.
None.
66
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Telewest Communications plc
By: /s/Stephen J. Davidson
----------------------------------
Name: Stephen J. Davidson
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Stephen J. Davidson and Charles Burdick,
and each of them, his true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign this report and any and all amendments to this
report, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ A. Gary Ames Director March 31, 1998
- ----------------------------------
A. Gary Ames
Director
- ----------------------------------
Lord Borrie
Director
- ----------------------------------
David Evans
67
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Lord Griffiths of Fforestfach Director March 31, 1998
- ----------------------------------
Lord Griffiths of Fforestfach
Director
- ----------------------------------
Charles M. Lillis
/s/ James O. Robbins Director March 31, 1998
- ----------------------------------
James O. Robbins
/s/ Rober Shaner Director March 31, 1998
- ----------------------------------
Robert Shaner
Director
- ----------------------------------
Anthony W. P. Stenham
/s/ David Van Valkenburg Director March 31, 1998
- ----------------------------------
David Van Valkenburg
Director
- ----------------------------------
Fred A. Vierra
/s/ Stephen J. Davidson Director and Chief March 31, 1998
- ---------------------------------- Executive Officer
Stephen J. Davidson (Principal Executive
Officer)
/s/Charles Burdick Director and Group March 31, 1998
- ---------------------------------- Finance Director
Charles Burdick (Principal Financial
and Accounting Officer)
68
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number
<S> <C>
3.1 -- Memorandum of Association of the Company. (Incorporated by reference to the
Company's Registration Statement on Form 8-B, filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
3.2 -- Articles of Association of the Company. (Incorporated by reference to the
Company's Registration Statement on Form 8-B, filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
4.1 -- Amended and Restated Deposit Agreement, dated as of November 30, 1994 (as amended
as of October 2, 1995), among the Company, The Bank of New York, as Depositary,
and the holders from time to time of American Depositary Receipts issued
thereunder. (Incorporated by reference to the Company's 1995 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 1, 1996).
4.2 -- Form of American Depositary Receipt (included in Exhibit 4.1).
4.3 -- Senior Debenture Indenture, dated as of October 3, 1995, between the Company and
The Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
April 1, 1996).
4.4 -- Senior Discount Debenture Indenture, dated as of October 3, 1995, between the
Company and The Bank of New York, as Trustee. (Incorporated by reference to the
Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996).
4.5 -- Form of Senior Debenture (included in Exhibit 4.3).
4.6 -- Form of Senior Discount Debenture (included in Exhibit 4.4).
4.7 -- Deposit Agreement, dated as of October 3, 1995, between the Company and The Bank
of New York, as Book-Entry Depositary. (Incorporated by reference to the Company's
1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on April 1, 1996).
<PAGE>
10.1 -- Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest,
certain subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by
reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995).
10.2 -- Shareholders Agreement, entered into as of November 22, 1994, between certain
subsidiaries of TCI and certain subsidiaries of U S WEST. (Incorporated by
reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995).
10.3 -- Registration Rights Agreement, dated October 3, 1995, among the Company, the TCI
Affiliate, the U S WEST Affiliates, the SBC Affiliates and the Cox Affiliate.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
10.4 -- Co-Operation Agreement, dated October 3, 1995, between the SBC Affiliates and the
Cox Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 1, 1996).
10.5 -- Share Dealing Agreement, dated October 3, 1995, among the TCI Affiliate, the U S
WEST Affiliates, the Company and the SBC Affiliates. (Incorporated by reference to
the Company's 1995 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996).
10.6 -- Tax Deed, dated November 22, 1994, between TCI International Holdings, Inc., U S
WEST Holdings and Old Telewest. (Incorporated by reference to Old Telewest's 1994
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 31, 1995).
10.7 -- Trademark License Agreement, effective as of November 22, 1994, between Old
Telewest and U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 31,
1995).
10.8 -- Tradename Agreement, effective as of November 22, 1994, between Old Telewest, TCI
and TCI/U S WEST Cable Communications Group. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.9 -- Tax Deed, dated October 3, 1995, among the Company, the SBC Affiliates and the Cox
Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form
10-K filed with the Securities and Exchange Commission on April 1, 1996).
<PAGE>
10.10 -- Consultant Agreement for Operational Assistance, dated July 17, 1992, among
Birmingham Cable Corporation Limited ("BCCL"), Birmingham Cable Limited ("BCL")
and Telewest Communications Group Limited ("Telewest CGL"). (Incorporated by
reference to Old Telewest's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on April 29, 1994, as amended (Registration No.
33-78398)).
10.11 -- Supplemental Agreement, dated April 8, 1994, relating to the Consultant Agreement
referred to in Exhibit 10.5 (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.12 -- Management Agreement, dated April 25, 1990, among BCCL, BCL, US WEST Holdings and
Comcast Cablevision of Birmingham Inc. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.13 -- Assignment and Amendment Agreement, dated August 5, 1992, relating to the
Management Agreement referred to in Exhibit 10.7 (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.14 -- Consultant Agreement, dated August 16, 1989, between Cable London plc and U S WEST
Cable Communications Limited. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.15 -- Consultant Agreement for Technical Assistance, dated July 15, 1992, among Cable
Corporation, Windsor Television Limited, Middlesex Cable Limited and Telewest CGL.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.16 -- Cable Affiliation Agreement, dated December 14, 1993, between Cable Programme
Partners - Limited Partnership, Telewest CGL and other parties signatory thereto.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.17 -- Agreement, dated October 1, 1993, among Alan Stewart MacDonald Robinson, Jack
Forrest Gill, Raman Subba Row Limited and TUCCI. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
<PAGE>
10.18 -- Co-ownership Agreement, dated March 12, 1990, between U S WEST Holdings and
Comcast Cablevision of Birmingham, Inc. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.19 -- Letter, dated April 29, 1992, relating to the Co-ownership Agreement referred to
in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April
29, 1994, as amended (Registration No. 33-78398)).
10.20 -- Letter, dated November 27, 1992, relating to the Co-ownership Agreement referred
to in Exhibit 10.13. (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April
29, 1994, as amended (Registration No. 33-78398)).
10.21 -- Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and an affiliate of U S WEST. (Incorporated by
reference to Old Telewest's 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995).
10.22 -- Agreement, dated December 4, 1987, between United Cable Television Corporation on
behalf of itself and United Artists Communications, Inc. and Trans-Global (U.K.)
Limited. (Incorporated by reference to Old Telewest's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)).
10.23 -- Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and TCI. (Incorporated by reference to Old Telewest's
1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 1995).
10.24 -- Novation Agreement relating to Birmingham Cable, dated November 21, 1994, among
General Cable, TUCCI, U S WEST Holding and other parties signatory thereto.
(Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1995).
10.25 -- Subscription and Shareholders Agreement, dated January 30, 1995, among Videotron
Corporation Limited, United Artists Communications (London South) Limited, Cable
London, Elt Acquisition Company Limited, Nynex CableComms Limited, Cable
Corporation, London Interconnect Limited, Independent Cable Sales Limited, London
Interconnect PPV Limited and London Interconnect Limited. (Incorporated by
reference to the Company's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on September 22, 1995, as amended).
<PAGE>
10.26 -- Form of BT Interconnect Agreement, a copy of which was executed by BT and various
of the Company's affiliated entities. (Incorporated by reference to the Company's
1997 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 1997)
10.27 -- Interconnection Agreement, dated July 15, 1994, between Mercury and United Artists
Communications (Scotland) Limited. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)). **
10.28 -- Mercury Marketing and Operations Agreement, dated August 10, 1993, between
Telewest CGL and Mercury. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)). **
10.29 -- Letter Agreement, dated August 23, 1995, between SBCC and Mercury. (Incorporated
by reference to the Company's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on September 22, 1995, as amended). ***
10.30 -- Programming Agreement, dated June 30, 1995, among British Sky Broadcasting
Limited, British Sky Broadcasting Group plc and Old Telewest. (Incorporated by
reference to Old Telewest's Quarterly Report on Form 10-Q for the six months ended
June 30, 1995).***
10.31 -- General Purchasing Agreement, dated March 1, 1993, among Telewest CGL, various
entities related to Telewest CGL, and Northern Telecom Europe Limited (the "General
Purchasing Agreement"). (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April
29, 1994, as amended (Registration No. 33-78398)).**
10.32 -- Purchase Agreement, dated August 27, 1993, between Southwestern Bell International
Holdings and GPT Limited. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended).
10.33 -- Network Services Center Agreement, dated May 16, 1994, among Telewest CGL, BCCL,
Cable London, and certain other signatories thereto. (Incorporated by reference to
Old Telewest's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on April 29, 1994, as amended (Registration No. 33-78398)).
<PAGE>
10.34 -- The Old Telewest Restricted Share Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.35 -- The Telewest 1995 Restricted Share Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
10.36 -- The Old Telewest Sharesave Scheme. (Incorporated by reference to Old Telewest's
1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 1995).
10.37 -- The Telewest 1995 Sharesave Scheme. (Incorporated by reference to the Company's
Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on September 22, 1995, as amended).
10.38 -- The Old Telewest Executive Share Option Scheme No. 1. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
10.39 -- The Telewest 1995 Executive Share Option Scheme No. 1. (Incorporated by reference
to the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
10.40 -- The Old Telewest Executive Share Option Scheme No. 2. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
10.41 -- The Telewest 1995 Executive Share Option Scheme No. 2. (Incorporated by reference
to the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
10.42 -- The Old Telewest Share Participation Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.43 -- The Telewest 1995 Share Participation Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on September 22, 1995, as amended).
<PAGE>
10.44 -- Executive Secondment Agreement, dated November 21, 1994, between
U S WEST Overseas and Telewest CGL (identical agreements were entered into between
an affiliate of TCI and Telewest CGL). (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.45 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company
and the SBC Affiliates. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended).
10.46 -- Form of Executive Secondment Agreement, dated August 10, 1995, between the Company
and the Cox Affiliate. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on
September 22, 1995, as amended).
10.49 -- Employment Agreement, dated November 21, 1994, between Stephen J. Davidson and
Telewest CGL. (Incorporated by reference to Old Telewest's 1994 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 31, 1995).
10.53 -- Employment Agreement, dated March 7, 1996, between Roger Wilson and Telewest CGL.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
10.54 -- Employment Agreement, dated February 16, 1996, between Bruce Langham and the
Telewest CGL. (Incorporated by reference to the Company's 1996 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 28, 1997).
Add Charles Burdick and Von Valkenburg.
10.55 -- Letter Agreement, dated September 30, 1996, between Bruce Langham and Telewest
CGL. (Incorporated by reference to the Company's 1996 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 28, 1997).
10.56 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the
Company and Anthony W.P. Stenham. (Incorporated by reference to the Company's
1996 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 28, 1997).
10.57 -- Non-Executive Directors Appointment Letter, dated August 1, 1995 between the
Company and Sir Gordon Borrie QC. (Incorporated by reference to the Company's 1996
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 28, 1997).
<PAGE>
10.58 -- Non-Executive Directors Appointment Letter, dated August 1, 1995, between the
Company and Lord Griffiths of Fforestfach. (Incorporated by reference to the
Company's 1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 28, 1997).
10.59 -- Loan Agreement, by and among Telewest Communications Networks Limited, as
borrower, The Bank of New York, CIBC Wood Gundy plc, Chase Investment Bank
Limited, NatWest Markets and The Toronto-Dominion Bank, as arrangers, and CIBC
Wood Gundy plc, as agent and security trustee, dated as of May 22, 1996, as
amended pursuant to an Amendment Agreement, dated as of May 31, 1996 and a Second
Amendment Agreement, dated as of August 2, 1996. (Incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the six months ended June 30,
1996).
10.60 -- Amendments number 1 through 9 to the General Purchasing Agreement filed as Exhibit
10.31.*+
10.61 -- Employment Agreement, dated August 7, 1997, between Charles Burdick and Telewest
CGL.*
13 -- The Company's 1997 Annual Report to Shareholders (only those portions of the
Company's 1997 Annual Report specifically incorporated by reference herein shall
be deemed filed by the Company herewith). *
21 -- List of Subsidiaries of the Company. (Incorporated by reference to the Company's
1996 Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 28, 1997).
27 -- Financial Data Schedule. *
99 -- Only those portions of the Company's 1998 Proxy Statement expressly incorporated
by reference herein shall be deemed filed by the Company herewith.*
</TABLE>
- ---------------------------
* Filed herewith
** Portions of this agreement have been accorded confidential treatment
by the Securities and Exchange Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
*** Portions of this agreement have been accorded confidential treatment
by the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.
+ An application has been filed with the Securities and Exchange
Commission requesting confidential treatment for certain portions of
these Amendments.
AMENDMENT NO. 1
TO THE TELEWEST GROUP GPA
This Amendment No. 1, dated 1 July 1993, shall be deemed effective as of the
first day of April 1993, by and between the companies listed under Exhibit A in
the General Purchasing Agreement (GPA), dated 1 March 1993 ("Customer"), and
Northern Telecom Europe Limited, having its registered office at Stafferton Way,
Maidenhead, Berks SL6 1AY acting through its Public Switching Division at
Meridian House, 134 Bridge Road, Maidenhead, Berks SL6 8DJ ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier agree to amend the GPA pursuant to the terms and
conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
TITLE PAGE is hereby amended as follows:
The contract name is hereby amended to include Encom Cable TV &
Telecommunications Ltd; and
the contract number of "NTE-GPA0001" is hereby added; and
a proprietary statement is hereby added, now stated as follows:
- --------------------------------------------------------------------------------
TELEWEST GROUP
ENCOM CABLE TV & TELECOMMUNICATIONS LTD
GENERAL PURCHASING AGREEMENT
NTE-GPA0001
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
- --------------------------------------------------------------------------------
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
<PAGE>
Page 2
INTRODUCTION, PAGE 1 is hereby amended as follows:
Northern Telecom's registered address is hereby corrected from "IB Portland
Place" to Stafferton Way, Maidenhead, Berks SL6 1AY, now stated as follows:
1 INTRODUCTION
This Agreement, dated 1 March 1993, is made by and between the companies listed
under Exhibit A attached hereto and by this reference incorporated into this
Agreement and identified herein ("Customer"), and Northern Telecom Europe
Limited, having its registered office at STAFFERTON WAY, MAIDENHEAD, BERKS SL6
1AY acting through its Public Switching Division at Meridian House, 134 Bridge
Road, Maidenhead, Berks SL6 8DJ ("Supplier").
In consideration of the promises, mutual covenants and agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, Customer
and Supplier agree as follows:
CLAUSE 1.1.6, PAGE 1 is hereby modified as follows:
The definition of "Consortium" is hereby revised to include Encom Cable TV &
Telecommunications Ltd, now stated as follows:
1.1.6. "Consortium" for the purposes of this Agreement means all Customers
listed under Exhibit A subject to Clause 2.40 entitled 'Several Liability' and
all actions to be taken by Consortium hereunder shall be taken RESPECTIVELY BY:
1)TELEWEST COMMUNICATIONS GROUP LIMITED ("TELEWEST") AS THE REPRESENTATIVE FOR
THOSE CUSTOMERS LISTED AS TELEWEST WHOLLY OWNED FRANCHISES UNDER SECTION 1,
EXHIBIT A AND FOR THOSE CUSTOMERS LISTED AS LIMITED COMPANIES UNDER SECTION 2,
EXHIBIT A; AND 2) ENCOM CABLE TV AND TELECOMMUNICATIONS LTD ("ENCOM") AS THE
REPRESENTATIVE FOR THOSE CUSTOMERS LISTED AS ENCOM WHOLLY OWNED FRANCHISES UNDER
SECTION 3, EXHIBIT A.
CLAUSE 2.1, PAGE 3 is hereby modified as follows:
The term of the contract is hereby extended to 31 December 1998, now stated as
follows:
2.1. TERM
This Agreement shall commence on 31 January 1993, and expire on 31 DECEMBER
1998. The parties may extend the term or any subsequent term by executing a
separate written agreement of extension prior to the expiration of the term.
CLAUSE 2.7.4, PAGE 6 is hereby amended as follows: The word "of" is hereby
changed to "or", now stated as follows:
2.7.4 Payment whether by finance OR otherwise shall not be considered
Acceptance of non conforming Purchases.
<PAGE>
Page 3
EXHIBIT E, APPENDIX 1, PAGE 104 is hereby amended to reflect TeleWest franchises
only for Appendix 1, now stated as follows:
[Confidential Portion Omitted]
CLAUSE 2.8, PAGE 6 is hereby amended as follows:
Minor changes are made to the text of this clause, now stated as follows:
2.8 FINANCING
Supplier agrees to provide financing to those Customers listed in Exhibit E,
Appendix 1, together with the amounts of their individual facilities for up to
[Confidential Portion Omitted] in aggregate Purchases under this Agreement
pursuant to Lease Purchase Agreements substantially in the form of Exhibit E,
Appendix 2 in the case of all Customers under common control with TeleWest;
substantially in the form of Exhibit E, Appendix 3 in the case of Birmingham
Cable Limited and Cable London plc; AND substantially in the form of Exhibit E,
Appendix 4 in the case of Windsor Television Limited. THE RELEVANT FINANCING
AGREEMENT shall be entered into by Supplier and each Customer that elects to
finance any Purchases prior to such Customer placing its initial Order
hereunder. In the event that a Customer elects to finance Purchases in
accordance with such Lease Purchase Agreement, Supplier shall issue invoices for
such Purchases in accordance with Clause 2.7, except that such invoices shall be
for the full amount due, and such invoices shall be deemed to be paid upon
inclusion of the amounts covered thereby in an Equipment Schedule under a Lease
Purchase Agreement. The financing of Purchases pursuant to a Lease Purchase
Agreement shall be without prejudice to the rights of Customer under this
Agreement with respect to such Purchases, including without limitation
Customer's right not to accept non-conforming Purchases.
CLAUSE 2.9.3, PAGE 7 is hereby amended as follows:
The word "increase" is hereby changed to "decrease", now stated as follows:
2.9.3 If Supplier's published prices, rates, charges or fees on the
Shipment Date of Product(s), and/or Software and/or the
Commencement Date for Services are less than any prices, rates,
charges or fees set forth in the Order(s) or elsewhere, Customer
shall have the benefit of the lesser prices, rates, charges or
fees. Supplier shall notify Customer in writing of the effective
date of any DECREASE.
<PAGE>
Page 4
CLAUSE 2.48, PAGE 19 is hereby amended as follows:
Encom are hereby added as a party to be notified with all correspondence
required under this Agreement, now stated as follows:
2.48 NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed by
Recorded or Registered Post or other delivery service to the following
addresses:
CUSTOMER :
--------
TeleWest Communications Group Ltd. ENCOM CABLE TV & TELECOMMUNICATIONS LTD
Attn : Contract Manager ATTN : SENIOR MANAGER-NETWORK SWITCHING
Materials Management Department 5 LIMEHARBOUR
Unit 1, Genesis Business Park ENCOM HOUSE
Woking, Surrey GU21 5RW LONDON E14 9TY
SUPPLIER :
--------
Commercial Manager; Cable Telephony
Northern Telecom Europe Limited
Public Switching Division
Northern Telecom House
St. Cloud Way
Maidenhead, Berks SL6 8XB
Addresses may be changed by written notices to the parties.
CLAUSE 3.2.4, PAGE 20 is hereby amended as follows: The word "ordered" is hereby
capitalised as the defined term "Ordered", now stated as follows:
3.2.4 Customer reserves the right to stop shipment of Ordered Product
(s) if it fails the inspection referred to in the immediately
preceding paragraph.
<PAGE>
Page 5
CLAUSE 3.3.2, PAGE 20 is hereby amended as follows:
The word "parties" is hereby changed to "party's", now stated as follows:
3.3.2 Supplier shall promptly furnish for Order(s) of Product(s),
standard site preparation Specifications, if applicable, in such
detail to ensure that Product(s) can be properly installed. If
any alterations or modifications required in site preparation or
manufacture are attributable to either party's incomplete or
erroneous Specifications, such alterations and/or modifications
shall be made at the erring PARTY'S expense.
CLAUSE 3.8, PAGE 22 is hereby amended as follows:
Supplier's Products will not be marked with Shipment Date, so the words "if
applicable" and "shipment or" are hereby deleted, now stated as follows:
3.8 MARKING
Product(s) shall be marked by Supplier, at no additional charge, with
Supplier's model NUMBER, SERIAL NUMBER, AND DATE OF MANUFACTURE.
CLAUSE 3.12.1.2, PAGE 23 is hereby amended as follows: "Delivery Date" is hereby
changed to "commencement of Acceptance Period", now stated as follows:
3.12.1.2 Supplier shall provide Documentation pertaining to Software NO
LATER THAN three (3) weeks PRIOR TO COMMENCEMENT OF THE
ACCEPTANCE PERIOD at no additional charge. Documentation shall
comply with Customer's Specifications and the highest standards
of the industry with respect to content, size, legibility and
reproducibility.
EXHIBIT A, PAGE 30 is hereby amended as follows:
Section 3 is hereby added to incorporate Encom franchises as Customers, now
stated as follows:
EXHIBIT A CUSTOMERS
- ---------------------------
This Exhibit A is attached to and made part of that certain General Purchase
dated 1 March 1993 ("Agreement"), by and between Customer as defined in the
Agreement ("Customer") and Northern Telecom Europe Limited ("Supplier").
<PAGE>
Page 6
PARTNERSHIPS AND REGISTERED ADDRESSES TABLE
- --------------------------------------------------------------------------------
FRANCHISE FRANCHISE HOLDER REG. NO.
================================================================================
1. TELEWEST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Avon Avon Cable Joint Venture
-----------------------------------------------------------------------------
Croydon, Kingston and London South Cable Partnership
Richmond and Merton and
Sutton
-----------------------------------------------------------------------------
North Thames Estuary United Artists Communications (Thames Estuary)
South Thames Estuary Partnership
-----------------------------------------------------------------------------
Edinburgh United Artists Communications (Scotland) Venture
-----------------------------------------------------------------------------
Tyneside United Artists Communications (North East)
Partnership
- --------------------------------------------------------------------------------
2. LIMITED COMPANIES
- --------------------------------------------------------------------------------
Birmingham Birmingham Cable Limited 2170379
-----------------------------------------------------------------------------
The registered office CABLE PHONE HOUSE,
for the above listed SMALL HEATH BUSINESS PARK,
company is: TALBOT WAY, SMALL HEATH,
BIRMINGHAM. B10 OHJ
-----------------------------------------------------------------------------
Camden, Enfield, Cable London plc 1794264
Hackney and Islington,
Haringey
-----------------------------------------------------------------------------
The registered office 100 CHALK FARM ROAD
for the above listed LONDON NW1 8EH
company is:
-----------------------------------------------------------------------------
Hillingdon Windsor Television Limited 1745542
Windsor
-----------------------------------------------------------------------------
The registered office CABLE HOUSE
for the above listed WATERSIDE DRIVE
company is: LANGLEY, BERKSHIRE. SL3 6EZ
-----------------------------------------------------------------------------
TeleWest Communications Group Limited 2514287
---------------------------------------------------
Cotswolds United Artists Communications
(Cotswolds) Limited 1743081
- --------------------------------------------------------------------------------
3. ENCOM WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
TOWER HAMLET/NEWHAM ENCOM CABLE TV AND TELECOMMUNICATIONS LTD
GREATER LONDON EAST 1870928
HAVERING
WALTHAM FOREST
DARTFORD
EPPING FOREST
- --------------------------------------------------------------------------------
THE REGISTERED OFFICE 4 CARLTON GARDENS
FOR THE ABOVE LISTED PALL MALL
COMPANY IS: LONDON SW1Y 5AA
- --------------------------------------------------------------------------------
<PAGE>
Page 7
EXHIBIT C, RECITALS, PAGE 34 is hereby modified as follows:
The "RFP" date is hereby revised from November 1993 to November 1992, now stated
as follows:
WHEREAS, Customer issued Request for Proposal entitled "Switch/RFP/001" dated
November 1992, (the "RFP") to Supplier soliciting a proposal for Switches
(defined herein);
CLAUSE C4.1, PAGE 35 is hereby amended as follows:
Customer's Purchase Objective is hereby revised from " [Confidential Portion
Omitted] " lines to " [Confidential Portion Omitted] " lines; and
the RLCM price per line for [Confidential Portion Omitted]-[Confidential Portion
Omitted] lines is hereby revised from " [Confidential Portion Omitted] " to "
[Confidential Portion Omitted] ", now stated as follows:
C4.1 Supplier's fully discounted net price per Switch line shown in
the table below, includes the initial installations and the first
two (2) extensions per Switch:
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
- --------------------------------------------
[Confidential Portion Omitted]
- --------------------------------------------------------------------------------
LINES LINES LINES LINES
- --------------------------------------------------------------------------------
PURCHASE OBJECTIVE [Confidential
Portion
Omitted]
- --------------------------------------------------------------------------------
HOST PRICE PER LINE:
- ----------------------------
SNSE PRICE PER LINE:
- ----------------------------
RSC PRICE PER LINE: [Confidential Portion Omitted]
- ----------------------------
RLCM PRICE PER LINE:
- ----------------------------
SRU PRICE PER LINE:
- --------------------------------------------------------------------------------
CLAUSE C5.1, PAGE 37 is hereby amended as follows:
Related Mercury owned equipment is hereby added to the definition of Remote
Concentrator Units; and
the amount of RCU credit for Customer is hereby established at [Confidential
Portion Omitted] for TeleWest in Clause C5.1.1 and at [Confidential Portion
Omitted] for Encom in Clause C5.1.2, now stated as follows:
C5.1 Supplier shall credit the Customer with a purchase credit based upon
amounts obligated to be paid or payable by Customer to Mercury
Communications Limited (Mercury) to compensate Mercury for its
stranded capital investment in Remote Concentrator Units AND RELATED
EQUIPMENT ("RCU's") resulting from Customer's DISCONTINUATION of
service from SUCH MERCURY OWNED EQUIPMENT installed in the network.
[Confidential Portion Omitted]
<PAGE>
Page 8
CLAUSE C5.1.1 is hereby added to establish the RCU credit for TeleWest, now
stated as follows:
C5.1.1 [Confidential Portion Omitted]
CLAUSE C5.1.2 is hereby added to establish the RCU credit for Encom, now stated
as follows:
C5.1.2 [Confidential Portion Omitted]
C5.1.2.1 [Confidential Portion Omitted]
C5.1.2.2 [Confidential Portion Omitted]
CLAUSE C5.2, PAGE 37 is hereby deleted and replaced in its entirety,
now stated as follows:
C5.2 SUPPLIER SHALL PROVIDE FOR THOSE CUSTOMERS LISTED IN SECTION 3 OF
EXHIBIT A, THE FOLLOWING PRODUCTS AT [Confidential Portion Omitted]:
C5.2.1 [Confidential Portion Omitted]
C5.2.2 [Confidential Portion Omitted]
<PAGE>
Page 9
CLAUSE C6.1, PAGE 37 is hereby amended as follows:
The references to Software Features itemised at the end of Clause C6.1 are
hereby deleted and are now identified in Attachment K, Issue 2, now stated as
follows:
C6 INVOICING AND PAYMENT
C6.1 Should Customer choose not to finance Purchases pursuant to
Clause 2.8, then Supplier shall invoice Customer for Products,
Software and Services pursuant to Clause 2.7 of this Agreement.
As an alternative payment method, at Customer's option, Supplier
shall invoice Customer for Software on a per Working Line basis.
The price per line to be invoiced under this option would be
determined by reducing the per line prices in Clause C4.1 by the
amount of Software included therein at [Confidential Portion
Omitted] per line. The remaining price represents the Product(s)
and Services price. Base Software would then be billed at a
one-time rate of payment of [Confidential Portion Omitted] per
line. This amount would be payable on a calendar quarterly basis,
with the first payment being based on the number of Customer's
Working Lines at the end of the first calendar quarter following
the first Switch Acceptance. Customer will subsequently pay an
amount equal to the increase in the number of Working Lines for
each subsequent calendar quarter at the end of that calendar
quarter, multiplied by [Confidential Portion Omitted]
Customer must clearly mark on the Order if the option under this
Clause C6.1 is required.
CLAUSE C6.4, PAGE 37 is hereby deleted and replaced in its entirety, now stated
as follows:
C6.4 CUSTOMER MAY DEPLOY SOFTWARE FEATURES AT [CONFIDENTIAL PORTION
OMITTED] FOR THE PURPOSES OF TESTING AND FOR CUSTOMER'S INTERNAL
BUSINESS, INCLUDING BUT NOT LIMITED TO [CONFIDENTIAL PORTION
OMITTED].
CLAUSE C6.6, PAGE 38 is hereby amended as follows:
Attachment K of Supplier's Proposal is modified and hereby incorporated:
C6.6 ADDITIONAL FEATURE SOFTWARE
Feature Software not included in base price per line stated under
Clause C4.1 but that is identified in ATTACHMENT K, ISSUE 2 of
Supplier's Proposal, ATTACHED HERETO AND INCORPORATED HEREIN BY
REFERENCE, can be purchased as follows:
C6.6.1 The Customer may purchase Software Modules on a per Switch
basis, as defined and priced in Attachment K, ISSUE 2; or
<PAGE>
Page 10
CLAUSE C6.6.2, PAGE 38 is hereby amended as follows:
A price cap is defined for the Software price per line option, now stated as
follows:
C6.6.2 The Customer may purchase Software on a price per line
basis, calculated on a case by case basis, according to the
following generic formula:
[Confidential Portion Omitted]
CLAUSE C6.6.3 is hereby added as follows:
C6.6.3 CUSTOMER MUST CLEARLY MARK ON THE ORDER WHICH PAYMENT OPTION IS
SELECTED.
CLAUSE C7.1, PAGE 38 is hereby amended as follows:
Reference to the original Purchase Objective of "[Confidential Portion Omitted]
Working Lines" is replaced with "Purchase Objective", now stated as follows:
C7.1 It is the intent of the parties listed as Customer under Exhibit
A in the aggregate to place Orders for Products, Software and
Services in the amount OF THE PURCHASE OBJECTIVE. SUCH PURCHASE
OBJECTIVE MAY CHANGE FROM TIME TO TIME IN ACCORDANCE WITH CLAUSE
7.2.
CLAUSE C7.1.1 is hereby added to enumerate Customer's initial Purchase Objective
as follows:
C7.1.1 CUSTOMER'S INITIAL PURCHASE OBJECTIVE IS DETAILED BELOW
("INITIAL PURCHASE OBJECTIVE")
[Confidential Portion Omitted]
<PAGE>
Page 11
CLAUSE C7.1.2 is hereby added to state the Customers' commitment as follows:
C7.1.2 WITHOUT PREJUDICE TO ITS RIGHTS UNDER CLAUSE 2.3 OF THE
AGREEMENT, CUSTOMER AGREES TO PLACE ORDERS FOR ITS INITIAL
PURCHASE OBJECTIVE ITEMISED IN CLAUSE 7.1.1 DURING THE TERM OF
THE AGREEMENT, PROVIDED THAT;
C7.1.2.1 CUSTOMER IS NOT OBLIGATED TO PURCHASE LINES IN EXCESS OF
ITS ACTUAL REQUIREMENTS, AS REFLECTED IN THE REVISED
PURCHASE OBJECTIVE FIGURES PRODUCED IN ACCORDANCE WITH
CLAUSE C7.2; AND
C7.1.2.2 AT CUSTOMER'S DISCRETION, SUPPLIER REMAINS COMPETITIVE IN
THE MARKET WITH REGARD TO PRICE AND SUPPORT FOR ITS
PRODUCTS; AND
C7.1.2.3 AT CUSTOMER'S DISCRETION, SUPPLIER REMAINS COMPETITIVE IN
THE MARKET WITH REGARD TO SOFTWARE FEATURE AND SWITCH
FUNCTIONALITY OFFERINGS TO CUSTOMER.
CLAUSE C7.2, PAGE 38 is hereby amended as follows:
The method of revising the Purchase Objective every six (6) months via a notice
is hereby added, now stated as follows:
C7.2 In addition to the establishment of thE Initial Purchase
Objective, the parties listed as Customer under Exhibit A agree
to update, each six (6) months beginning from the effective date
of this Agreement, the Purchase Objective with a cumulative
forecast covering the term of this Agreement. Such forecasts
shall identify the actual locations and numbers of lines for
Switches already procured during the term of this Agreement and
the proposed locations and numbers of lines for new Switches to
yet be procured from Supplier over the remaining term of this
Agreement, in order to determine the appropriate price per line
under Clause C4.1. SUCH PURCHASE OBJECTIVE REVISIONS SHALL
AUTOMATICALLY SUPERSEDE PREVIOUS PURCHASE OBJECTIVES WHEN ISSUED
AS A NOTICE IN ACCORDANCE WITH CLAUSE 2.48. EXCEPT AS PROVIDED IN
CLAUSE 7.1.2, it is understood and agreed that such forecasts are
provided for Supplier's use in planning, and do not represent
commitments on the part of Customer to procure such Switches, and
shall be utilised to determine the applicable price to be applied
under Clause C4.1 for the following six (6) months Order period.
CLAUSE C7.3, PAGE 39 is hereby deleted and replaced in its entirety, now stated
as follows:
C7.3 SHOULD ADDITIONAL CUSTOMERS FORMALLY ADVISE SUPPLIER, PRIOR TO 1
APRIL 1993, OF THEIR INTENT TO BE INCLUDED WITHIN THIS AGREEMENT
AND SUBSEQUENTLY CONFIRM SUCH INTENT BY SIGNING THIS AGREEMENT,
THEN THE PRICE PER LINE APPLIED TO ORDERS RECEIVED BY SUPPLIER
BETWEEN 1 APRIL 1993 AND THE ACTUAL DATE OF SIGNATURE OF THE
AGREEMENT BY SUCH CUSTOMERS, SHALL BE BASED UPON THE REVISED
PURCHASE OBJECTIVE FORMULATED FROM THE INCLUSION OF SUCH
ADDITIONAL CUSTOMERS. ORDERS RECEIVED BY SUPPLIER PRIOR TO 1
APRIL 1993 SHALL NOT RECEIVE RETROSPECTIVE PRICE ADJUSTMENTS FROM
THE INCLUSION OF SUCH ADDITIONAL CUSTOMERS.
CLAUSE C12.1, PAGE 40 is hereby amended as follows:
[Confidential Portion Omitted]
<PAGE>
Page 12
C12.1
[Confidential Portion Omitted]
CLAUSE C12.2, PAGE 40 is hereby amended as follows:
[Confidential Portion Omitted]
SECOND CLAUSE 12.2.1, PAGE 40 is hereby amended as follows:
- ------
The Clause number is hereby revised from "12.2.1" to "12.2.2".
CLAUSE C13.1 is hereby amended as follows:
The quantity of DASS-II signalling convertors provided by Supplier at no
additional charge is hereby changed from 20 ports per Switch to ten (10) 2Mbps
ports per Switch, now stated as follows:
C13.1 Supplier SHALL PROVIDE AND SUPPORT signalling converters which
convert Digital Private Network Signalling System ("DPNSS")
circuits to Digital Access Signalling System ("DASS-II")
functionality. SUPPLIER SHALL PROVIDE SUCH SIGNALLING CONVERTERS
TO SUPPORT TEN (10) 2MBPS PORTS PER SWITCH AT NO ADDITIONAL
CHARGE. Customer and the Supplier agree to work together to
maximise the deployment of DPNSS in all franchises. In addition,
Supplier agrees to develop a sales incentive programme BY 31
DECEMBER 1993 that will motivate Customer's sales force to sell
DPNSS as an alternative customer service offering to DASS II.
CLAUSE C13.2 is hereby added as follows:
C13.2 SUPPLIER SHALL PROVIDE DPNSS AT [Confidential Portion Omitted]
PER 2MBPS PORT. THIS PRICE INCLUDES THE 2MBPS INTERFACE,
SIGNALLING PRODUCT, DPNSS SOFTWARE AS DEFINED IN ATTACHMENT K,
ISSUE 2, ENGINEERING, INSTALLATION AND COMMISSIONING, AND PROJECT
MANAGEMENT. THE INITIAL ORDER BY CUSTOMER FOR SUCH 2MBPS PORTS
SHALL BE NO LESS THAN A MINIMUM QUANTITY OF SIXTEEN
(16) PORTS PER SWITCH.
CLAUSE C16.1, PAGE 40 is hereby deleted and replaced in its entirety, now stated
as follows:
C16.1 CUSTOMER SHALL PROCURE AND SUPPORT THE CUTOVER REQUIREMENTS FOR
SUBSCRIBER PULSE METERING ("SPM") HARDWARE.
CLAUSE C16.2 is hereby added, as follows:
<PAGE>
Page 13
C16.2 SUPPLIER SHALL RESEARCH AND REPORT TO CUSTOMER WITHIN THIRTY (30)
DAYS OF THE LATEST SIGNATURE OF THIS DOCUMENT A DEFINITIVE PLAN
FOR DEVELOPING AND IMPLEMENTING SPM HARDWARE AND SOFTWARE
APPLICATIONS FOR CUSTOMER. SUCH PLAN SHALL INCLUDE MILESTONE
DATES FOR DEVELOPMENT, VERIFICATION OFFICE INTRODUCTIONS, AND
IMPLEMENTATION FOR SPM PRODUCT PHASES, AS WELL AS PRICES TO THE
EXTENT POSSIBLE. CUSTOMER AGREES TO PARTICIPATE WITH SUPPLIER TO
THE EXTENT NECESSARY FOR PROVIDING RELEVANT INFORMATION, SUCH AS
MARKETING FORECASTS.
CLAUSE C16.3 is hereby added, as follows:
C16.3 SUBJECT TO A COMMERCIAL AGREEMENT WITH CUSTOMER, SUPPLIER SHALL
DEVELOP AND SUPPORT SUBSCRIBER PULSE METERING ("SPM") HARDWARE
AND SOFTWARE SUITABLE FOR INSTALLATION AND TESTING IN A
VERIFICATION OFFICE OF CUSTOMER'S CHOOSING BY A MUTUALLY AGREED
DATE.
CLAUSE C21.7, PAGE 43 is hereby amended as follows:
The word "ordered" is hereby capitalised as the defined term "Ordered", now
stated as follows:
C21.7 Supplier agrees to provide Customer with the following
information, in writing, each time a new Software generic is
released and Ordered by Customer :
CLAUSE C24.1, PAGE 44 is hereby amended as follows:
[Confidential Portion Omitted]
CLAUSE C32.1, PAGE 46 is hereby amended as follows:
British Telecom are hereby added for C7 certification and PTO interconnection
within the defined schedule; and
an additional week is hereby added to the defined schedule for certification and
interconnection when BT and Mercury are both required, now stated as follows:
C32.1 The Supplier will act on Customer's behalf and provide the
necessary Technical Support required to obtain C7 certification
and PTO interconnection with Mercury AND BRITISH
TELECOMMUNICATIONS PLC ("BT"), AS REQUIRED BY CUSTOMER. SHOULD
SUCH CERTIFICATION AND INTERCONNECTION BE REQUIRED OF BOTH BT AND
MERCURY IN ANY CUSTOMER LOCATION, SUPPLIER WILL BE ALLOWED ONE
(1) ADDITIONAL WEEK IN THE SCHEDULE STATED IN CLAUSE C28.1,
PROVIDED THE INTER-CONNECT SEQUENCE IS BT FOLLOWED BY MERCURY.
CUSTOMER AND SUPPLIER WILL MUTUALLY AGREE UPON THE PHASING OF
SUCH CERTIFICATION AND INTERCONNECTION SCHEDULING WHEN BOTH BT
AND MERCURY ARE REQUIRED BY CUSTOMER.
<PAGE>
Page 14
EXHIBIT C APPENDIX II, PAGE 54 is hereby amended as follows:
The paragraph entitled DPNSS under the heading ADDITIONAL ITEMS is hereby
deleted in its entirety and replaced by Clause C13.2, contained herein.
EXHIBIT C APPENDIX II is hereby amended as follows:
Section 3 is hereby added to identify the critical spares included in the price
per line, as stated in Clause C15.1, now stated as follows:
EXHIBIT C APPENDIX II
- --------------------------------------
CII-3 CRITICAL SPARES
CII-3.1 CRITICAL SPARES - 15K SWITCH SIZE
Following are the spare equipment which will be provided by Supplier
per Clause C15.1 for a 15,000 line Switch.
