---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

---

FORM 10-Q

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarter ended September 30, 2002

or

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File No. 000-25365

---

United Pan-Europe Communications N.V.(Exact name of Registrant as specified in its charter)

The Netherlands(State or other jurisdiction of
incorporation or organization)

98-0191997(I.R.S. Employer
Identification No.)Boeing Avenue 53,Schiphol Rijk, The Netherlands(Address of principal executive offices)

1119 PE(Zip code)


Registrant's telephone number, including area code: (31) 20-778-9840

---

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 and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

The
number of shares outstanding of the Registrant's common stock as of November 14, 2002 was:

443,417,525
ordinary shares A, including
shares represented by American Depository Receipts

---

---

---



TABLE OF CONTENTS

PART IFINANCIAL INFORMATION

|                                                                                             |                                                                                                                             | Page
Number
|-------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | -----------
|Item 1Financial Statements                                                                  |                                                                                                                             |            
|                                                                                             | Condensed Consolidated Balance Sheets as of September 30, 2002 (Unaudited) and December 31, 2001                            |            
|                                                                                             | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) |            
|                                                                                             | Condensed Consolidated Statements of Shareholders' Deficit for the Nine Months Ended September 30, 2002 (Unaudited)         |            
|                                                                                             | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001 (Unaudited)           |            
|                                                                                             | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                            |            
|Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                             | 32         
|Item 3Quantitative and Qualitative Disclosure About Market Risk                             |                                                                                                                             | 51         
|Item 4Controls and Procedures                                                               |                                                                                                                             | 58         
|PART IIOTHER INFORMATION                                                                   
|Item 1Legal Proceedings                                                                     |                                                                                                                             | 59         
|Item 2Changes in Securities and Use of Proceeds                                             |                                                                                                                             | 59         
|Item 3Defaults Upon Senior Securities                                                       |                                                                                                                             | 59         
|Item 4Submission of Matters to a Vote of Security Holders                                   |                                                                                                                             | 59         
|Item 5Other Information                                                                     |                                                                                                                             | 60         
|Item 6Exhibits and Reports on Form 8-K                                                      |                                                                                                                             | 67         

1

---



UNITED PAN-EUROPE COMMUNICATIONS N.V.  CONDENSED CONSOLIDATED BALANCE SHEETS  (Stated in thousands of Euros, except per share amounts and number of shares)

Item 1. Financial Statements

|                                          |                                                                                                           | As of
September 30,
2002                    |            | As of
December 31,
2001 |           
|----------------------------------------- | --------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ---------- | ----------------------- | ----------
|
|ASSETS:                                   |                                                                                                           |                                             |            |                         |           
|Current assets                            |                                                                                                           |                                             |            |                         |           
|                                          | Cash and cash equivalents                                                                                 |                                             | 301,094    |                         | 855,001   
|                                          | Restricted cash                                                                                           |                                             | 17,873     |                         | 36,322    
|                                          | Subscriber receivables, net of allowance for doubtful accounts of 54,366 and 39,990, respectively         |                                             | 102,666    |                         | 142,460   
|                                          | Costs to be reimbursed by affiliated companies                                                            |                                             | 4,919      |                         | 11,319    
|                                          | Other receivables                                                                                         |                                             | 33,105     |                         | 77,367    
|                                          | Deferred financing costs, net                                                                             |                                             | 126,210    |                         | 147,210   
|                                          | Prepaid expenses and other current assets                                                                 |                                             | 71,685     |                         | 64,494    
|                                          |                                                                                                           |                                             |            |                         |           
|                                          |                                                                                                           | Total current assets                        |            | 657,552                 |           
|Other investments                         |                                                                                                           | 9,277                                       |            | 32,336                  |           
|Investments in affiliates                 |                                                                                                           | 126,205                                     |            | 193,648                 |           
|Property, plant and equipment, net        |                                                                                                           | 3,331,134                                   |            | 3,754,330               |           
|Goodwill and other intangible assets, net |                                                                                                           | 2,893,382                                   |            | 3,003,503               |           
|Derivative assets                         |                                                                                                           | -                                           |            | 146,934                 |           
|Other assets                              |                                                                                                           | 4,210                                       |            | 10,540                  |           
|                                          |                                                                                                           |                                             |            |                         |           
|                                          |                                                                                                           | Total assets                                |            | 7,021,760               |           
|                                          |                                                                                                           |                                             |            |                         |           
|LIABILITIES AND SHAREHOLDERS' DEFICIT:    |                                                                                                           |                                             |            |                         |           
|Current liabilities                       |                                                                                                           |                                             |            |                         |           
|                                          | Accounts payable, including related party payables of 5,689 and 5,065, respectively                       |                                             | 124,600    |                         | 362,460   
|                                          | Accrued liabilities, including related party accrued interest of 94,820 and 18,080, respectively          |                                             | 612,406    |                         | 713,449   
|                                          | Subscriber prepayments and deposits                                                                       |                                             | 126,840    |                         | 99,554    
|                                          | Derivative liabilities                                                                                    |                                             | 70,423     |                         | -         
|                                          | Short-term debt                                                                                           |                                             | 6,093      |                         | 86,843    
|                                          | Current portion of long-term debt, including related party debt of 2,470,588 and 2,590,245, respectively  |                                             | 8,458,338  |                         | 9,188,098 
|                                          |                                                                                                           |                                             |            |                         |           
|                                          |                                                                                                           | Total current liabilities                   |            | 9,398,700               |           
|Long-term debt                            |                                                                                                           | 451,314                                     |            | 469,990                 |           
|Deferred gain on sale of assets           |                                                                                                           | 150,321                                     |            | -                       |           
|Other long-term liabilities               |                                                                                                           | 130,545                                     |            | 243,962                 |           
|                                          |                                                                                                           |                                             |            |                         |           
|                                          |                                                                                                           | Total liabilities                           |            | 10,130,880              |           
|                                          |                                                                                                           |                                             |            |                         |           
|Commitments and contingencies (Note 9)    |                                                                                                           |                                             |            |                         |           
|Minority interests in subsidiaries        |                                                                                                           | 13,723                                      |            | 152,096                 |           
|Convertible preferred stock               |                                                                                                           | 1,608,248                                   |            | 1,505,435               |           
|Shareholders' deficit                     |                                                                                                           |                                             |            |                         |           
|                                          | Priority stock, 1.0 par value, 300 shares authorized, issued and outstanding                              |                                             | -          |                         | -         
|                                          | Ordinary stock, 1.0 par value, 1,000,000,000 shares authorized, 443,417,525 shares issued and outstanding |                                             | 443,418    |                         | 443,418   
|                                          | Additional paid-in capital                                                                                |                                             | 2,751,626  |                         | 2,766,492 
|                                          | Deferred compensation                                                                                     |                                             | (21,163    | )                       | (52,088   
|                                          | Accumulated deficit                                                                                       |                                             | (8,043,546 | )                       | (7,651,418
|                                          | Other cumulative comprehensive income                                                                     |                                             | 138,574    |                         | 147,173   
|                                          |                                                                                                           |                                             |            |                         |           
|                                          |                                                                                                           | Total shareholders' deficit                 |            | (4,731,091              | )         
|                                          |                                                                                                           |                                             |            |                         |           
|                                          |                                                                                                           | Total liabilities and shareholders' deficit |            | 7,021,760               |           
|                                          |                                                                                                           |                                             |            |                         |           

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

---



UNITED PAN-EUROPE COMMUNICATIONS N.V.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (Stated in thousands of Euros, except per share amounts and number of shares)  (Unaudited)

|                                                                                                                                |                                              | For the Three Months
Ended September 30, |          | For the Nine Months
Ended September 30, |         
|------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------- | -------- | --------------------------------------- | --------
|
|Service and other revenue                                                                                                       |                                              | 340,872                                  |          | 342,444                                 |         
|Operating expense (exclusive of items shown separately below)                                                                   |                                              | (186,220                                 | )        | (221,013                                | )       
|Selling, general and administrative expense                                                                                     |                                              | (81,837                                  | )        | (166,809                                | )       
|Depreciation and amortization                                                                                                   |                                              | (189,779                                 | )        | (262,437                                | )       
|Impairment and restructuring charges                                                                                            |                                              | 1,413                                    |          | (38,345                                 | )       
|                                                                                                                                |                                              |                                          |          |                                         |         
|                                                                                                                                | Net operating loss                           |                                          | (115,551 | )                                       | (346,160
|Interest income                                                                                                                 |                                              | 597                                      |          | 17,275                                  |         
|Interest expense                                                                                                                |                                              | (154,594                                 | )        | (204,181                                | )       
|Interest expense-related party                                                                                                  |                                              | (59,353                                  | )        | (18,672                                 | )       
|Provision for loss on investments                                                                                               |                                              | (7,957                                   | )        | (375,923                                | )       
|Foreign exchange gain (loss) and other income (expense), net                                                                    |                                              | (19,914                                  | )        | 80,378                                  |         
|                                                                                                                                |                                              |                                          |          |                                         |         
|                                                                                                                                | Net loss before income taxes and other items |                                          | (356,772 | )                                       | (847,283
|Income tax expense                                                                                                              |                                              | -                                        |          | (292                                    | )       
|Minority interests in subsidiaries                                                                                              |                                              | (10,323                                  | )        | 34,805                                  |         
|Share in results (losses) of affiliated companies, net                                                                          |                                              | 2,779                                    |          | (45,673                                 | )       
|                                                                                                                                |                                              |                                          |          |                                         |         
|Loss from continuing operations before extraordinary gain and cumulative effect of change in accounting principle.              |                                              | (364,316                                 | )        | (858,443                                | )       
|Extraordinary gain                                                                                                              |                                              | -                                        |          | -                                       |         
|Cumulative effect of change in accounting principle                                                                             |                                              | -                                        |          | -                                       |         
|                                                                                                                                |                                              |                                          |          |                                         |         
|                                                                                                                                | Net loss                                     |                                          | (364,316 | )                                       | (858,443
|                                                                                                                                |                                              |                                          |          |                                         |         
|Basic and diluted net loss attributable to common shareholders (note 13)                                                        |                                              | (398,306                                 | )        | (888,515                                | )       
|                                                                                                                                |                                              |                                          |          |                                         |         
|Basic and diluted net loss per ordinary share before extraordinary gain and cumulative effect of change in accounting principle |                                              | (0.82                                    | )        | (1.94                                   | )       
|Basic and diluted net loss per ordinary share                                                                                   |                                              | (0.82                                    | )        | (1.94                                   | )       
|                                                                                                                                |                                              |                                          |          |                                         |         
|Basic weighted-average number of ordinary shares outstanding                                                                    |                                              | 443,417,525                              |          | 442,994,524                             |         
|                                                                                                                                |                                              |                                          |          |                                         |         

