ntl: feeling the pain
The ntl q2 results looked really bad to me.
First of all in terms of market share, it looks like ntl lost ground in all 3 major areas: TV, Telephony and Broadband.
• In the TV area, it looks like ntl actually lost 22.8k customers to take the total to 3.293m customers. This compares with 7.749m Sky customers and 77k net adds for Sky. That is a swing in market share of just under 1% for quarter. Apart from the poor performance in the market place the amazing thing for me is that ntl still has 456.9k (or 13.8% of TV base) customers on Analogue TV, approximately 6 years after introduction. This does not bode well for the integration of ntl/telewest and the launch of new products.
• In Telephony, again a loss of customers, this time 35.1k to take the total to 4.233m customers. The fact that ntl have more telephony customers than TV customers translates to me that people bought the telephony product for cheaper prices than BT. Ntl are far more exposed to declining telephony revenues than a typical US-based cableco.
• In Broadband, there was actual net adds with 80.6k on-net customer additions taking the total to 2.902m customers and 12.1k off-net (ie virgin.net bt resale) customers to 205.3k total. Although it is good to see some growth – it is noticeable that the ntl figures were well behind the BT Retail net adds of 158k implying a loss of market share.
Overall, ntl penetration is 38.9% of homes passed (taking at least 1 product) and 37% of these taking the triple play or around 15% of homes passed. I'd love to see the BT Vision business plan, because ntl have been offering the triple play now for over 6 years and do not seem to making fantastic in-roads into the market.
Other Divisions include:
• The Business Division is struggling as all alt-nets in the market currently seem to be and is slightly down y-o-y to £160.1m revenues. This division is really important as business customers tend to fill the pipes during the day when the residential customers are not using them.
• The Content Division looks as if a real improvement was made. This comprises of three areas – the first is Flextech which is 10 channels including Bravo, Trouble, LivingTV & Challenge seems to have improved to £34.4m in the quarter up 17.8% y-o-y, due to increased multi-channel penetration and increased audience. Sit-Up TV which is some sort TV retailing venture via auctioning is flat y-o-y at £45.1m. UKTV which is the 50%/50% joint venture with the BBC isn’t consolidated and doesn’t seem to report figures, but I would suspect has similar growth to Flextech. This is the division that ntl put up for sale when it originally merged with Telewest which is surprising as it seems to be performing the best.
Overall revenues are up 2.8% (£24.4m) y-o-y to £884.3m with all the increase coming from the content division. All in all there is nothing in the merged ntl/telewest which is showing that the company will grow fast.
All of this is nowhere near ntl’s biggest problem – this is the amount of debt ntl owes: £5.4bn net. Furthermore ntl aren’t anywhere near starting to pay down this debt. According to the cash flow statement released Net Cash provided by the operations in the first six months was £243.8m whilst Capital Expenditure was £263.4m – in other words ntl was eating cash even before the interest charges kicked-in.
Also the debt has actually increased with the post-q2 big event - the Virgin Mobile deal with gross debt pro-forma going to £6.3bn from £5.8bn – a lot of this seems to be linked to LIBOR (ie variable with bank rates). The recent 0.25% rise in interest rates will have added £15m p.a. interest charges, approximately the same as savings realised from the ntl/telewest merger. Although to be fair, ntl claim a lot more savings to come.
Virgin Mobile is in itself not without problems with margins shrinking on pre-paid products as the MNOs drop pricing and Virgin trying to move into contract sales to offset these which requires a big investment in subsidies.
All in all, I feel ntl was in a lot of trouble without the UK Broadband Wars breaking out and is probably too weak to do much in the marketplace. It is an extremely good soundbite to be the only quadruple player in the market, but when the triple-play is doing so badly, you have to wonder about the strategy.
First of all in terms of market share, it looks like ntl lost ground in all 3 major areas: TV, Telephony and Broadband.
• In the TV area, it looks like ntl actually lost 22.8k customers to take the total to 3.293m customers. This compares with 7.749m Sky customers and 77k net adds for Sky. That is a swing in market share of just under 1% for quarter. Apart from the poor performance in the market place the amazing thing for me is that ntl still has 456.9k (or 13.8% of TV base) customers on Analogue TV, approximately 6 years after introduction. This does not bode well for the integration of ntl/telewest and the launch of new products.
• In Telephony, again a loss of customers, this time 35.1k to take the total to 4.233m customers. The fact that ntl have more telephony customers than TV customers translates to me that people bought the telephony product for cheaper prices than BT. Ntl are far more exposed to declining telephony revenues than a typical US-based cableco.
• In Broadband, there was actual net adds with 80.6k on-net customer additions taking the total to 2.902m customers and 12.1k off-net (ie virgin.net bt resale) customers to 205.3k total. Although it is good to see some growth – it is noticeable that the ntl figures were well behind the BT Retail net adds of 158k implying a loss of market share.
Overall, ntl penetration is 38.9% of homes passed (taking at least 1 product) and 37% of these taking the triple play or around 15% of homes passed. I'd love to see the BT Vision business plan, because ntl have been offering the triple play now for over 6 years and do not seem to making fantastic in-roads into the market.
Other Divisions include:
• The Business Division is struggling as all alt-nets in the market currently seem to be and is slightly down y-o-y to £160.1m revenues. This division is really important as business customers tend to fill the pipes during the day when the residential customers are not using them.
• The Content Division looks as if a real improvement was made. This comprises of three areas – the first is Flextech which is 10 channels including Bravo, Trouble, LivingTV & Challenge seems to have improved to £34.4m in the quarter up 17.8% y-o-y, due to increased multi-channel penetration and increased audience. Sit-Up TV which is some sort TV retailing venture via auctioning is flat y-o-y at £45.1m. UKTV which is the 50%/50% joint venture with the BBC isn’t consolidated and doesn’t seem to report figures, but I would suspect has similar growth to Flextech. This is the division that ntl put up for sale when it originally merged with Telewest which is surprising as it seems to be performing the best.
Overall revenues are up 2.8% (£24.4m) y-o-y to £884.3m with all the increase coming from the content division. All in all there is nothing in the merged ntl/telewest which is showing that the company will grow fast.
All of this is nowhere near ntl’s biggest problem – this is the amount of debt ntl owes: £5.4bn net. Furthermore ntl aren’t anywhere near starting to pay down this debt. According to the cash flow statement released Net Cash provided by the operations in the first six months was £243.8m whilst Capital Expenditure was £263.4m – in other words ntl was eating cash even before the interest charges kicked-in.
Also the debt has actually increased with the post-q2 big event - the Virgin Mobile deal with gross debt pro-forma going to £6.3bn from £5.8bn – a lot of this seems to be linked to LIBOR (ie variable with bank rates). The recent 0.25% rise in interest rates will have added £15m p.a. interest charges, approximately the same as savings realised from the ntl/telewest merger. Although to be fair, ntl claim a lot more savings to come.
Virgin Mobile is in itself not without problems with margins shrinking on pre-paid products as the MNOs drop pricing and Virgin trying to move into contract sales to offset these which requires a big investment in subsidies.
All in all, I feel ntl was in a lot of trouble without the UK Broadband Wars breaking out and is probably too weak to do much in the marketplace. It is an extremely good soundbite to be the only quadruple player in the market, but when the triple-play is doing so badly, you have to wonder about the strategy.
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