EQUIPMENT DESCRIPTION PRODUCT CODE QTY
--------------------- ------------ ---
+/- 5V POWER CONVERTED NTDX15AA 1
INTRA FBUS A TERMIN CPNTA NTEX20AA 1
INTRA FBUS B TERMIN CPNTA NTEX20BA 1
IPF INTEGRATED PROC & FBUS NTEX22BA 1
POWER CONV +/-5V 12 24V NT1X78AA 1
MCCS CUSTOM ANN CP NT1X79AA 1
ENH MULTIPROTOCOL CTL CP NT1X89BA 1
4 CHAN DGTL MF RCVR A-LAW NT2X48CA 1
A-LAW TTU DIGITAL FILTER NT2X56BA 1
SD CARD I NT2X57AA 1
GROUP CODEC MERCURY 250 CP NT2X59EA 1
+-5/12V PWR CONVERTER 50A NT2X70AE 1
TRANSMISSION TERM TRK NT2X71AA 1
CONF CKT E/W TBI TONE CP NT3X67BB 1
TONE GEN - CALL WAITING NT3X68BC 1
PCM 30 TRUNK INTERFACE CP NT6X27AC 1
PCM 30 SIGNALLING CP NT6X28AA 1
DS30 NETWORK INTERFACE CP NT6X40AC 1
XPM DS512 LINK CONTROL CP NT6X40CA 1
XPM DS512 LINK CARD CP NT6X40DA 1
SPEECH BUS FORMAT (TURKEY) NT6X41AB 1
CHANNEL SUPERVISION MGS CP NT6X42AA 1
TIME SWITCH CP WITH (EBI) NT6X44EA 1
LGC/DTC PROCESSOR CP NT6X45BA 1
SIGNAL PROCESSOR MEMORY CP NT6X46BB 1
MASTER PROC MEMORY PLUS CP NT6X47AB 1
MASTER PROC MEMORY CP NT6X47AC 1
DS30A LCM INTERFACE CP NT6X48AA 1
LCM PROCESSOR CP NT6X51AB 1
INT DIGROUP CONTROL CP NT6X52AB 1
POWER CONVERTER 5V/15V CP NT6X53AA 1
DPNSS SIGNALLING TERM CP NT6X66CA 1
SIGNALLING TERM BUFFER CP NT6X67AA 1
<PAGE>
Page 15
SIGNALLING TERM INTERFACE NT6X68AC 1
CII-3.1 CRITICAL SPARES - 15K SWITCH SIZE (CONTINUED)
EQUIPMENT DESCRIPTION PRODUCT CODE QTY
--------------------- ------------ ---
STI WITH TERMINATOR NT6X68AD 1
MSG PROTOCOL & DOWNLD CP NT6X69LB 1
CPU PORT CP WITH PARITY NT9X12AC 1
CPU 4M BTYE DRAM ENET CP NT9X13FA 1
WSS CORE COMP MOD PROC CP NT9X13MB 1
WSSPR MS SIMPLEX PROC CARD NT9X13NA 1
MEMORY 24MEG CP NT9X14DB 1
MAPPER CIRCUIT PACK NT9X15AA 1
MS 4 PORT CARD CP NT9X17AD 1
MS - 32 PORT CIRCUIT PACK NT9X17BB 1
MS 64 - PORT CP NT9X17DA 1
BUS TERMINATOR PADDLEBOARD NT9X21AB 1
DS30 4PORT PADDLEBOARD CP NT9X23AA 1
REMOTE TERM. INTERFACE CP NT9X26AB 1
+5VOLTS POWER CONVERTER CP NT9X30AA 1
-5VOLTS POWER CONVERTER CP NT9X31AA 1
4K X 8K X-POINT CP NT9X35FA 1
ENET CLOCK & MESSAGE CP NT9X36BA 1
ENET DS-512 PADDLEBOARD NT9X40BA 1
SYSTEM LOAD MODULE SLM1A NT9X44AC 1
ENET DS512/DS30 INTF PADBD NT9X45BA 1
PARA PORT INTF PADDLEBRD NT9X46AA 1
MS P-BUS TERMINATOR CP NT9X49CC 1
T-BUS ACCESS CP NT9X52AA 1
DMS BUS SYS CLOCK CP NT9X53AC 1
DMS-BUS EXT CLK INTF PB NA NT9X54AC 1
2PORT SUBRATE DS512 CPNTA NT9X62AA 1
SR512 4 LINK PB E/W OOB RS NT9X62CA 1
16 LINK DS30 MS PB NT9X69BA 1
LMS-FBUS RATE ADAPTER CP NT9X73BA 1
F-BUS REPEATER CP NT9X74CA 1
STP SIGNALLING TERMINAL CP NT9X76AA 1
STP V.35 INTERFACE CPNTA NT9X77AA 1
F-BUS EXT CP E/W TERMINAT NT9X79BA 1
DUAL PORT MESS CONT CP NT9X86AA 1
STOR DEV POW CON +5,+12 NT9X91AA 1
<PAGE>
Page 16
CII-3.2 CRITICAL SPARES - 30K SWITCH SIZE
Following are the spare equipment which will be provided by Supplier
per Clause C15.1 for a 30,000 line Switch.
EQUIPMENT DESCRIPTION PRODUCT CODE QTY
--------------------- ------------ ---
INTRA FBUS A TERMIN CPNTA NTEX20AA 1
INTRA FBUS B TERMIN CPNTA NTEX20BA 1
IPF INTEGRATED PROC & FBUS NTEX22BA 1
POWER CONV +/-5V 12 24V NT1X78AA 1
MCCS CUSTOM ANN CP NT1X79AA 1
ENH MULTIPROTOCOL CTL CP NT1X89BA 1
4 CHAN DGTL MF RCVR A-LAW NT2X48CA 1
A-LAW TTU DIGITAL FILTER NT2X56BA 1
SD CARD I NT2X57AA 1
GROUP CODEC MERCURY 250 CP NT2X59EA 1
+-5/12V PWR CONVERTER 50A NT2X70AE 1
TRANSMISSION TERM TRK NT2X71AA 1
CONF CKT E/W TBI TONE CP NT3X67BB 1
TONE GEN - CALL WAITING NT3X68BC 1
PCM 30 TRUNK INTERFACE CP NT6X27AC 1
PCM 30 SIGNALLING CP NT6X28AA 1
DS30 NETWORK INTERFACE CP NT6X40AC 1
XPM DS512 LINK CONTROL CP NT6X40CA 1
XPM DS512 LINK CARD CP NT6X40DA 1
SPEECH BUS FORMAT (TURKEY) NT6X41AB 1
CHANNEL SUPERVISION MGS CP NT6X42AA 1
TIME SWITCH CP WITH (EBI) NT6X44EA 1
LGC/DTC PROCESSOR CP NT6X45BA 1
SIGNAL PROCESSOR MEMORY CP NT6X46BB 1
MASTER PROC MEMORY PLUS CP NT6X47AB 1
MASTER PROC MEMORY CP NT6X47AC 1
DS30A LCM INTERFACE CP NT6X48AA 1
LCM PROCESSOR CP NT6X51AB 1
INT DIGROUP CONTROL CP NT6X52AB 1
POWER CONVERTER 5V/15V CP NT6X53AA 1
DPNSS SIGNALLING TERM CP NT6X66CA 1
SIGNALLING TERM BUFFER CP NT6X67AA 1
SIGNALLING TERM INTERFACE NT6X68AC 1
STI WITH TERMINATOR NT6X68AD 1
MSG PROTOCOL & DOWNLD CP NT6X69LB 1
33MHZ 88000 BRISC CPU CP NT9X10AA 1
CPU PORT CP WITH PARITY NT9X12AC 1
CPU (16 MHZ) CP NT9X13DB 1
CPU (16MHZ) CP NT9X13DC 1
CPU 4M BTYE DRAM ENET CP NT9X13FA 1
6M MEM CP (SYNC OVERRIDE) NT9X14BB 1
MEMORY 24MEG CP NT9X14DB 1
MAPPER CIRCUIT PACK NT9X15AA 1
MS-4PORT CIRCUIT PACK NT9X17AA 1
MS 64 - PORT CP NT9X17DA 1
DS512 PADDLEBOARD CP NT9X20AA 1
ENET/MS FIBER INTERF CPNTA NT9X20BB 1
CMBUS TERMINATOR PADDLEBRD NT9X21AA 1
CM SUBSYS CLOCK PDBRD NT9X22CA 1
DS30 4PORT PADDLEBOARD CP NT9X23AA 1
<PAGE>
Page 17
DS-30 4-PORT CPNTA (STP) NT9X23BA 1
REMOTE TERM. INTERFACE CP NT9X26AB 1
BRISC RTIF CPNTA NT9X26DA 1
CM PROC SH BUS EXTENDER CP NT9X27AA 1
CII-3.2 CRITICAL SPARES - 30K SWITCH SIZE (CONTINUED)
EQUIPMENT DESCRIPTION PRODUCT CODE QTY
--------------------- ------------ ---
CM EXT SH BUS EXTENDER CP NT9X27BA 1
+5VOLTS POWER CONVERTER CP NT9X30AA 1
-5VOLTS POWER CONVERTER CP NT9X31AA 1
M.S. LOAD CP NT9X32AA 1
ENET 16K X 16K X-POINT CP NT9X35BA 1
ENET CLOCK & MESSAGE CP NT9X36BA 1
QUAD DS512 FIBER I/F CPNTA NT9X40BB 1
ENET DS512/DS30 INTF PADBD NT9X45BA 1
PARA PORT INTF PADDLEBRD NT9X46AA 1
+12V POWER CONVERTER CP NT9X47AA 1
MS P-BUS TERMINATOR CP NT9X49CA 1
DMS BUS TRACER CP NT9X49CB 1
T-BUS ACCESS CP NT9X52AA 1
MS CLOCK CP NT9X53AA 1
DMS BUS SYS CLOCK CP NT9X53AC 1
DMS-BUS EXT CLK INTF PB NA NT9X54AC 1
LMS-FBUS RATE ADAPTER CP NT9X73BA 1
F-BUS REPEATER CP NT9X74CA 1
STP SIGNALLING TERMINAL CP NT9X76AA 1
STP V.35 INTERFACE CPNTA NT9X77AA 1
F-BUS EXTENSION PADDLEBRD NT9X79AA 1
F-BUS EXT CP E/W TERMINAT NT9X79BA 1
ADVANCED ENET SPARING NT9X35CA 1
<PAGE>
Page 18
CII-3.3 CRITICAL SPARES - RLCM
Following are the spare equipment which will be provided by Supplier
per Clause C15.1 for a RLCM.
EQUIPMENT DESCRIPTION PRODUCT CODE QTY
--------------------- ------------ ---
5V/40A POWER CONV CP NT2X06AB 1
MULTI O/P PWR CONVERTER NT2X09AA 1
4 CHAN DGTL MF RCVR A-LAW NT2X48CA 1
A-LAW DTMF RECEIVER FOR UK NT2X48CC 1
SD CARD I NT2X57AA 1
A-LAW GRP CODEC & TONES CP NT2X59CA 1
+-5/12V PWR CONVERTER 50A NT2X70AE 1
INC/OGT TEST TRUNK CP NT2X90AD 1
8 X 8 MATRIX CP NT3X09BA 1
MTU CONTROLLER CP NT4X97AA 1
MTU ANALOG CARD NT4X98BB 1
PCM 30 INTERFACE CP NT6X27AB 1
PCM 30 TRUNK INTERFACE CP NT6X27AC 1
FSP ALARM CP NT6X36AA 1
LCM PROCESSOR CP NT6X51AB 1
INT DIGROUP CONTROL CP NT6X52AB 1
POWER CONVERTER 5V/15V CP NT6X53AA 1
INT BUS INTERFACE CP NT6X54BA 1
RINGING GENERATOR NT6X60AB 1
LINK CONTROL CARD CP NT6X73BA 1
RMM CONTROL CARD CP NT6X74AB 1
ESA TONE & CLOCK CP NT6X75EA 1
REMOTE ALARM PANEL CP NT6X77AA 1
<PAGE>
Page 19
CII-3.4 CRITICAL SPARES - RSC
Following are the spare equipment which will be provided by Supplier
per Clause C15.1 for a RSC.
EQUIPMENT DESCRIPTION PRODUCT CODE QTY
--------------------- ------------ ---
ISDN ENH LCME PROCESSOR CP NTBX34BA 1
LCMI DIGROUP CONTROL CP NTBX35AA 1
ISDN ENH LINE DRAWER BIC NTBX36BA 1
ISDN ENH L DWR PUPS CP NTBX71AA 1
ISDN LCME BAT/RNG ROUTER NTBX72AA 1
POWER CONVERTER PACK NTMX72AA 1
SIGNALLING PCP NTMX73AA 1
32 DS30A I/F PCP NTMX74AA 1
ENHANCED MATRIX PCP NTMX75AA 1
PROCESSOR PCP NTMX77AA 1
DUAL PCM30 PACKLET NTMX82AA 1
QUAD FRAME CARRIER PCCP NTMX87AA 1
5V/40A POWER CONV CP NT2X06AB 1
MULTI O/P PWR CONVERTER NT2X09AA 1
SD CARD I NT2X57AA 1
A-LAW GRP CODEC & TONES CP NT2X59CA 1
INC/OGT TEST TRUNK CP NT2X90AD 1
8 X 8 MATRIX CP NT3X09BA 1
MTU CONTROLLER CP NT4X97AA 1
MTU ANALOG CARD NT4X98BB 1
FSP ALARM CP NT6X36AA 1
FSP ALARM CP NT6X36AB 1
LCM PROCESSOR CP NT6X51AB 1
INT DIGROUP CONTROL CP NT6X52AB 1
POWER CONVERTER 5V/15V CP NT6X53AA 1
ISDN LCME PWR CONV +5/+15V NT6X53CA 1
INT BUS INTERFACE CP NT6X54BA 1
MSG PROTOCOL & DOWNLD CP NT6X69LB 1
RMM CONTROL CARD CP NT6X74AB 1
UNIVERSAL TONE RECEIVER CP NT6X92CA 1
<PAGE>
Page 20
CII-3.5 CRITICAL SPARES - SRU
Following are the spare equipment which will be provided by Supplier
per Clause C15.1 for a SRU.
EQUIPMENT DESCRIPTION PRODUCT CODE QTY
--------------------- ------------ ---
ISDN LCM PROCESSOR CP NTBX34CA 1
ISDN LCM DIGROUP CTL CP NTBX35CA 1
ISDN ENH LINE DRAWER BIC NTBX36BA 1
ISDN ENH L DWR PUPS CP NTBX71AA 1
A-LAW GRP CODEC & TONES CP NT2X59CA 1
8 X 8 MATRIX CP NT3X09BA 1
MTU CONTROLLER CP NT4X97AA 1
MTU ANALOG CARD NT4X98BB 1
PCM 30 TRUNK INTERFACE CP NT6X27AC 1
ARLB FSP ALARM CARD CP NT6X36AF 1
SRU RINGING GENERTOR (UK) NT6X60GA 1
LINK CONTROL CARD CP NT6X73BA 1
RMM CONTROL CARD CP NT6X74AB 1
BATTERY CHARGER CP NT8X02AB 1
SRU FUSE PNL & CABLE ASSY NT8X9707 1
SPU POWER CONVERTER CP NT8X99AB 1
<PAGE>
Page 21
EXHIBIT C APPENDIX IV is hereby clarified as follows:
Page 74 of the GPA does not exist.
<PAGE>
Page 22
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- --------- --------
TELEWEST COMMUNICATIONS GROUP LIMITEDNORTHERN TELECOM EUROPE LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------- -------------- ----------------------- -----------
authorised signature date authorised signature date
</TABLE>
Larry Carleton Pete Meldrum
- ------------------------------- -------------------------------
print or type name of signatory print or type name of signatory
President and Chief Operating Officer, TeleWestGeneral Manager
- --------------------------------------------------------------------------------
title title
UNITED ARTISTS COMMUNICATIONS (SCOTLAND) VENTURE
BY EDINBURGH CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION EDINBURGH, INC., GENERAL PARTNER
BY ------------------------------ -------------
authorised signature date
Larry Carleton
---------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
---------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 23
UNITED ARTISTS COMMUNICATIONS (NORTH EAST) PARTNERSHIP
BY TYNESIDE CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION TYNESIDE, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services. TeleWest
----------------------------------------------------------
title
AVON CABLE JOINT VENTURE
BY AVON CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION AVON, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 24
UNITED ARTISTS COMMUNICATIONS (THAMES ESTUARY) PARTNERSHIP
BY ESTUARIES CABLE LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION ESTUARIES, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
LONDON SOUTH CABLE PARTNERSHIP
BY UNITED CABLE (LONDON SOUTH) LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION UK. INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 25
CABLE LONDON PLC
- ---------------------------- --------------------
authorised signature date
Gerald Campbell
- --------------------------------------------------------
print or type name of signatory
Managing Director, Cable London plc
- --------------------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ---------------------------- --------------------
authorised signature date
Edward Campbell
- --------------------------------------------------------
print or type name of signatory
Managing Director, Birmingham Cable Limited
- --------------------------------------------------------
title
WINDSOR TELEVISION LIMITED
- ---------------------------- --------------------
authorised signature date
Phillipe Galteau
- --------------------------------------------------------
print or type name of signatory
Managing Director, The Cable Corporation
- --------------------------------------------------------
title
UNITED ARTISTS COMMUNICATIONS (COTSWOLDS) LIMITED
- ---------------------------- --------------------
authorised signature date
Larry Carleton
- --------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
- --------------------------------------------------------
title
<PAGE>
Page 26
ENCOM CABLE TV AND TELECOMMUNICATIONS
authorised signature date
John Sheridan
- --------------------------------------------------------
print or type name of signatory
Managing Director and Chief Executive Officer, ENCOM
- --------------------------------------------------------
title
<PAGE>
TELEWEST COMMUNICATIONS GROUP LTD Attachment: K
REQUEST FOR PROPOSAL Issue: 2
Page: 1
Date: 21/7/93
TELEWEST GROUP GPA
AMENDMENT 1
APPENDIX 1
ATTACHMENT K
CATV SOFTWARE STRUCTURE (BCS34)
(C) COPYRIGHT NORTHERN TELECOM EUROPE LIMITED 1993 PROPOSAL 2/399
Copyright in the whole and every part July 1993
of this document is owned by NT Europe Ltd
<PAGE>
TELEWEST COMMUNICATIONS GROUP LTD Attachment: K
REQUEST FOR PROPOSAL Issue: 2
Pages: 2 - 33
Date: 21/7/93
[CONFIDENTIAL PORTION OMITTED]
<PAGE>
AMENDMENT NO. 2
TO THE TELEWEST GROUP GPA
This Amendment No. 2, dated 29 October 1993, shall be deemed effective as of the
first day of September 1993, by and between the companies listed under Exhibit A
in the General Purchasing Agreement (GPA), dated 1 March 1993 ("Customer"), and
Northern Telecom Europe Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier agree to amend the GPA pursuant to the terms and
conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
TITLE PAGE is hereby amended as follows:
The contract name is hereby amended to include Telecential Communications
Limited Partnership;
- --------------------------------------------------------------------------------
TELEWEST GROUP
ENCOM CABLE TV & TELECOMMUNICATIONS LTD
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
GENERAL PURCHASING AGREEMENT
NTE-GPA0001
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
- --------------------------------------------------------------------------------
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
<PAGE>
Page 2
CLAUSE 1.1.6, PAGE 1 is hereby modified as follows:
The definition of "Consortium" is hereby revised to include Telecential
Communications Limited Partnership, now stated as follows:
1.1.6. "Consortium" for the purposes of this Agreement means all Customers
listed under Exhibit A subject to Clause 2.40 entitled 'Several Liability' and
all actions to be taken by Consortium hereunder shall be taken respectively by:
1)TeleWest Communications Group Limited ("TeleWest") as the representative for
those Customers listed as TeleWest wholly owned franchises under Section 1,
Exhibit A and for those Customers listed as Limited Companies under Section 2,
Exhibit A; and 2) Encom Cable TV and Telecommunications Ltd ("Encom") as the
representative for those Customers listed as Encom wholly owned franchises under
Section 3, Exhibit A; AND 3) TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
ENTERING INTO AGREEMENT FOR ITSELF AND ON BEHALF OF TELECENTIAL COMMUNICATIONS
(HERTS) LIMITED PARTNERSHIP AND TELECENTIAL COMMUNICATIONS (NORTHANTS) LIMITED
PARTNERSHIP ("TELECENTIAL") AS THE REPRESENTATIVE FOR THOSE CUSTOMERS LISTED AS
TELECENTIAL WHOLLY OWNED FRANCHISES UNDER SECTION 4, EXHIBIT A.
CLAUSE 2.8, PAGE 6 is hereby amended as follows:
Reference to Exhibit E Appendix 6 for Telecential is hereby added now stated as
follows:
2.8 FINANCING
Supplier agrees to provide financing to those Customers listed in Exhibit E,
Appendix 1, together with the amounts of their individual facilities for up to
[Confidential Portion Omitted] in aggregate Purchases under this Agreement
pursuant to Lease Purchase Agreements substantially in the form of Exhibit E,
Appendix 2 in the case of all Customers under common control with TeleWest;
substantially in the form of Exhibit E, Appendix 3 in the case of Birmingham
Cable Limited and Cable London plc; and substantially in the form of Exhibit E,
Appendix 4 in the case of Windsor Television Limited. SUPPLIER ALSO AGREES TO
PROVIDE FINANCING TO TELECENTIAL, SUBSTANTIALLY IN THE FORM OF EXHIBIT E,
APPENDIX 6. The relevant financing agreement shall be entered into by Supplier
and Customer that elects to finance any Purchases prior to such Customer placing
its initial Order hereunder. In the event that a Customer elects to finance
Purchases in accordance with such Lease Purchase Agreement, Supplier shall issue
invoices for such Purchases in accordance with Clause 2.7, except that such
invoices shall be for the full amount due, and such invoices shall be deemed to
be paid upon inclusion of the amounts covered thereby in an Equipment Schedule
under a Lease Purchase Agreement. The financing of Purchases pursuant to a Lease
Purchase Agreement shall be without prejudice to the rights of Customer under
this Agreement with respect to such Purchases, including without limitation
Customer's right not to accept non-conforming Purchases.
CLAUSE 2.48, PAGE 19 is hereby amended as follows:
Telecential are hereby added as a party to be notified with all correspondence
required under this Agreement, now stated as follows:
2.48 NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed by
Recorded or Registered Post or other delivery service to the following
addresses:
<PAGE>
Page 3
CUSTOMERS :
TeleWest Communications Group Ltd. Encom Cable TV & Telecommunications Ltd
Attn : Contract Manager Attn : Contract Manager
Materials Management Department 2 Millharbour
Unit 1, Genesis Business Park London E14 9TE
Woking, Surrey, GU21 5RW
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
ATTN : CONTRACT MANAGER
LINK 2 BEACONTREE PLAZA, GILLETTE WAY,
BASINGSTOKE ROAD,
READING RG2 0BS
SUPPLIER :
Commercial Manager; Cable Telephony
Northern Telecom Europe Limited
Public Switching Division
Northern Telecom House
St. Cloud Way
Maidenhead, Berks SL6 8XB
Addresses may be changed by written notices to the parties.
EXHIBIT A, PAGE 30 is hereby amended as follows:
Section 3 is hereby added to incorporate Telecential franchises as Customers,
now stated as follows:
EXHIBIT A CUSTOMERS
This Exhibit A is attached to and made part of that certain General Purchase
dated 1 March 1993 ("Agreement"), by and between Customer as defined in the
Agreement ("Customer") and Northern Telecom Europe Limited ("Supplier").
PARTNERSHIPS AND REGISTERED ADDRESSES TABLE
- --------------------------------------------------------------------------------
FRANCHISE FRANCHISE HOLDER REG. NO.
================================================================================
1. TELEWEST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Avon Avon Cable Joint Venture
-----------------------------------------------------------------------------
Croydon, Kingston and London South Cable Partnership
Richmond and Merton and
Sutton
-----------------------------------------------------------------------------
North Thames Estuary United Artists Communications (Thames Estuary)
South Thames Estuary Partnership
-----------------------------------------------------------------------------
Edinburgh United Artists Communications (Scotland) Venture
-----------------------------------------------------------------------------
Tyneside United Artists Communications
(North East) Partnership
- --------------------------------------------------------------------------------
<PAGE>
Page 4
- --------------------------------------------------------------------------------
2. LIMITED COMPANIES
- --------------------------------------------------------------------------------
Birmingham Birmingham Cable Limited 2170379
-----------------------------------------------------------------------------
The registered office CABLE PHONE HOUSE,
for the above listed SMALL HEATH BUSINESS PARK,
company is: TALBOT WAY, SMALL HEATH,
BIRMINGHAM. B10 OHJ
-----------------------------------------------------------------------------
Camden, Enfield, Cable London plc 1794264
Hackney and Islington,
Haringey
-----------------------------------------------------------------------------
The registered office 100 CHALK FARM ROAD
for the above listed LONDON NW1 8EH
company is:
-----------------------------------------------------------------------------
Hillingdon Windsor Television Limited 1745542
Windsor
-----------------------------------------------------------------------------
The registered office CABLE HOUSE
for the above listed WATERSIDE DRIVE
company is: LANGLEY, BERKSHIRE. SL3 6EZ
-----------------------------------------------------------------------------
TeleWest Communications Group Limited 2514287
---------------------------------------------------
---------------------------------------------------
Cotswolds United Artists Communications
(Cotswolds) Limited 1743081
- --------------------------------------------------------------------------------
3. ENCOM WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Tower Hamlet/Newham Encom Cable TV and Telecommunications Ltd 1870928
Greater London East
Havering
Waltham Forest
Dartford
Epping Forest
- --------------------------------------------------------------------------------
The registered office 4 CARLTON GARDENS
for the above listed PALL MALL
company is: LONDON SW1Y 5AA
- --------------------------------------------------------------------------------
4. TELECENTIAL WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
THAMES VALLEY TELECENTIAL COMMUNICATIONS LIMITED
PARTNERSHIP 2387692
WEST HERTS
NORTHANTS
SWINDON
WARWICKSHIRE
NORTHAMPTONSHIRE
- --------------------------------------------------------------------------------
THE REGISTERED OFFICE DRAGOON HOUSE
FOR THE ABOVE LISTED 37 ARTILLERY LANE
COMPANY IS: LONDON E1 7LT
- --------------------------------------------------------------------------------
<PAGE>
Page 5
CLAUSE C4.1, PAGE 35 is hereby amended as follows:
A new price per line range for [Confidential Portion Omitted] lines is hereby
added; and
Customer's Purchase Objective is hereby revised from [Confidential Portion
Omitted] lines to [Confidential Portion Omitted] lines;
and linkage between the price per line table and the Purchase Objective is
hereby added, as follows:
C4.1 Supplier's fully discounted net price per Switch line shown in the
table below, includes the [Confidential Portion Omitted] per Switch.
THE RELEVANT PRICE PER LINE FOR ANY ORDER SHALL BE DETERMINED BY
APPLYING THE PREVAILING PURCHASE OBJECTIVE EFFECTIVE ON THE DATE OF
SUCH ORDER, AS DEFINED IN CLAUSE C7, TO THE TABLE BELOW.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
- --------------------------------------------
- --------------------------------------------------------------------------------
[CONFIDENTIAL PORTION OMITTED]
----------------------------------------------------------
LINES LINES LINES LINES LINES
- ----------------------
- --------------------------------------------------------------------------------
PURCHASE OBJECTIVE
- ----------------------
- ----------------------
HOST PRICE PER LINE:
- ----------------------
- ----------------------
SNSE PRICE PER LINE: [CONFIDENTIAL PORTION OMITTED]
- ----------------------
- ----------------------
RSC PRICE PER LINE:
- ----------------------
- ----------------------
RLCM PRICE PER LINE:
- ----------------------
- ----------------------
SRU PRICE PER LINE:
- --------------------------------------------------------------------------------
No retrospective price adjustments will be made to previous Purchases upon
Consortium achieving the next pricing level.
The above stated price per line includes the Product(s) as listed in
Appendix 2, entitled "Price Per Line" attached hereto and by this reference
incorporated into this Agreement and Software as defined in Attachment K of
the Proposal, and Services including but not limited to [Confidential
Portion Omitted] . In the case of Switch remotes, (RSC, RLCM and SRU), the
price includes related [Confidential Portion Omitted]. These prices include
all customs and import duties, but exclude VAT.
<PAGE>
Page 6
CLAUSE C7.1.1 is hereby amended to show Customer's revised Purchase Objective
following the inclusion of Telecential as follows:
C7.1.1 Customer's initial Purchase Objective is detailed below
("Initial Purchase Objective")
[Confidential Portion Omitted]
CLAUSE C12.1, PAGE 40 is hereby amended as follows:
[Confidential Portion Omitted]
CLAUSE C12.2, PAGE 40 is hereby amended as follows:
[Confidential Portion Omitted]
C12.2 [Confidential Portion Omitted]
<PAGE>
Page 7
CLAUSE C12.3 is hereby added as follows:
C12.3 SUPPLIER AGREES TO MAKE GPP AVAILABLE ON ORDERS REQUIRING
DELIVERY AFTER 1 JANUARY 1995, IN ACCORDANCE WITH A MANAGED
IMPLEMENTATION PLAN TO BE GENERATED BY 31 DECEMBER 1993, AND
FORMALLY AGREED TO BY 30 JUNE 1994.
CLAUSE C12.4 is hereby added as follows:
C12.4 SHOULD SUPPLIER FAIL TO HAVE GPP AVAILABLE IN ACCORDANCE
WITH SUCH AGREED IMPLEMENTATION PLAN SPECIFIED IN CLAUSE
C12.3, THEN SUPPLIER SHALL RETROFIT, TO GPP, ALL NON-GPP
LINES DELIVERED AFTER THE AGREED DATES IN SUCH
IMPLEMENTATION PLAN AT NO CHARGE TO CUSTOMER AND SHALL NOT
CONSIDER SUCH RETROFIT AN EXTENSION FOR PRICING PURPOSES
STATED IN CLAUSE C4.
CLAUSE C12.5 is hereby added as follows:
C12.5 THE PROVISIONS OF CLAUSE C12.4 CONSTITUTE SUPPLIER'S SOLE
LIABILITY AND CUSTOMER'S SOLE REMEDY FOR SUPPLIER'S
FAILURE TO MEET THE AGREED IMPLEMENTATION PLAN SPECIFIED
IN CLAUSE C12.3.
CLAUSE C25.1.3 is hereby added as follows to detail the Marketing Support
provided to Telecential:
SUPPLIER AGREES TO PROVIDE A DEDICATED FULLY SKILLED MARKETING RESOURCE TO
TELECENTIAL FOR A PERIOD OF 3 (THREE) MONTHS.
<PAGE>
Page 8
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- ------------------------------------- ------------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTHERN TELECOM EUROPE LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------------ ---------------------- ----------
authorised signature date authorised signature date
</TABLE>
Larry Carleton Pete Meldrum
- ---------------------------------- ------------------------------------
print or type name of signatory print or type name of signatory
President and Chief Operating Officer, TeleWestGeneral Manager
- --------------------------------------------------------------------------------
title title
UNITED ARTISTS COMMUNICATIONS (SCOTLAND) VENTURE
BY EDINBURGH CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION EDINBURGH, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 9
UNITED ARTISTS COMMUNICATIONS (NORTH EAST) PARTNERSHIP
BY TYNESIDE CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION TYNESIDE, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services. TeleWest
----------------------------------------------------------
title
AVON CABLE JOINT VENTURE
BY AVON CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION AVON, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 10
UNITED ARTISTS COMMUNICATIONS (THAMES ESTUARY) PARTNERSHIP
BY ESTUARIES CABLE LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION ESTUARIES, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
LONDON SOUTH CABLE PARTNERSHIP
BY UNITED CABLE (LONDON SOUTH) LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION UK. INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 11
CABLE LONDON PLC
- ------------------------------ -----------
authorised signature date
Gerald Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Cable London plc
- ------------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ------------------------------ -----------
authorised signature date
Edward Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Birmingham Cable Limited
- ------------------------------------------------
title
WINDSOR TELEVISION LIMITED
- ------------------------------ -----------
authorised signature date
Philippe Galteau
- ------------------------------------------------
print or type name of signatory
Managing Director, The Cable Corporation
- ------------------------------------------------
title
UNITED ARTISTS COMMUNICATIONS (COTSWOLDS) LIMITED
- ------------------------------ -----------
authorised signature date
Larry Carleton
- ------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
- ------------------------------------------------
title
<PAGE>
Page 12
ENCOM CABLE TV AND TELECOMMUNICATIONS
- ------------------------------ ------------
authorised signature date
John Sheridan
- ------------------------------------------------
print or type name of signatory
Managing Director and Chief Executive Officer, ENCOM
- ----------------------------------------------------
title
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
- ------------------------------ ------------
authorised signature date
Vernon Achber
- ------------------------------------------------
print or type name of signatory
President and Chief Executive Officer, CUC Cablevision (UK) LTD. acting for
and on behalf of Telecential Communications Limited Partnership
- ---------------------------------------------------------------------------
title
<PAGE>
AMENDMENT NO. 3
TO THE TELEWEST GROUP GPA
This Amendment No. 3, dated the 12th day of November 1993, shall be deemed
effective as of the first day of November 1993, by and between the companies
listed under Exhibit A in the General Purchasing Agreement (GPA), dated 1 March
1993 ("Customer"), and Northern Telecom Europe Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
enetering into Amendment No. 2, dated 29 October 1993; and
WHEREAS, Customer and Supplier agree to further amend the GPA pursuant to the
terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
CLAUSE 2.8, PAGE 6 is hereby amended as follows:
Reference to Exhibit E Appendix 5 for United Artists (Scotland) Venture and
United Artists (Cotswolds) Limited is hereby added, now stated as follows:
2.8 FINANCING
Supplier agrees to provide financing to those Customers listed in Exhibit E,
Appendix 1, together with the amounts of their individual facilities for up to
[Confidential Portion Omitted] in aggregate Purchases under this Agreement
pursuant to Lease Purchase Agreements substantially in the form of Exhibit E,
Appendix 2 in the case of all Customers under common control with TeleWest;
substantially in the form of Exhibit E, Appendix 3 in the case of Birmingham
Cable Limited and Cable London plc; and substantially in the form of Exhibit E,
Appendix 4 in the case of Windsor Television Limited. Supplier also agrees to
provide financing: 1) TO UNITED ARTISTS (SCOTLAND) VENTURE AND UNITED ARTISTS
(COTSWOLDS) LIMITED, TO A COMBINED FACILITY OF UP TO [CONFIDENTIAL PORTION
OMITTED] IN AGGREGRATE PURCHASES UNDER THIS AGREEMENT PURSUANT TO LEASE PURCHASE
AGREEMENTS SUBSTANTIALLY IN THE FORM OF EXHIBIT E, APPENDIX 5 AND 2) to
Telecential, substantially in the form of Exhibit E, Appendix 6. The relevant
financing agreement shall be entered into by Supplier and Customer that elects
to finance any Purchases prior to such Customer placing its initial Order
hereunder. In the event that a Customer elects to finance Purchases in
accordance with such Lease Purchase Agreement, Supplier shall issue invoices for
such Purchases in accordance with Clause 2.7, except that such invoices shall be
for the full amount due, and such invoices shall be deemed to be paid upon
inclusion of the amounts covered thereby in an Equipment Schedule under a Lease
Purchase Agreement. The financing of Purchases pursuant to a Lease Purchase
Agreement shall be without prejudice to the rights of Customer under this
Agreement with respect to such Purchases, including without limitation
Customer's right not to accept non-conforming Purchases.
<PAGE>
Page 2
EXHIBIT A, PAGE 30 is hereby amended as follows:
Windsor Television's franchise name for Hillingdon is corrected with the
addition of Hounslow and the new Scotland franchises are listed against United
Artists Communications (Scotland) Venture, now stated as follows:
- --------------------------------------------------------------------------------
FRANCHISE FRANCHISE HOLDER REG. NO.
- --------------------------------------------------------------------------------
1. TELEWEST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Avon Avon Cable Joint Venture
-----------------------------------------------------------------------------
Croydon, Kingston and London South Cable Partnership
Richmond and Merton and
Sutton
-----------------------------------------------------------------------------
North Thames Estuary United Artists Communications (Thames Estuary)
South Thames Estuary Partnership
-----------------------------------------------------------------------------
Edinburgh and United Artists Communications (Scotland) Venture
Livingston, Uddingston,
Glenrothes, Dundee and
Perth.
-----------------------------------------------------------------------------
Tyneside United Artists Communications (North East)
Partnership
- --------------------------------------------------------------------------------
2. LIMITED COMPANIES
- --------------------------------------------------------------------------------
Birmingham Birmingham Cable Limited 2170379
-----------------------------------------------------------------------------
The registered office CABLE PHONE HOUSE,
for the above listed SMALL HEATH BUSINESS PARK,
company is: TALBOT WAY, SMALL HEATH,
BIRMINGHAM. B10 OHJ
-----------------------------------------------------------------------------
Camden, Enfield, Cable London plc 1794264
Hackney and Islington,
Haringey
-----------------------------------------------------------------------------
The registered office 100 CHALK FARM ROAD
for the above listed LONDON NW1 8EH
company is:
-----------------------------------------------------------------------------
Hillingdon AND Windsor Television Limited 1745542
Hounslow, Windsor
-----------------------------------------------------------------------------
The registered office CABLE HOUSE
for the above listed WATERSIDE DRIVE
company is: LANGLEY, BERKSHIRE. SL3 6EZ
-----------------------------------------------------------------------------
Cotswolds TeleWest Communications Group Limited 2514287
United Artists Communications (Cotswolds)
Limited 1743081
- --------------------------------------------------------------------------------
<PAGE>
Page 3
- --------------------------------------------------------------------------------
3. ENCOM WHOLLY OWNED FRANCHISES
--------------------------------------------------------------------------
Tower Hamlet/Newham Encom Cable TV and Telecommunications
Ltd 1870928
Greater London East
Havering
Waltham Forest
Dartford
Epping Forest
--------------------------------------------------------------------------
The registered office 4 CARLTON GARDENS
for the above listed PALL MALL
company is: LONDON SW1Y 5AA
- --------------------------------------------------------------------------------
4 TELECENTIAL WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Thames Valley Telecential Communications Limited
Partnership 2387692
West Herts
Northants
Swindon
Warwickshire
Northamptonshire
--------------------------------------------------------------------------
The registered office DRAGOON HOUSE
for the above listed 37 ARTILLERY LANE
company is: LONDON E1 7LT
- --------------------------------------------------------------------------------
CLAUSE C4.1, PAGE 35 is hereby amended as follows:
Customer's Purchase Objective is hereby revised from [Confidential Portion
Omitted] lines to [Confidential Portion Omittted];
C4.1 Supplier's fully discounted net price per Switch line shown in
the table below, includes the [Confidential Portion Omitted] per
Switch. The relevant price per line for any Order shall be
determined by applying the prevailing Purchase Objective
effective on the date of such Order, as defined in Clause C7, to
the table below.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
- --------------------------------------------
- --------------------------------------------------------------------------------
[CONFIDENTIAL PORTION OMITTED]
-----------------------------------------------------------
LINES LINES LINES LINES LINES
- --------------------------------------------------------------------------------
- ---------------------
PURCHASE OBJECTIVE
- ---------------------
- ---------------------
HOST PRICE PER LINE:
- ---------------------
- ---------------------
SNSE PRICE PER LINE:
- ---------------------
- ---------------------
RSC PRICE PER LINE: [Confidential Portion Omitted
- ---------------------
- ---------------------
RLCM PRICE PER LINE:
- ---------------------
- ---------------------
SRU PRICE PER LINE:
- --------------------------------------------------------------------------------
<PAGE>
Page 4
No retrospective price adjustments will be made to previous Purchases upon
Consortium achieving the next pricing level.
The above stated price per line includes the Product(s) as listed in
Appendix 2, entitled "Price Per Line" attached hereto and by this
reference incorporated into this Agreement and Software as defined in
Attachment K of the Proposal, and Services including but not limited to
[Confidential Portion Omitted]. In the case of Switch remotes, (RSC,
RLCM and SRU), the price includes [Confidential Portion Omitted]. These
prices include all customs and import duties, but exclude VAT.
CLAUSE C7.1.1 is hereby amended to show Customer's revised Purchase Objective
following the inclusion of TeleWest's Scotland franchises, as follows:
C7.1.1 Customer's initial Purchase Objective is detailed below
("Initial Purchase Objective")
[Confidential Portion Omitted]
<PAGE>
Page 5
CLAUSE C19 PAGE 41 is hereby amended as follows:
C19 EMERGENCY REPLACEMENT
C19.1 In the event that an emergency or catastrophic event affects any
Switch which Customer has purchased from Supplier, Supplier
agrees to immediately provide an emergency back-up Switch which
may be utilised by Customer until a replacement Switch arrives.
Supplier agrees to retain such emergency back-up Switch as well
as an emergency stock of Product(s), Software and sufficient
numbers of trained personnel to provide Services in the event of
an emergency. Such Switch shall be capable of serving not less
than 1,000 lines. In the event Customer orders a replacement
Switch from Supplier, Supplier agrees that such Switch shall have
emergency priority in Supplier's manufacturing and production
schedule.