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

---



UNITED PAN-EUROPE COMMUNICATIONS N.V.  CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT  (Stated in thousands of Euros, except number of shares)  (Unaudited)

|                                                              |  |     |  |   |  |             |  |         |  |           |   |         |   |            |   | Other
Cumulative
Comprehensive
Income
(Loss)(1) |   |            |  
|------------------------------------------------------------- |  | --- |  | - |  | ----------- |  | ------- |  | --------- | - | ------- | - | ---------- | - | ----------------------------------------------- | - | ---------- | -
|
|
|
|Balances, December 31, 2001                                   |  | 300 |  | - |  | 443,417,525 |  | 443,418 |  | 2,766,492 |   | (52,088 | ) | (7,651,418 | ) | 147,173                                         |   | (4,346,423 | )
|Deferred compensation expense related to stock options, net.  |  | -   |  | - |  | -           |  | -       |  | (11,763   | ) | 11,763  |   | -          |   | -                                               |   | -          |  
|Amortization of deferred compensation                         |  | -   |  | - |  | -           |  | -       |  | -         |   | 19,162  |   | -          |   | -                                               |   | 19,162     |  
|Equity transaction of subsidiaries                            |  | -   |  | - |  | -           |  | -       |  | (3,103    | ) | -       |   | -          |   | -                                               |   | (3,103     | )
|Accrual of Dividend on Series 1 Convertible Preferred Stock   |  | -   |  | - |  | -           |  | -       |  | -         |   | -       |   | (98,232    | ) | -                                               |   | (98,232    | )
|Accretion of Discount of Series 1 Convertible Preferred Stock |  | -   |  | - |  | -           |  | -       |  | -         |   | -       |   | (4,575     | ) | -                                               |   | (4,575     | )
|Unrealized loss on investments                                |  | -   |  | - |  | -           |  | -       |  | -         |   | -       |   | -          |   | (22,253                                         | ) | (22,253    | )
|Change in fair value of derivative assets                     |  | -   |  | - |  | -           |  | -       |  | -         |   | -       |   | -          |   | 13,155                                          |   | 13,155     |  
|Change in cumulative translation adjustments                  |  | -   |  | - |  | -           |  | -       |  | -         |   | -       |   | -          |   | 499                                             |   | 499        |  
|Net loss                                                      |  | -   |  | - |  | -           |  | -       |  | -         |   | -       |   | (289,321   | ) | -                                               |   | (289,321   | )
|                                                              |  |     |  |   |  |             |  |         |  |           |   |         |   |            |   |                                                 |   |            |  
|Total comprehensive loss                                      |  | -   |  | - |  | -           |  | -       |  | -         |   | -       |   | -          |   | -                                               |   | (297,920   | )
|                                                              |  |     |  |   |  |             |  |         |  |           |   |         |   |            |   |                                                 |   |            |  
|Balances, September 30, 2002 (Unaudited)                      |  | 300 |  | - |  | 443,417,525 |  | 443,418 |  | 2,751,626 |   | (21,163 | ) | (8,043,546 | ) | 138,574                                         |   | (4,731,091 | )
|                                                              |  |     |  |   |  |             |  |         |  |           |   |         |   |            |   |                                                 |   |            |  

---

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

---



UNITED PAN-EUROPE COMMUNICATIONS N.V.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (Stated in thousands of Euros)  (Unaudited)

|                                                                                        |                                                     | For the Nine Months
Ended September 30,                               |         
|--------------------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------------------------- | --------
|
|Cash flows from operating activities:                                                   |                                                     |                                                                       |         
|Net loss                                                                                |                                                     | (289,321                                                              | )       
|Adjustments to reconcile net income (loss) to net cash flows from operating activities: |                                                     |                                                                       |         
|                                                                                        | Depreciation and amortization                       |                                                                       | 534,679 
|                                                                                        | Non cash impairment and restructuring charges       |                                                                       | 23,635  
|                                                                                        | Stock-based compensation expense                    |                                                                       | 19,162  
|                                                                                        | Accretion of interest expense                       |                                                                       | 263,948 
|                                                                                        | Amortization of deferred financing costs            |                                                                       | 19,999  
|                                                                                        | Exchange rate differences                           |                                                                       | (515,428
|                                                                                        | Loss on derivative assets                           |                                                                       | 179,686 
|                                                                                        | Provision for loss on investments                   |                                                                       | 7,957   
|                                                                                        | Minority interests in subsidiaries                  |                                                                       | 10,387  
|                                                                                        | Share in results of affiliated companies            |                                                                       | 36,913  
|                                                                                        | Extraordinary gain                                  |                                                                       | (471,718
|                                                                                        | Cumulative effect of change in accounting principle |                                                                       | -       
|                                                                                        | Loss on assets                                      |                                                                       | 7,601   
|                                                                                        | Other                                               |                                                                       | (50     
|                                                                                        | Changes in assets and liabilities:                  |                                                                       |         
|                                                                                        |                                                     | Decrease in restricted cash                                           |         
|                                                                                        |                                                     | Decrease in receivables                                               |         
|                                                                                        |                                                     | Decrease in other current liabilities                                 |         
|                                                                                        |                                                     | Increase (decrease) in deferred taxes and other long-term liabilities |         
|                                                                                        |                                                     |                                                                       |         
|Net cash flows from operating activities                                                |                                                     | (298,725                                                              | )       
|                                                                                        |                                                     |                                                                       |         
|Cash flows from investing activities:                                                   |                                                     |                                                                       |         
|Restricted cash deposited, net                                                          |                                                     | (11,865                                                               | )       
|Investments in and advances to affiliated companies, net of repayments                  |                                                     | 745                                                                   |         
|Dividends received                                                                      |                                                     | 8,031                                                                 |         
|Capital expenditures                                                                    |                                                     | (191,251                                                              | )       
|Germany deconsolidated cash                                                             |                                                     | (9,404                                                                | )       
|Sale of assets                                                                          |                                                     | 21,526                                                                |         
|Acquisitions, net of cash acquired                                                      |                                                     | (24,060                                                               | )       
|                                                                                        |                                                     |                                                                       |         
|Net cash flows from investing activities                                                |                                                     | (206,278                                                              | )       
|                                                                                        |                                                     |                                                                       |         
|Cash flows from financing activities:                                                   |                                                     |                                                                       |         
|Proceeds from issuance of shares                                                        |                                                     | -                                                                     |         
|Proceeds from short-term borrowings                                                     |                                                     | 10,008                                                                |         
|Proceeds from long-term borrowings                                                      |                                                     | -                                                                     |         
|Repayments of long-term and short-term borrowings                                       |                                                     | (60,122                                                               | )       
|                                                                                        |                                                     |                                                                       |         
|Net cash flows from financing activities                                                |                                                     | (50,114                                                               | )       
|                                                                                        |                                                     |                                                                       |         
|Effect of exchange rates on cash                                                        |                                                     | 1,210                                                                 |         
|                                                                                        |                                                     |                                                                       |         
|Net decrease in cash and cash equivalents                                               |                                                     | (553,907                                                              | )       
|Cash and cash equivalents at beginning of period                                        |                                                     | 855,001                                                               |         
|                                                                                        |                                                     |                                                                       |         
|Cash and cash equivalents at end of period                                              |                                                     | 301,094                                                               |         
|                                                                                        |                                                     |                                                                       |         
|Supplemental cash flow disclosures:                                                     |                                                     |                                                                       |         
|                                                                                        | Cash paid for interest                              |                                                                       | (223,832
|                                                                                        |                                                     |                                                                       |         
|                                                                                        | Cash received for interest                          |                                                                       | 15,480  
|                                                                                        |                                                     |                                                                       |         

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

---

UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    Organization and Nature of Operations

United Pan-Europe Communications N.V. ("UPC" or the "Company"), whose parent company is UnitedGlobalCom Inc. ("United"), which owns an indirect
equity ownership interest in UPC through UGC Holdings Inc. ("UGC Holdings") and United Europe Inc. ("United Europe") of 53.1%, owns and operates broadband communications networks in 11
European countries through its three primary divisions: UPC Distribution, UPC Media andPriority Telecom. UPC Distribution comprises the local operating
systems and provides video, telephone and internet services for residential customers (Triple Play). UPC Media provides broadband internet and interactive digital products and services, transactional
television services such as pay per view movies, digital broadcast and post-production services, and thematic channels for distribution on UPC's network, third party networks and DTH
platforms.Priority Telecomfocuses on providing network solutions to the business customer. The following chart presents a summary of the Company's
significant investments as of September 30, 2002:

|                 |                                                   | UPC's Equity
Ownership |      
|---------------- | ------------------------------------------------- | ---------------------- | -----
|Distribution:    |                                                   |                        |      
|Austria:         |                                                   |                        |      
|                 | Telekabel Group                                   |                        | 95.0 
|Belgium:         |                                                   |                        |      
|                 | UPC Belgium                                       |                        | 100.0
|Czech Republic:  |                                                   |                        |      
|                 | KabelNet                                          |                        | 100.0
|                 | Kabel Plus                                        |                        | 99.9 
|France:          |                                                   |                        |      
|                 | Médiaréseaux S.A                                  |                        | 92.0 
|Germany:         |                                                   |                        |      
|                 | EWT/TSS Group                                     |                        | 28.7 
|                 | PrimaCom AG ("PrimaCom")                          |                        | 25.0 
|Hungary:         |                                                   |                        |      
|                 | UPC Magyarorszag                                  |                        | 100.0
|                 | Monor Telefon Tarsasag Rt. ("Monor")              |                        | 98.9 
|The Netherlands: |                                                   |                        |      
|                 | UPC Nederland                                     |                        | 100.0
|Norway:          |                                                   |                        |      
|                 | UPC Norge AS ("UPC Norge")                        |                        | 100.0
|Sweden:          |                                                   |                        |      
|                 | UPC Sweden                                        |                        | 100.0
|Slovak Republic: |                                                   |                        |      
|                 | Trnavatel                                         |                        | 95.0 
|                 | Kabeltel                                          |                        | 100.0
|                 | UPC Slovensko s.r.o                               |                        | 100.0
|Romania:         |                                                   |                        |      
|                 | Eurosat                                           |                        | 51.0 
|                 | AST Romania                                       |                        | 100.0
|Poland:          |                                                   |                        |      
|                 | UPC Polska, Inc ("UPC Polska")                    |                        | 100.0
|                 | Wizja TV B.V                                      |                        | 100.0
|                 | Telewizyjna Korporacja Partycpacyjna S.A. ("TKP") |                        | 25.0 

