NTL, Backed by France Telecom, to Acquire Consumer Operations of Cable & Wireless Communications plc - Company Business and Marketing

Cambridge Telcom Report, August 2, 1999

NTL Incorporated ("NTL") (Nasdaq: NTLI; Easdaq: NTLI.ED), with the support of France Telecom, has agreed Monday to acquire the consumer cable telephone, internet and television operations of Cable & Wireless Communications plc ("CWC ConsumerCo"). NTL proposes to acquire CWC ConsumerCo for 54.4 million new shares of NTL common stock and 2.85 billion Pounds Sterling in cash representing approximately 6.3 billion pounds in total equity consideration. NTL will also assume approximately 1.9 billion pounds of CWC's net debt, plus operational adjustments prior to closing. The bringing together of NTL and CWC ConsumerCo will create the largest cable telephone and TV company in the UK and Ireland with more than 2.8 million customers.

NTL and France Telecom also announced Monday that France Telecom has agreed to invest a total of $5.5 billion in NTL, which includes an initial investment of $1 billion previously announced on 15 July 1999. Under the terms of the France Telecom investment, France Telecom will invest $2.75 billion in NTL common equity issued at $92.50 per share and $2.75 billion of convertible preferred stock with 5% dividend and a conversion price of $125 per share. The France Telecom investment will finance the cash portion of the consideration for NTL's acquisition of CWC ConsumerCo and strengthen NTL's balance sheet.

Through this investment, France Telecom will become NTL's largest shareholder with up to 25% of the company's fully diluted share capital. France Telecom will thus participate in the consolidation of the UK cable industry and help create the country's largest broadband alternative local loop telecom company. France Telecom will support NTL in the development of innovative services combining telephony, digital television and the internet.

Michel Bon, Chairman and Chief Executive of France Telecom, said:

"Our investment in NTL is consistent with France Telecom's international strategy, within which Europe is the main priority. It is a unique opportunity for France Telecom to participate in the development of innovative and convergent services combining telephony, digital TV and the internet with one of the largest alternative telecom companies in the UK. We have been particularly impressed with NTL's management and their ability to provide superior services to UK customers."

Barclay Knapp, President and CEO, NTL said:

"The acquisition of CWC residential assets, and the strategic partnership forged with France Telecom, vaults NTL to centre stage in this new world of communications, where broadband fibre optic networks are making truly revolutionary new services possible. We not only increase our scope as a major force in media and telecommunications in the UK, but also gain the opportunity to become a web-centered worldwide showcase for innovative telephone, TV, internet and interactive services."

"I am sure that our increased national coverage will make NTL more effective in competing against BSkyB and British Telecommunications and in developing new interactive TV and high speed internet services. NTL will aim to improve the operating efficiencies of CWC's consumer business (in terms of penetration and churn rate) and deliver superior value for our shareholders. We are very excited to be working with FranceTelecom and look forward to leveraging their expertise and experience."

New NTL

The combined operations of NTL and CWC ConsumerCo will bring a new scale and focus to the development of cable networks in the UK. With this transaction:

* NTL will become the largest cable telephony and TV company in the UK

* NTL will have more than 2.8 million customers and 4.3 million revenue generating units

* NTL's cable networks will pass approximately 12 million franchise homes in the UK and Ireland

* NTL's networks will pass over one half of the UK's total cable homes including homes in Manchester, Leeds, Glasgow, Cardiff, Belfast, and most of metropolitan London.

NTL intends to achieve several operational and strategic benefits from the transaction. On a standalone basis, prior to giving effect to recent acquisitions, NTL has achieved industry leading customer penetration and retention levels with CATV penetration of approximately 44% compared with the UK industry average of approximately 24% and residential telephony penetration of approximately 43% compared with the UK industry average of approximately 29%. Similarly, it had CATV churn of approximately 12% compared with the UK industry average of approximately 27% and residential telephony churn of approximately 12% compared with the UK industry average of approximately 22%.

NTL believes this success has been largely due to its focus on customer service and the development of product offerings that emphasize choice, value and simplicity. NTL plans to apply its marketing and customer service skills to enhance the operating performance of the combined entity. NTL also expects to achieve significant operating synergies from the combined operations including economies of scale in content and equipment purchasing, reduced telephony interconnect and call termination costs and improved operating leverage. As previously indicated, NTL is also considering applying for a UMTS licence.