C19.2 Supplier shall provide to Customer a telephone number at which
Customer may obtain emergency replacement parts twenty four (24)
hours a day, seven (7) days a week.
C19.3 SUPPLIER SHALL HAVE AVAILABLE SUCH EMERGENCY SWITCH DESCRIBED
HEREUNDER BY A DATE TO BE MUTUALLY AGREED.
C19.4 CONSORTIUM AND SUPPLIER AGREE TO WORK TOGETHER IN FORMULATING A
DETAILED DISASTER RECOVERY CONTINGENCY PLAN, INCLUDING TECHNICAL
SPECIFICATION, TIMES SCALES AND COMMERCIAL TERMS, IN THE EVENT
THAT AN EMERGENCY OR CATASTROPHIC EVENT AFFECTS ANY SWITCH WHICH
CUSTOMER HAS PURCHASED FROM SUPPLIER.
CLAUSE C24.1, PAGE 44 is hereby amended as follows:
The initial training days are hereby increased from one hundred fifty (150)
student days to one hundred seventy (170) student days, now stated as follows:
C24.1 Upon execution of this Agreement, Supplier will provide an
initial credit for ONE HUNDRED AND SEVENTY (170) student days of
training ("Training Credit") for the Consortium; one hundred
TWENTY (120) student days for TeleWest and fifty (50) student
days for Encom. In addition, for each Switch Ordered by Customer,
Supplier shall provide an additional forty (40) student days per
Switch Ordered hereunder by Customer. Training Credits may be
pooled and allocated by Customer at its discretion.
<PAGE>
Page 6
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- --------------------------- -------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTHERN TELECOM EUROPE LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------------ ---------------------- ----------
authorised signature date authorised signature date
</TABLE>
Larry Carleton Pete Meldrum
- ---------------------------------- ------------------------------------
print or type name of signatory print or type name of signatory
President and Chief Operating Officer, TeleWestGeneral Manager
- --------------------------------------------------------------------------------
title title
UNITED ARTISTS COMMUNICATIONS (SCOTLAND) VENTURE
BY EDINBURGH CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION EDINBURGH, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 7
UNITED ARTISTS COMMUNICATIONS (NORTH EAST) PARTNERSHIP
BY TYNESIDE CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION TYNESIDE, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services. TeleWest
----------------------------------------------------------
title
AVON CABLE JOINT VENTURE
BY AVON CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION AVON, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 8
UNITED ARTISTS COMMUNICATIONS (THAMES ESTUARY) PARTNERSHIP
BY ESTUARIES CABLE LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION ESTUARIES, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
LONDON SOUTH CABLE PARTNERSHIP
BY UNITED CABLE (LONDON SOUTH) LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION UK. INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 9
CABLE LONDON PLC
- ------------------------------ -----------
authorised signature date
Gerald Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Cable London plc
- ------------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ------------------------------ -----------
authorised signature date
Edward Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Birmingham Cable Limited
- ------------------------------------------------
title
WINDSOR TELEVISION LIMITED
- ------------------------------ -----------
authorised signature date
Philippe Galteau
- ------------------------------------------------
print or type name of signatory
Director, Winsor Televisiob Limited
- ------------------------------------------------
title
UNITED ARTISTS COMMUNICATIONS (COTSWOLDS) LIMITED
- ------------------------------ -----------
authorised signature date
Larry Carleton
- ------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
- ------------------------------------------------
title
<PAGE>
Page 10
ENCOM CABLE TV AND TELECOMMUNICATIONS
- ------------------------------ ------------
authorised signature date
John Sheridan
- ------------------------------------------------
print or type name of signatory
Managing Director and Chief Executive Officer, ENCOM
- ----------------------------------------------------
title
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
- ------------------------------ ------------
authorised signature date
Vernon Achber
- ------------------------------------------------
print or type name of signatory
President and Chief Executive Officer, CUC Cablevision (UK) LTD. acting for
and on behalf of Telecential Communications Limited Partnership
- ---------------------------------------------------------------------------
title
<PAGE>
AMENDMENT NO. 4
TO THE TELEWEST GROUP GPA
This Amendment No. 4, dated the 10th day of December 1993, shall be deemed
effective as of the first day of December 1993, by and between the companies
listed under Exhibit A in the General Purchasing Agreement (GPA), dated 1 March
1993 ("Customer"), and Northern Telecom Europe Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 2, dated 29 October 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 3, dated 12 November 1993; and
WHEREAS, Customer and Supplier agree to further amend the GPA pursuant to the
terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
TITLE PAGE is hereby amended as follows:
The contract name is hereby amended to include Jones Cable Group Limited;
- --------------------------------------------------------------------------------
TELEWEST GROUP
ENCOM CABLE TV & TELECOMMUNICATIONS LTD
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
JONES CABLE GROUP LIMITED
GENERAL PURCHASING AGREEMENT
NTE-GPA0001
- --------------------------------------------------------------------------------
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
<PAGE>
Page 2
CLAUSE 1.1.6, PAGE 1 is hereby modified as follows:
The definition of "Consortium" is hereby revised to include Jones Cable Group
Limited, now stated as follows: 1.1.6. "Consortium" for the purposes of this
Agreement means all Customers listed under Exhibit A subject to Clause 2.40
entitled 'Several Liability' and all actions to be taken by Consortium hereunder
shall be taken respectively by: 1)TeleWest Communications Group Limited
("TeleWest") as the representative for those Customers listed as TeleWest wholly
owned franchises under Section 1, Exhibit A and for those Customers listed as
Limited Companies under Section 2, Exhibit A; and 2) Encom Cable TV and
Telecommunications Ltd ("Encom") as the representative for those Customers
listed as Encom wholly owned franchises under Section 3, Exhibit A; and 3)
Telecential Communications Limited Partnership entering into agreement for
itself and on behalf of Telecential Communications (Herts) Limited Partnership
and Telecential Communications (Northants) Limited Partnership ("Telecential")
as the representative for those Customers listed as Telecential wholly owned
franchises under Section 4, Exhibit A AND 4) JONES CABLE GROUP LIMITED ("JONES")
as the representative for those Customers listed as Jones wholly owned
franchises under Section 5 Exhibit A;
CLAUSE 2.8, PAGE 6 is hereby amended as follows:
Reference to Exhibit E Appendix 7 for Jones Cable Group Limited is hereby added
now stated as follows:
2.8 FINANCING
Supplier agrees to provide financing to those Customers listed in Exhibit E,
Appendix 1, together with the amounts of their individual facilities for up to
[Confidential Portion Omitted] in aggregate Purchases under this Agreement
pursuant to Lease Purchase Agreements substantially in the form of Exhibit E,
Appendix 2 in the case of all Customers under common control with TeleWest;
substantially in the form of Exhibit E, Appendix 3 in the case of Birmingham
Cable Limited and Cable London plc; and substantially in the form of Exhibit E,
Appendix 4 in the case of Windsor Television Limited. Supplier also agrees to
provide financing: 1) to United Artists (Scotland) Venture and United Artists
(Cotswolds) Limited, to a combined facility of up to [Confidential Portion
Omitted] in aggregrate Purchases under this Agreement pursuant to Lease Purchase
Agreements substantially in the form of Exhibit E, Appendix 5; 2) to
Telecential, substantially in the form of Exhibit E, Appendix 6; AND 3) JONES
CABLE GROUP LIMITED SUBSTANTIALLY IN THE FORM OF EXHIBIT E APPENDIX 7. The
relevant financing agreement shall be entered into by Supplier and Customer that
elects to finance any Purchases prior to such Customer placing its initial Order
hereunder. In the event that a Customer elects to finance Purchases in
accordance with such Lease Purchase Agreement, Supplier shall issue invoices for
such Purchases in accordance with Clause 2.7, except that such invoices shall be
for the full amount due, and such invoices shall be deemed to be paid upon
inclusion of the amounts covered thereby in an Equipment Schedule under a Lease
Purchase Agreement. The financing of Purchases pursuant to a Lease Purchase
Agreement shall be without prejudice to the rights of Customer under this
Agreement with respect to such Purchases, including without limitation
Customer's right not to accept non-conforming Purchases.
CLAUSE 2.48, PAGE 19 is hereby amended as follows:
Jones are hereby added as a party to be notified with all correspondence
required under this Agreement, now stated as follows:
2.48 NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon
<PAGE>
Page 3
receipt when properly addressed by Recorded or Registered Post or other delivery
service to the following addresses:
CUSTOMERS :
---------
TeleWest Communications Group Ltd. Encom Cable TV &
Telecommunications Ltd
Attn : Contract Manager Attn : Contract Manager
Materials Management Department 2 Millharbour
Unit 1, Genesis Business Park London E14 9TE
Woking, Surrey, GU21 5RW
Telecential Communications Ltd Partnership Jones Cable Group Limited
Attn : Contract Manager Attn : Contract Manager
Link 2 Beacontree Plaza, Gillette Way, Jones House
Basingstoke Road, 9 Greycaine Road
Reading RG2 0BS Watford Hertfordshire WD2 4JP
SUPPLIER :
--------
Commercial Manager; Cable Telephony
Northern Telecom Europe Limited
Public Switching Division
Northern Telecom House
St. Cloud Way
Maidenhead, Berks SL6 8XB
Addresses may be changed by written notices to the parties.
EXHIBIT A, PAGE 30 is hereby amended as follows:
Section 3 is hereby added to incorporate Jones franchises as Customers, now
stated as follows:
EXHIBIT A CUSTOMERS
- ---------------------------
This Exhibit A is attached to and made part of that certain General Purchase
dated 1 March 1993 ("Agreement"), by and between Customer as defined in the
Agreement ("Customer") and Northern Telecom Europe Limited ("Supplier").
- --------------------------------------------------------------------------------
FRANCHISE FRANCHISE HOLDER REG. NO.
- --------------------------------------------------------------------------------
1. TELEWEST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Avon Avon Cable Joint Venture
--------------------------------------------------------------------------
Croydon, Kingston and London South Cable Partnership
Richmond and Merton and
Sutton
--------------------------------------------------------------------------
North Thames Estuary United Artists Communications (Thames Estuary)
South Thames Estuary Partnership
--------------------------------------------------------------------------
<PAGE>
Page 4
--------------------------------------------------------------------------
Edinburgh and United Artists Communications (Scotland) Venture
Livingston, Uddingston,
Glenrothes, Dundee and
Perth.
--------------------------------------------------------------------------
Tyneside United Artists Communications (North East)
Partnership
- --------------------------------------------------------------------------------
2. LIMITED COMPANIES
- --------------------------------------------------------------------------------
Birmingham Birmingham Cable Limited 2170379
--------------------------------------------------------------------------
The registered office CABLE PHONE HOUSE,
for the above listed SMALL HEATH BUSINESS PARK,
company is: TALBOT WAY, SMALL HEATH,
BIRMINGHAM. B10 OHJ
--------------------------------------------------------------------------
Camden, Enfield, Cable London plc 1794264
Hackney and Islington,
Haringey
--------------------------------------------------------------------------
The registered office 100 CHALK FARM ROAD
for the above listed LONDON NW1 8EH
company is:
--------------------------------------------------------------------------
Hillingdon and Hounslow, Windsor Television Limited 1745542
Windsor
--------------------------------------------------------------------------
The registered office CABLE HOUSE
for the above listed WATERSIDE DRIVE
company is: LANGLEY, BERKSHIRE. SL3 6EZ
--------------------------------------------------------------------------
Cotswolds TeleWest Communications Group Limited 2514287
United Artists Communications
(Cotswolds) Limited 1743081
- --------------------------------------------------------------------------------
3. ENCOM WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Tower Hamlet/Newham Encom Cable TV and
Telecommunications Ltd 1870928
Greater London East
Havering
Waltham Forest
Dartford
Epping Forest
--------------------------------------------------------------------------
The registered office 4 CARLTON GARDENS
for the above listed PALL MALL
company is: LONDON SW1Y 5AA
- --------------------------------------------------------------------------------
4 TELECENTIAL WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Thames Valley Telecential Communications Limited
Partnership 2387692
West Herts
Northants
Swindon
Warwickshire
Northamptonshire
--------------------------------------------------------------------------
<PAGE>
Page 5
--------------------------------------------------------------------------
The registered office DRAGOON HOUSE
for the above listed 37 ARTILLERY LANE
company is: LONDON E1 7LT
- --------------------------------------------------------------------------------
5 JONES WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
South Herts Jones Cable Group of South Hertfordshire Limited
--------------------------------------------------------------------------
Leeds Jones Cable Group of Leeds Limited
- --------------------------------------------------------------------------------
<PAGE>
Page 6
CLAUSE C4.1, PAGE 35 is hereby amended as follows:
Customer's Purchase Objective is hereby revised from [Confidential Portion
Omitted] lines to [Confidential Portion Omitted] ;
C4.1 Supplier's fully discounted net price per Switch line shown in
the table below, includes the [Confidential Portion Omitted] per
Switch. The relevant price per line for any Order shall be
determined by applying the prevailing Purchase Objective
effective on the date of such Order, as defined in Clause C7, to
the table below.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
- --------------------------------------------------------------------------------
[Confidential Portion Omitted]
----------------------------------------------------------
----------------------------------------------------------
LINES LINES LINES LINES LINES
----------------------------------------------------------
PURCHASE OBJECTIVE
- ----------------------
- ----------------------
HOST PRICE PER LINE:
- ----------------------
- ----------------------
SNSE PRICE PER LINE:
- ----------------------
- ----------------------
RSC PRICE PER LINE: [Confidential Portion Omitted]
- ----------------------
- ----------------------
RLCM PRICE PER LINE:
- ----------------------
- ----------------------
SRU PRICE PER LINE:
- --------------------------------------------------------------------------------
No retrospective price adjustments will be made to previous Purchases upon
Consortium achieving the next pricing level.
The above stated price per line includes the Product(s) as listed in
Appendix 2, entitled "Price Per Line" attached hereto and by this reference
incorporated into this Agreement and Software as defined in Attachment K of
the Proposal, and Services including but not limited to [Confidential
Portion Omitted.] In the case of Switch remotes, (RSC, RLCM and SRU), the
price includes [Confidential Portion Omitted.]. These prices include all
customs and import duties, but exclude VAT.
CLAUSE C7.1.1 is hereby amended to show Customer's revised Purchase Objective
following the inclusion of Jones' franchises, as follows:
[Confidential Portion Omitted.]
<PAGE>
Page 7
[Confidential Portion Omitted.]
CLAUSE C12.2, PAGE 40 is hereby amended as follows:
[Confidential Portion Omitted.]
CLAUSE C25.1.3, AMENDMENT 2 PAGE 7 is hereby amended as follows to detail the
Marketing Support provided to Jones:
<PAGE>
Page 8
Supplier agrees to provide a dedicated fully skilled marketing resource to
Telecential for a period of 3 (three) monthsAND ALSO TO PROVIDE A DEDICATED
FULLY SKILLED MARKETING RESOURCE TO JONES FOR A PERIOD OF 3 (THREE) MONTHS.
<PAGE>
Page 9
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- --------------------------- -------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTHERN TELECOM EUROPE LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------------ ---------------------- ----------
authorised signature date authorised signature date
</TABLE>
Larry Carleton Pete Meldrum
- ---------------------------------- ------------------------------------
print or type name of signatory print or type name of signatory
President and Chief Operating Officer, TeleWestGeneral Manager
- --------------------------------------------------------------------------------
title title
UNITED ARTISTS COMMUNICATIONS (SCOTLAND) VENTURE
BY EDINBURGH CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION EDINBURGH, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 10
UNITED ARTISTS COMMUNICATIONS (NORTH EAST) PARTNERSHIP
BY TYNESIDE CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION TYNESIDE, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services. TeleWest
----------------------------------------------------------
title
AVON CABLE JOINT VENTURE
BY AVON CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION AVON, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 11
UNITED ARTISTS COMMUNICATIONS (THAMES ESTUARY) PARTNERSHIP
BY ESTUARIES CABLE LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION ESTUARIES, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
LONDON SOUTH CABLE PARTNERSHIP
BY UNITED CABLE (LONDON SOUTH) LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION UK. INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 12
CABLE LONDON PLC
- ------------------------------ -----------
authorised signature date
Gerald Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Cable London plc
- ------------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ------------------------------ -----------
authorised signature date
Edward Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Birmingham Cable Limited
- ------------------------------------------------
title
WINDSOR TELEVISION LIMITED
- ------------------------------ -----------
authorised signature date
Philippe Galteau
- ------------------------------------------------
print or type name of signatory
Director, Windsor Television Limited
- ------------------------------------------------
title
UNITED ARTISTS COMMUNICATIONS (COTSWOLDS) LIMITED
- ------------------------------ -----------
authorised signature date
Larry Carleton
- ------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
- ------------------------------------------------
title
<PAGE>
Page 13
ENCOM CABLE TV AND TELECOMMUNICATIONS
- ------------------------------ ------------
authorised signature date
John Sheridan
- ------------------------------------------------
print or type name of signatory
Managing Director and Chief Executive Officer, ENCOM
- ----------------------------------------------------
title
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
- ------------------------------ ------------
authorised signature date
Vernon Achber
- ------------------------------------------------
print or type name of signatory
President and Chief Executive Officer, CUC Cablevision (UK) LTD. acting for
and on behalf of Telecential Communications Limited Partnership
- --------------------------------------------------------------------------------
title
JONES CABLE GROUP LIMITED
- ------------------------------ ------------
authorised signature date
Alan Bates
- ------------------------------------------------
print or type name of signatory
Managing Director, Jones Cable Group Limited
- --------------------------------------------------------------------------------
title
<PAGE>
AMENDMENT NO. 5
TO THE TELEWEST GROUP GPA
This Amendment No. 5, dated the 24th day of May 1994, shall be deemed effective
as of the first day of June 1994, by and between the companies listed under
Exhibit A in the General Purchasing Agreement (GPA), dated 1 March 1993
("Customer"), and Northern Telecom Europe Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 2, dated 29 October 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 3, dated 12 November 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 4, dated 10 December 1993; and
WHEREAS, Customer and Supplier agree to further amend the GPA pursuant to the
terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
TITLE PAGE is hereby amended as follows:
The contract name is hereby amended to include IVS Cable Holdings Limited;
- --------------------------------------------------------------------------------
TELEWEST GROUP
ENCOM CABLE TV & TELECOMMUNICATIONS LTD
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
JONES CABLE GROUP LIMITED
IVS CABLE HOLDINGS LIMITED
GENERAL PURCHASING AGREEMENT
NTE-GPA0001
- --------------------------------------------------------------------------------
PROPRIETARY
------------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
<PAGE>
Page 2
PROPRIETARY
------------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
CLAUSE 1.1.6, PAGE 1 is hereby amended as follows:
The definition of "Consortium" is hereby revised to include IVS Cable Holdings
Limited, now stated as follows:
1.1.6. "Consortium" for the purposes of this Agreement means all Customers
listed under Exhibit A subject to Clause 2.40 entitled 'Several Liability' and
all actions to be taken by Consortium hereunder shall be taken respectively by:
1)TeleWest Communications Group Limited ("TeleWest") as the representative for
those Customers listed as TeleWest wholly owned franchises under Section 1,
Exhibit A and for those Customers listed as Limited Companies under Section 2,
Exhibit A; and 2) Encom Cable TV and Telecommunications Ltd ("Encom") as the
representative for those Customers listed as Encom wholly owned franchises under
Section 3, Exhibit A; and 3) Telecential Communications Limited Partnership
entering into agreement for itself and on behalf of Telecential Communications
(Herts) Limited Partnership and Telecential Communications (Northants) Limited
Partnership ("Telecential") as the representative for those Customers listed as
Telecential wholly owned franchises under Section 4, Exhibit A and 4) Jones
Cable Group Limited ("Jones") as the representative for those Customers listed
as Jones wholly owned franchises under Section 5 Exhibit A; and 5) IVS CABLE
HOLDINGS LIMITED ("IVS") AS THE REPRESENTATIVE FOR THOSE CUSTOMERS LISTED AS IVS
WHOLLY OWNED FRANCHISES UNDER SECTION 6 EXHIBIT A.
CLAUSE 2.48, PAGE 19 is hereby amended as follows:
IVS are hereby added as a party to be notified with all correspondence required
under this Agreement, now stated as follows:
2.48 NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed by
Recorded or Registered Post or other delivery service to the following
addresses:
CUSTOMERS :
---------
TeleWest Communications Group Ltd. Encom Cable TV & Telecommunications
Ltd
Attn : Contract Manager Attn : Senior Manager- Network
Switching
Materials Management Department 5 Limeharbour
Unit 1, Genesis Business Park London E14 9TY
Woking, Surrey, GU21 5RW
Telecential Communications Ltd Partnership Jones Cable Group Limited
Attn : Contract Manager Attn : Contract Manager
Link 2 Beacontree Plaza, Gillette Way, Jones House
Basingstoke Road, 9 Greycaine Road
Reading RG2 0BS Watford Hertfordshire WD2 4JP
IVS Cable Holdings Limited.
Attn: Contract Manager
284 Weyhill Road
Andover
Hampshire
SP10 3LF
<PAGE>
Page 3
SUPPLIER :
--------
Commercial Manager; Cable Telephony
Northern Telecom Europe Limited
Public Switching Division
Northern Telecom House
St. Cloud Way
Maidenhead, Berks SL6 8XB
Addresses may be changed by written notices to the parties.
EXHIBIT A, PAGE 30 is hereby amended as follows:
Section 6 is hereby added to incorporate IVS franchises as Customers, now stated
as follows:
EXHIBIT A CUSTOMERS
- ---------------------------
This Exhibit A is attached to and made part of that certain General Purchase
dated 1 March 1993 ("Agreement"), by and between Customer as defined in the
Agreement ("Customer") and Northern Telecom Europe Limited ("Supplier").
- --------------------------------------------------------------------------------
FRANCHISE FRANCHISE HOLDER REG. NO.
- --------------------------------------------------------------------------------
1. TELEWEST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Avon Avon Cable Joint Venture
-----------------------------------------------------------------------------
Croydon, Kingston and London South Cable Partnership
Richmond and Merton and
Sutton
-----------------------------------------------------------------------------
North Thames Estuary United Artists Communications (Thames Estuary)
South Thames Estuary Partnership
-----------------------------------------------------------------------------
Edinburgh and United Artists Communications (Scotland) Venture
Livingston, Uddingston,
Glenrothes, Dundee and
Perth.
- --------------------------------------------------------------------------------
Tyneside United Artists Communications (North East)
Partnership
- --------------------------------------------------------------------------------
2. LIMITED COMPANIES
- --------------------------------------------------------------------------------
Birmingham Birmingham Cable Limited 2170379
-----------------------------------------------------------------------------
The registered office CABLE PHONE HOUSE,
for the above listed SMALL HEATH BUSINESS PARK,
company is: TALBOT WAY, SMALL HEATH,
BIRMINGHAM. B10 OHJ
-----------------------------------------------------------------------------
<PAGE>
Page 4
-----------------------------------------------------------------------------
Camden, Enfield, Cable London plc 1794264
Hackney and Islington,
Haringey
-----------------------------------------------------------------------------
The registered office 100 CHALK FARM ROAD
for the above listed LONDON NW1 8EH
company is:
- --------------------------------------------------------------------------------
Hillingdon and Hounslow, Windsor Television Limited 1745542
Windsor
-----------------------------------------------------------------------------
The registered office CABLE HOUSE
for the above listed WATERSIDE DRIVE
company is: LANGLEY, BERKSHIRE. SL3 6EZ
-----------------------------------------------------------------------------
Cotswolds TeleWest Communications Group Limited 2514287
United Artists Communications (Cotswolds)
Limited 1743081
- --------------------------------------------------------------------------------
3. ENCOM WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Tower Hamlet/Newham Encom Cable TV and Telecommunications Ltd 1870928
Greater London East
Havering
Waltham Forest
Dartford
Epping Forest
-----------------------------------------------------------------------------
The registered office 4 CARLTON GARDENS
for the above listed PALL MALL
company is: LONDON SW1Y 5AA
- --------------------------------------------------------------------------------
4 TELECENTIAL WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Thames Valley Telecential Communications Limited
Partnership 2387692
West Herts
Northants
Swindon
Warwickshire
Northamptonshire
-----------------------------------------------------------------------------
The registered office DRAGOON HOUSE
for the above listed 37 ARTILLERY LANE
company is: LONDON E1 7LT
- --------------------------------------------------------------------------------
5 JONES WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
South Herts Jones Cable Group of South Hertfordshire Limited
-----------------------------------------------------------------------------
Leeds Jones Cable Group of Leeds Limited
- --------------------------------------------------------------------------------
6 IVS CABLE HOLDINGS LIMITED WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Andover Andover Cablevision Limited
- --------------------------------------------------------------------------------
Salisbury Wessex Cable Limited
- --------------------------------------------------------------------------------
Stafford Stafford Communications Limited
- --------------------------------------------------------------------------------
<PAGE>
Page 5
- --------------------------------------------------------------------------------
Oxford Oxford Cable Limited
- --------------------------------------------------------------------------------
<PAGE>
Page 6
CLAUSE C4.1, PAGE 35 is hereby amended as follows:
Customer's Purchase Objective is hereby revised from [Confidential Portion
Omitted] lines to [Confidential Portion Omitted] and the SNSE pricing is
adjusted in line with the SuperNode Host Price Per Line with a separate initial
price for a core plus a minimum line size for a orders for SNSE.
C4.1 Supplier's fully discounted net price per Switch line shown in
the table below, includes FOR [CONFIDENTIAL PORTION OMITTED] PER
SWITCH AND FOR [CONFIDENTIAL PORTION OMITTED] PER SWITCH . The
relevant price per line for any Order shall be determined by
applying the prevailing Purchase Objective effective on the date
of such Order, as defined in Clause C7, to the table below.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
- --------------------------------------------
- --------------------------------------------------------------------------------
[CONFIDENTIAL PORTION OMITTED]
------------------------------------------------------
LINES LINES LINES LINES LINES
- --------------------------------------------------------------------------------
- ---------------------
PURCHASE OBJECTIVE
- ---------------------
- ---------------------
HOST PRICE PER LINE:
- ---------------------
- ---------------------
SNSE PRICE PER LINE:
- ---------------------
- ---------------------
RSC PRICE PER LINE: [Confidential Portion Omitted]
- ---------------------
- ---------------------
RLCM PRICE PER LINE:
- ---------------------
- ---------------------
SRU PRICE PER LINE:
- --------------------------------------------------------------------------------
No retrospective price adjustments will be made to previous Purchases upon
Consortium achieving the next pricing level.
The above stated price per line, ACCEPT AS STATED BELOW WITH REGARD TO
SNSE, includes the Product(s) as listed in Appendix 2, entitled "Price Per
Line" attached hereto and by this reference incorporated into this
Agreement and Software as defined in Attachment K of the Proposal, and
Services including but not limited to [Confidential Portion Omitted]. In
the case of Switch remotes, (RSC, RLCM and SRU), the price includes
[Confidential Portion Omitted]. These prices include all customs and import
duties, but exclude VAT. [CONFIDENTIAL PORTION OMITTED]
CLAUSE C7.1.1 is hereby amended to show Customer's revised Purchase Objective
following the inclusion of IVS' franchises, as follows:
C7.1.1 Customer's initial Purchase Objective is detailed below
("Initial Purchase Objective")
<PAGE>
Page 7
[Confidential Portion Omitted]
<PAGE>
Page 8
CLAUSE C25.1.3, AMENDMENT 2 PAGE 7 is hereby amended to detail the Marketing
Support provided to IVS now restated as follows:
SUPPLIER AGREES TO PROVIDE A DEDICATED FULLY SKILLED MARKETING RESOURCE
INDIVIDUALLY, TO TELECENTIAL, JONES AND IVS EACH FOR A PERIOD OF 3 (THREE)
MONTHS.
<PAGE>
Page 9
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- --------------------------- -------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTHERN TELECOM EUROPE LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------------ ---------------------- ----------
authorised signature date authorised signature date
</TABLE>
Larry Carleton Steve Pusey
- ---------------------------------- ------------------------------------
print or type name of signatory print or type name of signatory
President and Chief Operating Officer, TeleWestGroup Director CATV
- --------------------------------------------------------------------------------
title title
UNITED ARTISTS COMMUNICATIONS (SCOTLAND) VENTURE
BY EDINBURGH CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION EDINBURGH, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 10
UNITED ARTISTS COMMUNICATIONS (NORTH EAST) PARTNERSHIP
BY TYNESIDE CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION TYNESIDE, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services. TeleWest
----------------------------------------------------------
title
AVON CABLE JOINT VENTURE
BY AVON CABLE LIMITED PARTNERSHIP, ITS GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION AVON, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 11
UNITED ARTISTS COMMUNICATIONS (THAMES ESTUARY) PARTNERSHIP
BY ESTUARIES CABLE LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION ESTUARIES, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
LONDON SOUTH CABLE PARTNERSHIP
BY UNITED CABLE (LONDON SOUTH) LIMITED PARTNERSHIP, GENERAL PARTNER
BY UNITED ARTISTS CABLE TELEVISION UK. INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Larry Carleton
----------------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
----------------------------------------------------------
title
BY US WEST CABLE TELECOM, INC., GENERAL PARTNER
BY ------------------------------ --------------
authorised signature date
Lynn Rexroth
----------------------------------------------------------
print or type name of signatory
Executive Vice-President, Telecoms Services, TeleWest
----------------------------------------------------------
title
<PAGE>
Page 12
CABLE LONDON PLC
- ------------------------------ -----------
authorised signature date
Gerald Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Cable London plc
- ------------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ------------------------------ -----------
authorised signature date
Edward Campbell
- ------------------------------------------------
print or type name of signatory
Managing Director, Birmingham Cable Limited
- ------------------------------------------------
title
WINDSOR TELEVISION LIMITED
- ------------------------------ -----------
authorised signature date
Neil Johnson
- ------------------------------------------------
print or type name of signatory
Director, Windsor Television Limited
- ------------------------------------------------
title
UNITED ARTISTS COMMUNICATIONS (COTSWOLDS) LIMITED
- ------------------------------ -----------
authorised signature date
Larry Carleton
- ------------------------------------------------
print or type name of signatory
President and Chief Operating Officer, TeleWest
- ------------------------------------------------
title
<PAGE>
Page 13
ENCOM CABLE TV AND TELECOMMUNICATIONS
- ------------------------------ ------------
authorised signature date
John Sheridan
- ------------------------------------------------
print or type name of signatory
Managing Director and Chief Executive Officer, ENCOM
- ----------------------------------------------------
title
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
- ------------------------------ ------------
authorised signature date
Vernon Achber
- ------------------------------------------------
print or type name of signatory
President and Chief Executive Officer, CUC Cablevision (UK) LTD. acting for
and on behalf of Telecential Communications Limited Partnership
- --------------------------------------------------------------------------------
title
JONES CABLE GROUP LIMITTED
- ------------------------------ ------------
authorised signature date
Alan Bates
- ------------------------------------------------
print or type name of signatory
Managing Director, Jones Cable Group Limited
- --------------------------------------------------------------------------------
title
IVS CABLE HOLDINGS LIMITED
- ------------------------------ ------------
authorised signature date
Peter C Funk
- -------------------------------------------------
print or type name of signatory
Chairman, IVS Cable Holdings Limited
- --------------------------------------------------------------------------------
title
<PAGE>
AMENDMENT NO. 6
TO THE GENERAL PURCHASING AGREEMENT
NTE-GPA0001
This Amendment No. 6, dated this 29th day of June 1995 shall be deemed effective
as of the first day of December 1994, by and between the companies listed under
Exhibit A in the General Purchasing Agreement (GPA), dated 1 March 1993
("Customer"), and Nortel Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 2, dated 29 October 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 3, dated 12 November 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 4, dated 10 December 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 5, dated 24 May 1994; and
WHEREAS, Customer and Supplier agree to further amend the GPA pursuant to the
terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
<PAGE>
Page 2
TITLE PAGE is hereby amended to include Comcast Teesside Limited and Cambridge
Cable Limited and to amend reference to Encom Cable TV and Telecommunications
Ltd and Jones Cable Group Limited to Bell Cablemedia plc;
- --------------------------------------------------------------------------------
TELEWEST GROUP
- --------------------------------------------------------------------------------
BELL CABLEMEDIA PLC
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
IVS CABLE HOLDINGS LIMITED
COMCAST TEESSIDE LIMITED
CAMBRIDGE CABLE LIMITED
GENERAL PURCHASING AGREEMENT
NTE-GPA0001
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE
PARTIES TO THIS DOCUMENT
INTRODUCTION, Supplier's legal name is hereby corrected from "Northern Telecom
Europe Limited" to "Nortel Limited" now stated as follows:
1 INTRODUCTION
------------
This Agreement, dated 1 March 1993, is made by and between the companies listed
under Exhibit A attached hereto and by this reference incorporated into this
Agreement and identified herein ("Customer"), and NORTEL LIMITED, having its
registered office at Stafferton Way, Maidenhead, Berks SL6 1AY ("Supplier").
In consideration of the promises, mutual covenants and agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, Customer
and Supplier agree as follows:
<PAGE>
Page 3
CLAUSE 1.1.6, The definition of "Consortium" is hereby revised to include
Comcast Teesside Limited and Cambridge Cable Limited and to amend reference to
Encom Cable TV and Telecommunications Ltd and Jones Cable Group Limited to Bell
Cablemedia plc, now stated as follows:
1.1.6. "Consortium" for the purposes of this Agreement means all Customers
listed under Exhibit A subject to Clause 2.40 entitled 'Several Liability' and
all actions to be taken by Consortium hereunder shall be taken respectively by:
1)TeleWest Communications Group Limited ("TeleWest") as the representative for
those Customers listed as TeleWest wholly owned franchises under Section 1,
Exhibit A and for those Customers listed as Limited Companies under Section 2,
Exhibit A; and 2) BELL CABLEMEDIA PLC ("BCM") as the representative for those
Customers listed as BCM wholly owned franchises under Section 3, Exhibit A; and
3) Telecential Communications Limited Partnership entering into agreement for
itself and on behalf of Telecential Communications (Herts) Limited Partnership
and Telecential Communications (Northants) Limited Partnership ("Telecential")
as the representative for those Customers listed as Telecential wholly owned
franchises under Section 4, Exhibit A and 4) Section 5) Exhibt A NOT USED ; and
5) IVS Cable Holdings Limited ("IVS") as the representative for those Customers
listed as IVS wholly owned franchises under Section 6 Exhibit A. and 6) COMCAST
TEESSIDE LIMITED ("COMCAST") AS THE REPRESENTATIVE FOR THOSE CUSTOMERS LISTED AS
COMCAST WHOLLY OWNED FRANCHISES UNDER SECTION 7 EXHIBIT A. AND 7) CAMBRIDGE
CABLE LIMITED ("CAMBRIDGE") AS THE REPRESENTATIVE FOR THOSE CUSTOMERS LISTED AS
CAMBRIDGE WHOLLY OWNED FRANCHISES UNDER SECTION 8 EXHIBIT A
CLAUSE 2.8, is hereby amended to alter reference to Jones Cable Group Limited to
Bell Cablemedia plc now stated as follows:
2.8 FINANCING
Supplier agrees to provide financing to those Customers listed in Exhibit E,
Appendix 1, together with the amounts of their individual facilities for up to
[Confidential Portion Omitted] in aggregate Purchases under this Agreement
pursuant to Lease Purchase Agreements substantially in the form of Exhibit E,
Appendix 2 in the case of all Customers under common control with TeleWest;
substantially in the form of Exhibit E, Appendix 3 in the case of Birmingham
Cable Limited and Cable London plc; and substantially in the form of Exhibit E,
Appendix 4 in the case of Windsor Television Limited. Supplier also agrees to
provide financing: 1) to United Artists (Scotland) Venture and United Artists
(Cotswolds) Limited, to a combined facility of up to [Confidential Portion
Omitted] in aggregrate Purchases under this Agreement pursuant to Lease Purchase
Agreements substantially in the form of Exhibit E, Appendix 5; 2) to
Telecential, substantially in the form of Exhibit E, Appendix 6; and 3) BELL
CABLEMEDIA PLC NORTHERN REGION substantially in the form of Exhibit E appendix
7. The relevant financing agreement shall be entered into by Supplier and
Customer that elects to finance any Purchases prior to such Customer placing its
initial Order hereunder. In the event that a Customer elects to finance
Purchases in accordance with such Lease Purchase Agreement, Supplier shall issue
invoices for such Purchases in accordance with Clause 2.7, except that such
invoices shall be for the full amount due, and such invoices shall be deemed to
be paid upon inclusion of the amounts covered thereby in an Equipment Schedule
under a Lease Purchase Agreement. The financing of Purchases pursuant to a Lease
Purchase Agreement shall be without prejudice to the rights of Customer under
this Agreement with respect to such Purchases, including without limitation
Customer's right not to accept non-conforming Purchases.
CLAUSE 2.48, is hereby amended to add Comcast and Cambridge as parties to be
notified with all correspondence required under this Agreement, to alter
reference to Encom and Jones to BCM and to alter reference to Supplier's
registered name to Nortel Limited now stated as follows:
<PAGE>
Page 4
2.48 NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed by
Recorded or Registered Post or other delivery service to the following
addresses:
CUSTOMERS :
---------
TeleWest Communications Group Ltd. BELL CABLEMEDIA PLC
Attn : Contract Manager ATTN : GROUP DIRECTOR ENGINEERING
Materials Management Department FLOOR 3 COLNE HOUSE
Unit 1, Genesis Business Park WATFORD
Woking, Surrey, GU21 5RW HERTFORDSHIRE WD1 7EL
Telecential Communications Ltd Partnership IVS Cable Holdings Limited
Attn : Contract Manager Attn : Contract Manager
Link 2 Beacontree Plaza, Gillette Way, 284 Weyhill Road
Basingstoke Road, Andover
Reading RG2 0BS Hampshire SP10 3LF
CAMBRIDGE CABLE LIMITED. COMCAST TEESIDE LIMITED
ATTN: DIRECTOR OF TELECOMS NETWORKS ATTN: COMPANY SECRETARY
CAMBRIDGE SCIENCE PARK WELLINGTON COURT
MILTON ROAD DE HAVILLAND AVENUE
CAMBRIDGE PRESTON FARM
CB4 4WA STOCKTON-ON-TEES
CLEVELAND TS18 3TA
SUPPLIER :
--------
Commercial Manager; CATV ACCOUNT GROUP
NORTEL LIMITED
Northern Telecom House
St. Cloud Way
Maidenhead, Berks
SL6 8XB
Addresses may be changed by written notices to the parties.
EXHIBIT A, is hereby amended to incorporate Comcast and Cambridge franchises as
Customers, to amend reference to Encom and Jones to BCM, and to change reference
to Supplier's name to Nortel Limited now stated as follows:
EXHIBIT A CUSTOMERS
- ---------------------------
This Exhibit A is attached to and made part of that certain General Purchase
dated 1 March 1993 ("Agreement"), by and between Customer as defined in the
Agreement ("Customer") and NORTEL LIMITED ("Supplier").
<PAGE>
Page 5
- --------------------------------------------------------------------------------
FRANCHISE FRANCHISE HOLDER REG. NO.
- --------------------------------------------------------------------------------
1. TELEWEST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Avon Avon Cable Joint Venture
--------------------------------------------------------------------------
Croydon, Kingston and London South Cable Partnership
Richmond and Merton and
Sutton
--------------------------------------------------------------------------
North Thames Estuary United Artists Communications (Thames Estuary)
South Thames Estuary Partnership
--------------------------------------------------------------------------
Edinburgh and United Artists Communications (Scotland) Venture
Livingston, Uddingston,
Glenrothes, Dundee and
Perth.