6

---

|Media:            |                                            |  |      
|----------------- | ------------------------------------------ |  | -----
|Pan-European:     |                                            |  |      
|                  | chello broadband N.V. ("chello broadband") |  | 100.0
|Spain:            |                                            |  |      
|                  | Iberian Programming Services ("IPS")       |  | 50.0 
|United Kingdom:   |                                            |  |      
|                  | Xtra Music Ltd                             |  | 50.0 
|The Netherlands:  |                                            |  |      
|                  | UPC Programming B.V. ("UPCtv")             |  | 100.0
|Other:            |                                            |  |      
|                  | SBS Broadcasting SA ("SBS")                |  | 21.2 
|Priority Telecom: |                                            |  |      
|                  | Priority Telecom N.V. ("Priority Telecom") |  | 86.7 
|Investments:      |                                            |  |      
|Malta:            |                                            |  |      
|                  | Melita Cable TV P.L.C. ("Melita")          |  | 50.0 

---

2.    Risks and Going Concern Uncertainties

UPC has experienced net losses since formation. As of September 30, 2002, there was substantial uncertainty whether UPC's sources of capital, working
capital and projected operating cash flow would be sufficient to fund the Company's expenditures and service the Company's indebtedness over the next year. Accordingly, there is substantial doubt
regarding the Company's ability to continue as a going concern. In addition, as a result of the events of default described below, UPC's senior notes, senior discount notes, the Exchangeable Loan and
the UPC Distribution Bank Facility have been classified as current liabilities. UPC's ability to continue as a going concern is dependent on (i) UPC's ability to restructure its senior notes
and senior discount notes, the Exchangeable Loan and convertible preferred stock and (ii) UPC's ability to generate the cash flows required to enable it to recover the Company's assets and
satisfy the

7

---

Company's liabilities, in the normal course of business, at the amounts stated in the consolidated financial statements. The report of the Company's previous independent accountant, Arthur Andersen,
on the Company's consolidated financial statements for the year ended December 31, 2001, includes a paragraph that states that the Company has suffered recurring losses from operations and has
a net capital deficiency that raises doubt about the Company's ability to continue as a going concern.

The
Company has incurred substantial operating losses and negative cash flows from operations, which have been driven by the Company's continuing development efforts, including the
introduction of new services such as digital video, telephony and internet. Additionally, substantial capital expenditures have been required to deploy these services and to acquire businesses.
Management expects the Company to incur operating losses at least through 2005, primarily as a result of the continued introduction of these new services, which are in the early stages of deployment,
as well as continued depreciation expense. During 2001, the Company reviewed its current and long-range plan for all segments of its business and the Company engaged a strategic consultant
to assist the Company in the process. The Company worked extensively with this consultant to revise the Company's strategic and operating plans. The Company has revised its strategic vision, no longer
focusing on an aggressive digital roll-out, but on increasing sales of products and services that have better gross margins and profitability. The revised business plan focuses on improved
average revenue per subscriber and margins, increased penetration of new service products within existing upgraded homes, efficient deployment of capital and focus on products with positive net
present values.

Default and Waivers

Viewing the Company's funding requirements and the Company's possible lack of access to debt and equity capital in the near term, UPC determined that it would not
make interest payments on UPC's senior notes and senior discount notes, as they fell due. On February 1, 2002, UPC failed to make required interest payments in the aggregate amount of
113.0 million (USD 100.6 million) on UPC's outstanding 107/8% Senior Notes due 2009, 111/4% Senior Notes due 2010 and 111/2% Senior Notes due
2010. The indentures related to UPC's senior notes and senior discount notes provide that failing to make interest payments constitutes an "Event of Default" under the notes if UPC is in default of
the payment of interest on any of the notes for a period of time in excess of 30 days. Since UPC failed to make the interest payments on the first three series of notes upon expiration of this
30-day grace period on March 3, 2002, Events of Default occurred under the related indentures. The occurrence of these Events of Default constituted cross Events of Default under
the indentures related to the remaining series of senior notes and senior discount notes. The occurrence of the various Events of Default gives the trustees under the related indentures, or requisite
number of holders of such notes, the right to accelerate the maturity of all of the Company's senior notes and senior discount notes. In addition, on May 1, 2002, August 1, 2002 and
November 1, 2002, UPC failed to make required interest payments in the aggregate amount of 38.9 million, 123.5 million and 36.5 million, respectively, on UPC's outstanding
107/8% Senior Notes due 2007 and 111/4% Senior Notes due 2009, 107/8% Senior Notes due 2009, 111/4% Senior Notes due 2010 and
111/2% Senior Notes due 2010. As of November 14, 2002, neither the trustees for the defaulted notes nor the requisite number of holders of those notes have accelerated the
payment of principal and interest under those notes.

UPC's
failure to make the February 1, 2002, May 1, 2002, August 1, 2002 and November 1, 2002 interest payments on its senior notes, and the resulting Events
of Default under the indentures relating to

8

---

the senior notes and senior discount notes, gave rise to potential cross events of default under the following credit and loan facilities:



On
July 30, 2002, UPC transferred 22.3% of its UPC Germany shares to the holders of the remaining minority interest in UPC Germany (See Note 5). Due to the share transfer,
such holders became the majority shareholders of UPC Germany on July 30, 2002. The EWT facility was refinanced by the new majority shareholders and the potential cross default ceased to exist.

The
UPC Distribution Bank Facility is secured by share pledges to the banks on UPC Distribution Holding B.V., which is the holding company of most companies within the UPC Distribution
group, and over certain operating companies within this group. The Exchangeable Loan is secured by pledges over the stock of Belmarken, its wholly owned subsidiary UPC Holding B.V. and UPC Internet
Holding B.V., which ownschello broadband N.V.The Exchangeable Loan continued to be held by United as of November 14,
2002.The occurrence of matured cross events of default under the UPC Distribution Bank Facility and the Exchangeable Loan would have given the
creditors under those facilities the right to accelerate the maturity of the loans and to foreclose upon the collateral securing the loans.

On
March 4, 2002, UPC received the first waivers from the lenders under the UPC Distribution Bank Facility, the EWT Facility and the Exchangeable Loan for the potential cross
events of defaults under such facilities that existed or may exist as a result of the Company's failure to make the interest payment due on February 1, 2002 on the Company's outstanding
107/8% Senior Notes due 2009, 111/4% Senior Notes due 2010 and, 111/2% Senior Notes due 2010 within the applicable cure periods, or any resulting cross
defaults. During the period from June 4, 2002 to July 28, 2002, UPC received bi-weekly waivers from the bank lenders and United until September 27, 2002. On
September 30, 2002, the bank lenders and United extended the coverage of the waivers to all UPC's outstanding senior notes and senior discount notes and any resulting cross defaults and the
duration of the waivers until March 31, 2003.

Each
of these waivers will remain effective until the earlier of



9

---



In
addition, each of these waivers contains certain other conditions and undertakings and will terminate if there is a default by UPC of the terms of that waiver. The waiver under the
UPC Distribution Bank Facility subjects UPC to a 100 million drawdown limitation under that facility, during the period in which the waiver is in place. Availability under the limitation is
subject to certain conditions. In addition, the waiver to the UPC Distribution Bank Facility includes amendments to the UPC Distribution Bank Facility which:



As
of November 14, 2002, UPC had not made the interest payments on the 107/8% Senior Notes due 2009, 111/4% Senior Notes due 2010,
111/2% Senior Notes due 2010, 107/8% Senior Notes due 2007 or the 111/4% Senior Notes due 2009. Subscriber growth has been impacted in some countries by
our financial restructuring, however the restructuring did not have a material adverse effect on UPC's subsidiaries' or UPC's relationships with suppliers and employees.

Agreement for Restructuring

On February 1, 2002, UPC signed a Memorandum of Understanding with United and UGC Holdings (the "Memorandum of Understanding"). The Memorandum of
Understanding is a non-binding agreement in principle with United and UGC Holdings to enter into negotiations with the holders of the Company's senior notes and senior discount notes to
attempt to reach agreement on a means to restructure the Company's indebtedness at the holding company level.

During
the month of March 2002, UPC met with representatives of United, which currently holds the Exchangeable Loan and a significant portion of the Company's senior notes and
senior discount notes, and an ad hoc noteholders committee representing the holders of the Company's senior notes and senior discount notes (other than United) to begin preliminary discussions with
respect to a process for, and terms of, a restructuring of those notes and the Exchangeable Loan. United and its advisors and the ad hoc noteholders committee and its advisors completed the due
diligence about UPC and the Company's current financial condition.

On
September 30, 2002, UPC announced that a binding agreement had been reached with United and the members of the ad hoc noteholders committee on a recapitalization plan for UPC.
If implemented under its current terms, the agreed recapitalization will substantially delever UPC's balance sheet eliminating approximately 4.3 billion accreted value of senior notes and
senior discount notes, accrued interest on the senior notes of 293.8 million, 942.1 million of Exchangeable Loan debt, and 1.6 billion of convertible preference shares in exchange
for equity issued by a new holding company that will be the

10

---

parent of UPC and a subsidiary of United ("New UPC"). The agreement consists primarily of the following key terms:



In
addition the restructuring agreement contains an agreement by the parties (other than UPC) to forbear on exercising rights and remedies relating to defaults on the senior notes,
senior discount notes and Exchangeable Loan while the restructuring agreement remains in effect.

In
order to facilitate an efficient and effective recapitalization, in accordance with the terms of the restructuring agreement, UPC, which operates as a financial holding company,
intends to seek relief under (i) a debt moratorium proceeding in the Netherlands, leading to a voluntary suspension of payments, and (ii) a Chapter 11 bankruptcy proceeding in the United
States. The Company expects that, in these proceedings in the Netherlands and the United States, a plan of reorganization will be approved that comports with the recapitalization terms contained in
the restructuring agreement. The anticipated court proceedings in the Netherlands and the United States could result in material changes in the nature of UPC's business, material adverse changes to
UPC's financial condition and results of operations or the Company's liquidation. UPC expects that this process will take a number of months to complete. If consummated, the recapitalization would
result in the exchange of the UPC senior and senior discount notes and other claims against the Company for equity in New UPC and the substantial dilution of UPC's existing shareholders, including the
holders of the Company's ordinary shares, priority shares and preference shares.

In
the event that the Company is unable to successfully consummate the recapitalization envisioned by the restructuring agreement holders of the Company's outstanding securities,
including the Company's ordinary shares, priority shares, preference shares and senior notes and senior discount notes, as well as the Exchangeable Loan, would likely lose a substantial portion, or
all, of the value of their investment in the Company's securities.

If
the Company is not able to complete the restructuring contemplated by the restructuring agreement, the Company might be required to liquidate or take other restructuring actions,
these may have a greater adverse effect on the Company's financial condition and results of operations and the value of its debt and equity securities.

11

---

3.    Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting
principles for interim financial information and are in the form prescribed by the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by
U.S. GAAP for complete financial statements. The interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of
and for the year ended December 31, 2001 and the unaudited condensed consolidated financial statements as of and for the three and nine month period ended September 30, 2001. In the
opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month
period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2002. The preparation of financial statements in
conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from
those estimates.

Certain
prior period amounts have been reclassified to conform with current period presentation.

New Accounting Principles

The Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") effective
January 1, 2002. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized, but are tested for impairment on an annual basis and whenever indicators of
impairment arise. In addition, goodwill on equity method investments is no longer amortized, but tested for impairment in accordance with APB 18. The goodwill impairment test, which is based on fair
value, is performed on a reporting unit level. All recognized intangible assets that are deemed not to have an indefinite life are amortized over their estimated useful lives.

12

---



The following table presents the pro forma effect on net loss from the reduction of amortization expense and the reduction of amortization of excess basis on
equity method investments, as a result of the adoption of SFAS 142:

|                                                          |           | For the Three Months
Ended September 30,           |   | For the Nine Months
Ended September 30, |  
|--------------------------------------------------------- | --------- | -------------------------------------------------- | - | --------------------------------------- | -
|
|
|Net loss as reported                                      |           | (364,316                                           | ) | (858,443                                | )
|                                                          | Add Back: |                                                    |   |                                         |  
|                                                          |           | Goodwill amortization                              |   | -                                       |  
|                                                          |           | Amortization of excess basis on equity investments |   | -                                       |  
|                                                          |           |                                                    |   |                                         |  
|Adjusted net loss                                         |           | (364,316                                           | ) | (698,993                                | )
|                                                          |           |                                                    |   |                                         |  
|Net loss per ordinary share:                              |           |                                                    |   |                                         |  
|Basic and diluted net loss per ordinary share as reported |           | (0.82                                              | ) | (1.94                                   | )
|                                                          | Add Back: |                                                    |   |                                         |  
|                                                          |           | Goodwill amortization                              |   | -                                       |  
|                                                          |           | Amortization of excess basis on equity investments |   | -                                       |  
|                                                          |           |                                                    |   |                                         |  
|Adjusted basic and diluted net loss per ordinary share    |           | (0.82                                              | ) | (1.58                                   | )
|                                                          |           |                                                    |   |                                         |  

The
Company has engaged an external party to compare the fair value of its reporting units with their respective carrying amounts, including goodwill. If the fair value of a reporting
unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill
impairment test will be performed to measure the amount of impairment loss. The first step of the goodwill impairment test was performed and the carrying value of certain reporting units exceeded
their fair value, including reporting units in the Netherlands, Sweden, Hungary, the Czech Repulic, France, Slovakia and Poland andPriority Telecom.
The Company is currently carrying out the second step of the test to quantify how much of the total goodwill will be impaired. A substantial cumulative effect adjustment will be required as a result
of this process. The determination of the potential impairment adjustment will be completed by the end of the year. Net goodwill of approximately 2.8 billion is included in the accompanying
condensed consolidated balance sheets as of September 30, 2002.

In
April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145, which updates, clarifies and simplifies existing accounting pronouncement, and addresses the
reporting of debt extinguishments and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The provisions of
SFAS 145 are generally effective for the Company's 2003 fiscal year, or in the case of specific provisions, for transactions occurring after May 15, 2002 or financial statements issued
on or after May 15, 2002. For certain provisions, including the rescission of Statement No. 4, early application is encouraged. UPC has not yet adopted SFAS 145 and is currently
evaluating the impact of SFAS 145 on the Company's consolidated financial statements. The Company does not believe that the adoption of SFAS 145 will have a material impact on the
Company's results of operations, financial condition or cash flows.

On
June 28, 2002 the Financial Accounting Standards Board issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses
significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including

13

---

restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The scope of SFAS 146 also includes
(1) costs related to terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily terminated receive under the terms of a
one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. SFAS 146 will be effective for financial statements issued
for fiscal years beginning after December 31, 2002. The Company has not yet determined what will be the impact of SFAS 146 on its results of operations or financial condition.

4.    Impairment and Restructuring Charges

During 2001, the Company implemented a restructuring plan to both lower operating expenses and strengthen its competitive and financial position, by eliminating
certain employee positions, reducing office space and related overhead expenses, recognizing losses related to excess capacity under certain contracts and canceling certain programming contracts. The
Company also incurred certain restructuring charges during the three and nine month period ended September 30, 2002 related to employee severance and termination costs and costs related to the
Company's financial debt restructuring.

The
following table summarizes these costs by type and related segment of the business.

|                                                           |  | Employee
Severance &
Termination
Costs |   | Office
Closures |   | Programming
and Lease
Contracts
Termination Costs |   | Asset
Disposal
Losses and
Other Costs |   | Total
Impairment and Restructuring Charges |  
|---------------------------------------------------------- |  | -------------------------------------- | - | --------------- | - | ------------------------------------------------- | - | ------------------------------------- | - | ------------------------------------------ | -
|
|Impairment and restructuring liability, December 31, 2001  |  | 37,556                                 |   | 11,140          |   | 102,052                                           |   | 16,228                                |   | 166,976                                    |  
|                                                           |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Priority Telecom                                           |  | 2,500                                  |   | -               |   | (10,284                                           | ) | 3,700                                 |   | (4,084                                     | )
|UPC Media                                                  |  | 1,924                                  |   | -               |   | -                                                 |   | 1,514                                 |   | 3,438                                      |  
|Corporate                                                  |  | -                                      |   | -               |   | -                                                 |   | 24,281                                |   | 24,281                                     |  
|                                                           |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Total impairment and restructuring charges 2002            |  | 4,424                                  |   | -               |   | (10,284                                           | ) | 29,495                                |   | 23,635                                     |  
|                                                           |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Cash paid during 2002                                      |  | (26,240                                | ) | (4,365          | ) | (16,109                                           | ) | (23,504                               | ) | (70,217                                    | )
|Non-cash release of restructuring liability                |  | (160                                   | ) | -               |   | (12,927                                           | ) | (4,831                                | ) | (17,918                                    | )
|                                                           |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Impairment and restructuring liability, September 30, 2002 |  | 15,580                                 |   | 6,775           |   | 62,733                                            |   | 17,388                                |   | 102,476                                    |  
|                                                           |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Short-term portion impairment and restructuring liability  |  | 15,580                                 |   | 2,569           |   | 5,962                                             |   | 12,916                                |   | 29,747                                     |  
|Long-term portion impairment and restructuring liability   |  | -                                      |   | 4,206           |   | 56,771                                            |   | 4,472                                 |   | 72,729                                     |  
|                                                           |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Impairment and restructuring liability, September 30, 2002 |  | 15,580                                 |   | 6,775           |   | 62,733                                            |   | 17,388                                |   | 102,476                                    |  
|                                                           |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  

Employee severance and termination costs.These costs relate to termination salaries, benefits, outplacement and other costs
related to the employees involuntarily terminated. The total workforce

14

---

reduction was effected through attrition, involuntary terminations and reorganization of the Company's operations to permanently eliminate open positions resulting from normal employee attrition.
These costs were determined in accordance with the criteria of EITF 94-3. Salaries and benefits earned during the transition period have not been included in the restructuring
charge.

Office closures.In addition to the decrease in employee positions, the restructuring plan provided for reduction in office
space and related overhead expenses. Office closure and consolidation costs are the estimated costs to be incurred upon closure of specifically identified facilities, costs associated with obtaining
subleases, lease-termination costs and other related costs.

Programming and lease contract termination costs.These costs relate to costs associated with the impairment and cancellation
of, or recognition of costs associated with, excess capacity of certain
contracts. For the nine months ended September 30, 2002,Priority Telecomreleased 10.3 million of its restructuring provision, which
relates to the extinguishment of vendor financing liabilities.

Asset disposal losses and other costs.These amounts relate to costs associated with asset disposal and costs relating to the
Company's financial debt restructuring.

The
following table summarizes the number of employees to be terminated during 2002 in accordance with the restructuring by both division and function and the number of employees still
to be terminated as of September 30, 2002:

|                                   |       | Total
Number of
Employees to be
Terminated in
2002 |     | Remaining
Number of
Employees, as of
September 30, 2002
|---------------------------------- | ----- | -------------------------------------------------- | --- | -------------------------------------------------------
|Division:                          |       |                                                    |     |                                                        
|UPC Distribution                   |       | 873                                                |     | 192                                                    
|Priority Telecom                   |       | 23                                                 |     | -                                                      
|UPC Media                          |       | 86                                                 |     | 1                                                      
|Corporate                          |       | 4                                                  |     | -                                                      
|                                   |       |                                                    |     |                                                        
|                                   | Total |                                                    | 986 |                                                        
|                                   |       |                                                    |     |                                                        
|Function:                          |       |                                                    |     |                                                        
|Programming                        |       | 1                                                  |     | -                                                      
|Network Operations                 |       | 498                                                |     | 120                                                    
|Customer Operations                |       | 112                                                |     | 22                                                     
|Customer Care                      |       | 92                                                 |     | 40                                                     
|Billing and Collection             |       | 4                                                  |     | -                                                      
|Customer Acquisition and Marketing |       | 164                                                |     | 3                                                      
|Administration                     |       | 115                                                |     | 8                                                      
|                                   |       |                                                    |     |                                                        
|                                   | Total |                                                    | 986 |                                                        
|                                   |       |                                                    |     |                                                        

15

---



5.    Investments in and Advances to Affiliated Companies

Equity Method Investments

|           |  | As of September 30, 2002
|---------- |  | ------------------------
|
|
|Tevel      |  | 114,278                 
|Melita     |  | 19,403                  
|Xtra Music |  | 11,390                  
|IPS        |  | 10,065                  
|SBS        |  | 261,999                 
|PrimaCom   |  | 345,096                 
|TKP        |  | 30,000                  
|Other, net |  | 55,006                  
|           |  |                         
|Total      |  | 847,237                 
|           |  |                         

|           |  | As of December 31, 2001
|---------- |  | -----------------------
|
|
|Tevel      |  | 114,278                
|Melita     |  | 12,881                 
|Xtra Music |  | 14,039                 
|IPS        |  | 10,065                 
|SBS        |  | 261,999                
|PrimaCom   |  | 345,096                
|TKP        |  | 30,000                 
|Other, net |  | 51,413                 
|           |  |                        
|Total      |  | 839,771                
|           |  |                        

Transfer of Germany Shares

Until July 30, 2002 UPC had effective ownership of 51% of EWT/TSS Group through its 51% owned subsidiary, UPC Germany. Pursuant to the agreement by which
UPC acquired EWT/TSS Group, UPC was required to fulfill a so-called contribution obligation by no later than March 2003, by contributing certain assets amounting to approximately
358.8 million. If UPC failed to make the contribution by such date or in certain circumstances, such as a material default by UPC under its financing agreements, the 49% owner in UPC Germany
could call for 22% of the ownership interest in UPC Germany in exchange for the Euro equivalent of 1 Deutsche Mark. On March 5, 2002, UPC received the holders' notice of exercise. On
July 30, 2002, UPC settled the exercise. UPC completed the transfer of 22.3% of UPC Germany to the 49% shareholders in return for the cancellation of the 358.8 million face value asset
contribution obligation due
from UPC to UPC Germany. UPC now owns 28.7% of UPC Germany, with the former 49% shareholders owning the remaining 71.3%. UPC Germany is governed by a newly agreed shareholders' agreement and was
deconsolidated by UPC effective August 1, 2002. This transaction

16

---

resulted in a deferred gain on sale of assets of 150.3 million in the third quarter of 2002. Although it is not the managements' current intention, it may decide to fund UPC Germany sometime
in the future, and as such the Company deferred the gain on sale of assets.