--------------------------------------------------------------------------
Tyneside United Artists Communications (North East)
Partnership
- --------------------------------------------------------------------------------
2. LIMITED COMPANIES
- --------------------------------------------------------------------------------
Birmingham Birmingham Cable Limited 2170379
- --------------------------------------------------------------------------------
The registered office CABLE PHONE HOUSE,
for the above listed SMALL HEATH BUSINESS PARK,
company is: TALBOT WAY, SMALL HEATH,
BIRMINGHAM. B10 OHJ
--------------------------------------------------------------------------
Camden, Enfield, Cable London plc 1794264
Hackney and Islington,
Haringey
--------------------------------------------------------------------------
The registered office 100 CHALK FARM ROAD
for the above listed LONDON NW1 8EH
company is:
--------------------------------------------------------------------------
Hillingdon and Hounslow, Windsor Television Limited 1745542
Windsor
--------------------------------------------------------------------------
The registered office CABLE HOUSE
for the above listed WATERSIDE DRIVE
company is: LANGLEY, BERKSHIRE. SL3 6EZ
--------------------------------------------------------------------------
Cotswolds TeleWest Communications Group Limited 2514287
United Artists Communications
(Cotswolds) Limited 1743081
- --------------------------------------------------------------------------------
3. BCM WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Tower Hamlet/Newham, BELL CABLEMEDIA SOUTHERN REGION
Greater London East,
Havering,
Waltham Forest,
Dartford, Epping Forest,
ASHFORD, WATFORD,
AYLESBURY, WORCESTER
--------------------------------------------------------------------------
PETERBOROUGH, NORWICH, BELL CABLEMEDIA EASTERN REGION
WHITTLESEY,
GT YARMOUTH
--------------------------------------------------------------------------
<PAGE>
Page 6
LEEDS, WEARSIDE, YORK & BELL CABLEMEDIA NORTHERNREGION
HARROGATE
--------------------------------------------------------------------------
The registered office IB PORLAND PLACE 2735732
for the above listed LONDON W1N 3AA
company is:
- --------------------------------------------------------------------------------
4 TELECENTIAL WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Thames Valley Telecential Communications
Limited Partnership 2387692
West Herts
Northants
Swindon
Warwickshire
Northamptonshire
--------------------------------------------------------------------------
The registered office DRAGOON HOUSE
for the above listed 37 ARTILLERY LANE
company is: LONDON E1 7LT
- --------------------------------------------------------------------------------
5 NOT USED
- --------------------------------------------------------------------------------
6 IVS WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Andover Andover Cablevision Limited
--------------------------------------------------------------------------
Salisbury Wessex Cable Limited
--------------------------------------------------------------------------
Stafford Stafford Communications Limited
--------------------------------------------------------------------------
Oxford Oxford Cable Limited
- --------------------------------------------------------------------------------
7 COMCAST WHOLLY OWNED FRANCHISES
--------------------------------------------------------------------------
TEESSIDE COMCAST TEESSIDE LIMITED
--------------------------------------------------------------------------
DARLINGTON COMCAST DARLINGTON LIMITED
-------------------------------------------------------------------------------
8 CAMBRIDGE WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
CAMBRIDGE CAMBRIDGE CABLE LIMITED
--------------------------------------------------------------------------
HARLOW/BISHOPS-STORTFORD ANGLIA CABLE COMMUNICATIONS LIMITED
--------------------------------------------------------------------------
IPSWICH/COLCHESTER EAST COAST CABLE LIMITED
--------------------------------------------------------------------------
BRAINTREE SOUTHERN EAST ANGLIA CABLE LIMITED
- --------------------------------------------------------------------------------
EXHIBIT B, is hereby amended to change reference to Supplier's name to Nortel
Limited now stated as follows:
EXHIBIT B FAULT CLASSIFICATIONS
- ---------------------------------------
<PAGE>
Page 7
This Exhibit B is attached to and made part of that certain General Purchase
Agreement dated 1 March, 1993 ("Agreement"), by and between Customer as defined
in Exhibit A of the Agreement ("Customer") and NORTEL LIMITED ("Supplier").
<PAGE>
Page 8
EXHIBIT C, is hereby amended to change reference to Supplier's name to Nortel
Limited and to incorporate the Comcast Teeside Limited request for proposal and
the Nortel Limited response to this request in the Recitals, now stated as
follows:
EXHIBIT C SWITCH PURCHASES
This Exhibit C is attached to and made part of that certain General Purchasing
Agreement dated 1 March 1993 ("Agreement"), by and between Customer as defined
in Exhibit A ("Customer") of the Agreement and NORTEL LIMITED ("Supplier").
RECITALS
--------
WHEREAS, Customer issued Request for Proposal entitled "Switch/RFP/001" dated
November 1992, AND COMCAST TEESIDE LIMITED REISSUED THIS REQUEST FOR PROPOSAL
DATED SEPTEMBER 1994 (the "RFP") to Supplier soliciting a proposal for Switches
(defined herein);
WHEREAS, Supplier responded to Customer's RFP by submitting its proposal which
offered to provide local switches comprised of DMS-100 Products, Software and
Services ("Switch" or "Switches") as well as individual items of Products,
Software and Services dated 4 January 1993 AND TO COMCAST TEESSIDE LIMITED'S
REISSUED RFP DATED 21 OCTOBER 1994. ("Proposal");
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises and advantages to the
parties, the parties incorporate by reference and agree to the accuracy of the
above recitals and further agree as follows:
CLAUSE C4.1, is hereby amended to revise Customer's Purchase Objective from
[Confidential Portion Omitted] lines to [Confidential Portion Omitted];
C4.1 Supplier's fully discounted net price per Switch line shown in
the table below, includes for [Confidential Portion Omitted] per
Switch and for [Confidential Portion Omitted] per Switch . The
relevant price per line for any Order shall be determined by
applying the prevailing Purchase Objective effective on the date
of such Order, as defined in Clause C7, to the table below.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
- --------------------------------------------------------------------------------
[CONFIDENTIAL PORTION OMITTED]
------------------------------------------------------
LINES LINES LINES LINES 1LINES
- --------------------------------------------------------------------------------
PURCHASE OBJECTIVE
- -----------------------
HOST PRICE PER LINE:
- -----------------------
SNSE PRICE PER LINE:
- -----------------------
RSC PRICE PER LINE: [Confidential Portion Omitted]
- -----------------------
RLCM PRICE PER LINE:
- -----------------------
SRU PRICE PER LINE:
- --------------------------------------------------------------------------------
<PAGE>
Page 9
No retrospective price adjustments will be made to previous Purchases upon
Consortium achieving the next pricing level.
The above stated price per line, accept as stated below with regard to
SNSE, includes the Product(s) as listed in Appendix 2, entitled "Price Per
Line" attached hereto and by this reference incorporated into this
Agreement and Software as defined in Attachment K of the Proposal, and
Services including but not limited to [Confidential Portion Omitted]. In
the case of Switch remotes, (RSC, RLCM and SRU), the price includes
[Confidential Portion Omitted]. These prices include all customs and import
duties, but exclude VAT.
[Confidential Portion Omitted]
CLAUSE C7.1.1 is hereby amended to show Customer's revised Purchase Objective
following the inclusion of Comcast and Cambridge franchises and to amend
reference to Encom and Jones to BCM, now stated as follows:
C7.1.1 Customer's initial Purchase Objective is detailed below
("Initial Purchase Objective")
[Confidential Portion Omitted]
<PAGE>
Page 10
[Confidential Portion Omitted]
CLAUSE C12.2 is hereby amended to replace reference to Encom and Jones with BCM,
now stated as follows:
[Confidential Portion Omitted]
<PAGE>
Page 11
CLAUSE C24.1 is hereby amended to replace reference to Encom with BCM, now
stated as follows:
[Confidential Portion Omitted]
CLAUSE C25.1.2 is hereby amended to replace reference to Encom with BCM, now
stated as follows:
C25.1.2 [Confidential Portion Omitted]
CLAUSE C25.1.3 is hereby amended to replace reference to Jones with BCM, now
stated as follows:
C25.1.3 Supplier agrees to provide a dedicated fully skilled marketing
resource individually, to Telecential, BCM (NORTHERN REGION) and IVS
each for a period of 3 (three) months.
<PAGE>
Page 12
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- ------------------------------------- ------------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTEL LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------ ----------------------- -----
authorised signature date authorised signature date
</TABLE>
Danny Bryan Steve Pusey
- ------------------------------------ ------------------------------------
print or type name of signatory print or type name of signatory
Managing Director, TeleWest, Director CATV Account Group
- ----------------------------- ------------------------------------
title title
For and on behalf of
- --------------------
TeleWest Communications Group Limited
- -------------------------------------
United Artists Communications (Scotland) Venture
- ------------------------------------------------
United Artists Communications (North East) Partnership
- ------------------------------------------------------
Avon Cable Joint Venture
- ------------------------
United Artists Communications (South East) Partnership
- ------------------------------------------------------
London South Cable Partnership
- ------------------------------
United Artists Communications (Cotswolds) Limited
- -------------------------------------------------
CABLE LONDON PLC
- ---------------------------------- --------
authorised signature date
Gerald Campbell
- --------------------------------------------
print or type name of signatory
Managing Director, Cable London plc
- --------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ---------------------------------- --------
authorised signature date
Ron Lawley
- --------------------------------------------
print or type name of signatory
Managing Director, Birmingham Cable Limited
- --------------------------------------------
title
<PAGE>
Page 13
WINDSOR TELEVISION LIMITED
- ---------------------------------- --------
authorised signature date
Neil Johnson
- --------------------------------------------
print or type name of signatory
Managing Director,
- --------------------------------------------
title
BELL CABLEMEDIA PLC
- ---------------------------------- --------
authorised signature date
John Sheridan
- --------------------------------------------
print or type name of signatory
Chief Operating Officer,
- --------------------------------------------
title
TELECENTIAL COMMUNICATIONS PARTNERSHIP
- ---------------------------------- --------
authorised signature date
Vernon Achber
- --------------------------------------------
print or type name of signatory
President and Chief Executive Officer, CUC Cablevision (UK) LTD. acting for and
on behalf of Telecential Communications Partnership
- --------------------------------------------------------------------------------
title
IVS CABLE HOLDINGS LIMITED
- ---------------------------------- --------
authorised signature date
Peter C Funk
- --------------------------------------------
print or type name of signatory
Chairman, IVS Cable Holdings Limited
- --------------------------------------------
title
COMCAST TEESSIDE LIMITED
- ---------------------------------- --------
authorised signature date
Edward Cambell
- --------------------------------------------
print or type name of signatory
Managing Director, Comcast Teesside Limited
- --------------------------------------------
title
CAMBRIDGE CABLE LIMITED
- ---------------------------------- --------
authorised signature date
Edward Ying
- --------------------------------------------
print or type name of signatory
Managing Director, Cambridge Cable Limited
- --------------------------------------------
title
<PAGE>
AMENDMENT NO. 7
TO THE GENERAL PURCHASING AGREEMENT
NTE-GPA0001
This Amendment No. 7, dated the 30th day of June 1995 shall be deemed effective
as of the first day of May 1995 by and between the companies listed under
Exhibit A in the General Purchasing Agreement (GPA), dated 1 March 1993
("Customer"), and Nortel Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 2, dated 29 October 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 3, dated 12 November 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 4, dated 10 December 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 5, dated 24 May 1994; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 6, dated 29 June 1995 and
WHEREAS, Customer and Supplier agree to further amend the GPA pursuant to the
terms and conditions set forth herein.
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES
TO THIS DOCUMENT
<PAGE>
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
CLAUSE C4.1, is hereby amended principally to detail the incremental price per
line for Advanced Software now stated as follows:
C4.1 Supplier's fully discounted net price per Switch line shown in
the table below, includes for [Confidential Portion Omitted] per
Switch and [Confidential Portion Omitted] per Switch. The
relevant price per line for any Order, EXCLUDING THE INCREMENTAL
PRICE FOR ADVANCED SOFTWARE WHICH IS DETAILED IN CLAUSE C4.1.4
Shall be determined by applying the prevailing Purchase Objective
effective on the date of such Order, as defined in Clause C7, to
the table below.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
--------------------------------------------
------------------------------------------------------------------------
[CONFIDENTIAL PORTION OMITTED]
------------------------------------------------------------------------
LINES LINES LINES LINES LINES
------------------------------------------------------------------------
PURCHASE OBJECTIVE
---------------------
HOST PRICE PER LINE:
---------------------
SNSE PRICE PER LINE:
---------------------
RSC PRICE PER LINE: [Confidential Portion Omitted]
---------------------
RLCM PRICE PER LINE:
---------------------
SRU PRICE PER LINE:
------------------------------------------------------------------------
C4.1.1 No retrospective price adjustments will be made to previous
Purchases upon Consortium achieving the next pricing level.
C4.1.2 The above stated price per line, EXCEPT as stated below
with regard to SNSE, includes the Product(s) as listed in
Appendix 2, entitled "Price Per Line" attached hereto and
by this reference incorporated into this Agreement and BASE
Software as defined in Attachment K ISSUE 3 of the
Proposal, and Services including but not limited to
[Confidential Portion Omitted] . In the case of Switch
remotes, (RSC, RLCM and SRU) the price PER LINE
[Confidential Portion Omitted]. These prices include all
customs and import duties, but exclude VAT.
C4.1.3 [Confidential Portion Omitted]
C4.1.4 CUSTOMER SHALL PAY AND INCLUDE WITHIN EVERY ORDER FOR
ADDITIONAL SWITCH LINE CAPACITY WHETHER ON A HOST, SNSE,
RSC, RLCM, SRU OR SRU-S THE INCREMENTAL PRICE PER LINE AS
DETAILED IN CLAUSES C4.1.4.1 AND C4.1.4.2 FOR ADVANCED
SOFTWARE AS DESCRIBED AND DEFINED IN ATTACHMENT K ISSUE 3.
SUCH INCREMENTAL PRICE PER LINE SHALL APPLY RETROSPECTIVELY
TO LINES ORDERED PRIOR TO THIS AMENDMENT.
<PAGE>
Page 3
C4.1.4.1 FOR THE FIRST [Confidential Portion Omitted] OF
SUCH LINES INSTALLED BY SUPPLIER, AND ORDERED
BY ALL CUSTOMERS COLLECTIVELY, UNDER THIS
AGREEMENT, THE INCREMENTAL PRICE PER LINE FOR
ADVANCED SOFTWARE TO BE INCLUDED ON CUSTOMER'S
ORDER SHALL BE [Confidential Portion Omitted].
C4.1.4.2 FOR ALL LINES ORDERED, UNDER THIS AGREEMENT, BY
CUSTOMERS COLLECTIVELY BEYOND THE FIRST
[Confidential Portion Omitted] LINES AS
DESCRIBED IN CLAUSE C4.1.4.1 AND UP TO
[Confidential Portion Omitted] LINES, THE
INCREMENTAL PRICE PER LINE FOR ADVANCED
SOFTWARE TO BE INCLUDED ON CUSTOMER'S ORDER
SHALL BE [Confidential Portion Omitted]
C4.1.4.3 SUPPLIER AND CUSTOMER SHALL NEGOTIATE IN GOOD
FAITH A PRICE FOR ALL LINES ORDERED, UNDER THIS
AGREEMENT, BY CUSTOMERS COLLECTIVELY BEYOND THE
FIRST [Confidential Portion Omitted] LINES AS
DESCRIBED IN CLAUSES C4.1.4.1 AND C4.1.4.2.
C4.1.4.4 THE ADVANCED SOFTWARE RTU FEE SHALL APPLY TO
ALL SWITCH AND REMOTE LINES. NO FURTHER
DISCOUNTS OR DEDUCTIONS WHATSOEVER WILL APPLY
INCLUDING FOR INTERNAL USE (CLAUSE C6.4) AND
SOFTWARE UTILISATION DISCOUNT (CLAUSE C31.5).
C4.1.4.5 THE ADVANCED SOFTWARE RTU FEE HAS BEEN
CALCULATED ASSUMING AN ULTIMATE SWITCH SIZE OF
[Confidential Portion Omitted] LINES. CUSTOMERS
SHALL ENDEAVOUR TO EXTEND THEIR SWITCHES TO
ACHIEVE THIS ULTIMATE SWITCH SIZE.
CLAUSE C6.6, is hereby amended to incorporate the modified Software pricing and
packaging as detailed in Attachment K issue 3 and clauses C6.6.1, C6.6.2 and
C6,6.3 are hereby deleted. Clause 6.6 is now restated as follows:
C6.6 ADDITIONAL FEATURE SOFTWARE
ADDITIONAL FEATURE SOFTWARE INCLUDED IN NEITHER THE BASE PRICE
PER LINE NOR THE INCREMENTAL PRICE PER LINE FOR ADVANCED SOFTWARE
AS STATED UNDER CLAUSE C4.1 CAN BE PURCHASED AS DEFINED AND
PRICED IN ATTACHMENT K, ISSUE 3 ATTACHED HERETO AND INCORPORATED
HEREIN BY REFERENCE.
CLAUSE C9.1, is hereby amended to incorporate a definition for Obsolescence now
restated as follows:
C9 TECHNOLOGY OBSOLESCENCE
C9.1 Supplier and Consortium will work together to minimise the impact of
Product "OBSOLESCENCE" (AS DEFINED BELOW IN CLAUSE C9.2) and the loss
of the Customer's competitive position through the provision of
regular technology working parties which will directly assist in the
Product roll out and custom Research and Development commitments for
the Customer. These working parties will consist of the Consortium and
technical experts from both the Supplier and the Supplier's agents
(Bell Northern Research). The Supplier proposes that the first such
working party be established during the 1st calendar quarter 1993 and
thereafter on a calendar quarterly basis. Where such system
developments will be of benefit to the Customer, the Supplier will
offer to the Customer an appropriate credit to upgrade the installed
systems. Such appropriate credits will be determined on a case by case
basis and will take into consideration a mutually agreed percentage of
the audited depreciated book value of the equipment being impacted.
<PAGE>
Page 4
C9.1.1 Consortium and Supplier agree to develop a method to
determine the appropriate credit.
C9.2 "OBSOLETE" OR "OBSOLESCENCE" MEANS WHEN SUPPLIER IMPOSES THE NEED FOR
A PRODUCT OR PORTION OF A PRODUCT TO BE UPGRADED OR REPLACED THROUGH
THE RELEASE OF A SOFTWARE UPGRADE WHICH IS NO LONGER COMPATIBLE WITH
THE EXISTING PRODUCT.
C9.2.1 THIS OBSOLESCENCE TAKES EFFECT ON A SWITCH BY SWITCH BASIS
FROM THE DATE THAT THE NEW SOFTWARE UPGRADE IS APPLIED TO
EACH SWITCH.
C9.2.2 AN EXISTING PRODUCT DOES NOT BECOME OBSOLETE DUE TO THE
RELEASE OF A NEW PRODUCT IF THE EXISTING PRODUCT REMAINS
COMPATIBLE WITH THE SOFTWARE AND THE SUPPLIER DOES NOT
REQUIRE THE EXISTING PRODUCT TO BE REPLACED OR UPGRADED.
C9.2.3 AN EXISTING PRODUCT DOES NOT BECOME OBSOLETE DUE TO NEW
FEATURE DEVELOPMENT BEING LIMITED ON THAT PRODUCT OR
PREFERRED ON AN ALTERNATIVE PRODUCT. NOTWITHSTANDING THIS,
SUPPLIER SHALL PROMPTLY ADVISE CUSTOMER OF THE OCCURRENCE
OF SUCH CIRCUMSTANCES AND ARRANGE TO MEET AND MUTUALLY
AGREE UPON THE METHOD OF PROCEEDING.
CLAUSE C10, is hereby amended to make reference to Suppliers BRISC 60 Product
now restated as follows:
C10 BELL NORTHERN RESEARCH RATIONALISED INSTRUCTION SET COMPUTING
PROCESSOR
C10.1 Supplier shall upgrade the Switches to Bell Northern Research
Rationalised Instruction Set Computing (BRISC) processors at no
additional charge where it is found that the recommended maximum
Busy Hour Call Attempts (BHCA) capacity for the Cable Television
(CATV) environment as detailed in the Supplier's response to the
RFP section 3.3.2.8 are not achieved, provided that the failure
to achieve such recommended maximum BHCA capacity is not
attributable to the introduction of additional Software features
or to a traffic volume and/or call mix varying from that detailed
in the BHCA capacity predictions.
C10.2 Customer may Order the BRISC 50 processor with the Order for an
initial Switch at the incremental price of (pound)25,000.
C10.3 CUSTOMER MAY ORDER THE BRISC 60 PROCESSOR WITH THE ORDER FOR AN
INITIAL SWITCH AT THE INCREMENTAL PRICE OF (POUND)50,000. PAYMENT
FOR (POUND)25,000 OF THIS (POUND)50,000 SHALL BE DEFERRED UNTIL
SUCH TIME AS CUSTOMER REQUIRES THE ADDITIONAL PROCESSING
CAPABILITY PROVIDED BY THE BRISC 60 OVER AND ABOVE THAT PROVIDED
BY THE BRISC 50.
CLAUSE C12, is hereby amended to [Confidential Portion Omitted]
[Confidential Portion Omitted]
<PAGE>
Page 5
[Confidential Portion Omitted]
<PAGE>
page 6
C12.3 Supplier agrees to make GPP available on Orders requiring
Delivery after 1 January 1995, in accordance with a managed
implementation plan to be generated by 31 December 1993, and
formally agreed to by 30 June 1994.
C12.4 Should Supplier fail to have GPP available in accordance with
such agreed implementation plan specified in Clause C12.3, then
Supplier shall retrofit, to GPP, all non-GPP lines Delivered
after the agreed dates in such implementation plan at no charge
to Customer and shall not consider such retrofit an extension for
pricing purposes stated in Clause C4.
C12.5 The provisions of Clause C12.4 constitute Supplier's sole
liability and Customer's sole remedy for Supplier's failure to
meet the agreed implementation plan specified in Clause C12.3.
C12.6 AT THE INTRODUCTION OF GPP IN SOFTWARE RELEASE "UK002", SUPPLIER
SHALL ENSURE THAT SOFTWARE FEATURES AVAILABLE ON GPP WILL ALSO BE
AVAILABLE ON PLD. SUPPLIER SHALL, SUBJECT TO THE CAVEATS DETAILED
HEREIN, DEVELOP AND RELEASE FEATURES IN PARALLEL ON BOTH GPP AND
PLD UNTIL 31 DECEMBER 1999. SUPPLIER'S COMMITMENT DOES NOT EXTEND
TO A FUTURE LINE PERIPHERAL PRODUCT BEYOND THE CURRENT GPP
PRODUCT NOR TO THE DEVELOPMENT AND DEPLOYMENT OF SOFTWARE
FEATURES WHERE THE INHERENT CAPABILITY OF THE SYSTEM ARCHITECTURE
RESTRICTS OR LIMITS SUCH DEVELOPMENT TO A SINGLE HARDWARE
PLATFORM. THIS INCLUDES BUT IS NOT LIMITED TO ISDN, V5.2 AND
NAILED UP N X 64 KBS.
C12.6.1 SHOULD SUPPLIER BECOME AWARE OF CIRCUMSTANCES WHICH PREVENT
IT FROM ADHERING TO THE COMMITMENT DETAILED IN THIS CLAUSE
C12.6 OR IDENTIFIES ADDITIONAL FEATURES WHERE THE INHERENT
CAPABILITY OF THE SYSTEM ARCHITECTURE RESTRICTS OR LIMITS
DEVELOPMENT TO A SINGLE HARDWARE PLATFORM, THEN SUPPLIER
SHALL PROMPTLY ADVISE CUSTOMER OF THE CIRCUMSTANCES AND
ARRANGE TO MEET AND MUTUALLY AGREE UPON THE METHOD OF
PROCEEDING.
CLAUSE C13.2, is hereby amended to refer to the modified Software pricing and
packaging (Attachment K issue 3) now restated as follows:
C13.2 Supplier shall provide DPNSS at [Confidential Portion Omitted]
per 2Mbps port. This price includes the 2Mbps interface,
signalling Product, DPNSS Software as defined in ATTACHMENT K,
ISSUE 3, engineering, installation and commissioning, and project
management. The initial Order by Customer for such 2Mbps ports
shall be no less than a minimum quantity of sixteen (16) ports
per Switch.
<PAGE>
Page 7
CLAUSE C21, is hereby amended to replace reference [Confidential Portion
Omitted]
C21 GENERIC SOFTWARE
C21.1 The Supplier shall provide [Confidential Portion Omitted]. It is
advisable to have all Switches in the network maintained at the
same PCL Software level.
C21.2 The Supplier is keen to encourage the wide spread use of
its Software and hence will allow [Confidential Portion
Omitted].
C21.2.1 The Supplier is notified in advance of the use of the
additional modules so that the product configuration can be
audited to identify (1) any additional Product
requirements; (2) the suitability of the Software release
and its proposed application in the UK; (3) and to ensure
that appropriate support personnel are available (where
necessary);
C21.2.2 Customer agrees to allow Supplier to prepare a capacity
analysis to ensure that no adverse impacts will occur due
to the use of this additional Software;
C21.2.3 Any additional Product(s) identified by Supplier as being
required is purchased and installed in the Switch before
the Software is used. The price for this Product
[Confidential Portion Omitted] .
C21.3 Customer understands that Supplier may load Software Features on
the PCL generic Software LOAD for which Customer will not have
paid a Right To Use ("RTU"). Customer agrees that upon commercial
deployment of such Feature(s) including use of such Feature by
Customer's customers, the Software Right to Use shall be paid to
Supplier as quoted under this Agreement.
C21.3.1 CUSTOMER ALSO UNDERSTANDS THAT THE FUNCTIONALITY OF ALL SOFTWARE
INCLUDED IN THE PCL GENERIC SOFTWARE LOAD HAS OR IS BEING
VERIFIED IN VARIOUS MARKET ENVIRONMENTS. IN ORDER TO ENSURE
SUCCESSFUL DEPLOYMENT OF THE SOFTWARE IN THE UK CATV ENVIRONMENT
(SWITCH AND NETWORK) ADDITIONAL VERIFICATION TESTING KNOWN AS
FIRST MARKET APPLICATION ("FMA") TESTING MAY BE NECESSARY. SUCH
TESTING SHALL BE PERFORMED BY SUPPLIER WITH THE CO-OPERATION OF
CUSTOMERS. THE PROGRAMME FOR FMA TESTING SHALL TAKE INTO
CONSIDERATION THE COMBINED PRIORITIES OF ALL CUSTOMERS AND
SUPPLIER SHALL ENSURE, THAT THEY ACHIEVE SUCH FMA TESTING TARGETS
AS MAY BE AGREED IN ORDER TO MEET CUSTOMER'S PLANS FOR COMMERCIAL
DEPLOYMENT.
C21.4 Supplier shall prepare and package Software programs and
releases, including maintenance releases, which will allow
Customer to skip programs or releases as its discretion without
being required to purchase or load skipped programs, Features, or
releases provided that Customer loads at least every third PCL
generic Software load.
C21.5 Customer, at its discretion, may skip PCL generic Software LOADS.
There will be no charge whatsoever for such programs skipped by
Customer, and Customer shall not be charged any additional
amounts to procure subsequent Software programs, other than the
normal prices, less applicable discounts, for those subsequent
Software LOADS.
C21.6 Unless otherwise specified in an Order, Supplier shall provision
each Switch with the most current commercially available Software
PCL on the Delivery Date.
<PAGE>
Page 8
C21.7 Supplier agrees to provide Customer with the following
information, in writing, each time a new Software generic is
released and Ordered by Customer :
C21.7.1 Notification of any known fault on a site specific Customer
Service Report (CSR) with severity levels as defined under
Exhibit B of this Agreement;
C21.7.2 The criticality of each fault;
C21.7.3 The impact of each fault on the operation of the Software
and associated Products; and
C21.7.4 Supplier's plans, schedules and
performance results for corrective action and regression
testing with respect to the faults identified in this
Clause C21.7, as well as for continuing Software quality
and reliability improvement.
C21.7.5 Supplier agrees to provide the information described in
this Clause C21.7 thirty (30) days prior to Delivery Date
provided such release has been generally available for
thirty (30) days.
CLAUSE C25.2, is hereby added to detail the additional marketing support
provided by Supplier in recognition of the purchase of Advanced Software now
stated as follows:
C25.2 SUPPLIER AGREES TO PROVIDE A MARKETING CONSULTANT FOR "13 MAN
WEEKS "TO ASSIST ALL CUSTOMERS IN SUCCESSFULLY LAUNCHING THE
ADVANCED SOFTWARE. THIS SUPPORT WILL BE ALLOCATED TO CUSTOMERS IN
RATIO TO THEIR PROPORTION OF THE FIRST ONE MILLION SWITCH LINES
AS DETAILED IN CLAUSE C4.1.4.1, SUCH THAT TELEWEST (INCLUDING IVS
AND COMCAST) WILL RECEIVE 8 MAN WEEKS OF SUPPORT, BCM, 3 MAN
WEEKS, TELECENTIAL 1 MAN WEEK AND CCL 1 MAN WEEK OF SUPPORT.
CLAUSE C31, is hereby added to detail the Software utilisation discount
available to Supplier, now stated as follows:
C31 ORDER AND CUSTOMER INFORMATION PROCESS FOR A NEW SWITCH
C31.1 Customer may procure a new Switch by issuing an Order. Such Order
shall state the number of lines, Acceptance Date and any other
pertinent information. Supplier's acceptance of such Order shall
be in compliance with Clause 2.4 of this Agreement.
C31.2 Upon receipt of such Order or as previously agreed between the
parties, Supplier and Customer shall establish a date for a
Customer Information (C/I) meeting, which will further define the
site specific requirements for the Switch.
C31.3 Subject to Clause 2.4.4, Customer shall be obligated to procure
Product(s), Software and Services, and Supplier shall be
obligated to provide Product(s), Software and Services, under
this Exhibit C only when an Order has been accepted by Supplier.
C31.4 Upon completion of the C/I, Supplier shall respond to Customer
with a QUOTATION which provides a detailed breakdown of THE
PRICES AND DISCOUNTS FOR Products, Software and Services required
to meet Customer's requirements and Specifications as defined in
the C/I. At such time the Order will be amended and agreed
between the parties in writing to reflect the changes resulting
from the C/I.
<PAGE>
Page 9
C31.5 THE C/I WILL IDENTIFY A UTILISATION FACTOR WHICH ARISES AS A
RESULT OF THE LIMITATIONS OF THE NETWORK ARCHITECTURE AND
REPRESENTS THE PORTION OF PLD OR GPP LINES THAT ARE ANTICIPATED
TO BE UTILISED BY CUSTOMER. THIS UTILISATION FACTOR WILL BE USED
TO DETERMINE A UTILISATION DISCOUNT RATE WHICH IS NOT TO EXCEED
15% AND IS CALCULATED AS FOLLOWS:
-------------------------------------------------------------------
UTILISATION DISCOUNT RATE = 100% - UTILISATION FACTOR.
-------------------------------------------------------------------
A SOFTWARE UTILISATION DISCOUNT WILL BE CALCULATED BY APPLYING
THE UTILISATION DISCOUNT RATE TO ALL GPP OR PLD LINES DETAILED
WITHIN THE C/I FOR THAT PARTICULAR ORDER AT THE RATE OF
[Confidential Portion Omitted] PER LINE. THE [Confidential
Portion Omitted] REPRESENTS THE BASE SOFTWARE PORTION OF THE
PRICE PER SWITCH LINE DETAILED IN CLAUSE C4.1. THE SOFTWARE
UTILISATION DISCOUNT AS CALCULATED WILL BE DETAILED WITHIN
SUPPLIER'S QUOTATION DESCRIBED IN CLAUSE C31.4. FOR THE AVOIDANCE
OF DOUBT SUBSCRIBER LINE DRAWER (SLD) LINES ARE EXCLUDED FROM THE
SOFTWARE UTILISATION DISCOUNT CALCULATION.
-----------------------------------------------------------------
SOFTWARE UTILISATION DISCOUNT = GPP OR PLD LINES * UTILISATION
DISCOUNT RATE *[Confidential Portion Omitted]
-----------------------------------------------------------------
EXAMPLE:- THE CI FOR A 50,700 LINE SWITCH (50,400 GPP LINES
AND 300 SLD LINES) IDENTIFIES A UTILISATION FACTOR OF 85%
UTILISATION DISCOUNT RATE OF 15% WILL APPLY (100% - 85%)
SOFTWARE UTILISATION DISCOUNT WILL BE [Confidential Portion
Omitted] CALCULATED AS (50,700-300) * 15% *[Confidential
Portion Omitted]
C31.6 SUPPLIER SHALL BE ENTITLED TO CLAW BACK THE SOFTWARE UTILISATION
DISCOUNT IF SUBSEQUENT TECHNOLOGY ADVANCEMENTS OR MATURITY OF THE
NETWORK SIGNIFICANTLY IMPROVES THE UTILISATION FACTOR.
<PAGE>
Page 10
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- ------------------------------------- ------------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTEL LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------ ----------------------- -----
authorised signature date authorised signature date
</TABLE>
Danny Bryan Steve Pusey
- ------------------------------------ ------------------------------------
print or type name of signatory print or type name of signatory
Managing Director, TeleWest, Director CATV Account Group
- ----------------------------- ------------------------------------
title title
For and on behalf of
- --------------------
TeleWest Communications Group Limited
- -------------------------------------
United Artists Communications (Scotland) Venture
- ------------------------------------------------
United Artists Communications (North East) Partnership
- ------------------------------------------------------
Avon Cable Joint Venture
- ------------------------
United Artists Communications (South East) Partnership
- ------------------------------------------------------
London South Cable Partnership
- ------------------------------
United Artists Communications (Cotswolds) Limited
- -------------------------------------------------
CABLE LONDON PLC
- ---------------------------------- --------
authorised signature date
Gerald Campbell
- --------------------------------------------
print or type name of signatory
Managing Director, Cable London plc
- --------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ---------------------------------- --------
authorised signature date
Ron Lawley
- --------------------------------------------
print or type name of signatory
Managing Director, Birmingham Cable Limited
- --------------------------------------------
title
<PAGE>
Page 11
WINDSOR TELEVISION LIMITED
- ---------------------------------- --------
authorised signature date
Neil Johnson
- --------------------------------------------
print or type name of signatory
Managing Director,
- --------------------------------------------
title
BELL CABLEMEDIA PLC
- ---------------------------------- --------
authorised signature date
John Sheridan
- --------------------------------------------
print or type name of signatory
Chief Operating Officer,
- --------------------------------------------
title
TELECENTIAL COMMUNICATIONS PARTNERSHIP
- ---------------------------------- --------
authorised signature date
Vernon Achber
- --------------------------------------------
print or type name of signatory
President and Chief Executive Officer, CUC Cablevision (UK) LTD. acting for and
on behalf of Telecential Communications Partnership
- --------------------------------------------------------------------------------
title
IVS CABLE HOLDINGS LIMITED
- ---------------------------------- --------
authorised signature date
Peter C Funk
- --------------------------------------------
print or type name of signatory
<PAGE>
Page 12
Chairman, IVS Cable Holdings Limited
- --------------------------------------------
title
COMCAST TEESSIDE LIMITED
- ---------------------------------- --------
authorised signature date
Edward Cambell
- --------------------------------------------
print or type name of signatory
Managing Director, Comcast Teesside Limited
- --------------------------------------------
title
CAMBRIDGE CABLE LIMITED
- ---------------------------------- --------
authorised signature date
Edward Ying
- --------------------------------------------
print or type name of signatory
Managing Director, Cambridge Cable Limited
- --------------------------------------------
title
<PAGE>
Page 13
CATV SOFTWARE PRICING Attachment: K
Issue: 2
Page: 13
Date: 21/7/93
GENERAL
PURCHASING AGREEMENT
NTE-GPA0001
AMENDMENT 7
APPENDIX 1
ATTACHMENT K
CATV SOFTWARE STRUCTURE (BCS34, BCS34+ UK002 PART)
<PAGE>
CATV SOFTWARE PRICING Attachment: K
Issue: 2
Pages: 13-23
Date: 21/7/93
[Confidential Portion Omitted]
<PAGE>
AMENDMENT NO. 8
TO THE GENERAL PURCHASING AGREEMENT
NTE-GPA0001
This Amendment No. 8, dated this 5th day of February 1996 shall be deemed
effective as of the 25th day of September 1995, by and between the companies
listed under Exhibit A in the General Purchasing Agreement (GPA), dated 1 March
1993 ("Customer"), and Nortel Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 2, dated 29 October 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 3, dated 12 November 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 4, dated 10 December 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 5, dated 24 May 1994; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 6, dated 29 June 1995; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 7, dated 30 June 1995; and
WHEREAS, Customer and Supplier agree to further amend the GPA pursuant to the
terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
PROPRIETARY
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
<PAGE>
Page 2
TITLE PAGE is hereby amended to include Diamond Cable Communications Plc now
stated as follows:
- --------------------------------------------------------------------------------
TELEWEST GROUP
BELL CABLEMEDIA PLC
TELECENTIAL COMMUNICATIONS LIMITED PARTNERSHIP
IVS CABLE HOLDINGS LIMITED
COMCAST TEESSIDE LIMITED
CAMBRIDGE CABLE LIMITED
DIAMOND CABLE COMMUNICATIONS PLC
GENERAL PURCHASING AGREEMENT
NTE-GPA0001
PROPRIETARY
-------------------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
CLAUSE 1.1.6, The definition of "Consortium" is hereby revised to include
Diamond Cable Communications Limited, now stated as follows:
1.1.6. "Consortium" for the purposes of this Agreement means all Customers
listed under Exhibit A subject to Clause 2.40 entitled 'Several Liability' and
all actions to be taken by Consortium hereunder shall be taken respectively by:
1)TeleWest Communications Group Limited ("TeleWest") as the representative for
those Customers listed as TeleWest wholly owned franchises under Section 1,
Exhibit A and for those Customers listed as Limited Companies under Section 2,
Exhibit A; and 2) Bell Cablemedia plc ("BCM") as the representative for those
Customers listed as BCM wholly owned franchises under Section 3, Exhibit A; and
3) Telecential Communications Limited Partnership entering into agreement for
itself and on behalf of Telecential Communications (Herts) Limited Partnership
and Telecential Communications (Northants) Limited Partnership ("Telecential")
as the representative for those Customers listed as Telecential wholly owned
franchises under Section 4, Exhibit A and 4) Section 5) Exhibit A not used ; and
5) IVS Cable Holdings Limited ("IVS") as the representative for those Customers
listed as IVS wholly owned franchises under Section 6 Exhibit A. and 6) Comcast
Teesside Limited ("Comcast") as the representative for those Customers listed as
Comcast wholly owned franchises under Section 7 Exhibit A and 7) Cambridge Cable
Limited ("Cambridge") as the representative for those Customers listed as
Cambridge wholly owned franchises under Section 8 Exhibit A and 8) DIAMOND CABLE
COMUNICATIONS PLC ("DIAMOND") AS THE
<PAGE>
Page 3
REPRESENTATIVE FOR THOSE CUSTOMERS LISTED AS DIAMOND WHOLLY OWNED FRANCHISES
UNDER SECTION 9 EXHIBIT A.
CLAUSE 2.48, is hereby amended to add Diamond as a party to be notified with all
correspondence required under this Agreement, now stated as follows:
2.48 NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed by
Recorded or Registered Post or other delivery service to the following
addresses:
CUSTOMERS :
---------
TeleWest Communications Group Ltd. Bell Cablemedia plc
Attn : Contract Manager Attn : Group Director Engineering
Materials Management Department Floor 3 Colne House
Unit 1, Genesis Business Park Watford
Woking, Surrey, GU21 5RW Hertfordshire WD1 7EL
Telecential Communications Ltd Partnership IVS Cable Holdings Limited
Attn : Contract Manager Attn : Contract Manager
Link 2 Beacontree Plaza, Gillette Way, 284 Weyhill Road
Basingstoke Road, Andover
Reading RG2 0BS Hampshire SP10 3LF
Cambridge Cable Limited. Comcast Teeside Limited
Attn: Director of Telecoms Networks Attn: Company Secretary
Cambridge Science Park Wellington Court
Milton Road De Havilland Avenue
Cambridge Preston Farm
CB4 4WA Stockton-on-Tees
Cleveland TS18 3TA
DIAMOND CABLE COMMUNICATIONS LIMITED
ATTN: DIRECTOR OF TECHNICAL SERVICES
DIAMOND PLAZZA
DALESIDE ROAD
NOTTINGHAM
NG2 3GG
SUPPLIER :
--------
Commercial Manager; CATV Account Group
Nortel Limited
Northern Telecom House
St. Cloud Way
Maidenhead, Berks
SL6 8XB
Addresses may be changed by written notices to the parties.
<PAGE>
Page 4
EXHIBIT A, is hereby amended to incorporate Diamond as Customers, now stated as
follows:
EXHIBIT A CUSTOMERS
- ---------------------------
This Exhibit A is attached to and made part of that certain General Purchase
dated 1 March 1993 ("Agreement"), by and between Customer as defined in the
Agreement ("Customer") and Nortel Limited ("Supplier").
- --------------------------------------------------------------------------------
FRANCHISE FRANCHISE HOLDER REG. NO.
- --------------------------------------------------------------------------------
1. TELEWEST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Avon Avon Cable Joint Venture
--------------------------------------------------------------------------
Croydon, Kingston and London South Cable Partnership
Richmond and Merton and
Sutton
--------------------------------------------------------------------------
North Thames Estuary United Artists Communications (Thames Estuary)
South Thames Estuary Partnership
--------------------------------------------------------------------------
Edinburgh and United Artists Communications (Scotland) Venture
Livingston, Uddingston,
Glenrothes, Dundee and
Perth.