Germany Assets and Liabilities

Details of the final deconsolidated assets and liabilities are as follows (in thousands):

|                                          |  |          |  
|----------------------------------------- |  | -------- | -
|Working capital                           |  | (75,977  | )
|Property, plant and equipment             |  | 75,415   |  
|Goodwill and other intangible assets, net |  | 71,087   |  
|Long-term liabilities                     |  | (85,704  | )
|Minority interest                         |  | (144,546 | )
|Deferred gain on sale of assets           |  | 150,321  |  
|                                          |  |          |  
|Deconsolidated cash Germany               |  | (9,404   | )
|                                          |  |          |  

For
details on revenue, Adjusted EBITDA and total assets of UPC Germany as of September 30, 2002, see Note 10.

Marketable Equity Securities of United, at Fair Value

UPC holds 5,569,240 Class A common shares of United as of September 30, 2002. The fair value of these shares was approximately 9.3 million as
of September 30, 2002, including a cumulative unrealized loss of approximately 17.4 million.

6.    Property, Plant and Equipment

|                                             |                                    | As of
September 30,
2002 |            | As of
December 31,
2001 |           
|-------------------------------------------- | ---------------------------------- | ------------------------ | ---------- | ----------------------- | ----------
|
|Cable distribution networks                  |                                    | 3,501,095                |            | 3,513,362               |           
|Subscriber premises equipment and converters |                                    | 816,115                  |            | 793,809                 |           
|DTH, MMDS and distribution facilities        |                                    | 83,098                   |            | 117,692                 |           
|IT systems, office equipment and fixtures    |                                    | 288,282                  |            | 289,376                 |           
|Buildings and leasehold improvements         |                                    | 152,518                  |            | 168,186                 |           
|Other                                        |                                    | 62,353                   |            | 73,893                  |           
|                                             |                                    |                          |            |                         |           
|                                             |                                    | 4,903,461                |            | 4,956,318               |           
|                                             | Accumulated depreciation           |                          | (1,572,327 | )                       | (1,201,988
|                                             |                                    |                          |            |                         |           
|                                             | Property, plant and equipment, net |                          | 3,331,134  |                         | 3,754,330 
|                                             |                                    |                          |            |                         |           

17

---

7.    Goodwill and Other Intangible Assets

|                  |                                                  | As of
September 30,
2002 |           | As of
December 31,
2001 |          
|----------------- | ------------------------------------------------ | ------------------------ | --------- | ----------------------- | ---------
|
|Goodwill          |                                                  | 3,349,690                |           | 3,450,665               |          
|Other Intangibles |                                                  | 136,651                  |           | 137,364                 |          
|                  |                                                  |                          |           |                         |          
|                  |                                                  | 3,486,341                |           | 3,588,029               |          
|                  | Accumulated amortization goodwill                |                          | (537,281  | )                       | (543,891 
|                  | Accumulated amortization other intangible assets |                          | (55,678   | )                       | (40,635  
|                  |                                                  |                          |           |                         |          
|                  | Goodwill and other intangible assets, net        |                          | 2,893,382 |                         | 3,003,503
|                  |                                                  |                          |           |                         |          

8.    Long-Term Debt

|                               |                         | As of
September 30,
2002 |            | As of
December 31,
2001 |           
|------------------------------ | ----------------------- | ------------------------ | ---------- | ----------------------- | ----------
|
|July 1999 Notes                |                         | 1,584,522                |            | 1,796,252               |           
|October 1999 Notes             |                         | 1,064,025                |            | 1,207,569               |           
|January 2000 Notes             |                         | 1,684,682                |            | 1,942,684               |           
|UPC Distribution Bank Facility |                         | 3,127,939                |            | 3,163,834               |           
|Exchangeable Loan              |                         | 942,129                  |            | 992,816                 |           
|@Entertainment Notes           |                         | 384,652                  |            | 384,144                 |           
|DIC Loan                       |                         | 54,269                   |            | 53,762                  |           
|Other                          |                         | 67,434                   |            | 117,027                 |           
|                               |                         |                          |            |                         |           
|                               |                         | 8,909,652                |            | 9,658,088               |           
|                               | Less current portion(1) |                          | (8,458,338 | )                       | (9,188,098
|                               |                         |                          |            |                         |           
|                               | Total                   |                          | 451,314    |                         | 469,990   
|                               |                         |                          |            |                         |           

---

All
non-Euro denominated borrowings are recorded each period using the period end spot rate with the result being recorded as foreign exchange gain or loss.

Exchangeable Loan

The Exchangeable Loan was transferred to United on January 30, 2002, as part of a transaction between Liberty Media Corporation ("Liberty"), the original
holder of the Exchangeable Loan, and United. The notes issued under the Exchangeable Loan may be exchanged for UPC's ordinary shares at USD 6.85 per share under certain circumstances before or after
May 29, 2002. As indicated in Note 2,

18

---

there is a potential cross default under this facility, but the Company has obtained waivers of the cross defaults until March 31, 2003.

UPC Distribution Bank Facility

As described in Note 2, the Company defaulted on its interest payments under its senior notes in the first quarter of 2002, which gave rise to potential
cross events of default under the terms of this the UPC Distribution Bank Facility. The Company had obtained waivers for the potential cross default from the bank syndicate which was extended on the
same terms thereafter, currently until March 31, 2003. During the period of waiver, the Company is permitted to borrow another 100 million under the facility, subject to certain
conditions. UPC has made drawdowns aggregating 65 million of the permitted 100 million as of November 14, 2002.

In
addition, the bank lenders under UPC Distribution Bank Facility have included the following amendments to the UPC Distribution Bank Facility:



Derivative Instruments

In connection with certain borrowings, the Company entered into both cross-currency swaps and interest rate swaps providing economic hedges to both currency and
interest rate exposure.

The
following table details the fair value of the derivative instruments outstanding by related borrowing (in thousand of Euros):

|Borrowing                      |                                            | Type of Instrument                |  | As of
September 30,
2002 |         | As of
December 31,
2001 |        
|------------------------------ | ------------------------------------------ | --------------------------------- |  | ------------------------ | ------- | ----------------------- | -------
|July 1999 Notes                |                                            | Cross currency/interest rate swap |  | -                        |         | 101,736                 |        
|October 1999 Notes             |                                            | Cross currency/interest rate swap |  | -                        |         | 55,522                  |        
|January 2000 Notes             |                                            | Cross currency/interest rate swap |  | -                        |         | 36,741                  |        
|UPC Distribution Bank Facility |                                            | Cross currency/interest rate swap |  | (70,423                  | )       | (47,065                 | )      
|                               |                                            |                                   |  |                          |         |                         |        
|                               | Total derivative (liabilities) assets, net |                                   |  |                          | (70,423 | )                       | 146,934
|                               |                                            |                                   |  |                          |         |                         |        

The
UPC Distribution Bank Facility swaps include an interest rate swap of 13.8 million, which qualifies as an accounting cash flow hedge. Accordingly, the changes in fair value of
this instrument are recorded through other comprehensive income in the consolidated statement of shareholders' deficit. The remaining instruments are marked-to-market each
period with the corresponding fair value gain (loss) recorded as a part of foreign exchange gain (loss) and other income (expense) in the accompanying

19

---

consolidated statements of operations. For the three months ended September 30, 2002 and 2001, the Company recorded a gain of 1.0 million and a loss of 85.1 million,
respectively, and for the nine months ended September 30, 2002 and 2001, the Company recorded a loss of 179.7 million and a loss of 59.6 million, respectively, in connection with
the mark-to-market valuations.

The
condensed consolidated balance sheets reflect these instruments as derivative assets or liabilities as appropriate.

In
June 2002, the Company recognized an extraordinary gain of 347.2 million from the delivery by certain banks of 404.6 million in aggregate principal amount of the
Company's senior notes and senior discount notes as settlement of the interest rate/cross currency derivative contracts on UPC's July 1999 Senior Notes, UPC's October 1999 Senior Notes
and the UPC January 2000 Senior Notes.

9.    Commitments and Contingencies

Purchase Commitments

The table below provides an overview of the Company's commitments per year.

|                                   |  | Payments due by Period
|---------------------------------- |  | ----------------------
|
|
|Operating Leases                   |  | 49,076                
|Unconditional Purchase Obligations |  | 38,528                
|Other Long term Obligations        |  | 43,571                
|                                   |  |                       
|Total Commitments                  |  | 131,175               
|                                   |  |                       

In
addition to the programming commitments specified in table above, all UPC Distribution affiliates are parties to channel carriage agreements obliging the affiliate to make the channel
available to subscribers throughout the term of the agreement and in a specified package. The payments due under these programming commitments are dependent upon the actual number of subscribers.

The
Company has entered into a framework agreement for the supply of various types of equipment. Under this agreement, the company has a remaining one to three year obligation to buy
197,000 Set Top Computers ("STCs") at market price and a one year obligation to buy 61,500 modems.

Litigation and Claims

The following is a description of certain legal proceedings to which UPC or one of UPC's subsidiaries is a party. In addition, from time to time, UPC may become
involved in litigation relating to claims arising out of its operations in the normal course of the Company's business. In the opinion of the Company's management, the ultimate resolution of these
legal proceedings would not be likely to have a material adverse effect on UPC's subsidiaries' business, results of operations, financial condition or liquidity.