--------------------------------------------------------------------------
Tyneside United Artists Communications (North East)
Partnership
- --------------------------------------------------------------------------------
2. LIMITED COMPANIES
- --------------------------------------------------------------------------------
Birmingham Birmingham Cable Limited 2170379
--------------------------------------------------------------------------
The registered office CABLE PHONE HOUSE,
for the above listed SMALL HEATH BUSINESS PARK,
company is: TALBOT WAY, SMALL HEATH,
--------------------------------------------------------------------------
Camden, Enfield, Cable London plc 1794264
Hackney and Islington,
Haringey
--------------------------------------------------------------------------
The registered office 100 CHALK FARM ROAD
for the above listed LONDON NW1 8EH
company is:
--------------------------------------------------------------------------
Hillingdon and Hounslow, Windsor Television Limited 1745542
Windsor
--------------------------------------------------------------------------
The registered office CABLE HOUSE
for the above listed WATERSIDE DRIVE
company is: LANGLEY, BERKSHIRE. SL3 6EZ
--------------------------------------------------------------------------
Cotswolds TeleWest Communications Group Limited 2514287
United Artists Communications (Cotswolds)
Limited 1743081
- --------------------------------------------------------------------------------
<PAGE>
Page 5
- --------------------------------------------------------------------------------
3. BCM WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Tower Hamlet/Newham, Bell Cablemedia Southern Region
Greater London East,
Havering,
Waltham Forest,
Dartford, Epping Forest,
Ashford, Watford,
Aylesbury, Worcester
--------------------------------------------------------------------------
Peterborough, Norwich, Bell Cablemedia Eastern Region
Whittlesey,
Gt Yarmouth
--------------------------------------------------------------------------
Leeds, Wearside, York & Bell Cablemedia Northern Region
Harrogate
--------------------------------------------------------------------------
The registered office IB PORLAND PLACE 2735732
for the above listed LONDON W1N 3AA
company is:
- --------------------------------------------------------------------------------
4 TELECENTIAL WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Thames Valley Telecential Communications Limited
Partnership 2387692
West Herts
Northants
Swindon
Warwickshire
Northamptonshire
--------------------------------------------------------------------------
The registered office DRAGOON HOUSE
for the above listed 37 ARTILLERY LANE
company is: LONDON E1 7LT
- --------------------------------------------------------------------------------
5 NOT USED
- --------------------------------------------------------------------------------
6 IVS WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Andover Andover Cablevision Limited
--------------------------------------------------------------------------
Salisbury Wessex Cable Limited
--------------------------------------------------------------------------
Stafford Stafford Communications Limited
--------------------------------------------------------------------------
Oxford Oxford Cable Limited
--------------------------------------------------------------------------
7 COMCAST WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Teesside Comcast Teesside Limited
--------------------------------------------------------------------------
Darlington Comcast Darlington Limited
--------------------------------------------------------------------------
8 CAMBRIDGE WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
Cambridge Cambridge Cable Limited
--------------------------------------------------------------------------
Harlow/Bishops-Stortford Anglia Cable Communications Limited
--------------------------------------------------------------------------
Ipswich/Colchester East Coast Cable Limited
--------------------------------------------------------------------------
Braintree Southern East Anglia Cable Limited
- --------------------------------------------------------------------------------
<PAGE>
Page 6
- --------------------------------------------------------------------------------
9 DIAMOND WHOLLY OWNED FRANCHISES
- --------------------------------------------------------------------------------
LEICESTER DIAMOND CABLE COMMUNICATIONS PLC
LOUGBOROUGH
HINKLEY
BURTON UPON TRENT
- --------------------------------------------------------------------------------
THE REGISTERED OFFICE 40 ARTILLERY LANE, BISHOPGATE, LONDON E1 7LS
FOR THE ABOVE LISTED
COMPANY IS:
- --------------------------------------------------------------------------------
CLAUSE C4.1, is hereby amended to revise Customer's Purchase Objective from
[Confidential Portion Omitted] lines to [Confidential Portion Omitted];
C4.1 Supplier's fully discounted net price per Switch line shown in
the table below, includes for [Confidential Portion Omitted] per
Switch and for [Confidential Portion Omitted] per switch. The
relevant price per line for any Order, excluding the incremental
price for Advanced Software which is detailed in clause C4.1.4,
shall be determined by applying the prevailing Purchase Objective
effective on the date of such Order, as defined in Clause C7, to
the table below.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
- --------------------------------------------------------------------------------
[CONFIDENTIAL PORTION OMITTED]
--------------------------------------------------------
LINES LINES LINES LINES LINES
- --------------------------------------------------------------------------------
PURCHASE OBJECTIVE
- -----------------------
HOST PRICE PER LINE:
- -----------------------
SNSE PRICE PER LINE:
- -----------------------
RSC PRICE PER LINE:
- ----------------------- [Confidential Portion Omitted]
RLCM PRICE PER LINE:
- -----------------------
SRU PRICE PER LINE:
- --------------------------------------------------------------------------------
<PAGE>
Page 7
CLAUSE C7.1.1 is hereby amended to show Customer's revised Purchase Objective
following the inclusion of Diamond franchises, now stated as follows:
C7.1.1 Customer's initial Purchase Objective is detailed below
("Initial Purchase Objective")
[Confidential Portion Omitted]
<PAGE>
Page 8
[Confidential Portion Omitted]
<PAGE>
Page 9
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- ------------------------------------- ------------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTEL LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------ ----------------------- -----
authorised signature date authorised signature date
</TABLE>
- ------------------------------------ ------------------------------------
print or type name of signatory print or type name of signatory
- ----------------------------- ------------------------------------
title title
For and on behalf of
- --------------------
TeleWest Communications Group Limited
- -------------------------------------
United Artists Communications (Scotland) Venture
- ------------------------------------------------
United Artists Communications (North East) Partnership
- ------------------------------------------------------
Avon Cable Joint Venture
- ------------------------
United Artists Communications (South East) Partnership
- ------------------------------------------------------
London South Cable Partnership
- ------------------------------
United Artists Communications (Cotswolds) Limited
- -------------------------------------------------
CABLE LONDON PLC
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
<PAGE>
Page 10
WINDSOR TELEVISION LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
BELL CABLEMEDIA PLC
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
TELECENTIAL COMMUNICATIONS PARTNERSHIP
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
IVS CABLE HOLDINGS LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
<PAGE>
Page 11
- --------------------------------------------
title
COMCAST TEESSIDE LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
CAMBRIDGE CABLE LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
DIAMOND CABLE COMMUNICATIONS LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
<PAGE>
AMENDMENT NO. 9
TO THE GENERAL PURCHASING AGREEMENT
NTE-GPA0001
This Amendment No. 9, dated this 17th day of July 1997 shall be deemed effective
as of the 1st day of December 1996, by and between the companies listed under
Exhibit A in the General Purchasing Agreement (GPA), dated 1 March 1993
("Customer"), and Nortel Limited, ("Supplier").
RECITALS
WHEREAS, Customer and Supplier entered into a General Purchasing Agreement dated
the first day of March 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 1, dated 1 July 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 2, dated 29 October 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 3, dated 12 November 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 4, dated 10 December 1993; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 5, dated 24 May 1994; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 6, dated 29 June 1995; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 7, dated 30 June 1995; and
WHEREAS, Customer and Supplier amended the General Purchasing Agreement by
entering into Amendment No. 8, dated 5 February 1996; and
WHEREAS, Customer and Supplier agree to further amend the GPA pursuant to the
terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
PROPRIETARY
-----------
THE INFORMATION CONTAINED HEREIN SHOULD NOT BE DISCLOSED TO UNAUTHORISED
PERSONS, IT IS INTENDED FOR USE BY AUTHORISED REPRESENTATIVES OF THE PARTIES TO
THIS DOCUMENT
<PAGE>
Page 2
INTRODUCTION, Supplier's legal name and address of registered office is hereby
amended from Nortel Limited to Nortel plc (effective 1 May 1997) and is now
stated as follows:
1 INTRODUCTION
- ---------------------
This Agreement, dated 1 March 1993, is made by and between the companies listed
under Exhibit A attached hereto and by this reference incorporated into this
Agreement and identified herein ("Customer"), and NORTEL PLC, HAVING ITS
REGISTERED OFFICE AT MAIDENHEAD OFFICE PARK, WESTACOTT WAY MAIDENHEAD, BERKS SL6
3QH ("Supplier").
In consideration of the promises, mutual covenants and agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, Customer
and Supplier agree as follows:
CLAUSE 2.4.1, is hereby amended and now stated as follows:
2.4.1 Written acceptance or performance, in whole or in part, shall
constitute Supplier's acceptance of the Order(s). Acceptance of
the Order(s) binds the parties to honour all dates, amounts and
other requirements of the Order(s). Supplier agrees to accept all
Orders which comply with the terms and conditions of this
Agreement. Supplier shall have no obligation to accept an Order
that contains a delivery interval shorter than that specified by
Supplier as its standard delivery intervals as defined herein OR
THAT DOES NOT MEET THE CRITERIA DETAILED IN CLAUSE C31.1
CLAUSE 2.48, is hereby amended as a consequence of Supplier's change of name and
address, now stated as follows:
2.48 NOTICES
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed by
Recorded or Registered Post or other delivery service to the following
addresses:
CUSTOMERS :
---------
TeleWest Communications Group Ltd. Bell Cablemedia plc
Attn : Contract Manager Attn : Group Director Engineering
Materials Management Department Floor 3 Colne House
Unit 1, Genesis Business Park Watford
Woking, Surrey, GU21 5RW Hertfordshire WD1 7EL
Telecential Communications Ltd Partnership IVS Cable Holdings Limited
Attn : Contract Manager Attn : Contract Manager
Link 2 Beacontree Plaza, Gillette Way, 284 Weyhill Road
Basingstoke Road, Andover
Reading RG2 0BS Hampshire SP10 3LF
Cambridge Cable Limited. Comcast Teeside Limited
Attn: Director of Telecoms Networks Attn: Company Secretary
Cambridge Science Park Wellington Court
Milton Road De Havilland Avenue
Cambridge Preston Farm
CB4 4WA Stockton-on-Tees
Cleveland TS18 3TA
<PAGE>
Page 3
Diamond Cable Communications Limited
Attn: Director of Technical Services
Diamond Plazza
Daleside Road
Nottingham
NG2 3GG
SUPPLIER :
--------
COMMERCIAL MANAGER, CABLE COMMUNICATIONS ACCOUNT GROUP
NORTEL PLC
MAIDENHEAD OFFICE PARK
WESTACOTT WAY
MAIDENHEAD, BERKS
SL6 3QH
Addresses may be changed by written notices to the parties.
CLAUSE C4.1, is hereby amended to remove reference to the number of extensions
permitted at the price per line and to detail the revised price for advanced
Software now stated as follows:
C4.1 Supplier's fully discounted net price per Switch line IS shown in
the table below. [Confidential Portion Omitted]. The
relevant price per line for any Order, excluding the incremental
price for Advanced Software which is detailed in clause C4.1.4
Shall be determined by applying the prevailing Purchase Objective
effective on the date of such Order, as defined in Clause C7, to
the table below.
PRICE PER LINE BASED UPON PURCHASE OBJECTIVE
-----------------------------------------------------------------
[CONFIDENTIAL PORTION OMITTED]
--------------------------------------------
LINES LINES LINES LINES LINES
-----------------------------------------------------------------
PURCHASE OBJECTIVE
----------------------
HOST PRICE PER LINE:
-----------------------
SNSE PRICE PER LINE:
-----------------------
[Confidential Portion Omitted]
-----------------------
-----------------------
-----------------------------------------------------------------
C4.1.1 No retrospective price adjustments will be made to previous
Purchases upon Consortium achieving the next pricing level.
C4.1.2 The above stated price per line, except as stated IN CLAUSE
C4.1.3 below with regard to SNSE, includes the Product(s)
as listed in Appendix 2, entitled "Price Per Line" attached
hereto and by this reference incorporated into this
Agreement and Base Software as defined in Attachment K
issue 3 of the Proposal, and Services including but not
limited to [Confidential Portion Omitted]. These prices
include all customs and import duties, but exclude VAT.
<PAGE>
Page 4
C4.1.3 [Confidential Portion Omitted]
C4.1.4 Customer shall pay and include within every order for
additional Switch line capacity whether on a Host, SNSE,
RSC, SRU or SRU-S the incremental price per line as
detailed in clauses C4.1.4.1 and C4.1.4.2 for Advanced
Software as described and defined in Attachment K issue 3.
Such incremental price per line shall apply retrospectively
to lines ordered prior to this amendment.
C4.1.4.1 For the first [Confidential Portion Omitted] of
such lines installed by Supplier, and Ordered
by all Customers collectively, under this
Agreement, the incremental price per line for
Advanced Software to be included on Customer's
order shall be [Confidential Portion Omitted].
C4.1.4.2 For all lines Ordered, under this Agreement, by
Customers collectively beyond the first
[Confidential Portion Omitted] lines as
described in clause C4.1.4.1 and up to
[Confidential Portion Omitted] lines, the
incremental price per line for Advanced
Software to be included on Customer's order
shall be [Confidential Portion Omitted].
C4.1.4.3 [Confidential Portion Omitted]. FOR
ALL LINES ORDERED, UNDER THIS AGREEMENT, BY
CUSTOMERS COLLECTIVELY BEYOND THE FIRST
[CONFIDENTIAL PORTION OMITTED] LINES AS
DESCRIBED IN CLAUSE C4.1.4.2, THE INCREMENTAL
PRICE PER LINE FOR ADVANCED SOFTWARE TO BE
INCLUDED ON CUSTOMER'S ORDER SHALL BE
[CONFIDENTIAL PORTION OMITTED].
C4.1.4.4 The Advanced Software RTU fee shall apply to
all Switch and remote lines. No further
discounts or deductions whatsoever will apply
including for internal use (clause C6.4) and
Software Utilisation Discount (clause C31.5).
C4.1.4.5 The Advanced Software RTU fee has been
calculated assuming an ultimate Switch size of
[Confidential Portion Omitted] lines. Customers
shall endeavour to extend their Switches to
achieve this ultimate Switch size.
CLAUSE C4.2, is hereby amended to remove reference to [Confidential Portion
Omitted], now stated as follows:
C4.2 For any OTHER Products ordered TOGETHER WITH or separately FROM
Switches OR SWITCH EXTENSIONS Customer shall [Confidential
Portion Omitted]. Unless otherwise agreed, Supplier's Software
and Services [Confidential Portion Omitted].
<PAGE>
Page 5
CLAUSE C4.3, is hereby deleted to remove reference to [Confidential Portion
Omitted] from the Agreement:
CLAUSE C10, is hereby amended to detail that the BRISC 50 processor is provided
with an initial switch at no additional charge, now restated as follows:
C10 BELL NORTHERN RESEARCH RATIONALISED INSTRUCTION SET COMPUTING
PROCESSOR
C10.1 FOR THOSE SITES WHERE SERIES 40 PROCESSORS HAVE BEEN INSTALLED,
Supplier shall upgrade the Switches to Bell Northern Research
Rationalised Instruction Set Computing (BRISC) processors at no
additional charge where it is found that the recommended maximum
Busy Hour Call Attempts (BHCA) capacity for the Cable Television
(CATV) environment as detailed in the Supplier's response to the
RFP section 3.3.2.8 are not achieved, provided that the failure
to achieve such recommended maximum BHCA capacity is not
attributable to the introduction of additional Software features
or to a traffic volume and/or call mix varying from that detailed
in the BHCA capacity predictions.
C10.2 A BRISC 50 PROCESSOR WILL BE PROVIDED AS PART OF AN INITIAL
SWITCH AT NO INCREMENTAL PRICE.
C10.3 Customer may Order the BRISC 60 processor with the Order for an
initial Switch at the incremental price of (POUND)25,000
SUCH PAYMENT shall be deferred until such time as Customer
requires the additional processing capability provided by the
BRISC 60 over and above that provided by the BRISC 50.
CLAUSE C31, is hereby amended to detail Switch Order criteria now stated as
follows:
C31 ORDER AND CUSTOMER INFORMATION PROCESS FOR A NEW SWITCH
C31.1 Customer may procure a new Switch by issuing an Order. Such Order
shall state the number of lines, Acceptance Date and any other
pertinent information AND SHALL ADHERE TO THE FOLLOWING ORDER
CRITERIA:
C31.1.1 GPP LINES SHALL ONLY BE ORDERED IN MULTIPLES OF 3,600 WHICH
REPRESENTS A FULLY EQUIPPED GPP CABINET .
C31.1.2 THE MINIMUM ORDER QUANTITY OF GPP LINES FOR A NEW HOST
SWITCH IS 21,600 AND FOR A SNSE 7,200 LINES.
C31.1.3 THE MINIMUM INITIAL HOST SWITCH IMPLEMENTATION SHALL BE
10,800 GPP LINES AND FOR A SNSE SWITCH, 3,600 GPP LINES.
C31.1.4 ANY BALANCE OF LINES ORDERED IN ACCORDANCE WITH CLAUSE
C31.1.2 BUT NOT INCLUDED IN THE INITIAL IMPLEMENTATION
DETAILED IN CLAUSE C31.1.3 SHALL BE IMPLEMENTED FOR
ACCEPTANCE NO LATER THAN TWO YEARS AFTER THE ACCEPTANCE
DATE FOR THE INITIAL IMPLEMENTATION OF SUCH SWITCH.
C31.1.5 THE MINIMUM ORDER QUANTITY FOR A SINGLE IMPLEMENTATION OF
GPP LINES FOR AN EXTENSION TO A HOST SWITCH SHALL BE 7,200
LINES AND FOR AN EXTENSION TO AN
<PAGE>
Page 6
SNSE SHALL BE 3,600 LINES.
EXCEPT THAT WHERE CUSTOMER REQUIRES LESS THAN 7,200 LINES
ON A HOST SWITCH TO COMPLETE THE BUILD FOR THAT AREA,
CUSTOMER MAY ORDER AN EXTENSION OF 3,600 LINES.
<PAGE>
Page 7
EXHIBIT C, APPENDIX II, is hereby deleted in its entirety and replaced with the
following to define in more detail the items included within the price per line
and the engineering assumptions and is now stated as follows:-
EXHIBIT C APPENDIX II
- --------------------------------------
This Appendix 2 to Exhibit C of the Agreement details the Product(s)
and Software contained in the price per line stated in Clause C4.1, the
associated ENGINEERING assumptions.
CII.1 PRICE PER LINE
THIS PART 1 OF APPENDIX 2 DETAILS THE PRODUCT, SOFTWARE AND SERVICES INCLUDED
WITHIN THE PRICE PER LINE STATED IN CLAUSE C4.1.
[Confidential Portion Omitted]
<PAGE>
Pages 8 - 22
[Confidential Portion Omitted]
<PAGE>
Page 23
EXHIBIT C, APPENDIX III, is hereby deleted in its entirety and replaced with the
following to define in more detail the fully discounted prices for Purchases
which are incremental or additional to the items included within the price per
line and is now stated as follows:-
EXHIBIT C APPENDIX III
- ---------------------------------------
This Appendix III to Exhibit C of the Agreement details the fully discounted
prices for Purchases which are incremental or additional to the items included
within the price per line. This price list may be updated or amended by Supplier
by written notice in accordance with clause C2.48 provided that any variations
to prices are not inconsistent with the provisions of clause 2.9 (price
protection).
EXHIBIT C, APPENDIX III PRICE LIST - INDEX
- --------------------------------------------------------------------------------
REFERENCE NO. DESCRIPTION
-------------------------------------------------------------------------------
DPNSS ports
----------------------------------------------------
DASS II Model 1200
----------------------------------------------------
DASS II Model 800
----------------------------------------------------
DASS II Network Interface Management System (NIMS)
----------------------------------------------------
Xyplex based NSC Interface Equipment
----------------------------------------------------
LIU7 links and LPP Cabinet
----------------------------------------------------
EDRAM
----------------------------------------------------
IOC Module and device cards
----------------------------------------------------
MAP terminal and printer
----------------------------------------------------
P-Phone Screen Based Operator Console
----------------------------------------------------
MDF Equipment
----------------------------------------------------
Helmsman CD ROM Documentation
----------------------------------------------------
Paper copies of Documentation
----------------------------------------------------
[Confidential Portion Attendant Console
----------------------------------------------------
Omitted] P-Phones, Headsets and Residential Telephones sets
----------------------------------------------------
Music On Hold Interface
----------------------------------------------------
Centrex - including RSC-s/SRU/LCME/Line cards
----------------------------------------------------
CMIS cabinet
----------------------------------------------------
CODES
----------------------------------------------------
PDTC or DTCOi Ports
----------------------------------------------------
Technical Support (hourly Labour Rates)
----------------------------------------------------
Filters
----------------------------------------------------
Cabinetised Integrated Services Module (CISM) and
associated cards
----------------------------------------------------
Training
----------------------------------------------------
Wallboard
----------------------------------------------------
Stratum Clock Interface
- --------------------------------------------------------------------------------
<PAGE>
Page 24
QUOTATION FOR DPNSS PORTS
-------------------------
REFERENCE: CATV/GPA/801
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 25
QUOTATION FOR DASS II MODEL 1200
--------------------------------
REFERENCE: CATV/GPA/802
ISSUE: 1
PAGE: 1/3
[Confidential Portion Omitted]
<PAGE>
Page 26
QUOTATION FOR DASS II MODEL 1200
--------------------------------
REFERENCE: CATV/GPA/802
ISSUE: 1
PAGE: 2/3
[Confidential Portion Omitted]
<PAGE>
Page 27
QUOTATION FOR DASS II MODEL 1200
--------------------------------
REFERENCE: CATV/GPA/802
ISSUE: 1
PAGE: 3/3
[Confidential Portion Omitted]
<PAGE>
Page 28
[Confidential Portion Omitted]
<PAGE>
Page 29
QUOTATION FOR DASS II MODEL 800
-------------------------------
REFERENCE: CATV/GPA/803
ISSUE: 1
PAGE: 1/3
[Confidential Portion Omitted]
<PAGE>
Page 30
QUOTATION FOR DASS II MODEL 800
-------------------------------
REFERENCE: CATV/GPA/803
ISSUE: 1
PAGE: 2/3
[Confidential Portion Omitted]
<PAGE>
Page 31
[Confidential Portion Omitted]
<PAGE>
Page 32
QUOTATION FOR DASS II MODEL 800
-------------------------------
REFERENCE: CATV/GPA/803
ISSUE: 1
PAGE: 3/3
[Confidential Portion Omitted]
<PAGE>
Page 33
QUOTATION FOR DASS II NETWORK INTERFACE MANAGEMENT SYSTEM (NIMS)
----------------------------------------------------------------
REFERENCE: CATV/GPA/804
ISSUE: 1
PAGE: 1/3
[Confidential Portion Omitted]
<PAGE>
Page 34
QUOTATION FOR DASS II NETWORK INTERFACE MANAGEMENT SYSTEM (NIMS)
----------------------------------------------------------------
REFERENCE: CATV/GPA/804
ISSUE: 1
PAGE: 2/3
[Confidential Portion Omitted]
<PAGE>
Page 35
QUOTATION FOR DASS II NETWORK INTERFACE MANAGEMENT SYSTEM (NIMS)
----------------------------------------------------------------
REFERENCE: CATV/GPA/804
ISSUE: 1
PAGE: 3/3
[Confidential Portion Omitted]
<PAGE>
Page 36
[Confidential Portion Omitted]
<PAGE>
Page 37
QUOTATION FOR XYPLEX BASED NSC INTERFACE EQUIPMENT
--------------------------------------------------
REFERENCE: CATV/GPA/805
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 38
QUOTATION FOR ADDITIONAL LIU7 LINKS AND LPP CABINET
---------------------------------------------------
REFERENCE: CATV/GPA/806
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 39
QUOTATION FOR EDRAM
-------------------
REFERENCE: CATV/GPA/807
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 40
QUOTATION FOR IOC MODULE AND DEVICE CARDS
-----------------------------------------
REFERENCE: CATV/GPA/808
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 41
QUOTATION FOR A MAP TERMINAL AND PRINTER
----------------------------------------
REFERENCE: CATV/GPA/809
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 42
QUOTATION FOR A P-PHONE SCREEN BASED OPERATOR CONSOLE
-----------------------------------------------------
REFERENCE: CATV/GPA/810
ISSUE: 1
PAGE: 1/2
[Confidential Portion Omitted]
<PAGE>
Page 43
QUOTATION FOR A P-PHONE SCREEN BASED OPERATOR CONSOLE
-----------------------------------------------------
REFERENCE: CATV/GPA/810
ISSUE: 1
PAGE: 2/2
[Confidential Portion Omitted]
<PAGE>
Page 44
QUOTATION FOR MDF EQUIPMENT
---------------------------
REFERENCE: CATV/GPA/811
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 45
QUOTATION FOR HELMSMAN CD ROM DOCUMENTATION
-------------------------------------------
REFERENCE: CATV/GPA/812
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 46
QUOTATION FOR PAPER COPIES OF DOCUMENTATION
-------------------------------------------
REFERENCE: CATV/GPA/815
ISSUE: 1
PAGE 1/1
[Confidential Portion Omitted]
<PAGE>
Page 47
QUOTATION FOR ATTENDANT CONSOLE
-------------------------------
REFERENCE: CATV/GPA/814
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 48
QUOTATION FOR P-PHONES, HEADSETS AND RESIDENTIAL TELEPHONES SETS
-----------------------------------------------------------------
REFERENCE: CATV/GPA/815
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 49
QUOTATION FOR MUSIC ON HOLD INTERFACE
-------------------------------------
REFERENCE: CATV/GPA/816
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 50
QUOTATION FOR CENTREX
---------------------
INCLUDING RSC-S/SRU/LCME/LINE CARDS
-----------------------------------
REFERENCE: CATV/GPA/817
ISSUE: 1
PAGE: 1/3
[Confidential Portion Omitted]
<PAGE>
Page 51
QUOTATION FOR CENTREX
INCLUDING RSC-S/SRU/LCME/LINE CARDS
REFERENCE: CATV/GPA/817
ISSUE: 1
PAGE: 2/3
[Confidential Portion Omitted]
<PAGE>
Page 52
QUOTATION FOR CENTREX
INCLUDING RSC-S/SRU/LCME/LINE CARDS
REFERENCE: CATV/GPA/817
ISSUE: 1
PAGE: 3/3
[Confidential Portion Omitted]
<PAGE>
Page 53
QUOTATION FOR CMIS CABINET
--------------------------
REFERENCE: CATV/GPA/818
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 54
QUOTATION FOR CODES
-------------------
REFERENCE: CATV/GPA/819
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 55
QUOTATION FOR PDTC OR DTCOI PORTS
---------------------------------
REFERENCE: CATV/GPA/820
ISSUE: 1
PAGE : 1/1
[Confidential Portion Omitted]
<PAGE>
Page 56
QUOTATION FOR TECHNICAL SUPPORT
-------------------------------
REFERENCE: CATV/GPA/821
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 57
QUOTATION FOR FILTERS
---------------------
REFERENCE: CATV/GPA/822
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 58
QUOTATION FOR CISM AND ASSOCIATED CARDS
---------------------------------------
REFERENCE: CATV/GPA/823
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 59
QUOTATION FOR TRAINING
----------------------
REFERENCE: CATV/GPA/824
ISSUE: 1
PAGE: 1/1
<PAGE>
Page 60
-------
QUOTATION FOR WALLBOARD
-----------------------
REFERENCE: CATV/GPA/825
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 61
QUOTATION FOR STRATUM CLOCK INTERFACE
-------------------------------------
REFERENCE: CATV/GPA/826
ISSUE: 1
PAGE: 1/1
[Confidential Portion Omitted]
<PAGE>
Page 62
SIGNATURES
The parties intending to be legally bound have caused this Amendment to be
executed by their duly authorised representatives.
CUSTOMERS SUPPLIER
- ------------------------------------- ------------------------------------
TELEWEST COMMUNICATIONS GROUP LIMITED NORTEL LIMITED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------- ------ ----------------------- -----
authorised signature date authorised signature date
</TABLE>
- ------------------------------------ ------------------------------------
print or type name of signatory print or type name of signatory
- ----------------------------- ------------------------------------
title title
CABLE LONDON PLC
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
BIRMINGHAM CABLE LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
<PAGE>
Page 63
WINDSOR TELEVISION LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
BELL CABLEMEDIA PLC
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
TELECENTIAL COMMUNICATIONS PARTNERSHIP
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
IVS CABLE HOLDINGS LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
<PAGE>
Page 64
- --------------------------------------------
title
COMCAST TEESSIDE LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
CAMBRIDGE CABLE LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
DIAMOND CABLE COMMUNICATIONS LIMITED
- ---------------------------------- --------
authorised signature date
- --------------------------------------------
print or type name of signatory
- --------------------------------------------
title
DATED 7 AUGUST 1997
------------------------------------------------------
(1) TELEWEST COMMUNICATIONS GROUP LIMITED
- AND -
(2) CHARLES BURDICK
-----------------------------
SERVICE AGREEMENT
-----------------------------
CLIFFORD CHANCE
200 ALDERSGATE STREET
LONDON EC1A 4JJ
0171 600 1000
REF: BXH
<PAGE>
THIS AGREEMENT is made the 7 day of August 1997
BETWEEN :
(1) TELEWEST COMMUNICATIONS GROUP LIMITED whose registered office is at
Unit 1, Genesis Business Park, Albert Drive, Woking, Surrey GU21 5RW
("the Company"); and
(2) CHARLES BURDICK of
("the Executive")
WHEREBY it is agreed that the Company shall employ the Executive upon and
subject to the following terms and conditions:-
1. COMMENCEMENT AND TERM
1.1. The Executive's employment with the Company under the terms of this
Agreement shall begin on the date of this Agreement Executive's period
of continuous employment for statutory purposes also began on the date
of this Agreement.
1.2. The employment of the Executive shall (subject to the provisions of
clause 14) be for an initial fixed period of 24 months from 12 February
1997 and shall continue thereafter unless and until terminated by the
Company giving not less than 12 months notice in writing to the
Executive or by the Executive giving not less than 12 months notice in
writing to the Company to expire on or at any time after the end of the
initial fixed period.
1.3. The Company may at its absolute discretion elect to terminate the
employment of the Executive with immediate effect by paying to the
Executive salary and a sum equal to the value to him of the other
benefits to which he is entitled pursuant to Clauses 4, 5, 7 and 8 in
lieu of notice.
2. OBLIGATIONS DURING EMPLOYMENT
2.1. The Executive shall during the continuance of his employment:-
(a) serve the Company and its Associated Companies to the best of
his ability in the capacity of Finance Director of TeleWest ;
and
<PAGE>
(b) faithfully and diligently perform such duties and exercise such
powers consistent with his position as Finance Director as the
Board may from time to time properly assign to or confer upon
him; and
(c) if and so long as the Board so directs perform and exercise the
said duties and powers on behalf of any Associated Company and
act as a director or other officer of any Associated Company;
and
(d) in the performance of his duties do all which is reasonably
within his power to protect promote develop and extend the
business interests and reputation of the Group; and
(e) at all times and in all respects conform to and comply with the
lawful and reasonable directions of the Board ; and
(f) promptly give to the Board (in writing if so requested) all
such information explanations and assistance as it may require
in connection with the business and affairs of TeleWest and any
Associated Company for which he is required to perform duties;
and
(g) unless prevented by sickness injury or other incapacity or as
otherwise agreed by the Board devote the whole of his time
attention and abilities during his hours of work (which shall
be normal business hours and such additional hours as may be
necessary for the proper performance of his duties) to the
business and affairs of the Company and any Associated Company
for which he is required to perform duties; and
(h) work at the Company's offices at Unit 1, Genesis Business Park,
Albert Drive, Woking, Surrey, GU21 5RW or such other place of
business of the Company or any Associated Company within a
radius of 50 miles from London which the Board may reasonably
require for the proper performance and exercise of his duties
and powers and the Executive may be required to travel on the
business of the Company and any Associated Company for which he
is required to perform duties; and
(i) at such times as the Board may reasonably request and at the
expense of the Company undergo a medical examination by a
doctor of the Company's choice.
2.2. Notwithstanding the foregoing or any other provision of this
Agreement the Company shall not be under any obligation to provide
the Executive with any work and the Company may at any time during
the continuance of his employment without notice suspend the
Executive and/or exclude him from all or any premises of the Company
<PAGE>
or any Associated Company for any period or periods not exceeding six
months in aggregate provided that throughout any such period the
Executive's salary and other contractual benefits shall continue to
be paid or provided by the Company .
3. FURTHER OBLIGATIONS OF THE EXECUTIVE
3.1. During the continuance of his employment the Executive shall not
without the prior written consent of the Board (such consent not to
be unreasonably withheld or delayed) directly or indirectly carry on
or be engaged concerned or interested in any other business trade or
occupation otherwise than as a holder directly or through nominees of
not more than five per cent in aggregate of any class of shares
debentures or other securities in issue from time to time of any
company which are for the time being quoted or dealt in on any
recognised investment exchange (as defined by Section 207(1) of the
Financial Services Act 1986) and shall be permitted, with the prior
written consent of the Board, to accept appointment as a
non-executive director of another company or companies.
3.2. The Executive shall during the continuance of his employment comply
(and shall do all that is reasonably within his power to procure that
his spouse or partner and his minor children shall comply) with all
applicable rules of law stock exchange regulations (including the
"Model Code" issued by The International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited) and codes of conduct of
the Company and any Associated Company for the time being in force in
relation to dealings in shares debentures or other securities of the
Company or any Associated Company or any unpublished price sensitive
information affecting the securities of any other company.
3.3. The Executive shall in relation to any dealings in securities of
overseas companies comply with all laws of any foreign state
affecting dealings in the securities of such companies and all
regulations of any relevant stock exchanges on which such dealings
take place.
3.4. During the continuance of his employment the Executive:-
(a) shall not directly or indirectly procure accept or obtain for
his own benefit (or for the benefit of any other person) any
payment rebate discount commission vouchers or other benefit of
significant value ("Gratuities") from any third party in
respect of any business transacted or proposed to be transacted
(whether or not by him) by or on behalf of the Company or any
Associated Company; and
<PAGE>
(b) shall observe the terms of any policy issued by the Company in
relation to Gratuities; and
(c) shall immediately disclose and account to the Company for any
Gratuities received by him (or by any other person on his
behalf or at his instruction).
4. REMUNERATION
4.1. The Company shall pay to the Executive during the continuance of his
employment a salary (which shall accrue from day to day) at the rate
of (pound)225,000 per year inclusive of any directors' fees payable
to the Executive under the articles of association of the Company or
any Associated Company (and any such fees as the Executive shall
receive he shall pay to the Company). The salary shall be payable by
equal monthly instalments in arrears on or about the last day of each
calendar month.
4.2. The salary payable to the Executive under Clause 4.1 shall be
increased by such amount as the remuneration committee of the Board
may in its absolute discretion from time to time decide and notify to
the Executive in writing.
4.3. The Executive shall during the continuance of his employment be
entitled to be paid bonuses payable at the end of each calendar year
of up to 50% of base salary depending on performance against Company
and personal objectives.
5. PENSION SCHEME
5.1 The Company shall pay for the sole benefit of the Executive an annual
sum equal to the lesser of 10% of the Executive's salary under clause
4.1 from time to time or the sum permitted by Inland Revenue limits
as the percentage of net relevant earnings from time to time by equal
monthly instalments in arrears into the Executive's personal pension
scheme with Norwich Union (or such other personal pension scheme
approved under Part XIV of the Income and Corporation Taxes Act 1988
as the Executive may from time to time direct) and the Executive
agrees to contribute the annual sum of 2% of the said salary to the
pension scheme and the Company is hereby authorised to deduct any
such contributions from the Executive's monthly salary payments.
5.2 A contracting-out certificate is not in force in respect of the
employment of the Executive.
<PAGE>
6. SHARE OPTION SCHEMES
The Executive will within a reasonable time of the date of this
Agreement be granted options over shares of TeleWest having a value
of four times the salary payable to the Executive pursuant to clause
4 at the date of grant under and subject to the terms of the TeleWest
No.1 Share Option Scheme and the TeleWest No.2 Share Option Scheme.
7. INSURANCE
7.1. Subject to his complying with and satisfying any applicable
requirements of the relevant insurers the Company shall during the
continuance of his employment:-
(a) provide for the Executive and his spouse and children under the
age of 18 years membership of the British United Provident
Association medical expenses insurance scheme of which he is a
member at the date of this Agreement or of such other private
medical expenses insurance scheme providing equivalent benefits
as the Company may in its absolute discretion from time to time
decide;
(b) provide the Executive with life assurance cover which in the
event of his death during the continuance of his employment may
pay to his chosen dependants (subject only to the discretion of
the trustees of the appropriate scheme) a lump sum equal to
four times his then annual rate of salary; and
(c) provide for the Executive membership of the Company's permanent
health insurance scheme.
7.2. The Company shall at its absolute discretion be entitled to cease to
provide any or all of the insurances referred to in sub-Clause 7.1.
(a) (b) and (c) if in the opinion of the Board the medical condition
of the Executive is or becomes such that the Company is unable to
secure any such insurance under the rules of any applicable scheme or
otherwise at reasonable rates or premiums.
8. COMPANY CAR
8.1. The Company shall provide the Executive with a car of such make and
model as the Board shall decide is suitable for him for his sole use
during the continuance of his employment in respect of which the
Company shall pay or reimburse the Executive all standing and running
<PAGE>
costs including the cost of fuel consumed by the car in the course of
private journeys undertaken by the Executive.
8.2. The Company shall replace the car with another of such make and model
(but equivalent to that provided to him at the date of this
Agreement) and at such intervals as the Board may in its discretion
decide.
8.3. The Executive shall at all times and in all respects conform to and
comply with any policy which may from time to time be made by the
Company in relation to cars provided by it for the use of its
employees and in particular the Executive:-
(a) shall ensure that at all times when the car is driven on a
public highway it is in the state and condition required by law
and that a current M.O.T. test certificate is in force in
respect of it (if appropriate); and
(b) shall at all times be the holder of a current driving licence
entitling him to drive motor cars in the United Kingdom and
shall produce it to the Company upon request.
8.4. For the avoidance of doubt the Company shall be entitled at its
absolute discretion to withdraw the use of the car provided pursuant
to this Clause in the circumstances provided for in the Company's car
policy in force from time to time or if the Executive is disqualified
from holding a valid current driving licence.
9. RELOCATION AND ACCOMMODATION
9.1 The Company shall reimburse the Executive for all reasonable
household and removal expenses incurred by him as a result of a move
from his present address to an address within reasonable daily
travelling distance of the Company's offices in Woking up to the
maximum cost permitted in accordance with the rules of US West
Overseas Operations, Inc., relating to the secondment of Executives
outside the United States of America.
9.2 For the period from the date of this Agreement until 31 July 1997 the
Company shall make available for the use of the Executive and his
family furnished accommodation within reasonable daily travelling
distance of the Company's offices in Woking up to a maximum cost of
(pound)500 per week.
<PAGE>
9.3 On the termination of this Agreement the Company shall reimburse the
Executive for all reasonable household and removal expenses incurred
by him as a result of a move from his address in the United Kingdom
to his choice of location in the United States of America up to the
maximum cost permitted in accordance with the rules of US West
Overseas Operations, Inc., relating to the secondment of Executives
outside the United States of America provided always that the Company
shall not be required to purchase or provide assistance for the sale
of any land or accommodation purchased by the Executive in the United
Kingdom.
10. EXPENSES
10.1. The Company shall during the continuance of his employment reimburse
the Executive in respect of:-
(a) all reasonable travelling accommodation entertainment and other
similar out-of-pocket expenses wholly exclusively and
necessarily incurred by him in or about the performance of his
duties; and
(b) all reasonable household and removal expenses and other
reasonable costs incurred by him as a result of a move from his
present address necessitated by the Company's requiring him to
work permanently at another location; and
(c) up to (pound)5,000 per calendar year for financial and tax
advice.
10.2. Except where specified to the contrary all expenses shall be
reimbursed on a monthly basis subject to the Executive providing in
appropriate circumstances evidence (including receipts invoices
tickets and/or vouchers as may be appropriate) of the expenditure in
respect of which he claims reimbursement.
11. HOLIDAY
11.1. The Executive shall (in addition to the usual public and bank
holidays) be entitled during the continuance of his employment to 20
working days' paid holiday in each holiday year of the Company which
is the calendar year to be taken at such times as shall have been
approved by the Board.
11.2. The Executive shall not be entitled to carry forward any annual
holiday entitlement foregone by him for any reason during the holiday
year in which it accrued without the prior written consent of the
Board.
<PAGE>
11.3. Upon the termination of his employment the Executive's entitlement to
accrued holiday pay (which accrues at the rate of 1.66 days per
month) shall be calculated on a pro rata basis in respect of each
completed month of service in the holiday year in which his
employment terminates and the appropriate amount shall be paid to the
Executive provided that if the Executive shall have taken more days'
holiday than his accrued entitlement the Company is hereby authorised
to make an appropriate deduction from the Executive's final salary
payment.