On
July 4, 2001, InterComm Holdings LLC, InterComm France CVOHA ("ICF I"), InterComm France II CVOHA ("ICF II"), and Reflex Participations ("Reflex," collectively with ICF I and
ICF II, the "ICF Party") served a demand for arbitration on UPC, UGC Holdings, and its subsidiaries, Belmarken Holding B.V. and UPC France Holding B.V. The claimants allege breaches of obligations
allegedly owed by UPC in connection with the ICF Party's position as a minority shareholder in Médiaréseaux S.A. The claimants seek relief in the nature of immediate
acceleration of an alleged right to require UPC or an

20

---

affiliate to purchase all or any of the remaining shares in Médiareséaux S.A. from the ICF Party and/or compensatory damages, but in either case no less than EUR
163 million, plus reasonable fees and costs. The ICF Party has not specified from which entity it is seeking such relief; however, UGC Holdings is not a party to any agreement with the
claimants and has been dismissed from the proceedings. UPC and its affiliates, as respondents, deny these claims and intend to defend against claimants' allegations vigorously. UPC is vigorously
defending the arbitration proceedings and has filed appropriate counter claims.

On
October 28, 2002, the vice-president of the French commercial court of Meaux acceded on the request made by the ICF Party and Mr. Schimmel (the "ICH Group")
on emergency proceedings and appointed a temporary judicial administrator (French concept of "administrateur provisoire") for Médiaréseaux S.A. (i.e., the French holding
company of UPC's French operating subsidiaries), with the mission, in particular, to carry out the management of Médiaréseaux S.A. in lieu of the directors of the
aforesaid company so as to resolve both the so-called financial crisis alleged by the ICH Group and an alleged conflict of interests by the ICH Group resulting from the status of the
directors of Médiaréseaux S.A. within the different companies of the UPC group. Médiaréseaux S.A. has been granted an accelerated appeal
process with the Court of Appeal of Paris to overturn the appointment of the temporary judicial administrator and has made appropriate counter claims.

On
October 22, 2002, Philips Digital Networks B.V. ("Philips") commenced legal proceedings against UPC, UPC Nederland B.V. and UPC Distribution (together the "UPC Defendants")
alleging the UPC's Defendants' failure to perform under a Set Top Computer Supply Agreement between the parties dated November 19, 2001, as amended (the "STC Agreement"). Philips' principle
allegation is that the UPC Defendants have failed to take delivery of 47,100 STCs with a value claimed of 21.2 million. Additionally, Philips is claiming dissolution of the STC Agreement and a
release from an obligation to manufacture and deliver a further 29,850 STCs and related damages of 7.0 million. Lastly, Philips is claiming additional costs, including interest on late payments
of approximately 1.0 million. The
UPC Defendants deny all claims brought by Philips, and intend to vigorously defend themselves against these claims and will file appropriate counter claims. This action has been commenced by Philips
following a termination of the STC Agreement by the UPC Defendants as a consequence of Philips failure to deliver STCs conforming to the material technical specifications required by the terms of the
STC Agreement.

On
October 2, 2002 UPC Distribution Holding B.V. gave notice that it wished to cancel 83.3 million of the Facility A commitments and 416.8 million of the Facility B
commitments under the UPC Distribution Bank Facility, effective on October 7, 2002. In order to prepay 346.8 million of the outstanding Facility B advances, UPC Distribution Holding B.V.
also made a request for an advance of 346.8 million under the Facility A tranche under the UPC Distribution Bank Facility effective on October 7, 2002. All the lenders advanced their
proportionate shares of the requested drawing, except ten institutions. The shortfall arising was 29.3 million. UPC made a further request for advances in the sum of 25.0 million, on
October 14, 2002. The same institutions failed to pay and accordingly there was a further shortfall of 2.3 million. On October 3, 2002, six of the ten lenders which did not fund
pursuant to the October 2, 2002 notice (the "Claimants"), issued proceedings in the English High Court against TD Bank Europe Limited, UPC Distribution Holding BV and UPC Financing Partnership
(the "UPCD Defendants"). In the proceedings the Claimants seek, amongst other things, a declaration from the English High Court as to whether they were obligated in the circumstances to make the
payments in dispute. The UPCD Defendants, who consider that the English High Court is likely to declare that the Claimants are obligated to make the payments, applied for the hearing of these
proceedings to be expedited and a trial date has been set for November 18, 2002. The Company expects that the trial will last a few days. The UPCD Defendants intend to defend themselves
vigorously in these proceedings.

21

---

10.  Segments and Geographic Information

The Company is managed internally as three primary divisions: UPC Distribution, UPC Media andPriority Telecom. In
addition, Corporate, IT and Other is a separate reporting segment. UPC Distribution focuses on providing cable television, DTH, internet and telephony services to residential customers and is
comprised of the local operating systems.chello broadbandserves as the internet access provider and was, in February 2001, combined with the
programming businesses led by UPCtv under one management team as UPC Media. UPC Media provides broadband internet and interactive digital products and services, transactional television services such
as pay per view movies, digital broadcast and post-production services, and thematic channels for distribution on UPC's network, third party networks and DTH platforms. Priority Telecomis focused on
providing services to business customers. Corporate, IT and Other relates primarily to centralized activities, which
support multiple platforms and services.

The
Company evaluates performance and allocates resources based on the results of these divisions. The key operating performance criteria used in this evaluation include revenue growth
and "Adjusted EBITDA". Adjusted EBITDA is not a generally accepted accounting principle ("GAAP") measure. Adjusted EBITDA represents net operating earnings before depreciation, amortization,
stock-based
compensations charges, retention bonuses, and impairment and restructuring charges. Adjusted EBITDA is one of the primary measures used by the Company's chief decision makers to measure the Company's
operating results and to measure segment profitability and performance. Management believes that Adjusted EBITDA is meaningful to investors because it provides an analysis of operating results using
the same measures used by the Company's chief decision makers, that Adjusted EBITDA provides investors with the means to evaluate the financial results of the Company compared to other companies
within the same industry and it is common practice for institutional investors and investment bankers to use various multiples of current or projected Adjusted EBITDA for purposes of estimating
current or prospective enterprise value. The Company's calculation of Adjusted EBITDA may or may not be consistent with the calculation of this measure by other companies in the same industry.
Investors should not view adjusted EBITDA as an alternative to GAAP measure of income as a measure of performance, or to cash flows from operating investing and financing activities as a measure of
liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. Adjusted EBITDA excludes
non-cash and cash stock-based compensation charges, which result from variable plan accounting for certain of the Company's and its subsidiaries' stock option and phantom stock option
plans.

22

---

A
summary of the segment information is as follows:

|                               |                    | Revenues for the Three Months Ended September 30, |         | Revenues for the Nine Months Ended September 30, |        
|------------------------------ | ------------------ | ------------------------------------------------- | ------- | ------------------------------------------------ | -------
|
|
|Triple Play(1):                |                    |                                                   |         |                                                  |        
|                               | The Netherlands    |                                                   | 121,172 |                                                  | 106,690
|                               | Austria            |                                                   | 52,283  |                                                  | 45,618 
|                               | Belgium            |                                                   | 6,476   |                                                  | 6,079  
|                               | Czech Republic     |                                                   | 8,904   |                                                  | 8,520  
|                               | Norway             |                                                   | 20,310  |                                                  | 16,536 
|                               | Hungary            |                                                   | 28,340  |                                                  | 24,429 
|                               | France             |                                                   | 23,684  |                                                  | 23,943 
|                               | Poland             |                                                   | 18,758  |                                                  | 20,854 
|                               | Sweden             |                                                   | 13,663  |                                                  | 10,982 
|                               | Other              |                                                   | 8,917   |                                                  | 7,847  
|                               |                    |                                                   |         |                                                  |        
|Total Triple Play Distribution |                    | 302,507                                           |         | 271,498                                          |        
|                               |                    |                                                   |         |                                                  |        
|Germany                        |                    | 4,283                                             |         | 13,829                                           |        
|DTH                            |                    | 7,205                                             |         | 21,987                                           |        
|Programming                    |                    | -                                                 |         | 19,679                                           |        
|Other                          |                    | 7,369                                             |         | 12,847                                           |        
|Intercompany Eliminations      |                    | -                                                 |         | (18,978                                          | )      
|                               |                    |                                                   |         |                                                  |        
|                               | Total Distribution |                                                   | 321,364 |                                                  | 320,862
|                               |                    |                                                   |         |                                                  |        
|Priority Telecom               |                    | 28,952                                            |         | 53,403                                           |        
|UPC Media                      |                    | 17,730                                            |         | 22,064                                           |        
|Corporate, IT & Other          |                    | -                                                 |         | 1,271                                            |        
|Intercompany Eliminations      |                    | (27,174                                           | )       | (55,156                                          | )      
|                               |                    |                                                   |         |                                                  |        
|                               | Total              |                                                   | 340,872 |                                                  | 342,444
|                               |                    |                                                   |         |                                                  |        

---

23

---



|                               |                 | Triple Play Revenues for the
Nine Months Ended September 30, 2002
|------------------------------ | --------------- | -----------------------------------------------------------------
|
|
|Triple Play(1):                |                 |                                                                  
|                               | The Netherlands |                                                                  
|                               | Austria         |                                                                  
|                               | Belgium         |                                                                  
|                               | Czech Republic  |                                                                  
|                               | Norway          |                                                                  
|                               | Hungary         |                                                                  
|                               | France          |                                                                  
|                               | Poland          |                                                                  
|                               | Sweden          |                                                                  
|                               | Other           |                                                                  
|                               |                 |                                                                  
|Total Triple Play Distribution |                 | 556,685                                                          
|                               |                 |                                                                  

|                               |                 | Triple Play Revenues for the
Three Months Ended September 30, 2002
|------------------------------ | --------------- | ------------------------------------------------------------------
|
|
|Triple Play(1):                |                 |                                                                   
|                               | The Netherlands |                                                                   
|                               | Austria         |                                                                   
|                               | Belgium         |                                                                   
|                               | Czech Republic  |                                                                   
|                               | Norway          |                                                                   
|                               | Hungary         |                                                                   
|                               | France          |                                                                   
|                               | Poland          |                                                                   
|                               | Sweden          |                                                                   
|                               | Other           |                                                                   
|                               |                 |                                                                   
|Total Triple Play Distribution |                 | 182,479                                                           
|                               |                 |                                                                   