12. INCAPACITY
12.1. Subject to his complying with the Company's procedures relating to
the notification and certification of periods of absence from work
the Executive shall continue to be paid his salary (inclusive of any
statutory sick pay or social security benefits to which he may be
entitled) during any periods of absence from work due to sickness
injury or other incapacity up to a maximum of 26 weeks in aggregate
in any period of 52 consecutive weeks.
12.2. If the Executive shall have been absent from work due to sickness
injury or other incapacity for a continuous period of 26 weeks or
more then he shall receive such benefits (if any) as are available to
him under the terms of the Company's permanent health insurance
scheme or any other applicable scheme or arrangement or (if no such
benefits are available) such sum (if any) as the Board may in its
absolute discretion decide.
12.3. If any incapacity of the Executive shall be caused by any alleged
action or wrong of a third party and the Executive shall decide to
claim damages in respect thereof, then the Executive shall use all
reasonable endeavours to recover damages for loss of earnings over
the period for which salary has been or will be paid to him by the
Company under Clause 12.1, and shall account to the Company for any
such damages recovered (in an amount not exceeding the actual salary
paid or payable to him by the Company under Clause 12.1 in respect of
the said period) less any costs borne by him in achieving such
recovery. The Executive shall keep the Company informed of the
commencement, progress and outcome of any such claim.
<PAGE>
13. CONFIDENTIALITY
13.1. The Executive shall not (other than in the proper performance of his
duties or without the prior written consent of the Board or unless
ordered by a court of competent jurisdiction) at any time either
during the continuance of his employment or after its termination
disclose or communicate to any person or use for his own benefit or
the benefit of any person other than the Company or any Associated
Company any confidential information which may come to his knowledge
in the course of his employment and the Executive acknowledges that
in the course of his duties he should do all which is reasonably
within his power to prevent the unauthorised publication or misuse of
any confidential information provided that such restrictions shall
cease to apply to any confidential information which may enter the
public domain other than through the default of the Executive.
13.2. All notes and memoranda of any trade secret or confidential
information concerning the business of the Company and the Associated
Companies or any of its or their suppliers, agents, distributors,
customers or others which shall have been acquired received or made
by the Executive during the course of his employment shall be the
property of the Company and shall be surrendered by the Executive to
someone duly authorised in that behalf at the termination of his
employment or at the request of the Board at any time during the
course of his employment.
13.3. For the avoidance of doubt and without prejudice to the generality of
Clause 13.1 the following is a non-exhaustive list of matters which
in relation to the Company and the Associated Companies are
considered confidential and must be treated as such by the
Executive:-
(a) any trade secrets of the Company or any Associated Company; and
(b) any information in respect of which the Company or any
Associated Company is bound by an obligation of confidence to
any third party; and
(c) customer lists and details of contacts with or requirements of
customers; and
(d) any invention technical data know-how instruction or operations
manual or other manufacturing or trade secret.
14. TERMINATION OF EMPLOYMENT
14.1. The employment of the Executive may be terminated by the Company
forthwith without notice or payment in lieu of notice if the
Executive:-
<PAGE>
(a) commits any serious or persistent breach or non-observance of
any of the terms, conditions or stipulations contained in this
Agreement; or
(b) is guilty of any serious negligence or gross misconduct in
connection with or affecting the business or affairs of the
Company or any Associated Company for which he is required to
perform duties; or
(c) is guilty of conduct which brings or is likely to bring himself
or the Company or any Associated Company into disrepute; or
(d) is convicted of an arrestable criminal offence (other than an
offence under road traffic legislation in the United Kingdom or
elsewhere for which a non-custodial penalty is imposed); or
(e) is adjudged bankrupt or makes any arrangement or composition
with his creditors or has an interim order made against him
pursuant to Section 252 of the Insolvency Act 1986; or
(f) in the reasonable opinion of the Board becomes incapable by
reason of mental disorder of discharging his duties; or
(g) is or becomes prohibited by law from being a director; or
(h) voluntarily resigns as a director of the Company;
(i) is on the basis of a medical report supplied to the Company
following his having undergone a medical examination pursuant
to paragraph (i) of Clause 2.1, in the reasonable opinion of
the Board medically unfit to perform his duties.
14.2. If the Executive shall have been absent from work due to sickness
injury or other incapacity for periods in excess of 26 weeks in
aggregate in any period of twelve consecutive months the Company may
terminate his employment by giving to him not less than six months'
notice in writing expiring at any time provided that the Company
shall withdraw such notice if during its currency the Executive
returns to full-time work and provides the Company with a medical
certificate stating that he has fully recovered and that no
recurrence of such incapacity may reasonably be anticipated and
provided that the Company shall not terminate the employment of the
<PAGE>
Executive if to do so would or would be likely to prejudice the
Executive's entitlement to benefits (actual or prospective) under the
Company's permanent health insurance scheme or any other scheme or
arrangement under which the Executive is or may be entitled to
benefits in respect of his sickness, injury or incapacity, in which
event the Executive shall remain an employee of the Company solely
for the purpose of recouping those benefits and shall not at any time
thereafter be entitled to perform duties and the Company shall be
entitled to terminate the employment of the Executive immediately he
ceases to be entitled to receive benefits under those schemes or
arrangements.
14.3. Upon the termination of his employment (for whatever reason and
howsoever arising) the Executive:-
(a) shall not take away conceal or destroy but shall
immediately deliver up to the Company all documents (which
expression shall include but without limitation notes
memoranda correspondence drawings sketches plans designs
and any other material upon which data or information is
recorded or stored) relating to the business or affairs of
the Company or any Associated Company or any of their
clients/customers shareholders employees officers
suppliers distributors and agents (and the Executive shall
not be entitled to retain any copies or reproductions of
any such documents) together with any other property
belonging to the Company or any Associated Company
(including his car and its keys) which may then be in his
possession or under his control;
(b) shall at the request of the Board immediately resign
without claim for compensation from office as a director
of the Company and any Associated Company and from any
other office held by him in the Company or any Associated
Company (but without prejudice to any claim he may have
for damages for breach of this Agreement) and in the event
of his failure to do so the Company is hereby irrevocably
authorised to appoint some person in his name and on his
behalf to sign and deliver such resignations to the Board;
and
(c) shall not at any time thereafter make any untrue or
misleading oral or written statement concerning the
business and affairs of the Company or any Associated
Company nor represent himself or permit himself to be held
out as being in any way connected with or interested in
the business of the Company or any Associated Company
(except as a former employee for the purpose of
communicating with prospective employers or complying with
any applicable statutory requirements); and
<PAGE>
(d) shall immediately repay all outstanding debts or loans due
to the Company or any Associated Company and the Company
is hereby authorised to deduct from any wages (as defined
by Section 7 of the Wages Act 1986) of the Executive a sum
equal to any such debts or loans.
14.4. If the employment of the Executive is terminated by reason of the
liquidation of the Company for the purpose of reconstruction or
amalgamation or as part of any arrangement for the amalgamation or
reconstruction of the Company not involving insolvency and the
Executive is offered employment with any concern or undertaking
resulting from the reconstruction or amalgamation on the same terms
and conditions as this Agreement then the Executive shall have no
claim against the Company in respect of such termination.
15. EXECUTIVE'S COVENANTS
15.1. The Executive acknowledges that during the course of his employment
with the Company he will receive and have access to confidential
information of the Company and its Associated Companies he will also
receive and have access to detailed client/customer lists and
information relating to the operations and business requirements of
those clients/customers and accordingly he is willing to enter into
the covenants described in Clause 15.2 .
15.2. The Executive hereby covenants with the Company that he will not for
the period of twelve months after the termination of his employment
without the prior written consent of the Board either alone or
jointly with or on behalf of any person directly or indirectly:-
(a) carry on or set up or be employed or engaged by or
otherwise assist in or be interested in a business
anywhere within the United Kingdom which is similar to or
in competition with the business of the provision of
television, telephony and other services by cable whether
for domestic or business purposes as such business is
carried on by the Company and its Associated Companies at
the date of such termination;
(b) in connection with the carrying on of any business
anywhere in the United Kingdom in competition with the
business of the provision of television, telephony and
other services by cable whether for domestic or business
purposes canvass solicit or approach or cause to be
canvassed or solicited or approached for orders in respect
of any services provided and/or any goods sold by the
Company or any Associated Company any person who or which
at the date of termination of his employment or at any
time during the period of twelve months prior to that date
is a customer or client of the Company or any Associated
<PAGE>
Company and with whom or which the Executive shall have
had dealings during the course of his employment;
(c) in connection with the carrying on of any business in the
United Kingdom in competition with the business of the
provision of television, telephony and other services by
cable whether for domestic or business use do business
with any person who or which has at any time during the
period of twelve months immediately preceding the date of
such termination done business with the Company or any
Associated Company as a supplier or customer or client or
distributor or consultant and with whom or which the
Executive shall have had dealings during the course of his
employment;
(d) solicit or entice away or endeavour to solicit or entice
away from the Company or any Associated Company any person
who at the date of termination of his employment is
employed or engaged by the Company or any Associated
Company in a senior capacity and with whom the Executive
shall have had contact during the course of his employment
(whether or not such person would commit a breach of his
contract of employment by so doing);
provided always that the restriction in clause 15.2(a) above shall
only apply so as to prohibit the Executive from being employed or
engaged by Cable and Wireless Communications plc BT plc or BSkyB plc
(or any subsidiary of either of them) in the event that the
Executive's employment terminates pursuant to a notice served by
either party under clause 1.2 above or by the Company making payment
in lieu of notice under clause 1.3 above.
15.3. The covenants contained in Clauses 15.2(a), (b), (c) and (d) are
intended to be separate and severable and enforceable as such.
16. DISCIPLINARY AND GRIEVANCE PROCEDURE
16.1. For statutory purposes there is no formal disciplinary procedure in
relation to the Executive's employment. The Executive shall be
expected to maintain the highest standards of integrity and
behaviour.
16.2. If the Executive is not satisfied with any disciplinary decision
taken in relation to him he may apply in writing within 14 days of
that decision to the Board whose decision shall be final.
16.3. If the Executive Director has any grievance in relation to his
employment he may raise it in writing with the Board whose decision
shall be final.
<PAGE>
17. DIRECTORSHIP
17.1. The Executive shall not during his employment voluntarily resign from
his office as a director of the Company or of TeleWest and he shall
not do or fail to do anything which causes or is likely to cause him
to be prohibited by law from continuing to act as a director.
17.2. The removal of the Executive from the office of director of the
Company or TeleWest or the failure of TeleWest in general meeting to
re-elect the Executive as a director of TeleWest (if he shall be
obliged to retire by rotation or otherwise pursuant to the articles
of association of TeleWest) shall terminate the Executive's
employment under this Agreement. Such termination shall constitute a
breach by the Company of this Agreement unless it has been terminated
in accordance with its terms at the date of such removal or failure
to re-elect or the Company was entitled at the time of such removal
or failure to re-elect to terminate it pursuant to Clause 14.1.
18. NOTICES
18.1. Any notice to be given under this Agreement shall be given in writing
and shall be deemed to be sufficiently served by one party on the
other if it is delivered personally or is sent by registered or
recorded delivery pre-paid post (air mail if overseas) addressed to
either the Company's registered office for the time being or the
Executive's last known address as the case may be.
18.2. Any notice sent by post shall be deemed (in the absence of evidence
of earlier receipt) to be received 2 days after posting (6 days if
sent air mail) and in proving the time such notice was sent it shall
be sufficient to show that the envelope containing it was properly
addressed stamped and posted.
19. MISCELLANEOUS
19.1. Any benefits provided by the Company to the Executive or his family
which are not expressly referred to in this Agreement shall be
regarded as ex gratia benefits provided at the entire discretion of
the Company and shall not form part of the Executive's contract of
employment unless otherwise agreed by the parties after the date of
this Agreement.
19.2. The Company shall be entitled at any time during the Executive's
employment to make deductions from the Executive's salary or from any
other sums due to the Executive from the Company or any Associated
<PAGE>
Company in respect of any overpayment of any kind made to the
Executive or in respect of any debt or other sum due from him.
20. DEFINITIONS AND INTERPRETATION
20.1. In this Agreement unless the context otherwise requires words and
phrases defined in Part XXVI of the Companies Act 1985 have the same
meanings thereby attributed to them and the following expressions
have the following meanings:-
"ASSOCIATED COMPANY"
any company which is a holding company or a subsidiary of the Company
or a subsidiary of the Company's holding company but excluding US
West Inc., and Tele-Communications Inc, and any subsidiary or holding
company of either of them.
"THE BOARD"
the Board of Directors for the time being of TeleWest including any
duly appointed committee thereof or the directors present at a
meeting of the directors of TeleWest at which a quorum is present but
excluding the Executive (as appropriate).
"GROUP"
the Company and the Associated Companies (excluding US West Inc., and
Tele-Communications Inc., and any holding or subsidiary company of
either of them).
"TELEWEST"
TeleWest plc, whose registered office is at Unit 1, Genesis Business
Park, Albert Drive, Woking, Surrey GU21 5RW, the holding company of
TeleWest Communications Group Limited.
20.2. The headings in this Agreement are for convenience only and shall not
affect its construction or interpretation.
20.3. References in this Agreement to Clauses and paragraphs are references
to Clauses and paragraphs to this Agreement.
20.4. Any reference in this Agreement to the employment of the Executive is
a reference to his employment by the Company whether or not during
the currency of this Agreement.
<PAGE>
20.5. Any reference in this Agreement to a person shall where the context
permits include a reference to a body corporate and to any
unincorporated body of persons.
20.6. Any word in this Agreement which denotes the singular shall where the
context permits include the plural and vice versa and any word in
this Agreement which denotes to the masculine gender shall where the
context permits include the feminine and/or the neuter genders and
vice versa.
20.7. Any reference in this Agreement to a statutory provision shall be
deemed to include a reference to any statutory amendment modification
or re-enactment of it.
20.8. This Agreement contains the entire understanding between the parties
and supersedes all (if any) subsisting agreements arrangements and
understandings relating to the employment of the Executive which such
agreements arrangements and understandings shall be deemed to have
been terminated by mutual consent provided that the Executive shall
remain entitled to any benefits accrued up to the date of termination
of such subsisting agreements arrangements and understandings.
20.9. This Agreement is governed by and shall be construed in accordance
with the laws of England and the parties to this Agreement hereby
submit to the exclusive jurisdiction of the English courts.
IN WITNESS whereof this Agreement has been executed as a deed by the parties
hereto and is intended to be and is hereby delivered on the date first above
written
<PAGE>
Executed as a deed by )
TELEWEST COMMUNICATIONS GROUP LIMITED )
- ------------------------------
Director
/s/ Victoria Hull
- ------------------------------
Secretary
Signed as a deed by )
CHARLES BURDICK /s/ Charles Burdick )
in the presence of:- )
Signature /s/ Susan Holmes
-----------------------------
Name Susan Holmes
Address 52 Wycliffe Road
Battersea SW11 5QR
Occupation Executive Assistant
EXHIBIT 13
Selected portions of the Company's 1997 Annual Report to Shareholders
incorporated by reference herein:
Pages 14-21
FINANCIAL REVIEW
To comply with applicable UK and US securities regulations, Telewest
Communications plc prepares financial statements under UK and US generally
accepted accounting principles ("GAAP") both sets of financial statements are
included in this report. Financial statements prepared under UK GAAP can be
found on pages 26 to 56; financial statements prepared under US GAAP can be
found on pages 57 to 77.
In the discussion of the financial results that follows, unless specifically
noted, all references to figures are identical under UK and US GAAP.
SUMMARY OF OPERATIONS YEARS ENDED 31 DECEMBER 1997 AND 1996
The Group's consolidated revenue increased by (pound)96.2 million or 33% from
(pound)290.3 million in 1996 to (pouNd)386.5 million in 1997. The increase was
attributable to the larger customer base created by the Group's continuing
network construction and penetration and price increases in certain segments of
our business.
CABLE TELEVISION REVENUE
Cable television revenue increased by 32% from (pound)121.2 million in 1996 to
(pound)159.9 million in 1997. The iNcrease was primarily attributable to a 28%
increase (from 440,212 to 562,343) in the average number of customers in 1997
over 1996. The increase in the average number of customers is a result of an
increase in the number of homes passed and marketed (from 2,335,953 at 31
December 1996 to 2,760,184 at 31 December 1997).
Average monthly revenue per cable television customer increased 2% from
(pound)22.95 in 1996 to (pound)23.40 in 1997. This was due to the expansion of
pay per view events, a decrease in promotional discounts offered by the Group
and price increases implemented from 1 November 1997.
TELEPHONY REVENUE
Telephony revenue increased by 32% from (pound)159.6 million in 1996 to
(pound)210.5 million in 1997.
Residential telephony revenue increased by 33% from (pound)125.0 million in 1996
to (pound)166.6 million in 1997. Business telephony revenue increased by 27%
from (pound)34.6 million in 1996 to (pound)43.9 million in 1997.
The increase in residential telephony in 1997 over 1996 was primarily due to a
42% increase (from 514,156 to 732,487) in the average number of residential
lines. This resulted from an increase in the number of homes passed and marketed
(from 2,254,734 at 31 December 1996 to 2,725,154 at 31 December 1997) and an
increase in penetration of the total base of homes passed of 2.2 percentage
<PAGE>
points. The revenue increase from the growth in the average number of
residential lines was partially offset by a 5% decrease in the average monthly
revenue per residential line, from (pound)20.26 in 1996 to (pound)19.19 in 1997.
2
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
(all amounts in (pound)million)
<TABLE>
<CAPTION>
UK GAAP US GAAP
-------------------------------------- -----------------------------------------
Year ended 31 December 1997 1996 1995 1995 1994 1997 1996 1995 1995 1994
Pro forma Pro forma
REVENUE Note
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cable television 159.9 121.2 64.7 83.7 35.9 159.9 121.2 64.7 83.7 35.9
Telephony - residential 166.6 125.0 57.6 81.2 23.5 166.6 125.0 57.6 81.2 23.5
Telephony - business 43.9 34.6 17.4 20.6 8.8 43.9 34.6 17.4 20.6 8.8
Other 16.1 9.5 5.1 5.7 3.8 16.1 9.5 5.1 5.7 3.8
- ---------------------------------------------------------------------------------------------------------------------------------
Total Revenue 386.5 290.3 144.8 191.2 72.0 386.5 290.3 144.8 191.2 72.0
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES
Programming (93.4) (69.9) (32.2) (42.9) (15.5) (93.4) (69.9) (32.2) (42.9) (15.5)
Telephony (50.1) (52.7) (29.5) (38.7) (14.7) (50.1) (52.7) (29.5) (38.7) (14.7)
Selling, general and administrative (193.3) (167.3) (105.4) (137.8) (60.4) (193.3) (167.3) (105.4) (137.8) (60.4)
Depreciation (177.3) (129.7) (61.5) (82.3) (30.3) (177.3) (129.7) (60.0) (80.8) (30.3)
Amortisation of goodwill (1) - - - - - (26.4) (26.1) (7.9) (25.3) (1.8)
- ---------------------------------------------------------------------------------------------------------------------------------
(514.3) (419.6) (228.6) (301.7) (120.9) (540.7) (445.7) (235.0) (325.5) (122.7)
- ---------------------------------------------------------------------------------------------------------------------------------
Operating loss (127.8) (129.3) (83.8) (110.5) (48.9) (154.2) (155.4) (90.2) (134.3) (50.7)
OTHER INCOME (EXPENSE)
Share of loss of affiliates (21.3) (15.2) (12.1) (12.1) (8.5) (21.7) (16.0) (12.8) (12.8) (805)
Financial expenses, net (2) (160.8) (105.4) (18.8) (25.3) (7.8) (156.2) (90.8) (34.6) (41.1) (6.2)
Other (0.8) (1.0) (0.7) (0.7) - (0.4) (0.2) 0.1 0.1 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss before extraordinary item (310.7) (250.9) (115.4) (148.6) (65.2) (332.5) (262.4) (137.5) (188.1) (65.4)
- ---------------------------------------------------------------------------------------------------------------------------------
Extraordinary item (3) - - - - - - - - - 7.3
Net loss (310.7) (250.9) (115.4) (148.6) (65.2) (332.5) (262.4) (137.5) (188.1) (58.1)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 1 Under UK GAAP goodwill related to acquisitions is written off to
reserves at time of purchase. Under US GAAP goodwill is generally
amortised over 20 years.
Note 2 The accounting treatment for financial instruments is different under
UK and US GAAP, as explained in the consolidated US GAAP financial
statements in note 4.
Note 3 Amount represents the unrealised gain embedded in interest rate swaps
which were marked to market for US GAAP purposes but not for UK GAAP
purposes.
Telewest acquired SBCC on 3 October 1995. Pro forma information has been
included for 1995 to demonstrate the effect of including the results of former
SBCC franchises for the full year ended 31 December 1995. The pro forma
information is not commented upon in the Financial Review.
For the purposes of comparison, UK GAAP consolidated financial highlights for
1994 are shown to reflect the results of certain predecessor businesses which
were acquired by the Group in November 1994. The results of predecessor
businesses do not include the results of former SBCC franchises.
3
<PAGE>
This decrease was mainly attributable to price reductions in per minute call
charges in response to price cutting by BT, the Group's main competitor in
residential telephony. The Group intends to continue to reduce per minute call
tariffs as necessary to compete effectively and to seek to mitigate the revenue
impact of these reductions through higher line rentals, increased call volumes
and sales of value added services such as call-waiting and voice-messaging.
The increase in business telephony revenue in 1997 over 1996 was primarily
attributable to a 58% increase (from 52,849 to 83,552) in the average number of
business telephony lines in 1997, which was partially offset by a 20% decrease
in the average monthly revenue per business line, from (pound)54.50 in 1996 to
(pound)43.62 in 1997. This decrease was mainly attributable to price reductions
in per minute call charges and increased volume discounts, together with
increased sales of Centrex, a business telecommunications product which provides
more lines to customers but has a lower average monthly revenue per line.
Other revenue increased by 70% from (pound)9.5 million in 1996 to (pound)16.1
million in 1997. Other revenue is derived primarily from management services
provided to Affiliated Companies, Internet sales, cable publications and network
management services provided to other operators, and advertising sales.
OPERATING COSTS AND EXPENSES
The Group's consolidated operating costs and expenses (which include direct
costs of programming and interconnection; selling, general and administrative
expenses; depreciation and amortisation expenses) increased by 23% from
(pound)419.6 million in 1996 to (pound)514.3 million in 1997 (21% under US GAAP
from (pound)445.7 million in 1996 to (pound)540.7 million in 1997).
Programming fees are the largest component of the Group's operating costs in
providing cable television services. The Group obtains most of its programming
under contracts which provide for payments based upon the number of subscribers.
As a percentage of cable television revenues, programming costs remained stable
at 58% in both 1996 and 1997.
Interconnection charges are the largest component of the Group's telephony
operating costs in providing telephony services. As a percentage of telephony
revenue, telephony operating costs decreased from 33% in 1996 to 24% in 1997 due
to the continuing reduction in interconnection charges in the UK telephony
market, a growing percentage of calls handled within the Telewest network and by
credits relating to interconnection charges from earlier periods, which have
been recalculated based on the final agreed rates applicable for that period.
Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue from 58% in
1996 to 50% in 1997. The improvement is largely due to the rapid growth in
revenues and continued reduction in support costs per customer as the Group
benefits from the economies of scale resulting from its enlarged operations. The
Group expects that selling, general and administrative expenses will continue to
decline as a percentage of revenue as revenues increase, efficiency gains from
its fixed cost base are increasingly exploited, and the full year benefits of a
restructuring and redundancy programme, completed in 1997, take effect. The
restructuring programme announced in August 1997, resulted in a reduction in
headcount of 1,400 staff and contractors at a cost of approximately (pound)3
million, and is expected to result in cash savings of approximately (pound)40
million in 1998. Total labour and overhead costs capitalised in 1997 were
(pound)76.9 million, compared to (pound)54.0 million in 1996.
4
<PAGE>
Depreciation expense increased 37% from (pound)129.7 million in 1996 to
(pound)177.3 million in 1997. The increase of (pound)47.6 million was
principally attributable to capital expenditure associated with the Group's
continuing construction activities ((pound)37.2 million) and a reclassification
of certain network assets in 1997 ((pound)10.4 million), as set out in Note 1 to
the UK GAAP financial statements and Note 3 to the US GAAP financial statements.
Under US GAAP, amortisation expense increased slightly from (pound)26.1 million
in 1996 to (pound)26.4 million in 1997. Under UK GAAP, all goodwill arising on
acquisitions is directly written off to reserves.
OTHER INCOME (EXPENSE)
The Group's share of the net losses of its Affiliated Companies accounted for
under the equity method, principally Birmingham Cable Corporation Limited and
Cable London plc, was (pound)21.3 million and (pound)15.2 million in 1997 and
1996, respectively, under UK GAAP ((pound)21.7 million and (pound)16.0 million
in 1997 and 1996, respectively, under US GAAP due to a difference in the
classification of tax expense).
Financial expenses, net, under UK GAAP consist primarily of interest expense of
(pound)139.0 million in 1997 ((pound)96.8 million in 1996), and foreign exchange
losses of (pound)31.0 million in 1997 ((pound)25.9 million in 1996) offset in
part by interest income earned on short-term investments and loans to Affiliated
Companies of (pound)9.1 million in 1997 ((pound)17.2 million in 1996). Under US
GAAP, financial expenses consist primarily of interest expense of (pound)141.7
million in 1997 ((pound)105.2 million in 1996), and foreign exchange losses of
(pound)23.5 million in 1997 ((pound)2.8 million in 1996) offset in part by
interest income earned on short-term investments and loans to Affiliated
Companies of (pound)8.0 million in 1997 ((pound)16.7 million in 1996).
Interest expense increased by (pound)42.2 million in 1997 ((pound)36.5 million
under US GAAP) primarily as a result of the interest expense on higher
outstanding borrowings relating to the Senior Secured Facility and the higher
accrued interest expense on the Senior Discount Debentures issued by the Group
in October 1995. The debentures are fully described in the following discussion
on Liquidity and Capital Resources. The foreign exchange losses under UK GAAP in
1997 primarily relate to the amortisation of the foreign currency option premium
which hedges the Senior Discount Debentures and the amortisation of exchange
losses arising on the translation of the debentures to Sterling using the
contracted exchange rate of the option. It is the Group's policy to hedge
non-Sterling denominated borrowings to reduce or eliminate exchange rate
exposure. The foreign exchange losses under US GAAP in 1997 arose principally
from the re-translation of the US Dollar denominated debentures to Pounds
Sterling, using the 31 December 1997 exchange rate, and marking the associated
hedging instruments to their market value at 31 December 1997.
SUMMARY OF OPERATIONS YEARS ENDED 31 DECEMBER 1996 AND 1995
The acquisition of SBCC on 3 October 1995 has been accounted for in the 1995
consolidated financial statements under the acquisition method of accounting.
Therefore, the 1995 consolidated profit and loss account includes the results of
SBCC from 3 October 1995 to 31 December 1995. The 1996 consolidated profit and
loss account includes the results of SBCC for the full year.
The Group's consolidated revenue increased by (pound)145.5 million or 100% from
(pound)144.8 million in 1995 to (pound)290.3 million in 1996. The increase was
attributable to the inclusion of the results of the former SBCC franchises for a
5
<PAGE>
full year in 1996 and to the larger customer base created by the enlarged
Group's continuing network construction.
CABLE TELEVISION REVENUE
Cable television revenue increased by 87% from (pound)64.7 million in 1995 to
(pound)121.2 million in 1996. The increase was primarily attributable to a 74%
increase (from 253,049 to 440,212) in the average number of customers in 1996
over 1995. The increase in the average number of customers resulted from the
inclusion for a full year in 1996 of the results of the former SBCC franchises
(which contributed an average of 165,855 customers in 1996 compared to an
average of 35,192 customers in 1995) and from an increase in the number of homes
passed and marketed in the other franchises (from 1,142,860 at 31 December 1995
to 1,460,463 at 31 December 1996).
Average monthly revenue per cable television customer increased 8% from
(pound)21.32 in 1995 to (pound)22.95 in 1996. This was a result of an increase
in the basic channel charge implemented in December 1995 and the additional
revenue generated from pay per view programming. This was, however, partially
offset by a decrease in the average number of premium channels purchased per
customer due to the inclusion for a full year in 1996 of the results of the
former SBCC franchises which historically had a lower average number of premium
channels purchased per customer.
TELEPHONY REVENUE
Telephony revenue increased by 113% from (pound)75.0 million in 1995 to
(pound)159.6 million in 1996.
Residential telephony revenue increased by 117% from (pound)57.6 million in 1995
to (pound)125.0 million in 1996. Business telephony revenue increased by 98%
from (pound)17.4 million in 1995 to (pound)34.6 million in 1996.
The increase in residential telephony in 1996 over 1995 was primarily due to a
119% increase (from 234,400 to 514,156) in the average number of residential
lines. This increase resulted from the inclusion for a full year in 1996 of the
results of the former SBCC franchises (which contributed an average of 229,751
lines in 1996 compared to an average of 45,117 lines in 1995), and from an
increase in the number of homes passed and marketed in the other franchises
(from 968,863 at 31 December 1995 to 1,380,484 at 31 December 1996). The revenue
increase from the growth in the average number of residential lines was slightly
offset by a 1% decrease in the average monthly revenue per residential line,
from (pound)20.48 in 1995 to (pound)20.26 in 1996. This decrease was mainly
attributable to price reductions in per minute call charges in response to price
cutting by BT, which were offset by increases in line rental rates.
The increase in business telephony revenue in 1996 over 1995 was primarily
attributable to a 114% increase (from 24,681 to 52,849) in the average number of
business telephony lines in 1996, which was partially offset by an 8% decrease
in the average monthly revenue per business line, from (pound)58.92 in 1995 to
(pound)54.50 in 1996. This decrease was attributable to price reductions in per
minute call charges in response to competition and increased sales of Centrex.
Other revenue increased by 89% from (pound)5.0 million in 1995 to (pound)9.5
million in 1996. Other revenue was derived primarily from management services
provided to Affiliated Companies, cable publications and network management
services provided to other operators, and advertising sales.
6
<PAGE>
OPERATING COSTS AND EXPENSES
The Group's consolidated operating costs and expenses (which include direct
costs of programming and interconnection; selling, general and administrative
expenses; depreciation expense and amortisation expense) increased by 84% from
(pound)228.6 million in 1995 to (pound)419.6 million in 1996 (90% under US GAAP
from (pound)235.0 million in 1995 to (pound)445.7 million in 1996).
As a percentage of cable television revenues, programming costs increased from
50% in 1995 to 58% in 1996 as a result of programming fee increases, providing
more channels in the basic cable television package with no price increase and
the inclusion for a full year in 1996 of the results of the former SBCC
franchises which have higher per channel programming costs.
Interconnection charges are the largest component of the Group's telephony
operating costs in providing telephony services. As a percentage of telephony
revenue, telephony operating costs decreased from 39% in 1995 to 33% in 1996 as
line rental income, which incurs no third-party cost, represented a larger
proportion of total average revenue per line in 1996 than in 1995.
Interconnection charges in 1996 also were reduced by credits relating to
interconnection charges from earlier periods which have been calculated based on
revised estimates of prevailing interconnection charges in the UK.
Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue from 73% in
1995 to 58% in 1996. The majority of this improvement is due to the rapid growth
in revenues and continued reduction in support costs per customer, with the
balance accounting for 5 percentage points of the year-on-year reduction - due
to revised estimates used in determining the proportion of labour and overhead
costs which are capitalised as network assets. Total labour and overhead costs
capitalised in 1996 were (pound)54.0 million, compared to (pound)26.6 million in
1995.
Depreciation expense increased 111% from (pound)61.5 million in 1995 to
(pound)129.7 million in 1996 under UK GAAP and increased 116% from (pound)60
million under US GAAP. This increase was principally attributable to capital
expenditure associated with the Group's continuing construction activities, a
full year of depreciation expense recorded in the former SBCC franchises, and a
reduction in the estimated useful lives of certain network assets in 1996 as set
out in Note 1 to the UK GAAP financial statements and Note 3 to the US GAAP
financial statements. Under US GAAP, amortisation expense increased from
(pound)7.9 million in 1995 to (pound)26.1 million in 1996 primarily due to a
full year of amortisation of the goodwill arising on the acquisition of SBCC in
October 1995.
OTHER INCOME (EXPENSE)
The Group's share of the net losses of its Affiliated Companies accounted for
under the equity method, principally Birmingham Cable Corporation Limited and
Cable London plc, was (pound)15.2 million and (pound)12.1 million in 1996 and
1995, respectively, under UK GAAP ((pound)16.0 million and (pound)12.8 million
in 1996 and 1995, respectively, under US GAAP due to a difference in the
classification of tax expense).
Financial expenses, net, under UK GAAP consist primarily of interest expense of
(pound)96.8 million in 1996 ((pound)23.8 million in 1995), and foreign exchange
losses of (pound)25.9 million in 1996 ((pound)4.7 million in 1995) offset in
part by interest income earned on short-term investments and loans to Affiliated
Companies of (pound)17.2 million in 1996 ((pound)15.6 million in 1995). Under US
GAAP, financial expenses consist primarily of interest expense of (pound)105.2
million in 1996 ((pound)26.6 million in 1995), and foreign exchange losses of
(pound)2.8 million in 1996 ((pound)14.6 million in 1995) offset in part by
interest income earned on short-term investments and loans to Affiliated
Companies of (pound)16.7 million in 1996 ((pound)15.6 million in 1995). In 1995,
financial expenses under UK GAAP also included an accounting loss on the sale of
interest rate swaps of (pound)5.5 million ((pound)8.6 million under US GAAP).
7
<PAGE>
Interest expense increased by (pound)73.0 million in 1996 ((pound)78.6 million
under US GAAP) primarily as a result of the interest payments and accrued
interest expense on the Senior Debentures and the Senior Discount Debentures,
issued by the Group in October 1995. The foreign exchange losses under UK GAAP
in 1996 primarily relate to the amortisation of the foreign currency option
premium which hedges the Senior Discount Debentures and the amortisation of
exchange losses arising on the translation of the debentures to Sterling using
the contracted exchange rate of the option. It is the Group's policy to hedge
non-Sterling denominated borrowings to reduce or eliminate exchange rate
exposure. The foreign exchange losses under US GAAP in 1996 arose principally
from the re-translation of the US Dollar denominated debentures to Pounds
Sterling using the 31 December 1996 exchange rate and marking the associated
hedging instruments to their market value at 31 December 1996.
LIQUIDITY AND CAPITAL RESOURCES
On May 22, 1996, the Group entered into a (pound)1.2 billion senior secured
credit facility with a syndicate of banks (the "Senior Secured Facility"). The
Senior Secured Facility is being used to finance the capital expenditure,
working capital requirements and other permitted related activities for the
construction and operation of the wholly owned telephony and television
franchises of the Group; to fund the payment of cash interest on the Senior
Debentures and Senior Discount Debentures (as described below); to fund the
repayment of existing secured borrowings of the Group in respect of certain
franchises; to fund loans to or investments in Affiliated Companies; to fund the
acquisition and subsequent construction of local delivery operators/franchises;
and to refinance advances and the payment of interest, fees and expenses in
respect of the Senior Secured Facility.
The Senior Secured Facility is divided into two tranches. The first (tranche A)
is available on a revolving basis for up to (pound)300 million, reducing to
(pound)100 million by 30 June 1998, with full repayment by 31 December 1998. The
second tranche (tranche B) is available on a revolving basis concurrently with
the first tranche for an amount up to 6.5 times the trailing, rolling six month
annualised consolidated net operating cash flow, gradually reducing throughout
the period of the facility to 4 times by 1 January 2000. Thereafter, the amount
outstanding under the facility converts to a term loan amortising over 5 years.
The aggregate drawing at any time under both tranches cannot exceed (pound)1.2
billion. Borrowings under the Senior Secured Facility are secured by assets,
including the partnership interests and shares of subsidiaries of the Group, and
bear interest at 2.25% above LIBOR for tranche A and between 0.5% and 1.875%
above LIBOR (depending on the ratio of borrowings to the trailing, rolling six
month annualised consolidated net operating cash flow) for tranche B. The
Group's ability to borrow under the Senior Secured Facility is subject to, among
other things, its compliance with the financial and other covenants and
borrowing conditions contained therein. The failure to comply with such
covenants could result, in extremis, in all such amounts outstanding under the
facility becoming due and payable. As at 31 December, 1997, the Group has
drawndown (pound)125 million and (pound)367.5 million under tranche A and
tranche B respectively.
Since 31 December 1997, this facility has been restructured with relaxed
financial covenants, a reduction in the amount available under the facility from
(pound)1,200 million to (pound)1,000 million, and a supplementary (pound)100
million revolving credit facility secured with a second fixed and floating
charge over the Group's assets, and interest costs on the latter ranging from
3.5% - 5.5% above LIBOR. As a result of this restructuring of the facility, the
repayment dates for tranche A, referred to above, have been accelerated by three
months.
8
<PAGE>
The Group has entered into certain delayed-starting interest rate swap
agreements in order to manage interest rate risk on the Senior Secured Facility.
The interest rate swaps convert floating rate interest payable on drawdowns
under the facility to fixed interest rate payments in the range of 7.835% -
7.975%. The swap agreements, which commenced in early 1997, have a five-year
maturity and a notional principal amount which adjusts upwards on a semi-annual
basis to a maximum of (pound)750 million. As at 31 December 1997, the aggregate
notional principal amount of the swaps was (pound)440 million.
On 3 October 1995, the Group raised (pound)734 million through the issue of $300
million principal amount of 95/8% Senior Debentures due 2006 (the "Senior
Debentures") and $1,536 million principal amount at maturity of 11% Senior
Discount Debentures due 2007 (the "Senior Discount Debentures"). Interest on the
Senior Debentures is payable semi-annually and commenced on 1 April 1996;
interest on the Senior Discount Debentures will be payable semi-annually
commencing on 1 April 2001. The proceeds of the issue were used by the Group to
fund general working capital, capital expenditures and additional investments in
Affiliated Companies, to repay a credit facility entered into by a Group company
and to purchase the currency hedge arrangements as described below.
The Group's principal hedge instruments are a combined foreign currency and
interest rate swap ("Foreign Currency Swap") and a foreign currency option. The
Foreign Currency Swap fully hedges against adverse exchange rate fluctuations on
the principal amount of the Senior Debentures and the associated interest
payments. The foreign currency option provides protection against exchange rate
fluctuations on the Senior Discount Debentures below a rate of $1.452: (pound)1
and allows the Group to benefit from positive exchange rate movements. Both
hedging instruments provide protection up to 1 October 2000, the early
redemption date of the Senior Debentures and the Senior Discount Debentures.
The Group's results may be materially influenced by future exchange rate
movements, particularly in the US GAAP financial statements, due to the
requirement that the hedge instruments and the debentures are marked to their
market value at the end of the financial period and the US Dollar denominated
debentures are re-translated to Pounds Sterling using the period end exchange
rate.
The Group generated a net cash inflow/(outflow) from operating activities of
(pound)68.6 million, (pound)28.5 million, and ((pound)10.2) million in 1997,
1996 and 1995, respectively, under UK GAAP. On a US GAAP basis, net cash
provided by/(used in) operating activities was (pound)3.0 million, (pound)18.1
million and ((pound)6.6) million in 1997, 1996 and 1995, respectively. The
difference between UK and US GAAP is principally due to a difference in the
classification of interest on the cash flow statement.
The Group incurred net cash outflow from investing activities of (pound)439.7
million, (pound)483.2 million and (pound)265.8 million in 1997, 1996 and 1995,
respectively. The Group's principal investing activities continue to be the
construction of the network, the provision of funding to the Affiliated
Companies, and, in the year ended 31 December 1996, the acquisition of a
franchise covering the Worcester area from Bell Cablemedia plc for (pound)9.8
million. Total expenditure on fixed assets was (pound)440.6 million,
(pound)515.6 million and (pound)269.1 million in 1997, 1996 and 1995,
respectively. The Group has implemented a reduction in the pace of its network
construction and its expenditure on certain discretionary capital projects,
which is expected to result in a significant reduction in capital expenditure in
1998.
9
<PAGE>
Cash inflow from financing activities was (pound)386.2 million, (pound)79.0
million and (pound)480.8 million in 1997, 1996 and 1995, respectively.
In 1997, the cash inflow from financing activities was principally generated
through a (pound)392.5 million drawdown under the Senior Secured Facility.
Similarly in 1996, such cash inflow was principally generated through a
(pound)100 million drawdown which was partially offset by costs incurred to
arrange the facility. In 1995, the cash inflow was principally generated by net
proceeds of (pound)734.2 million arising from the issue of the debentures which
were partially used to purchase the associated currency hedges and to repay a
credit facility entered into by a Group company.
Cash balances at 31 December 1997 were (pound)29.6 million.