---

24

---

|                               |                 | Triple Play Revenues for the
Nine Months Ended September 30, 2001
|------------------------------ | --------------- | -----------------------------------------------------------------
|
|
|Triple Play(1):                |                 |                                                                  
|                               | The Netherlands |                                                                  
|                               | Austria         |                                                                  
|                               | Belgium         |                                                                  
|                               | Czech Republic  |                                                                  
|                               | Norway          |                                                                  
|                               | Hungary         |                                                                  
|                               | France          |                                                                  
|                               | Poland          |                                                                  
|                               | Sweden          |                                                                  
|                               | Other           |                                                                  
|                               |                 |                                                                  
|Total Triple Play Distribution |                 | 531,009                                                          
|                               |                 |                                                                  

|                               |                 | Triple Play Revenues for the
Three Months Ended September 30, 2001
|------------------------------ | --------------- | ------------------------------------------------------------------
|
|
|Triple Play(1):                |                 |                                                                   
|                               | The Netherlands |                                                                   
|                               | Austria         |                                                                   
|                               | Belgium         |                                                                   
|                               | Czech Republic  |                                                                   
|                               | Norway          |                                                                   
|                               | Hungary         |                                                                   
|                               | France          |                                                                   
|                               | Poland          |                                                                   
|                               | Sweden          |                                                                   
|                               | Other           |                                                                   
|                               |                 |                                                                   
|Total Triple Play Distribution |                 | 178,234                                                           
|                               |                 |                                                                   

---

25

---



|                               |                    | Adjusted EBITDA
for the
Three Months Ended
September 30, |        | Adjusted EBITDA
for the
Nine Months Ended
September 30, |        
|------------------------------ | ------------------ | -------------------------------------------------------- | ------ | ------------------------------------------------------- | -------
|
|
|Triple Play(1):                |                    |                                                          |        |                                                         |        
|                               | The Netherlands    |                                                          | 29,897 |                                                         | 20,124 
|                               | Austria            |                                                          | 19,123 |                                                         | 12,199 
|                               | Belgium            |                                                          | 2,417  |                                                         | 2,445  
|                               | Czech Republic     |                                                          | 3,794  |                                                         | 2,853  
|                               | Norway             |                                                          | 5,847  |                                                         | 2,239  
|                               | Hungary            |                                                          | 11,676 |                                                         | 8,187  
|                               | France             |                                                          | (974   | )                                                       | (7,490 
|                               | Poland             |                                                          | 4,731  |                                                         | 152    
|                               | Sweden             |                                                          | 5,824  |                                                         | 2,755  
|                               | Other              |                                                          | 3,005  |                                                         | 2,365  
|                               |                    |                                                          |        |                                                         |        
|Total Triple Play Distribution |                    | 85,340                                                   |        | 45,829                                                  |        
|                               |                    |                                                          |        |                                                         |        
|Germany                        |                    | 2,291                                                    |        | 6,338                                                   |        
|DTH                            |                    | (592                                                     | )      | 156                                                     |        
|Programming                    |                    | -                                                        |        | (7,564                                                  | )      
|Other                          |                    | 9,071                                                    |        | 452                                                     |        
|                               |                    |                                                          |        |                                                         |        
|                               | Total Distribution |                                                          | 96,110 |                                                         | 45,211 
|                               |                    |                                                          |        |                                                         |        
|Priority Telecom               |                    | 528                                                      |        | (32,021                                                 | )      
|UPC Media                      |                    | 402                                                      |        | (26,418                                                 | )      
|Corporate, IT & Other          |                    | (18,946                                                  | )      | (23,606                                                 | )      
|                               |                    |                                                          |        |                                                         |        
|                               | Total              |                                                          | 78,094 |                                                         | (36,834
|                               |                    |                                                          |        |                                                         |        

---

Consolidated
adjusted EBITDA reconciles to the condensed consolidated statements of operations as follows:

|                                                          |                              | For the Three Months
Ended September 30, |        | For the Nine Months
Ended September 30, |        
|--------------------------------------------------------- | ---------------------------- | ---------------------------------------- | ------ | --------------------------------------- | -------
|
|Operating loss                                            |                              | (115,551                                 | )      | (346,160                                | )      
|Depreciation and amortization                             |                              | 189,779                                  |        | 262,437                                 |        
|Stock-based compensation expense and retention bonuses(1) |                              | 5,279                                    |        | 8,544                                   |        
|Impairment and restructuring charges                      |                              | (1,413                                   | )      | 38,345                                  |        
|                                                          |                              |                                          |        |                                         |        
|                                                          | Consolidated Adjusted EBITDA |                                          | 78,094 |                                         | (36,834
|                                                          |                              |                                          |        |                                         |        

---

26

---

|                |  | Third Party Revenue by
Geographical Area
for the Three Months Ended September 30, |  | Third Party Revenue by
Geographical Area
for the Nine Months Ended September 30,
|--------------- |  | --------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------
|
|
|The Netherlands |  | 139,684                                                                           |  | 124,933                                                                         
|Austria         |  | 55,176                                                                            |  | 46,378                                                                          
|Belgium         |  | 6,476                                                                             |  | 6,095                                                                           
|Czech Republic  |  | 12,181                                                                            |  | 11,937                                                                          
|Norway          |  | 25,562                                                                            |  | 19,297                                                                          
|Hungary         |  | 32,260                                                                            |  | 27,542                                                                          
|France          |  | 23,705                                                                            |  | 23,458                                                                          
|Poland          |  | 18,748                                                                            |  | 37,301                                                                          
|Sweden          |  | 13,868                                                                            |  | 11,467                                                                          
|Germany         |  | 4,283                                                                             |  | 15,304                                                                          
|Other           |  | 8,929                                                                             |  | 18,732                                                                          
|                |  |                                                                                   |  |                                                                                 
|                |  | 340,872                                                                           |  | 342,444                                                                         
|                |  |                                                                                   |  |                                                                                 

|                 |                 | Total Assets
|---------------- | --------------- | ------------
|
|
|Corporate        |                 | 596,715     
|UPC Media        |                 | 88,175      
|Priority Telecom |                 | 601,390     
|Distribution:    |                 |             
|                 | The Netherlands |             
|                 | Austria         |             
|                 | Belgium         |             
|                 | Czech Republic  |             
|                 | Norway          |             
|                 | Hungary         |             
|                 | France          |             
|                 | Poland          |             
|                 | Sweden          |             
|                 | Germany         |             
|                 | Other           |             
|                 |                 |             
|Total            |                 | 7,021,760   
|                 |                 |             

11.  Extraordinary Gain

The extraordinary gain of 471.7 million for the nine months ended September 30, 2002, relates, in part, to the restructuring and cancellation of
costs associated with excess capacity of certainPriority Telecomvendor contracts of 124.5 million recognized during the first three months of
2002 and an extraordinary gain of 347.2 million associated with the unwinding of certain swap agreements recognized during the three months ended June 30, 2002.

27

---

On
February 1, 2002, UPC amended certain swap agreements with a bank effective as of January 31, 2002. The swap agreements were entered into in connection with the issuance
of some of the Company's senior notes and senior discount notes. The swap agreements were subject to early termination upon the occurrence of certain events, including the defaults described above.
The amendment provided that the bank's obligations to the Company under the swap agreements were substantially fixed and the agreements were to be unwound on or prior to July 30, 2002. In
settlement of the bank's obligations to the Company, the bank was to deliver to the Company approximately
400 million in aggregate principal amount of the Company's senior notes and senior discount notes held by that bank, subject to adjustment in case of certain circumstances, and subject to
movements in the EUR/USD exchange rate. On June 28, 2002, the bank delivered to the Company 353.2 million in aggregate principal amount of the Company's senior notes and senior discount
notes held by that bank in settlement of the bank's obligation.

On
June 11, 2002, UPC unwound certain swap agreements with a bank. The swap agreements were entered into in connection with the issuance of some of the Company's senior notes and
senior discount notes. The swap agreements were subject to a potential event of default as a result of UPC's non-payment of interest on the senior notes, during which time the bank was not
obliged to make payments to the Company under the swap agreement. In settlement of the bank's obligations to the Company, the bank delivered approximately 51.4 million in aggregate principal
amount of the Company's senior notes and senior discount notes held by that bank.

On
delivery of the senior notes and senior discount notes described in the two transactions above, UPC's indebtedness was reduced by 404.6 million and the Company recognized an
extraordinary gain of 347.2 million on the cross currency swaps. In addition, the Company reduced its accrued interest expense associated with these notes.

12.  Comprehensive Income (Loss)

The components of total comprehensive loss are as follows:

|                                   |                                                 | For the Three Months Ended September 30, |         | For the Nine Months Ended September 30, |         
|---------------------------------- | ----------------------------------------------- | ---------------------------------------- | ------- | --------------------------------------- | --------
|
|
|Net loss                           |                                                 | (364,316                                 | )       | (858,443                                | )       
|Other comprehensive income (loss): |                                                 |                                          |         |                                         |         
|                                   | Change in unrealized gain (loss) on investments |                                          | (6,224  | )                                       | (42,725 
|                                   | Change in fair value of derivative assets       |                                          | (57     | )                                       | (20,624 
|                                   | Change in cumulative translation adjustments    |                                          | (11,916 | )                                       | (126,864
|                                   |                                                 |                                          |         |                                         |         
|                                   |                                                 | Total comprehensive loss                 |         | (382,513                                | )       
|                                   |                                                 |                                          |         |                                         |         

28

---

13.  Basic Net Income (Loss) Attributable to Common Shareholders

|                                                  |                                                    | For the Three Months Ended September 30, |          | For the Nine Months Ended September 30, |         
|------------------------------------------------- | -------------------------------------------------- | ---------------------------------------- | -------- | --------------------------------------- | --------
|
|
|Net loss                                          |                                                    | (364,316                                 | )        | (858,443                                | )       
|Accretion of Series 1 convertible preferred stock |                                                    | (33,990                                  | )        | (30,072                                 | )       
|                                                  |                                                    |                                          |          |                                         |         
|                                                  | Basic net loss attributable to common shareholders |                                          | (398,306 | )                                       | (888,515
|                                                  |                                                    |                                          |          |                                         |         

14.  Subsequent Events

Tevel

UPC's 100% indirect subsidiary, Cable Network Zuid-oost Brabant Holding B.V. ("Cable Brabant"), holds through its 100% subsidiary U.C.T. Netherlands B.V.
("UCTN") and its 100% subsidiary, Tishdoret Achzakot Ltd ("Tishdoret"), a 46% interest in Tevel Israel Communications Ltd. ("Tevel") the largest cable operator in Israel. The economic and regulatory
situation in Israel together with the instability in the region, led the Company to write the value of this minority investment down to zero at the year end 2001. Tevel's situation has not improved
since December 31, 2001. On April 22, 2002, Tevel filed for court protection from creditors and a trustee was appointed by the Israeli Court to form a plan of reorganization. To date, no
plan or reorganization has been approved or accepted by any of the interested parties to the Tevel proceeding. In connection with the original aquisition of the cable assets in Israel, Cable Brabant
is indebted to the First International Bank of Israel in the principal amount of 55 million, which was due, together with accrued interest, on November 9, 2002, resulting in an aggregate
indebtedness of approximately 67 million (the "FiBI Loan"). The FiBI loan is secured by a pledge of half of the shares in Tevel. On October 30, 2002, the First International Bank of
Israel and Cable Brabant entered into an agreement whereby Cable Brabant has agreed to sell all of its material assets (including the shares in UCTN, and indirectly the shares in Tishdoret and Tevel)
to the First International Bank of Israel, assuming the obligations of Cable Brabant to repay the FiBI Loan, and the First Bank of Israel has agreed to novate Cable Brabant's obligations under the
FiBI loan. The closing of the transaction is subject to telecommunication, competition and banking regulatory approvals in Israel. The Company expects to close the transaction by year-end
2002. The maturity date of the loan is extended until 7 days after the closing or the termination of the agreement.