The Group currently expects that the anticipated funding requirements (after
taking into account current cash and deposit balances and anticipated revenues)
required to substantially complete the construction of the owned and operated
network, to fund the Group's operations, to upgrade older portions of the
network, and to pay interest on the Group's debt will be provided by the Senior
Secured Facility and the supplementary revolving credit facility. There can be
no assurance that the Group will not elect to use alternative funding sources or
that the Group's actual funding requirements will be in line with expectations.
CHARLES BURDICK
- --------------------------------------------------------------------------------
SAFE HARBOR STATEMENT UNDER THE US PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
The discussion above and contained elsewhere in this report includes certain
forward looking statements that involve risks and uncertainties that could lead
to actual results that are significantly different from those anticipated by the
Group. These risks and uncertainties relate to, among other things, the extent
consumer preference develops for cable television over other methods of
providing in-home entertainment and for the Group a viable alternative to BT and
others as a provider of telephony service; the ability of the Group to manage
growth and expansion; the ability of the Group to construct its network in a
cost efficient and timely manner; the ability of the Group to raise additional
financing if there is a material adverse change in the Group's anticipated
revenues or expenses; the ability of the Group to respond to changes or
increases in competition and adverse changes in government regulation; the
extent programming is available at reasonable costs; adverse changes in the
price of telephony interconnection; disruptions in supply of services and
equipment, and the performance of the Affiliated Companies (which are not
controlled by the Group).
- --------------------------------------------------------------------------------
10
<PAGE>
Pages 30-33
REPORT OF THE REMUNERATION COMMITTEE
1. Compliance
The following report by the Remuneration Committee complies with Section A of
the Best Practice Provisions on remuneration committees as annexed to the
Listing Rules of the London Stock Exchange. Full consideration has also been
given to Section B of the Best Practice Provisions regarding remuneration
policy, service contracts and compensation, as annexed to the Listing Rules of
the London Stock Exchange. The Report is also in line with requirements under US
securities laws applicable to remuneration committee reports. Further
information on senior executive remuneration as required by US law can be found
in the proxy statement accompanying this document.
2. Composition
During the year the members of the Committee were Mr Ames (Chairman), Mr Stenham
and Mr Singer. The Committee submits reports regularly to the full board of
Directors concerning its activities and decisions. It has written terms of
reference which include the assessment and approval of the remuneration of the
executive Directors and senior executives. The Board determines the remuneration
of the non-executive Directors.
3. Remuneration policy for the executive Directors and senior executives
a) General policy
The Group aims to attract, motivate and retain high calibre executives by
rewarding them with competitive salary and benefit packages which are linked to
both individual and business performance. These packages are based on the
Group's philosophy of emphasising pay-for-performance. The Group recognises the
pressures for short-term as well as long-term performance and seeks to provide
an appropriate balance. The Group uses a market-based four-tiered salary
structure for its executive employees. Each senior executive is assigned to one
of these four tiers based on his or her level of responsibility and position in
relation to others inside and outside the Group.
The Committee believes that the Group's current remuneration policy
appropriately aligns the Group's senior executive compensation with the
performance of the Group and shareholder interests and offers competitive
compensation for its executives. The Committee does not believe in compensating
for poor performance and does not reward unsatisfactory performance. In the case
of early termination of employment, it is the Committee's policy to seek to
mitigate any liability.
b) Remuneration components
There are four components to the senior executive remuneration package: base
salary and benefits, annual cash bonus, long-term incentive arrangements and
pension.
i) Base salary and benefits
Salaries are established by the Committee by reference to those prevailing in
the employment market generally for executives of comparable status,
responsibility and skills. To assist in determining the comparability of
positions and competitive market pricing, the Group uses executive compensation
salary surveys prepared by recognised independent compensation consulting firms
in the UK. The Group uses surveys that specifically cover the UK cable
11
<PAGE>
communications industry, as well as surveys of comparable companies of similar
size in similar industries. In general, and because of the competitive nature of
the market, the Group seeks to set overall executive compensation levels to rank
between the mid-market and upper quartile of the survey data.
Salary reviews are generally determined by the Committee on an annual basis.
Adjustments in base salary, if any, occur after a formal appraisal process,
taking account of individual performance, changes in job responsibilities,
changes in the marketplace and general economic conditions in the UK.
Benefits for senior executives typically include a car (or a cash payment in
lieu thereof) and payment of its operating expenses and fuel, and life,
disability and health insurance. The benefits are not pensionable.
ii) Annual cash bonuses
The Group's Short-Term Incentive Plan (the "STIP") provides all employees with
an opportunity to earn an annual cash award (which is not pensionable) based
upon the achievement of short-term Group targets (ie, one financial year). These
targets are set by the Remuneration Committee at the commencement of each
financial year and kept under review thereafter. Under the STIP, the senior
executive has an award opportunity expressed as a percentage of base salary. For
executive Directors, the award is up to 25% of salary for achieving target,
rising to a maximum of 50% of salary if the Group exceeds its STIP target. The
1997 STIP awards to the executive Directors represented approximately 53.3% of
the targeted bonus amount. The amount of the STIP is based upon the extent to
which the Group achieves certain specified objectives. In 1997, the STIP
objectives related to the achievement of targets set in respect of growth,
quality of operations (measured by customer satisfaction surveys), operating
cash flow and taking into account the completion of the restructuring programme.
The objective is to have payout tied to Group performance, thereby providing
higher than targeted payouts for better than expected performance and lower than
targeted payouts for performance below the targeted levels.
iii) Long-term incentive arrangements
The Group operates the following long-term share and option incentive plans: The
Telewest Restricted Share Scheme and The Telewest Long Term Incentive Plan (each
of the aforesaid plans is designed to operate in conjunction with an Employee
Share Ownership Plan ("ESOP")); an Inland Revenue approved executive share
option scheme, the Telewest 1995 (No.1) Executive Share Option Scheme; an
unapproved executive share option scheme, the Telewest 1995 (No.2) Executive
Share Option Scheme; an Equity Participation Plan ("EPP"); an Employee Sharesave
Scheme and a profit sharing scheme designed for Inland Revenue approval.
The Telewest Restricted Share Scheme was designed to replace a cash bonus scheme
in operation prior to the initial public offering in November 1994 and, for this
reason, exercise of the award is not subject to the satisfaction of a
performance condition. Under this scheme, awards were made of Telewest shares to
senior executives based on a percentage of salary and for no consideration. At
the time of the initial public offering Mr Davidson was granted an award over
475,183 Telewest shares. Awards generally vest over a three year period and, in
the case of Mr Davidson, the final vesting date was January 1998.
The Telewest Restricted Share Scheme has been replaced with a Long-Term
Incentive Plan ("LTIP") for share awards to executive Directors and senior
executives. It is intended that senior executives in the LTIP will not be
granted further options under the executive share option schemes (subject to
12
<PAGE>
exceptions at the discretion of the Remuneration Committee). In future, options
under these schemes will generally be awarded to employees not participating in
the LTIP. Under the LTIP a senior executive will be awarded the provisional
right to receive, for no payment, a number of Telewest shares with a value
equating to a percentage of base salary. The shares will not vest unless certain
performance criteria, based on total shareholder return assessed over a three
year period, are met. The percentage of salary will be determined by the
Remuneration Committee and will be up to 100% of base salary for executive
Directors. The award is divided equally, with vesting of 50% depending on the
Company's TSR meeting a performance condition relating to the TSR of FT-SE 100
companies, and the remaining 50% depending on the Company's TSR meeting a
performance condition relating to the TSR of a group of comparative companies
(including cable, broadcasting and telecommunications companies listed on the
London Stock Exchange and cable companies operating in the UK and listed on
Nasdaq), in each case over a three year period. If the Company's TSR is in the
top quartile of the FT-SE 100 over that period, the executive will receive 50%
of the number of shares awarded to him; if the Company's TSR is 50th place in
the FT-SE 100, the executive will receive 12.5% of the number of shares awarded
to him; if below 50th place in the FT-SE 100, the executive will receive nothing
in respect of this portion of the award. Similarly, if the Company's TSR is in
the top quartile of the group of comparative companies in that period, the
executive will receive 50% of the number of shares awarded to him; if the
Company's TSR is at the median position the executive will receive 12.5% of the
number of shares awarded to him; if below the median position, the executive
will receive nothing in respect of that portion of the award. In either test a
proportionate number of shares will be received for intermediate positions. TSR
in each case will be calculated by reference to the cash flow generated by
dividends, and capital appreciation on a share purchased at the beginning and
sold at the end of the period. If the executive remains employed by the Group
and depending on the achievement of the performance criteria, at the end of the
third year after the date of grant, 50% of the vested award will be transferred
to the employee and the balance will be transferred at the end of the fourth
year after the date of grant if the employee remains so employed.
The executive share option schemes also form part of the Group's long-term
incentive arrangements. Options over Telewest shares are granted in phases,
generally on a one times salary basis up to a maximum of four times salary and
exercise is subject to a performance condition, namely out-performance of the
FT-SE 100 Index over any three-year period preceding exercise.
The option arrangements relating to Mr Davidson and Mr Burdick are set out on
page 28 of the Report of the Directors.
Under the STIP, employees may be due a cash bonus. The Remuneration Committee
has provided that, under the EPP, an employee with two years service or at
manager level or above, can use up to 50% of the pre-tax bonus payable to him to
acquire Telewest shares ("bonus shares"). The employee must deposit the bonus
shares with the Trustee of the existing Telewest ESOP. In return, the employee
is provisionally allocated for no payment a matching number of Telewest shares.
Provided the bonus shares are retained for three years and the employee remains
employed by the Group for three years, the bonus and matching shares would
thereafter be released to the employee.
The Inland Revenue approved sharesave scheme, which enables the Company to grant
options to employees to purchase Telewest shares at a 20% discount to market
price is designed to incentivise employees. These options can be exercised only
with funds saved by employees over time in a qualified savings account.
13
<PAGE>
4. Pensions
The Group contributes to personal pension schemes established by individual
employees. The actual contribution of the Group to such schemes depends on the
contribution made by the employee and may vary according to length of service.
Generally the Group contribution varies from 3% of an employee's salary to a
maximum of 12% for executive Directors or up to the Inland Revenue limits. In
addition, there is a money purchase pension scheme to which the Group
contributes an amount equal to the employee's contribution, such contributions
varying between 3% and 6%. The Group's contribution is based on the employee's
salary excluding benefits or bonuses.
5. Executive Directors' agreements
Mr Davidson's employment agreement has a one year notice period in accordance
with the recommendation of the Code. However, the Remuneration Committee
believes that at this stage of the Group's development it may be necessary to
offer executives contracts (such as Mr Burdick as discussed below) in excess of
one year to attract candidates of the appropriate calibre. In February 1997 Mr
Davidson's salary was increased to (pound)335,000 (effective from July 1996, to
reflect his confirmation as Chief Executive). For the financial year ended 1997,
Mr Davidson was awarded an annual bonus, pursuant to the STIP, of (pound)45,000.
Mr Burdick has an initial two year, fixed term agreement commencing 12 February
1997 and to continue thereafter until terminated by either party giving no less
than 12 months' notice to expire on or at any time after the end of the initial
fixed term. The Remuneration Committee believes an initial notice period in
excess of one year is justified in view of his move from the US. Mr Burdick's
salary is (pound)225,000. For the financial year ended 1997, Mr Burdick was
awarded an annual bonus, pursuant to the STIP, of (pound)25,000.
Mr Van Valkenburg has been seconded to the Company from US WEST International
for an indefinite period and such arrangement is terminable without advance
notice by either US WEST International or the Company. The Company has agreed to
reimburse US WEST International for Mr Van Valkenburg's salary and related
benefits during his secondment to the Company. His salary is (pound)157,738 per
annum. Mr Van Valkenburg is eligible for an annual bonus of up to 40% of salary
for achieving target. For the financial year ended 31 December 1997, Mr Van
Valkenburg was awarded such bonus based on US WEST International plan criteria
and the Company has reimbursed US WEST International for the period Mr Van
Valkenburg spent with the Company amounting to (pound)41,584. For the financial
year ending 31 December 1998 he will be subject to the rules of the Telewest
STIP.
Under the current Remuneration Committee policy senior executives have
employment agreements with notice periods which range from three months to one
year, depending on their grade.
6. DIRECTORS' REMUNERATION
The aggregate compensation for the Directors is as follows:-
1997 1996
(POUND)'000 (pound)'000
Base salary and benefits 1,034 530
Annual bonus - STIP 112 25
Pension 33 18
Compensation for loss of office - 538
1,179 1,112
14
<PAGE>
Additional information required under US securities laws with respect to the
compensation of the Directors, the Chief Executive Officer and certain other
executives is set out under the caption "Executive Compensation" in the Proxy
Statement.
DIRECTORS COMPENSATION
<TABLE>
<CAPTION>
Salaries/fees Taxable benefits Annual/ Special bonuses Compensation for
loss of office Total emoluments excluding pension contributions Pension contributions
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
(all amounts in (pounds)'000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXECUTIVE:
S J Davidson 334 236 19 12 45 25 - - 398 273 24 13
A Michels - 100 - 68 - - - 539 - 707 - 5
D Van Valkenburg 94 - 170 - 42 - - - 306 - 3 -
C J Burdick 225 - 9 - 25 - - - 259 - 6 -
NON-EXECUTIVE:
F A Vierra - - - - - - - - - - - -
A G Ames - - - - - - - - - - - -
A W P Stenham 108 50 - - - - - - 108 50 - -
Lord Borrie QC 39 34 - - - - - - 39 34 - -
Lord Griffiths 36 30 - - - - - - 36 30 - -
J A Atterbury - - - - - - - - - - - -
J O Robbins - - - - - - - - - - - -
A N Singer - - - - - - - - - - - -
R W Shaner - - - - - - - - - - - -
836 450 198 80 112 25 0 539 1,146 1,094 33 18
</TABLE>
Notes:
1 Certain amounts reflected in this table and elsewhere in this section were
paid in US dollars, but are represented in this table in pounds sterling,
based on an average exchange rate of $1.64 to (pound)1.00 for the year
ended 31 December 1997.
2 Mr Van Valkenburg's principal taxable benefits were the provision of
(pound)55,330 in respect of his income taxes, housing allowance of
(pound)74,057 and relocation and foreign service allowances of
(pound)27,527.
3 The independent non-executive Directors are paid (pound)1,000 for each
Board or Committee meeting they attend in addition to their fees. The
executive Directors' interests in Company share options and restricted
share scheme awards are set out on page 28 of the Report of the Directors.
No non-executive Director has any interests in Telewest shares.
15
<PAGE>
4 Mr Stenham received additional fees for 1997 for increased responsibilities
undertaken on behalf of the Company.
5 The pension contributions for the Directors were paid into their private
pension schemes. None of the Directors are members of the Group's money
purchase pension scheme.
7. Remuneration policy for non-executive Directors
The remuneration policy for non-executive Directors consists of fees for their
services in connection with Board and Board Committee meetings and, where
relevant, for additional services such as chairing a Committee. They are not
eligible for pension scheme membership and do not participate in any of the
Group's bonus, share option or other incentive schemes. Their remuneration is
approved by the Board of Directors.
A G Ames (Chairman)
A W P Stenham
A N Singer
The Remuneration Committee
16
<PAGE>
Pages 57-77
FINANCIAL STATEMENTS UNDER US GAAP
Contents
58 Independent auditors' report
59 Consolidated statements of operations for each of the years in the
three-year period ended December 31, 1997
60 Consolidated balance sheets at December 31, 1997 and 1996
61 Consolidated statements of cash flows for each of the years in the
three-year period ended December 31, 1997
62 Consolidated statement of shareholders' equity for each of the years in
the three-year period ended December 31, 1997
63 Notes to the consolidated financial statements
77 Supplementary financial information - five year summary
17
<PAGE>
Independent auditors' report
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TELEWEST COMMUNICATIONS PLC
We have audited the accompanying consolidated balance sheets of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements on pages 59 to 76 present
fairly, in all material respects, the financial position of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31,1997 in conformity with generally accepted
accounting principles in the United States of America.
KPMG AUDIT PLC
Chartered Accountants
Registered Auditors
London, England
March 18, 1998
18
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
1997 1997 1996 1995
$'000 (POUND)'000 (pound)'000 (pound)'000
(NOTE 2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Cable television 262,698 159,918 121,224 64,740
Telephony - residential 273,748 166,645 125,013 57,597
Telephony - business 72,085 43,882 34,562 17,449
Other ((pound)3,573, (pound)1,600 and
(pound)1,451 in 1997, 1996 1995,
respectively, from related parties) 26,370 16,053 9,467 4,998
- ------------------------------------------------------------------------------------------------------
634,901 386,498 290,266 144,784
- ------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Programming (153,496) (93,441) (69,906) (32,194)
Telephony (82,373) (50,145) (52,572) (29,526)
(Selling, general and administrative
(including (pound)1,170, (pound)2,560
and (pound)3,257 in 1997, 1996 and 1995,
respectively, to related parties) (317,591) (193,335) (167,323) (105,388)
Depreciation (291,318) (177,341) (129,716) (60,019)
Amortization of goodwill (43,359) (26,395) (26,149) (7,854)
- ------------------------------------------------------------------------------------------------------
(888,137) (540,657) (445,666) (234,981)
- ------------------------------------------------------------------------------------------------------
OPERATING LOSS (253,236) (154,159) (155,400) (90,197)
OTHER INCOME/ (EXPENSE)
Interest income (including (pound)3,178,
(pound)1,723 and (pound)1,583 in 1997,
1996 and 1995, respectively, from
related parties) 13,074 7,959 16,651 15,645
Interest expense (232,805) (141,721) (105,172) (26,649)
Loss on disposal of interest rate swaps - - - (8,609)
Foreign exchange losses, net (38,676) 23,544) (2,838) (14,575)
Share of net losses of affiliates (35,640) (21,696) (15,973) (12,777)
Gain/(loss) on disposal of assets 1,871 1,139 571 (419)
Minority interests in profits of consolidated
subsidiaries, net (482) (293) (180) (16)
Other, net - - - 82
LOSS BEFORE INCOME TAXES (545,894) (332,315) (262,341) (137,515)
Income tax expenses (note 14) (225) (137) (50) (16)
- ------------------------------------------------------------------------------------------------------
NET LOSS (546,119) (332,452) (262,391) (137,531)
- ------------------------------------------------------------------------------------------------------
Year ended December 31,
1997 1997 1996 1995
$* (POUND)* (pound)* (pound)*
- ------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER ORDINARY
SHARE
Weighted average number of ordinary shares
outstanding 927,567,600 927,567,600 925,425,473 861,424,848
- --------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER ORDINARY
SHARE (0.59) (0.36) (0.28) (0.16)
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
*Except number of shares
19
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1997 1997 1996
$'000 (POUND)'000 (pound)'000
(note 2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 48,595 29,582 79,116
Trade receivables (net of allowance for doubtful accounts
of (pound)6,507 and(pound)5,405) 60,167 36,627 29,305
Other receivables (note 7) 43,050 26,207 32,394
Prepaid expenses 12,526 7,625 5,168
Investments in affiliates, accounted for under the equity
method, and related receivables (note 8) 98,081 59,707 69,420
Other investments, at cost 42,162 25,666 25,666
Property and equipment (less accumulated depreciation
of (pound)481,451 and(pound)308,240) (note 9) 2,801,658 1,705,520 1,447,194
Goodwill (less accumulated amortization of(pound)64,301
and (pound)37,907) 765,342 465,905 491,290
Other assets (less accumulated amortization of(pound)10,140
and (pound)4,162) (note 11) 92,833 56,513 62,387
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 3,964,414 2,413,352 2,241,940
- -----------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 43,877 26,710 46,855
Other liabilities (note 12) 326,345 198,664 190,200
Debt (note 13) 2,255,516 1,373,054 879,351
Capital lease obligations (note 17) 124,080 75,534 54,390
- -----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,749,818 1,673,962 1,170,796
- -----------------------------------------------------------------------------------------------------
MINORITY INTERESTS 1,051 640 347
- -----------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (note 15)
Convertible preference shares, 10p par value; 661,000,000
shares authorized and 496,066,708 shares issued and
outstanding 81,489 49,607 49,607
Ordinary shares, 10p par value; 2,010,000,000 shares
authorized; 927,567,600 issued and outstanding in
1997 and 1996 152,372 92,757 92,757
Additional paid-in capital 2,189,533 1,332,887 1,332,887
Accumulated deficit (1,206,661) (734,560) (402,108)
- -----------------------------------------------------------------------------------------------------
1,216,733 740,691 1,073,143
Ordinary shares held in trust for The Telewest Restricted
Share Scheme (note 16) (3,188) (1,941) (2,346)
- -----------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,213,545 738,750 1,070,797
- -----------------------------------------------------------------------------------------------------
Commitments and contingencies (note 17)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,964,414 2,413,352 2,241,940
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
20
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
1997 1997 1996 1995
$'000 (POUND)'000 (pound)'000 (pound)'000
(NOTE 2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss (546,119) (332,452) (262,391) (137,531)
Adjustments to reconcile net loss to net
cash provided by/(used in) operating activities:
Depreciation 291,318 177,341 129,716 60,019
Amortization of goodwill 43,359 26,395 26,149 7,854
Amortization of deferred financing costs and
issue discount on senior discount debentures 127,280 77,482 74,104 16,605
Accrued interest on senior debentures - - - 5,451
Unrealized loss on foreign currency translation 38,676 23,544 2,838 14,575
Loss on disposal of interest rate swaps - - - 8,609
Share of net losses of affiliates 35,640 21,696 15,973 12,777
(Gain)/loss on disposals of assets (1,871) (1,139) (571) 419
Minority interests in profits of consolidated
subsidiaries 482 293 180 16
Changes in operating assets and liabilities,
net of effect of acquisition of subsidiaries:
Change in receivables (7,011) (4,268) (15,908) (5,282)
Change in prepaid expenses (4,036) (2,457) 953 (3,367)
Change in accounts payable (11,648) (7,091) (4,575) (5,603)
Change in other liabilities 38,825 23,635 51,668 19,206
Other - - - (356)
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES 4,895 2,979 18,136 (6,608)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash paid for property and equipment (714,635) (435,037) (464,367) (254,453)
Cash paid for acquisition of subsidiaries (999) (608) (14,167) (3,232)
Additional investments in and loans to affiliates (14,825) (9,025) (2,728) (9,143)
Additions to other investments - - (5,000) -
Proceeds from disposals of assets 9,962 6,066 3,059 688
Other investing activities - - - 335
- --------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (720,497) (438,604) (483,203) (265,805)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash paid for credit facility arrangement costs - - (18,400) -
Proceeds from debenture issue - - - 754,812
Cash paid for foreign currency option - - - (88,070)
Repayment of borrowings (3,901) (2,375) (937) (157,930)
Cash paid for debenture issue costs - - (829) (20,574)
Cash paid for share issue costs - - - (6,141)
Proceeds from borrowings 644,760 392,500 100,400 -
Capital element of finance lease repayments (6,523) (3,971) (1,231) (1,291)
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 634,336 386,154 79,003 480,806
- --------------------------------------------------------------------------------------------------------
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (81,266) (49,471) (386,064) 208,393
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (103) (63) 362 8,423
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 129,964 79,116 464,818 248,002
- --------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR 48,595 29,582 79,116 464,818
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
21
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Convertible Ordinary Shares held Additional Accumulated Total
preference shares in trust paid-up capital Deficit (pound)'000
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 15,300 84,824 (7,280) 686,276 (2,186) 776,934
Conversion of ordinary shares into
convertible preference shares (note 15) 11,227 (11,277) - - - -
Shares issued in connection with the
acquisition of TCMN (notes 5 and 15) 23,080 18,399 - 636,695 - 678,174
Accrued employee compensation relating
to the Telewest Restricted Share Scheme - - 5,171 - - 5,171
Net loss - - - - (137,531) (137,531)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 49,607 91,996 (2,109) 1,322,971 (139,717) 1,322,748
Ordinary shares issued - 761 - 9,916 - 10,677
Accrued employee compensation relating to
the Telewest Restricted Share Scheme - - (237) - - (237)
Net loss - - - - (262,391) (262,391)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 49,607 92,757 (2,346) 1,332,887 (402,108) 1,070,797
Accrued employee compensation relating to
the Telewest Restricted Share Scheme - - 405 - - 405
Net loss - - - - (332,452) (332,452)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 49,607 92,757 (1,941) 1,332,887 (734,560) 738,750
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
22
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS
ENDED DECEMBER 31, 1997, 1996 AND 1995
1 ORGANIZATION AND HISTORY
Telewest Communications plc (the "Company") is a cable television and telephony
operator which offers these services to business and residential customers in
the United Kingdom ("UK"). The Company derives its cable television revenues
from installation fees, monthly basic and premium service fees and advertising
charges. The Company derives its telephony revenues from connection charges,
monthly line rentals, call charges, special residential service charges and
interconnection fees payable by other operators. The cable television and
telephony services account for approximately 41% and 54%, respectively, of the
Company's revenue. This revenue is predominantly derived from residential,
rather than business, customers.
The Company was incorporated on October 20, 1994 under the laws of England and
Wales in preparation for the October 2, 1995 internal reorganization of Telewest
Communications Cable Limited ("TCCL"), then called TeleWest Communications plc,
and its subsidiaries whereby the entire issued share capital of TCCL was
transferred to the Company in exchange for fully paid up shares of the Company.
TCCL had traded since November 22, 1994 when affiliates of Tele-Communications,
Inc. (the "TCI Affiliates") and affiliates of US WEST, Inc. (the "US WEST
Affiliates") contributed their UK cable interests to TCCL (the "Contribution").
These interests were previously held by the TCI Affiliates and US WEST
Affiliates through TCI/US West Cable Communications Group, a general
partnership. TCI/US WEST Cable Communications Group and its subsidiaries
collectively are referred to herein as the "Joint Venture" and the TCI
Affiliates and US WEST Affiliates collectively are referred to herein as the
"Joint Venturers."
2 BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America ("US
GAAP"). The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The economic environment and currency in which the Company operates is the UK
and hence its reporting currency is Pounds Sterling ((pound)). Certain financial
information for the year ended December 31, 1997 has BEEn translated into US
Dollars, with such US Dollar amounts being unaudited and presented solely for
the convenience of the reader, at the rate of $1.6427 = (pound)1.00, the Noon
Buying Rate of the Federal Reserve BANK of New York on December 31, 1997. The
presentation of the US Dollar amounts should not be construed as a
representation that the Pounds Sterling amounts could be so converted into US
Dollars at the rate indicated or at any other rate.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
those of all majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated upon consolidation.
23
<PAGE>
All acquisitions have been accounted for under the purchase method of
accounting. Under this method, the results of subsidiaries and affiliates
acquired in the year are included in the consolidated statement of operations
from the date of acquisition.
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (FAS 121), "Accounting for Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of." FAS 121 requires that long-lived assets
and certain identifiable intangibles, including goodwill, to be held and used by
an entity, be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Upon adoption of this standard, the Company evaluated its
long-lived assets using projected undiscounted future cash flows and operating
income for each subsidiary and determined that no material impairment of these
assets existed at January 1, 1996 and accordingly, no loss was recognized. The
Company believes that no material impairment existed at December 31, 1997.
Goodwill arising on consolidation (representing the excess of the fair value of
the consideration given over the fair value of the identifiable net assets
acquired) is amortized over the acquisition's useful life or over a maximum
period of 40 years. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance over its
remaining life can be recovered through projected undiscounted future operating
cash flows of the acquired operations. The assessment of the recoverability of
goodwill will be impacted if projected future operating cash flows are not
achieved. The amount of goodwill impairment, if any, is measured based on the
projected discounted future operating cash flows using a discount rate
reflecting the Company's cost of funds.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly-liquid investments with original
maturities of three months or less that are readily convertible into cash.
FINANCIAL INSTRUMENTS
The Company uses foreign currency option contracts which permit, but do not
require, the Company to exchange foreign currencies at a future date with
another party at a contracted exchange rate. The Company also enters into
combined foreign currency and interest rate swap contracts ("Foreign Currency
Swaps"). Such contracts are used to hedge against adverse changes in foreign
currency exchange rates associated with obligations denominated in foreign
currency.
The foreign currency option and Foreign Currency Swaps are recorded on the
balance sheet in other assets or other liabilities at their fair value at the
reporting period with changes in their fair value during the reporting period
being reported as part of the foreign exchange gain or loss in the consolidated
statement of operations. Such gains and losses are offset against foreign
exchange gains and losses on the obligations denominated in foreign currencies
which have been hedged.
Interest rate swap agreements which are used to manage interest rate risk on the
Company's borrowings are accounted for using the accruals method. Net income or
expense resulting from the differential between exchanging floating and fixed
rate interest payments is recorded on an accruals basis. To the extent that the
interest rate swap agreements are delayed starting, net income or expense is not
recognized until the effective date of the agreement.
24
<PAGE>
Other interest rate swaps which are held as trading assets are recorded on the
consolidated balance sheet at their fair value at the end of each reporting
period with changes in their fair value being recorded as gains and losses in
the consolidated statement of operations.
INVESTMENTS
Investments in partnerships, joint ventures and subsidiaries in which the
Company's voting interest is 20% to 50%, and others where the Company has
significant influence, are accounted for using the equity method. Investments
which do not have a readily determinable fair value, in which the Company's
voting interest is less than 20%, and in which the Company does not have
significant influence, are carried at cost and written down to the extent that
there has been an other-than-temporary diminution in value.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The amount of advertising costs
expensed was (pound)25,920,000, (pound)24,846,000 and (pound)10,246,000 for the
years ended December 31, 1997, 1996, and 1995, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, including the historical carryover
basis cost from the Contribution. Except during the prematurity period as
described below, depreciation is provided to write off the cost, less estimated
residual value, of property and equipment by equal installments over their
estimated useful economic lives as follows:
25
<PAGE>
Freehold and long leasehold buildings 50 years
Cable and ducting 20 years
Electronic equipment
- - System electronics 8 years
- - Switching equipment 8 years
- - Subscriber electronics 5 years
- - Headend, studio and playback facilities 5 years
Other equipment
- - Office furniture and fittings 5 years
- - Motor vehicles 4 years
During the prematurity period, depreciation of cable and ducting and system
electronics is charged monthly to write off the estimated cost at the end of the
prematurity phase over a useful life of 20 and 8 years, respectively. In
accordance with Statement of Financial Accounting Standard ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies," the monthly charge is
scaled down by a ratio of average customers in the current period to the
estimated customer base at the end of the prematurity period. The prematurity
period covers the period between connecting the first customer and substantial
completion of the network.
Preconstruction costs which are included within cable and ducting are amortized
over the life of the franchise from the date of the first customer.
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable systems under SFAS No. 51.
The estimated useful lives of cable and ducting and systems electronics were
reassessed with effect from January 1, 1996, and were changed from 25-30 years
and 10 years to 20 years and 8 years, respectively. The net book value of these
assets are being written-off over their revised estimated remaining lives.
In 1997, the treatment of activation costs was reviewed. With effect from
January 1, 1997, activation labor was reclassified from "cable and ducting" to
"electronics" to be consistent with the classification of activation materials.
The assets are now depreciated over 8 years rather than 20 years.
FRANCHISE COSTS
Expenditure incurred on successful applications for franchise licenses is
included in property and equipment and is amortized over the remaining life of
the original franchise term. Costs relating to unsuccessful applications are
charged to the consolidated statement of operations.
DEFERRED FINANCING COSTS
Costs incurred in raising debt are deferred and recorded on the consolidated
balance sheet in other assets. The costs are amortized to the consolidated
statement of operations at a constant rate to the carrying value of the debt
over the life of the obligation.
MINORITY INTERESTS
Recognition of the minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests' allocable
portion of the equity of those consolidated subsidiaries.
26
<PAGE>
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange in
effect at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the consolidated statement of operations.
REVENUE RECOGNITION
Revenue is recognized as services are delivered. Other revenues include
connection fees which are recognized in the period of connection to the extent
that the fee is offset by direct selling costs. The remainder is recognized over
the estimated average period that customers are expected to remain connected to
the system.
PENSION COSTS
The Company operates a defined-contribution scheme or contributes up to
specified limits to third-party schemes on behalf of the employees. The amount
included in losses in 1997, 1996 and 1995 of (pound)2,801,000, (pound)2,580,000
and (pound)1,538,000, respectively, represents the contributions payable to the
selected scheMES in respect of the relevant accounting periods.
INCOME TAXES
Under the asset and liability method of SFAS No 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered.
SHARE-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does
not require, companies to record compensation cost for share-based employee
compensation plans at fair value. The Company has chosen to continue to account
for share-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, compensation cost for share
options is measured as the excess, if any, of the quoted market price of the
Company's shares at the date of the grant over the amount an employee must pay
to acquire the shares.
Shares purchased by trustees in connection with the Telewest Restricted Share
Scheme, are valued at the market price on the date on which they are purchased
and are reflected as a reduction of shareholders' equity in the consolidated
balance sheet. This equity account is reduced when the shares are awarded to
employees based on the original cost of the shares to the trustees. The value of
awards of ordinary shares to be made to employees in future years is charged to
the consolidated statement of operations to the extent that the awards have been
awarded to and earned by employees in the current accounting period. The value
of shares which have been awarded to, but have not been earned by employees, is
included as deferred compensation expense within other assets.
NEW ACCOUNTING STANDARDS APPLICABLE TO THE COMPANY
EARNINGS PER SHARE AND CAPITAL STRUCTURE
The Company adopted the provisions of SFAS No. 128, "Earnings per Share." This
Statement required that all prior-period earnings per share calculations be
restated to conform with the provisions of this statement. Basic earnings per
27
<PAGE>
share has been computed by dividing net income available to ordinary
shareholders by the weighted average number of ordinary shares outstanding
during the period. Diluted earnings per share is computed by adjusting the
weighted average number of ordinary shares outstanding during the period for all
dilutive potential ordinary shares outstanding during the period and adjusting
the net loss for any changes in income or loss that would result from the
conversion of such potential ordinary shares. There is no difference in net
income and number of shares used for basic and diluted net income per ordinary
share, as potential ordinary share equivalents are not included in the
computation as their effect would be to decrease the loss per share.
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods for comparative
purposes is required. It requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. It requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
statement of financial position. The Company is currently reviewing the likely
impact on the classification of items included in the shareholders' equity.
SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which is effective for fiscal years
beginning after December 15, 1997. In the initial year of application
comparative information for earlier years is to be restated. It requires that
companies disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance. It also
requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assets and reports revenues,
and its major customers. The Company is currently reviewing the likely impact on
the level of disclosure currently provided in its consolidated financial
statements.
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosure About Pensions
and other Postretirement Benefits" ("SFAS No.132"). SFAS No. 132 revises
disclosure requirements about employers' pension and other postretirement
benefit plans. SFAS No. 132 is effective for fiscal years beginning after
December 15, 1997. The company has not determined the impact that SFAS No. 132
will have on its pension and post retirement benefit disclosures.
4 FINANCIAL INSTRUMENTS
FOREIGN CURRENCY OPTION CONTRACT
At December 31, 1997, the Company held a Pounds Sterling put option to purchase
US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange rates
on the principal amount at maturity of its US Dollar-denominated Senior Discount
Debentures due 2007 ("Senior Discount Debentures"). The expiration date of this
option contract is September 28, 2000. The put option has a strike price at
expiration of (pound)1.00 = US$1.4520. The foreign currency option has been
included in other assets at its fair value on December 31, 1997.
28
<PAGE>
FOREIGN CURRENCY SWAP
The Company has entered into a Foreign Currency Swap to hedge its exposure to
adverse fluctuations in exchange rates on the principal amount of its US
Dollar-denominated Senior Debentures due 2006 ("Senior Debentures"). The terms
of the contract provided for the Company to make an initial exchange of
principal of US$300,000,000 in exchange for (pound)196,078,000. On expiration on
October 1, 2000, the initial principal amounts will be re-exchanged. The
interest element of the Foreign Currency Swap requires the Company to make
Pounds Sterling fixed-rate interest payments and to receive US Dollar fixed-rate
interest payments on the initial exchange amounts on a semi-annual basis. The
Foreign Currency Swap contract has been included in other liabilities at its
fair value on December 31, 1997.
INTEREST RATE SWAPS
The Company has also entered into certain delayed-starting interest rate swap
agreements in order to manage interest rate risk on its senior secured credit
facility ("Senior Secured Facility"). The effective dates of the swap agreements
are January 2, 1997 and March 31, 1997, and the agreements mature on December
31, 2001 and March 28, 2002. The aggregate notional principal amount of the
swaps adjusts upwards on a semi-annual basis to a maximum of (pound)750 million.
In accordance with the swap agreements, the Company receives interesT At the six
month LIBOR rate and pays a fixed interest rate in the range of 7.835 - 7.975%.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 119 "Disclosures about Derivative Financial Instruments and Fair Value
of Financial Instruments" requires disclosure of an estimate of the fair values
of certain financial instruments. SFAS No. 119 defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties other than in a forced sale. Fair
value estimates are made at a specific point in time, based upon relevant market
information and information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment, and therefore cannot be determined precisely. Changes in assumptions
could significantly affect the estimates.
At December 31, 1997, the Company's significant financial instruments include
cash and cash equivalents, trade receivables, a foreign currency option
contract, a Foreign Currency Swap, interest rate swap agreements, trade payables
and long-term borrowings. The following table summarizes the fair value of the
foreign currency option contract, the Foreign Currency Swap, the interest rate
swap agreements, the Senior Discount Debentures and the Senior Debentures. The
fair value of the other financial instruments held by the Company approximates
their recorded carrying amount due to the short maturity of these instruments
and these instruments are not presented in the following table.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 At December 31, 1996
------------------------------- -----------------------------
CARRYING Carrying
AMOUNT FAIR VALUE amount Fair value
(POUND)'000 (POUND)'000 (pound)'000 (pound)'000
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Foreign currency option contract 26,145 26,145 25,828 25,828
Liabilities:
Interest rate swap agreements - 25,543 - 4,776
Foreign Currency Swap 18,039 18,039 26,481 26,481
Senior Discount Debentures 696,954 729,532 600,799 621,367
Senior Debentures 182,626 189,931 175,203 179,582
- -------------------------------------------------------------------------------------------------------
</TABLE>
The estimated fair value of the foreign currency option contract, the interest
rate swap agreements and the Foreign Currency Swap are based on quotations
received from independent, third-party financial institutions and represent the
net amount receivable or payable to terminate the position, taking into
29
<PAGE>
consideration market rates and counterparty credit risk. The estimated fair
values of the Senior Discount Debentures and the Senior Debentures are also
based on quotations from independent third-party financial institutions and are
based on discounting the future cash flows to net present values using
appropriate market interest rates prevailing at the year end.
MARKET RISK AND CONCENTRATIONS OF CREDIT RISK
Market risk is the sensitivity of the value of the financial instruments to
changes in related currency and interest rates. Generally, the Company is not
exposed to such market risk because gains and losses on the financial
instruments are offset by gains and losses on the underlying assets and
liabilities.
The Company may be exposed to potential losses due to the credit risk of
non-performance by the counterparties to its foreign currency option, interest
rate swap agreements and Foreign Currency Swap contract, however such losses are
not anticipated as these counterparties are major international financial
institutions.
Temporary cash investments also potentially expose the Company to concentrations
of credit risk, as defined by SFAS No. 105 "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risks." The Company places its temporary cash
investments with major international financial institutions and limits the
amount of credit exposure to any one financial institution. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base.
At December 31, 1997, the Company had no significant concentration of credit
risk.
5 BUSINESS COMBINATIONS
On January 10, 1996, the Company acquired the entire issued share capital of
Telewest Communications (Worcester) Limited, then called Bell Cablemedia
(Worcester) Limited and owner of the Worcester cable franchise, for cash
consideration of (pound)9,849,000. Telewest Communications (Worcester) Limited
was otherwise a dormant company with net assets of (pound)2 representing its
called up share capital. This acquisition has been accounted for under the
purchase method of accounting. The goodwill arising on acquisition was
(pound)9,849,000 and is being amortized on a straight-line basis over 20 years.
During 1996, the Company made various other minor acquisitions, largely for
share consideration. The goodwill arising on these acquisitions was
(pound)11,708,000 and is being amortized on a straight-line basis over 20 years.
On October 3, 1995, the Company acquired the entire share capital of Telewest
Communications (Midlands & North West) Limited ("TCMN"), then called SBC
CableComms (UK), a company which holds cable television and telephony interests
in the UK, from an affiliate of Cox Communications, Inc. and affiliates of SBC
Communications, Inc., in exchange for an aggregate of 183,994,960 ordinary
shares of 10 pence each and 230,790,208 convertible preference shares of 10
pence each. The value attributable to the shares issued was (pound)1.635 per
share, being the market price of the shares on June 8, 1995, the day the terms
of the acquisition were agreed to and announced. The fair value of the share
consideration using this share price was (pound)678,174,000. The aggregate cost
of acquisition was (pound)689,878,000 including the costs of acquisition. This
acquisition has been accounted for under the purchase method of accounting. The
30
<PAGE>
goodwill arising on acquisition is (pound)464,872,000 and is being amortized on
a straight-line basis over 20 years.
6 SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash paid for interest was (pound)63,479,000, (pound)25,795,000 and
(pound)6,041,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Significant non-cash investing activities of the Company are described below.
The amounts stated for 1996 represent the purchase of former minority
shareholders' interests in certain UK cable interests held by the Company. The
amounts stated for 1995 represent the purchase of TCMN for largely share
consideration as described in Note 5 to the consolidated financial statements.
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
(POUND)'000 (pound)'000 (pound)'000
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchase/contribution of cable interests:
Assets - - 428,080
Liabilities assumed - - (45,144)
Debt assumed - - (157,930)
- -------------------------------------------------------------------------------------------------
Net assets acquired contributed - - 225,006
Goodwill on acquisition - 9,874 464,872
- -------------------------------------------------------------------------------------------------
- 9,874 689,878
Share consideration capital contribution - 9,869 678,174
Costs of acquisition - 5 11,704
- -------------------------------------------------------------------------------------------------
- 9,874 689,878
- -------------------------------------------------------------------------------------------------
</TABLE>
7 OTHER RECEIVABLES
<TABLE>
<CAPTION>
At December 31,
1997 1996
(POUND)'000 (POUND)'000
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Value Added Tax refund 4,567 10,633
Interconnection receivables 1,505
Interest receivable 807 63
Accrued income 8,290 4,356
Prepaid expenses 3,161 5,714
Other 7,877 7,763
- ------------------------------------------------------------------------------------------
26,207 32,394
- ------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
8 INVESTMENTS
The Company has investments in affiliates accounted for under the equity method
at December 31, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
Percentage Ownership at
December 31,
1997 1996
(POUND)'000 (POUND)'000
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Cable London plc 50.00% 50.00%
Birmingham Cable Corporation Limited 27.47% 27.47%
London Interconnect Limited 16.67% 16.67%
Central Cable Sales Limited 50.00% 50.00%
Front Row Television Limited 40.00% -
The Company has accounted for its investment in London Interconnect Limited
under the equity method because it is in a position to exercise a significant
influence over London Interconnect Limited.
Summarized combined financial information for such affiliates which operate
principally in the cable television and telephony industries is as follows:
COMBINED FINANCIAL POSITION
At December 31,
1997 1996
(POUND)'000 (pound)'000
- --------------------------------------------------------------------------------------------
Property and equipment, net 429,161 391,183
Intangible assets, net 4,859 3,845
Other assets, net 30,249 105,475
- --------------------------------------------------------------------------------------------
TOTAL ASSETS 464,269 500,503
- --------------------------------------------------------------------------------------------
Debt 293,492 281,500
Other liabilities 98,758 91,947
Owners' equity 72,019 127,056
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY 464,269 500,503
- --------------------------------------------------------------------------------------------
COMBINED OPERATIONS
Year ended December 31,
1997 1996
(POUND)'000 (pound)'000
- --------------------------------------------------------------------------------------------
Revenue 120,468 98,329
Operating expenses (150,768) (124,358)
- --------------------------------------------------------------------------------------------
Operating loss (30,300) (26,029)
Interest expense (26,311) (15,945)
- --------------------------------------------------------------------------------------------
Net loss (56,611) (41,974)
- --------------------------------------------------------------------------------------------
The Company's investments in affiliates are comprised as follows:
At December 31,
1997 1996
(POUND)'000 (pound)'000
Loans 39,863 29,089
Share of net assets 19,844 40,331
- ------------------------------------------------------------------------------------------
59,707 69,420
- ------------------------------------------------------------------------------------------
</TABLE>
Any excess of the purchase cost over the value of the net assets acquired is
treated as goodwill and amortized over 20 years on a straight-line basis.
32
<PAGE>
9 PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Cable Electronic Other
Land Buildings ducting equipment equipment Total
(all values in (pound)'000)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACQUISITION COSTS
Balance at January 1, 1997 4,223 45,956 1,101,961 489,835 113,459 1,755,434
Reclassification - (62) (118,331) 117,954 439 -
Additions 11 8,683 280,814 101,204 49,882 440,594
Disposals - - (182) (556) (8,319) (9,057)
- ------------------------------------------------------------------------------------------------------
Balance at December 31,1997 4,234 54,577 1,264,262 708,437 155,461 2,186,971
- ------------------------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION
Balance at January 1, 1997 - 7,378 121,181 130,483 49,198 308,240
Reclassification - - (12,792) 12,792 - -
Charge for year - 3,824 59,324 88,502 25,691 177,341
Disposals - - (182) (229) (3,719) (4,130)
- ------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 - 11,202 167,531 231,548 71,170 481,451
- ------------------------------------------------------------------------------------------------------
1997 NET BOOK VALUE 4,234 43,375 1,096,731 476,889 84,291 1,705,520
- ------------------------------------------------------------------------------------------------------
ACQUISITION COSTS
Balance at January 1, 1996 4,223 36,005 766,866 359,617 79,239 1,245,950
Additions - 9,951 335,844 130,783 39,012 515,590
Disposals - - (749) (565) (4,792) (6,106)
- ------------------------------------------------------------------------------------------------------
Balance at December 31,1996 4,223 45,956 1,101,961 489,835 113,459 1,755,434
- ------------------------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION
Balance at January 1,1996 - 4,920 74,532 70,810 31,880 182,142
Charge for year - 2,458 47,374 60,220 19,664 129,716
Disposals - - (725) (547) (2,346) (3,618)
- ------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 - 7,378 121,181 130,483 49,198 308,240
- ------------------------------------------------------------------------------------------------------
1996 NET BOOK VALUE 4,223 38,578 980,780 359,352 64,261 1,447,194
- ------------------------------------------------------------------------------------------------------
</TABLE>
Cable and ducting consists principally of civil engineering and fibre optic
costs. In addition, cable and ducting includes net book value of preconstruction
and franchise costs of (pound)9,807,000 and (pound)13,220,000 as of December 31,
1997 and 1996, respectively. Electronic equipment includes the Company's
switching, headend and converter equipment. Other equipment consists principally
of motor vehicles, office furniture and fixtures and leasehold improvements.
33
<PAGE>
10 VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
charged to
Balance at Acquisition costs and Balance at
January 1 of TCMN expenses Deductions December 31
(all values in (pound)'000)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Allowance for doubtful accounts 5,405 - 8,815 (7,713) 6,507
- ---------------------------------------------------------------------------------------------------
1996
Allowance for doubtful accounts 4,695 - 9,020 (8,310) 5,405
- ---------------------------------------------------------------------------------------------------
1995
Allowance for doubtful accounts 1,736 1,063 5,920 (4,024) 4,695
- ---------------------------------------------------------------------------------------------------
</TABLE>
11 OTHER ASSETS
The components of other assets, net of amortization, are as follows:
<TABLE>
<CAPTION>
At December 31,
1997 1996
(POUND)'000 (pound)'000
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred financing costs of debentures 13,770 17,510
Deferred financing costs of Senior Secured Facility 15,963 18,186
Foreign currency option contract 26,145 25,828
Other 635 863
- -----------------------------------------------------------------------------------------
56,513 62,387
- -----------------------------------------------------------------------------------------
12 OTHER LIABILITIES
Other liabilities are summarized as follows:
At December 31,
1997 1996
(POUND)'000 (pound)'000
- -----------------------------------------------------------------------------------------
Amounts due to affiliated or other
related parties 61 1,901
- ------------------------------------------------------------------------------------------
Accrued interest 13,641 8,921
Accrued construction costs 30,235 36,397
Accrued expenses and deferred income 112,198 82,938
Foreign Currency Swap 18,039 26,481
Other liabilities 24,490 33,562
- ------------------------------------------------------------------------------------------
198,664 190,200
- ------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
13 DEBT
Debt is summarized as follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Weighted average interest rate
1997 1996
1997 1996 (POUND)'000 (pound)'000
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Senior Debentures 9.625% 9.625% 182,626 175,203
Senior Discount
Debentures 11.000% 11.000% 696,954 600,799
Senior Secured
Facility 9.071% 8.281% 492,500 100,000
Other debt 8.719% 7.790% 974 3,349
- ----------------------------------------------------------------------------------------------------
1,373,054 879,351
- ----------------------------------------------------------------------------------------------------
</TABLE>
SENIOR DEBENTURES
In October 1995, the Company issued US$300,000,000 principal amount of Senior
Debentures with a yield to maturity of 9.625%. The cash consideration received
at the date of issue was (pound)188,703,000. The Senior Debentures mature on
October 1, 2006. Interest on the Senior Debentures accrues semi-annually and is
payable in arrears. The Senior Debentures are redeemable, in whole or in part,
at the option of the Company at any time on or after October 1, 2000 at the
redemption price of 104.813% of the principal amount during the year commencing
October 1, 2000, 102.406% of the principal amount during the year commencing
October 1, 2001, and thereafter at 100% of the principal amount plus accrued and
unpaid interest.
The Senior Debentures and the Senior Discount Debentures, which are described
below, were issued to finance working capital, capital expenditure, foreign
currency swap and options to hedge against adverse fluctuations in exchange
rates, and additional investments in affiliated companies. A portion of the net
proceeds of the issue also was used to repay the (pound)157,930,000 indebtedness
outstanding under the loan facility held by TCMN at the date that it was
acquired by the Company.
The indenture under which the Senior Debentures were issued contains various
covenants which, among other things, restrict the ability of the Company to
incur additional indebtedness, pay dividends, create certain liens, enter into
certain transactions with shareholders or affiliates, or sell certain assets.
The Company was in compliance with the covenants at December 31, 1997.
The Company has entered into a Foreign Currency Swap to hedge its exposure to
adverse fluctuations in exchange rates on the principal amount which will be
outstanding on October 1, 2000, the earliest redemption date, and the associated
interest payments of the Senior Debentures. The terms of the Foreign Currency
Swap are described in Note 4 to the consolidated financial statements.
The Senior Debentures are unsecured liabilities of the Company.
SENIOR DISCOUNT DEBENTURES
In October 1995, the Company issued US$1,536,413,000 principal amount at
maturity of Senior Discount Debentures with a yield to maturity of 11%. The cash
consideration received at the date of issue was (pound)566,109,000
(US$900,000,000). At December 31, 1997, the unamortized portion of the discount
on issue was (pound)238,344,000 (US$391,528,000). The Senior Discount Debentures
mature on October 1, 2007. Interest on the Senior Discount Debentures accrues
semi-annually. Cash interest will not accrue on the Senior Discount Debentures
prior to October 1, 2000 and is thereafter payable in arrears on April 1 and
October 1 of each year at a rate of 11% per annum. The Senior Discount
Debentures are redeemable, in whole or in part, at the option of the Company at
35
<PAGE>
any time on or after October 1, 2000 at the redemption price of 100% of the
principal amount plus accrued and unpaid interest.
The indenture under which the Senior Discount Debentures were issued contains
various covenants as set out for the Senior Debentures above and the Company was
in compliance with such covenants at December 31, 1997.
The Company has purchased a five year Pounds Sterling put option to purchase
US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange rates
on the principal amount which will be outstanding on October 1, 2000, the
earliest redemption date, of the Senior Discount Debentures. The terms of the
foreign currency option contract are described in Note 4 to the consolidated
financial statements.
The Senior Discount Debentures are unsecured liabilities of the Company.
SENIOR SECURED FACILITY
During 1996, a subsidiary of the Company entered into a senior secured credit
facility (the "Senior Secured Facility") with a syndicate of banks. The facility
is available to finance the capital expenditure, working capital requirements
and other permitted related activities involving the construction and operation
of all the Company's owned and operated franchises, to pay cash interest on the
Company's unsecured debentures, to fund the repayment of existing secured
borrowings in respect of the London South and South West Regional Franchise
Areas, to fund loans to or investments in affiliated companies, to bid for or
purchase, and subsequently construct, licenses or franchises which may become
available and to refinance advances and the payment of interest, fees, and
expenses in respect of the Senior Secured Facility.
The facility is divided into two tranches: the first portion (Tranche A) is
available on a revolving basis for up to (pound)300 million, reducing to
(pound)100 million by June 30, 1998 with full repayment by December 31, 1998;
the second portion (Tranche B) is available on a revolving basis concurrently
with Tranche A for an amount up to 6.5 times the trailing, rolling six month
annualized consolidated net operating cash flow, gradually reducing throughout
the period of the facility to 4 times by January 1, 2000. Thereafter, the amount
outstanding under the Tranche B facility converts to a term loan amortizing over
5 years. The aggregate drawing at any time under both tranches cannot exceed
(pound)1.2 billion. At December 31, 1997, (pound)125,000,000 (1996:
(pound)100,000,000) was outstanding under Tranche A and (pound)367,500,000 under
Tranche B (1996: (pound)nil).
Borrowings under the facility are secured by the assets of the Company,
including the partnership interests and shares of subsidiaries, and bear
interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875% above
LIBOR (depending on the ratio of borrowings to the trailing, rolling six month
annualized consolidated net operating cash flow) for Tranche B. Since 31
December 1997, this facility has been restructured with revised financial
covenants, a reduction in the amount available under the facility from
(pound)1,200 million to (pound)1,000 million, and a supplementary (pound)100
million revolving credit facility secured with a second fixed and floating
charge over the Group's assets, and interest costs on the latter ranging from
3.5% - 5.5% above LIBOR. As a result of this restructuring of the facility, the
repayment dates for Tranche A, referred to above, have been accelerated by three
months.
In September 1996, the Company entered into certain delayed-starting interest
rate swap agreements in order to manage interest rate risk on the Senior Secured
Facility. The terms of the swap agreements are described in Note 4 to the
consolidated financial statements.
36
<PAGE>
The Company's ability to borrow under the facility is subject to, among other
things, its compliance with the financial and other covenants and borrowing
conditions contained therein.
The Company was in compliance with the covenants at December 31, 1997.
OTHER DEBT
Other debt is represented by property loans which are secured on freehold land
and buildings held by the Company which mature from 1998 onwards. The property
loans bear interest at a rate of between 1.00% and 1.5% above LIBOR.
14 INCOME TAXES
Loss before income taxes is solely attributable to the UK.
The provisions for income taxes follow:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
(POUND)'000 (pound)'000 (pound)'000
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable 137 50 16
- ------------------------------------------------------------------------------------------------
A reconciliation of income taxes determined using the statutory UK rate of 31.5%
(1996: 33%) to the effective rate of income tax is as follows:
Year ended December 31,
1997 1996 1995
% % %
- ------------------------------------------------------------------------------------------------
Corporate tax at UK statutory rates (31.5) (33) (33)
Permanent differences 0.5 1 3
Valuation allowance and other temporary differences 29 30 26
Share of losses of affiliates 2 2 4
- ------------------------------------------------------------------------------------------------
- - -
- ------------------------------------------------------------------------------------------------
</TABLE>
Deferred income tax assets and liabilities at December 31, 1997 and 1996 are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
(POUND)'000 (pound)'000
- ----------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets relating to:
Fixed assets 79,100 -
Net operating loss carried forward 181,800 310,300
Other 2,400 3,400
- ----------------------------------------------------------------------------------
Deferred tax asset 263,300 313,700
Valuation allowance (247,400) (175,200)
- ----------------------------------------------------------------------------------
15,900 138,500
- ----------------------------------------------------------------------------------
Deferred tax liabilities relating to:
Fixed assets - (110,600)
Other (15,900) (27,900)
- ----------------------------------------------------------------------------------
Deferred tax liabilities (15,900) (138,500)
- ----------------------------------------------------------------------------------
DEFERRED TAX ASSET
PER BALANCE SHEET - -
- ----------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, the Company estimates that it has, subject to Inland
Revenue agreement, net operating losses ("NOLs") of (pound)587,000,000 available
to relieve against future profits. This excludes capital allowances on assets
which were available to the Company, but had not been claimed, of
(pound)465,000,000.
37
<PAGE>
Due to a history of operating losses the Company has established a valuation
allowance with respect to deferred tax assets, except to the extent of deferred
tax liabilities.
The NOLs have an unlimited carry forward period under UK tax law, but are
limited to their use to the type of business which has generated the loss.
15 SHAREHOLDERS' EQUITY
MOVEMENTS IN SHARE CAPITAL
During 1996 the Company issued 7,604,200 ordinary shares of 10 pence each for
the following consideration: an additional 0.25% of the ordinary shares of Cable
London plc, the surrender by Trans-Global (UK) Limited of its option to acquire
9.9% of equity in the South East Regional Franchise Area, and the remaining 20%
of the ordinary shares of Telewest Communications (Cotswolds) Limited held by a
minority interest.
On October 3, 1995, the Company acquired the entire share capital of TCMN from
its former shareholders in exchange for an aggregate of 183,994,960 ordinary
shares of 10 pence each and 230,790,208 convertible preference shares of 10
pence each. On October 2, 1995, pursuant to a court-approved scheme of
arrangement (the "Scheme of Arrangement"), the Company exchanged 735,468,440
ordinary shares of 10 pence each and 265,276,500 convertible preference shares
of 10 pence each in consideration for the transfer of shares of TCCL to the
Company. Dealings in ordinary shares and ADSs representing ordinary shares of
TCCL ceased on the London Stock Exchange and NASDAQ National Market immediately
prior to the execution of the Scheme of Arrangement and upon completion of the
Scheme of Arrangement, dealings in the ordinary shares and ADSs representing
ordinary shares of the Company commenced. Immediately prior to the execution of
the Scheme of Arrangement on October 2, 1995, TCCL restructured its share
capital by converting 112,276,500 ordinary shares of 10 pence each into
112,276,500 convertible preference shares of 10 pence each.
CONVERTIBLE PREFERENCE SHARES
The convertible preference shares are convertible into fully paid up ordinary
shares at any time on the basis of one ordinary share for every convertible
preference share provided that, immediately following the conversion, the
percentage of the issued ordinary share capital of the Company held by members
of the public, as defined by the listing rules of the London Stock Exchange,
does not fall below 25%. The ordinary shares arising on conversion will rank
pari passu in all respects with the ordinary shares then in issue.
The holders of the convertible preference shares are entitled to receive a
dividend of such amount as is declared and paid in relation to each ordinary
share, subject to the dividend to be paid not exceeding 20 pence per share net
of any associated tax credit.
In the event of a winding-up of the Company or other return of capital, the
assets of the Company available for distribution will be paid first to the
holders of the convertible preference shares up to the sum of capital paid-up or
credited as paid-up unless the right of election upon a winding-up of the
Company has been exercised in respect of the convertible preference shares (the
"Elected Shares"). If the election has been exercised, the holders of the
ordinary shares and the Elected Shares will receive any surplus in accordance
with the amount paid-up or credited as paid-up on the shares held.
The holders of the convertible preference shares are not entitled to vote at any
general meeting of the Company unless the meeting includes the consideration of
a resolution for winding up the Company or a resolution modifying the rights or
privileges attaching to the convertible preference shares.
38
<PAGE>
16 SHARE-BASED COMPENSATION PLANS
At December 31, 1997, the Company operated five types of share-based
compensation plans: the Telewest Executive Share Option Schemes, the Telewest
Sharesave Schemes, and the Telewest Restricted Share Scheme, as replaced in 1997
by the Telewest Long Term Incentive Plan ("LTIP") and an Equity Participation
Plan ("EPP").
The Company applies APB Opinion Bulletin No. 25 and related interpretations in
accounting for its share-based compensation plans. Accordingly, no compensation
cost has been charged to the consolidated statement of operations in respect of
performance-based option grants since the options do not have exercise prices
less than the market value of the Company's ordinary shares. Compensation cost
has been recognized for fixed option grants since the options have exercise
prices less than the market value of the Company's ordinary shares at the date
of grant. Compensation cost has also been recognized for awards over ordinary
shares made under the Telewest Restricted Share Scheme since the awards have no
exercise price. Compensation cost recognized for fixed option grants and awards
under the Telewest Restricted Share Scheme was (pound)496,000, (pound)1,380,000
and (pound)1,334,000 for 1997, 1996, and 1995, respectively.
If compensation cost for share option grants and for awards under the Telewest
Restricted Share Scheme and Long Term Incentive Plan had been determined based
on their fair value at the date of grant for 1997 and 1996 consistent with the
method prescribed by SFAS 123, the Company's net loss and basic and diluted loss
per share would have been adjusted to the pro forma amounts set out below:
39
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
(POUND)'000 (pound)'000 (pound)'000
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss - As reported (332,452) (262,391) (137,531)
- Pro forma (336,737) (264,579) (138,468)
(pound) (pound) (pound)
- ------------------------------------------------------------------------------------------
Basic and diluted loss per share
- As reported (0.36) (0.28) (0.16)
- Pro forma (0.36) (0.29) (0.16)
- ------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE-BASED SHARE OPTION COMPENSATION PLANS
The Company has two performance-based share option plans: the Telewest 1995 (No.
1) Executive Share Option Scheme and the Telewest 1995 (No. 2) Executive Share
Option Scheme. Under both plans, certain officers and key employees are granted
options to purchase ordinary shares of the Company. The exercise price of each
option generally equals the market price of the Company's ordinary shares on the
date of grant. The options are exercisable between three and ten years after the
date of the grant with exercise conditional on the Company's shares
out-performing by price the FT-SE100 Index over any three year period preceding
exercise. The Company may grant options for up to 92,000,000 ordinary shares.
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model using a weighted-average risk-free interest
rate of 6.8%, 8.1% and 8.3% for grants in 1997, 1996 and 1995 respectively, and
an expected volatility of 30-45% used for grants in these years. The Company
does not expect to pay a dividend on its ordinary shares at any time during the
expected life of the option.
A summary of the status of the Company's performance-based share option plans as
at December 31, 1997, 1996 and 1995, the first year in which the options were
granted, and changes during the years ended on those dates is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
WEIGHTED Weighted Weighted
AVERAGE average average
NUMBER EXERCISE Number exercise Number exercise
OF SHARES PRICE of shares price of shares price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 11,238,852 153.0p 8,645,229 160.4p - -
Granted 8,994,654 83.7p 4,121,474 140.9p 8,871,398 160.3p
Forfeited (1,205,075) 147.1p (1,527,851) 162.6p (226,169) 158.0p
- --------------------------------------------------------------------------------------------------------
Outstanding at end 19,028,431 120.6p 11,238,852 153.0p 8,645,229 160.4p
- --------------------------------------------------------------------------------------------------------
Options exercisable at 3,375,739 152.3p 1,023,042 154.3p - -
year end
Weighted average fair value 50.4p 75.6p 86.0p
of options granted during
the year
</TABLE>
40
<PAGE>
The following table summarizes information about the Company's performance-based
share option plans outstanding at December 31, 1997.
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------- -------------------
Weighted
Number average Weighted Number Weighted
outstanding at remaining average exercisable at average
December 31, contractual exercise December 31, exercise
Range of exercise prices 1997 life price 1997 price
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
71.0 - 73.0p 2,666,913 7.4 years 72.6p
82.5 - 83.0p 5,297,509 7.6 years 82.9p
117.5 - 118.0p 765,847 9.2 years 117.5p
135.0 - 141.0p 3,674,467 6.2 years 140.6p 1,293,086 140.8p
154.5 - 155.5p 4,842,914 4.8 years 154.5p 1,502,527 154.6p
171.5 - 173.5p 1,780,781 5.9 years 172.4p 580,126 171.9p
- -----------------------------------------------------------------------------------------------
71.0 - 173.5p 19,028,431 6.5 YEARS 120.6p 3,375,739 152.3p
- -----------------------------------------------------------------------------------------------
</TABLE>
FIXED SHARE OPTION COMPENSATION PLANS
The Company also operates the Telewest Sharesave Scheme, a fixed share option
compensation scheme. Under this plan, the Company grants options to employees to
purchase ordinary shares at a 20% discount to market price. These options can be
exercised only with funds saved by employees over time in a qualified savings
account. The options are exercisable between 37 and 66 months after the date of
grant.
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model using a weighted-average risk-free interest
rate of 6.95 per cent, 7.4 per cent and 7.2 per cent for grants in 1997, 1996
and 1995, respectively, and an expected volatility of 30-45 per cent. The
Company does not expect to pay a dividend on its ordinary shares at any time
during the expected life of the option.
A summary of the status of the Company's fixed share option plans as of December
31, 1997, 1996, and 1995 and the changes during the years ended on those dates
is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
WEIGHTED Weighted
AVERAGE Weighted average
NUMBER EXERCISE Number average Number exercise
OF SHARES PRICE of shares exercise of shares price
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 4,076,635 119.8p 3,345,941 139.6p 1,666,534 150.0p
Granted 5,341,783 58.0p 2,165,009 102.5p 2,168,157 134.0p
Forfeited (2,450,243) 120.7p (1,434,315) 139.8p (488,750) 150.0p
- ------------------------------------------------------------------------------------------------------------
Outstanding at end of year 6,968,175 72.1p 4,076,635 119.8p 3,345,941 139.6p
- ------------------------------------------------------------------------------------------------------------
Options exercisable at year end - - -
Weighted average fair 42.7p 49.7p 79.3p
value of options granted
during the year
</TABLE>
41
<PAGE>
The following table summarizes information about the Company's fixed share
options outstanding at December 31, 1997.
Options outstanding
-------------------
Weighted average
Number outstanding remaining contractual
Exercise price at December 31. 1997 life
------------------------------------------------------------
58.0p 5,341,783 3.6 years
102.5p 941,444 2.6 years
134.0p 404,256 3.6 years
150.0p 280,692 2.6 years
58.0 - 150.0p 6,968,175 3.4 years
------------------------------------------------------------
TELEWEST RESTRICTED SHARE SCHEME
The Company operates the Telewest Restricted Share Scheme in conjunction with an
employment trust, the Telewest Employees Share Ownership Plan Trust (the
"Telewest ESOP"), which has been designed to provide incentives to executives of
the Company based on the performance of the Company. Under the Telewest
Restricted Share Scheme, executives may be granted awards over ordinary shares
of the Company based on a percentage of salary. The awards are made for no
consideration. The awards generally vest three years after the date of the award
and are exercisable for up to seven years after the date when they vest. Awards
granted under the Telewest Restricted Share Scheme may be made over a maximum of
4,000,000 ordinary shares of the Company.
The fair value of each award is the share price of the ordinary shares on the
date the award was made.
A summary of the status of the Company's Restricted Share Scheme at December 31,
1997, 1996 and 1995, and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
1997 1996 1995
NUMBER OF Number of Number of
SHARES shares shares
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 2,648,433 2,616,857 -
Granted 377,975 328,297 2,857,191
Exercised (1,123,324) (62,920) -
Forfeited (155,922) (233,801) (240,334)
- ----------------------------------------------------------------------------------------------------
Outstanding at end of year 1,747,162 2,648,433 2,616,857
- ----------------------------------------------------------------------------------------------------
Awards exercisable at year end 924,008 646,341 49,867
- ----------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE FAIR VALUE
OF AWARDS GRANTED DURING THE YEAR (POUND)1.25 (pound)1.47 (pound)1.72
- ----------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, the 1,747,162 awards outstanding and the 924,008 awards
exercisable have weighted average remaining contractual lives of 6.7 years and
6.6 years, respectively.
LONG-TERM INCENTIVE PLAN ("LTIP")
The Telewest Restricted Share Scheme has been replaced with a Long-Term
Incentive Plan ("LTIP") for share awards to executive Directors and senior
executives. Under the LTIP an executive will be awarded the provisional right to
receive, for no payment, a number of Telewest shares with a value equating to a
percentage of base salary. The shares will not vest unless certain performance
42
<PAGE>
criteria, based on total shareholder return assessed over a three-year period
are met. The percentage of salary will be determined by the Remuneration
Committee and will be up to 100% of base salary for executive Directors.
1997
NUMBER OF SHARES
- -----------------------------------------------------------------------------
Outstanding at beginning of year -
Granted 574,309
- -----------------------------------------------------------------------------
Outstanding at end of year 574,309
- -----------------------------------------------------------------------------
Awards exercisable at year end -
- -----------------------------------------------------------------------------
WEIGHTED AVERAGE FAIR VALUE
OF AWARDS GRANTED DURING THE YEAR (POUND)0.81
- -----------------------------------------------------------------------------
At December 31, 1997, the 574,309 awards outstanding have weighted average
remaining contractual lives of 9.8 years.
17 COMMITMENTS AND CONTINGENCIES
CAPITAL AND OPERATING LEASES
The Company leases a number of assets under arrangements accounted for as
capital leases, as follows:
<TABLE>
<CAPTION>
Accumulated
Acquisition costs depreciation Net book value
(pound)'000 (pound)'000 (pound)'000
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
At December 31, 1997
Electronic equipment 58,465 (16,061) 42,404
Other equipment 40,207 (8,050) 32,157
At December 31, 1996
Electronic equipment 46,634 (8,376) 38,258
Other equipment 8,780 (1,900) 6,880
- ---------------------------------------------------------------------------------------------------
</TABLE>
Depreciation charged on these assets was (pound)10,889,000 and (pound)7,106,000
for the years ended December 31, 1997 and 1996, respectively.
The Company leases business offices and uses certain equipment under lease
arrangements accounted for as operating leases. Minimum rental expense under
such arrangements amounted to (pound)3,198,000, (pound)3,065,000 and
(pound)2,276,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Future minimum lease payments under capital and operating leases are summarized
as follows as at December 31,1997:
Capital Operating
leases leases
- -------------------------------------------------------------------------------
(pound)'000 (pound)'000
- -------------------------------------------------------------------------------
1998 15,712 3,059
1999 14,488 2,989
2000 12,740 2,939
2001 11,883 2,885
2002 8,741 2,884
2003 and thereafter 38,413 14,323
- -------------------------------------------------------------------------------
101,977
Imputed interest (26,443)
- ------------------------------------------
TOTAL 75,534
- ------------------------------------------
43
<PAGE>
It is expected that, in the normal course of business, expiring leases will be
renewed or replaced.
CONTINGENT LIABILITIES
The Company is a party to various legal proceedings in the ordinary course of
business which it does not believe will result, in aggregate, in a material
adverse effect on its financial condition.
18 RELATED PARTY TRANSACTIONS
The Company, in the normal course of providing cable television services,
purchases certain of its programming from UK affiliates of TCI. Such programming
is purchased on commercially-available terms. Total purchases in the years ended
December 31, 1997 and 1996 amounted to (pound)9,681,000 and (pound)6,951,000
respectively.
The Company has management agreements with TCI and US WEST under which amounts
are paid by the Company relating to TCI and US WEST employees who have been
seconded to the Company. For the years ended December 31, 1997, 1996 and 1995,
fees charged to the Company under the agreements were (pound)968,000,
(pound)2,185,000 and (pound)3,042,000, respectively. The Company has similar
management agreements with Cox Communications, Inc. and SBC Communications, Inc.
For the years ended December 31, 1997, 1996 and 1995, fees charged to the
Company under these agreements were (pound)202,000, (pound)374,000 and
(pound)233,000 respectively.
The Company has entered into consulting agreements with its affiliates pursuant
to which the Company provides consulting services related to telephony
operations. Under the agreements, the Company receives an annual fee from each
affiliate based upon the affiliate's revenues. Fees received for the years ended
December 31, 1997, 1996 and 1995 were (pound)786,000, (pound)642,000 and
(pound)566,000, respectively. The affiliate banking agreements contain certain
deferred payment arrangements for these fees. The Company also receives a fee
for providing switching support services, comprising of a fixed element based on
a number of switches and a variable element based on a number of lines. Fees
received for the years ended December 31, 1997, 1996 and 1995, were
(pound)740,000, (pound)741,000 and (pound)827,000, respectively.
19 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1997
Total Fourth quarter Third quarter Second quarter First quarter
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue 386,498 104,969 100,087 91,052 90,390
Operating loss (154,159) (39,578) (41,394) (36,421) (36,766)
Finance expenses, net (156,167) (29,604) (43,613) (30,992) (51,958)
Net loss (332,452) (74,887) (90,780) (72,902) (93,883)
Basic and diluted loss per
ordinary share (36 pence) (8 pence) (10 pence) (8 pence) (10 pence)
- --------------------------------------------------------------------------------------------------------------
1996
Total Fourth quarter Third quarter Second quarter First quarter
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
- --------------------------------------------------------------------------------------------------------------
Revenue 290,266 83,663 73,123 68,320 65,160
Operating loss (155,400) (46,095) (34,512) (38,536) (36,257)
Finance expenses, net (90,788) 28,222 (30,710) (54,503) (33,797)
Net loss (262,391) (22,361) (69,303) (97,080) (73,647)
Basic and diluted loss per
ordinary share (28 pence) (2 pence) (7 pence) (10 pence) (8 pence)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Company regularly reviews estimated useful lives of its property and
equipment and the estimates in calculating the capitalised overheads which
relate to the construction of the cable network. With effect from January 1,
1996, the Company has revised the estimated lives of certain assets as set out
in Note 3 to the consolidated financial statements and certain estimates used in
calculating capitalizable overheads. The impact of these revisions was to
increase the depreciation charge for 1996 from (pound)110,223,000 to
(pound)129,716,000 and to increase the basic and diluted loss per ordinary share
44
<PAGE>
for the year by 2 pence, and to increase the capitalization of overheads in 1996
from (pound)38,812,000 to (pound)54,019,000 and to reduce the basic and diluted
loss per share for the year by 2 pence. The impact was principally accounted for
in the fourth quarter of 1996.
In 1997, the treatment of activation costs was reviewed. With effect from
January 1, 1997, activation labor was reclassified from `Cable and Ducting' to
`Electronics' to be consistent with the classification of activation materials.
The impact of this change, was an additional depreciation charge of
(pound)10,359,000, with activation labor now depreciated over 8 years rather
than 20 years.
Finance expenses include foreign exchange gains and losses on the retranslation
or valuation of non sterling denominated financial instruments using period end
exchange rates and market valuations.
45
<PAGE>
Page 77
SUPPLEMENTARY FINANCIAL INFORMATION - FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
Year ended December 31,
Company Joint Predecessor
Venture Businesses
(1) (2)
1997 1996 1995(3) 1994 1993
(POUND)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property and equipment (net) 1,705,520 1,447,194 1,063,808 454,843 269,974
Total assets 2,413,352 2,241,940 2,289,720 878,156 413,865
Investment in affiliates 59,707 69,420 80,703 81,907 68,838
Debt(4) 1,373,054 879,351 792,265 3,886 49,386
Equity 738,750 1,070,797 1,322,748 776,934 311,695
INCOME STATEMENT DATA:
REVENUE
Cable television 159,918 121,224 64,740 35,875 20,729
Telephony - residential 166,645 125,013 57,597 23,471 11,261
Telephony - business 43,882 34,562 17,449 8,812 4,908
Other 16,053 9,467 4,998 3,869 3,440
- ----------------------------------------------------------------------------------------------------
TOTAL REVENUE 386,498 290,266 144,784 72,027 40,338
- ----------------------------------------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES:
Programming (93,441) (69,906) (32,194) (15,500) (8,403)
Telephony (50,145) (52,572) (29,526) (14,714) (10,203)
Selling, general and administrative (193,335) (167,323) (105,388) (60,414) (32,505)
Depreciation (177,341) (129,716) (60,019) (30,320) (17,635)
Amortization (26,395) (26,149) (7,854) (1,827) (840)
- ----------------------------------------------------------------------------------------------------
OPERATING LOSS (154,159) (155,400) (90,197) (50,748) (29,248)
- ----------------------------------------------------------------------------------------------------
Share of loss of affiliates (21,696) (15,973) (12,777) (8,466) (7,540)
Financial expenses, net(4) (156,167) (90,788) (34,607) (6,137) (651)
Extraordinary gain - - 7,287(5) -
Net loss (332,452) (262,391) (137,531) (58,050) (37,439)
Basic and diluted (loss)/gain per
ordinary share:
Before extraordinary gain
(pro forma loss for 1994) (36 PENCE) (28 pence) (16 pence) (10 pence)
Extraordinary gain - - - 1 pence
Loss (pro forma loss for 1994) (36 PENCE) (28 pence) (16 pence) (9 pence)
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) See Note 1 (Organization and history) to the US GAAP Consolidated Financial
Statements.
(2) Predecessor Businesses refers to certain businesses owned by TCI prior to
the formation of the Joint Venture and which are now owned by the Company.
(3) See Note 5 (Business combinations) to the US GAAP Consolidated Financial
Statements.
(4) See Note 13 (Debt) to the US GAAP Consolidated Financial Statements.
(5) Extraordinary gain relates to the fair value of interest rate swaps in the
US GAAP Consolidated Financial Statements arising on repayment of debt following
the initial public offering of the Company in November 1994.
46
<PAGE>
Page 78
SHARE AND ADS INFORMATION
Telewest shares trade under the symbol "TWT" on the London Stock Exchange.
American Depositary Shares ("ADSs") (evidenced by American Depositary Receipts
("ADRs")) representing Telewest shares trade on the Nasdaq Stock Market's
National Market under the symbol "TWSTY". Each ADS represents ten Telewest
shares.
The following table sets out, for the periods indicated, the high and low middle
market quotations for Telewest shares on the London Stock Exchange and the high
and low reported trade prices for the ADSs on the Nasdaq Stock Market's National
Market.
<TABLE>
<CAPTION>
Ordinary Shares (1) ADSs(2)
High Low High Low
---------------------------------------------------------
<S> <C> <C> <C> <C>
1996 First Quarter 156p 118p $24.38 $17.81
Second Quarter 188.5p 145p $28.50 $21.63
Third Quarter 161p 119p $25.13 $18.50
Fourth Quarter 141.5p 117.5p $23.25 $18.63
1997 First Quarter 133.5p 106p $22.00 $17.38
Second Quarter 107.5p 63p $17.50 $10.75
Third Quarter 95p 74p $15.50 $12.13
Fourth Quarter 88.5p 68.5p $14.88 $11.75
</TABLE>
(1) The prices set out for the Telewest shares are derived from the London Stock
Exchange Daily Official List.
(2) The prices set out for the ADSs are provided by the Nasdaq Stock Market's
National Market.
47
<PAGE>
Pages 78-79
REGISTRAR AND DEPOSITARY
Enquiries concerning holdings of Telewest shares should be addressed to the
Registrars, who are Lloyds Bank Registrars, The Causeway, Worthing, West Sussex
BN99 6DA, Tel: (01903) 502541.
Changes in a holder's address should also be notified to the Registrars.
The Bank of New York is the Authorized Depositary Bank for the Telewest ADR
programme and all enquiries regarding ADR holder accounts and payment of
dividends should be directed to: The Bank of New York, ADR Department, 101
Barclay Street, New York NY 10286, Tel: (001) 800 524 4458.
In accordance with US securities laws, each year the Company prepares an Annual
Report on Form 10-K. A copy of the Form 10-K for the fiscal year ended 1997 is
available without charge upon written request made to the Company Secretary at
the address below.
The Company does not currently intend to pay dividends on the ordinary shares or
convertible preference shares as it intends to retain earnings, if any, for the
foreseeable future to fund the development and growth of the business of the
Group. In addition, the ability of certain direct and indirect subsidiaries of
the Company to pay dividends, or make advances or other payments to Telewest or
other members of the Group for payment of dividends is effectively prohibited by
the terms of certain financing arrangements. However, if any dividends are paid,
holders of ADSs will receive their dividends net of fees, expenses and taxes, if
any, withheld by the Depositary, pursuant to the terms of the Deposit Agreement
relating to the ADSs. For further information regarding the tax consequences of
ownership of Telewest shares and ADSs, refer to "Certain Tax Consequences of
Ownership of Telewest Ordinary Shares and ADSs" in the Proxy Statement.
48
<PAGE>
Page 79
CREST - SHARE SETTLEMENT SYSTEM
The Company belongs to CREST, the settlement system for shares and other
securities. There are 426 CREST holders, holding 237,472,532 Telewest shares as
at 18 March 1998.
49
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-K and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> POUNDS STERLING
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.6427
<CASH> 29,582
<SECURITIES> 0
<RECEIVABLES> 62,834
<ALLOWANCES> 6,507
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,186,971
<DEPRECIATION> 481,451
<TOTAL-ASSETS> 2,413,352
<CURRENT-LIABILITIES> 0
<BONDS> 1,373,054
0
49,607
<COMMON> 92,757
<OTHER-SE> (596,386)
<TOTAL-LIABILITY-AND-EQUITY> (2,413,352)
<SALES> 0
<TOTAL-REVENUES> 386,498
<CGS> 0
<TOTAL-COSTS> 143,586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,721
<INCOME-PRETAX> (332,315)
<INCOME-TAX> (137)
<INCOME-CONTINUING> (332,452)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (332,452)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