Proceedings by Certain Institutional Lenders

On October 2, 2002 UPC Distribution Holding B.V. gave notice that it wished to cancel 83.3 million of the Facility A commitments and
416.8 million of the Facility B commitments under the UPC Distribution Bank Facility, effective on October 7, 2002. In order to prepay 346.8 million of the outstanding Facility B
advances, UPC Distribution Holding B.V. also made a request for an advance of 346.8 million under the Facility A tranche under the UPC Distribution Bank Facility effective on
October 7, 2002. All the lenders advanced their proportionate shares of the requested drawing, except ten institutions. The shortfall arising was 29.3 million. UPC made a further request
for advances in the sum of 25.0 million, on October 14, 2002.
The same institutions failed to pay and accordingly there was a further shortfall of 2.3 million. On October 3, 2002, six of the ten lenders which did not fund pursuant to the
October 2, 2002 notice (the "Claimants"), issued proceedings in the English High Court against TD Bank Europe Limited, UPC Distribution Holding BV and UPC Financing Partnership (the "UPCD
Defendants"). In the proceedings the Claimants seek, amongst other things, a declaration from the English High Court as to whether they

29

---

were obligated in the circumstances to make the payments in dispute. The UPCD Defendants, who consider that the English High Court is likely to declare that the Claimants are obligated to make the
payments, applied for the hearing of these proceedings to be expedited and a trial date has been set for November 18, 2002. The Company expects that the trial will last a few days. The UPCD
Defendants intend to defend itself vigorously in these proceedings.

Legal Proceedings Médiaréseaux

On October 28, 2002, the vice-president of the French commercial court of Meaux acceded on the request made by the ICF Party and
Mr. Schimmel (the "ICH Group") on emergency proceedings and appointed a temporary judicial administrator (French concept of "administrateur provisoire") for
Médiaréseaux S.A. (i.e., the French holding company of UPC's French operating subsidiaries), with the mission, in particular, to carry out the management of
Médiaréseaux S.A. in lieu of the directors of the aforesaid company so as to resolve both the so-called financial crisis alleged by the ICH Group and
an alleged conflict of interests by the ICH Group resulting from the status of the directors of Médiaréseaux S.A. within the different companies of the UPC group.
Médiaréseaux S.A. has been granted an accelerated appeal process with the Court of Appeal of Paris to overturn the appointment of the temporary judicial
administrator and has made appropriate counterclaims.

Philips Legal Proceedings

On October 22, 2002, Philips Digital Networks B.V. ("Philips") commenced legal proceedings against UPC, UPC Nederland B.V. and UPC
Distribution (together the "UPC Defendants") alleging the UPC Defendants' failure to perform under a Set Top Computer Supply Agreement between the parties dated November 19, 2001, as amended
(the "STC Agreement"). Philips' principle allegation is that the UPC Defendants have failed to take delivery of 47,100 Set Top Computers ("STCs") with a value claimed of 21.2 million.
Additionally, Philips is claiming dissolution of the STC Agreement and a release from an obligation to manufacture and deliver a further 29,850 STCs and related damages of 7.0 million. Lastly,
Philips is claiming additional costs, including interest on late payments of approximately 1.0 million.

The
UPC Defendants deny all claims brought by Philips, and intend to vigorously defend themselves against these claims and will file appropriate counter claims. This action has been
commenced by Philips following a termination of the STC Agreement by the UPC Defendants as a consequence of Philips failure to deliver STCs conforming to the material technical specifications required
by the terms of the STC Agreement.

Freeze of Swaps

As per the waiver letter of September 30, 2002, the lending banks under the UPC Distribution Bank Facility have agreed to temporarily waive certain of
their rights under the UPC Distribution Bank Facility, subject to certain conditions including the resolution of certain issues arising under the Senior Hedging Agreements. These issues were resolved
when:

(i) the
mark to market positions under the cross currency hedges with a notional amount of USD 347.5 million (swapped into a notional amount of EUR
408.1 million) were frozen, (ii) we repaid these positions with a cash payment of 12 million and (iii) the counter parties agreed to extend the remainder position totaling
approximately 54 million to August 2003.

30

---

Related Party Transactions

Chello B Shares Transfer

On October 10, 2002, in consideration for the transfer of rights from UGC Internet Holdings to UPC necessary to eliminate UGC Internet Holdings territorial
restrictions onchello broadband's business, UPC transferred 4,838,946chello broadbandclass B
ordinary shares to UGC Internet Holdings, representing 13.3% ofchello broadband's issued share capital. As a result of the transfer of the
class B ordinary shares to UGC Internet Holdings, UPC has owned approximately 86.7% ofchello broadbandsince October 10, 2002. Including
shares owned by thechelloFoundation, UPC owns approximately 76.9% of thechello broadbandordinary
shares on a fully diluted basis subsequent to such date.

Thematic Channel

On October 21, 2002, UPC Programming B.V. and UPC Distribution Holding B.V. entered into a term sheet with Regent Worldwide Sales LLC ("Regent") for
the creation of a fifty-fifty joint venture to create and distribute an alternative life-style digital broadband channel. The term sheet contemplates the parties entering into long form
agreements for the joint venture and the distribution. On October 18, 2002, an independent committee of the Supervisory Board of the Company approved
entering into the transaction. The independent committee was deemed necessary as Messrs. Gene W. Schneider (including his family partnership), Mark L. Schneider and John P. Cole Jr., own
28.65%, 14.56% and 2.13%, respectively, of Advance Display Technologies, Inc., which is proposing to merge with an affiliate of Regent. As a result of the merger, it is expected that Messrs.
Gene W. Schneider (including his family partnership), an advisor to the Supervisory Board, Mark L. Schneider, son of Gene W. Schneider, and John P. Cole Jr., a Supervisory Director, will
dilute their current shareholdings in the aggregate to less than 5% of the merged companies.

31

---



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These
forward-looking statements may include, and be identified by, statements concerning our future plans and strategies, objectives and future economic prospects, expectations, beliefs, anticipated events
or trends and similar expressions concerning matters that are not historical facts, such as our contemplated restructuring. These forward-looking statements involve both known and unanticipated risks,
uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from what we say or imply with the forward-looking
statements. These factors include, among other things, changes in television viewing preferences and habits by our subscribers and potential subscribers, their acceptance of new technology,
programming alternatives and new video services we may offer. They also include the timing, cost, and effectiveness of technological developments, competitive and regulatory factors, our ability to
complete announced transactions and to manage and grow our newer telephone, digital and internet/data services. With respect to our announced restructuring, these factors include the parties' ability
to satisfy the conditions to the restructuring and complete the restructuring within the contemplated time-frame. These forward-looking statements apply only as of the time of this
Quarterly Report on Form 10-Q and we have no obligation or plans to provide updates or revisions to these forward-looking statements or any other changes in events or circumstances
on which these forward-looking statements are based.

The
report of our former independent accountants, Arthur Andersen, on our consolidated financial statements for the year ended December 31, 2001, includes a paragraph that states
that we have suffered recurring losses from operations and have a net capital deficiency that raises substantial doubt about our ability to continue as a going concern. Our management's plans in
regard to these matters are described in Note 2 of the Notes to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q. Our condensed
consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might
result, should we be unable to continue as a going concern. Investors in our company should review carefully the report of Arthur Andersen. There can be no assurance we will be able to continue as a
going concern.

The
following discussion and analysis of financial condition and results of operations covers the three and nine month periods ended September 30, 2002 and 2001, and should be
read together with our consolidated financial statements and related notes included elsewhere herein. These consolidated financial statements provide additional information regarding our financial
activities and condition.

All
monetary amounts in Management's Discussion and Analysis are stated in Euros, unless indicated otherwise.

Developments

We have experienced net losses since formation. As of September 30, 2002, there was substantial uncertainty whether our sources of capital, working capital
and projected operating cash flow would be sufficient to fund our expenditures and service our indebtedness over the next year. Accordingly, there is substantial doubt regarding our ability to
continue as a going concern. In addition, as a result of the events of default described below, our senior notes, senior discount notes, the Exchangeable Loan (defined below) and the UPC Distribution
Bank Facility (defined below) have been classified as current liabilities. Our ability to continue as a going concern is dependent on (i) our ability to restructure our senior notes and senior
discount notes, the Exchangeable Loan and the convertible preferred stock and (ii) our ability to generate the cash flows required to enable us to recover our assets and satisfy our
liabilities, in the ordinary course of business, at the amounts stated in the consolidated financial statements. The report of our previous independent accountant, Arthur Andersen, on our consolidated
financial statements for the

32

---

year ended December 31, 2001, includes a paragraph that states that we have suffered recurring losses from operations and have a net capital deficiency that raises doubt about our ability to
continue as a going concern.

Defaults and Waivers

Viewing our funding requirements and our possible lack of access to debt and equity capital in the near term, we determined that we would not make interest
payments on our senior notes and senior discount notes as they fell due. On February 1, 2002, we failed to make required interest payments in the aggregate amount of 113.0 million (USD
100.6 million) on our outstanding 107/8% Senior Notes due 2009, 111/4% Senior Notes due 2010 and 111/2% Senior Notes due 2010. The indentures
related to our senior notes and senior discount notes provide that failing to make interest payments constitutes an "Event of Default" under the notes if we are in default of the payment of interest
on any of the notes for a period of time in excess of 30 days. Since we failed to make the interest payments on the first three series of notes, upon expiration of this 30-day grace
period on March 3, 2002, Events of Default occurred under the related indentures. The occurrence of these Events of Default constituted cross Events of Default under the indentures related to
the remaining series of senior notes and senior discount notes. The occurrence of the various Events of Default gives the trustees under the related indentures, or requisite number of holders of such
notes, the right to accelerate the maturity of all of our senior notes and senior discount notes. In addition, on May 1, 2002, August 1, 2002 and November 1, 2002, we failed to
make required interest payments in the aggregate amount of 38.9 million, 123.5 million and 36.5 million, respectively, on our outstanding 107/8% Senior Notes due
2007 and 111/4% Senior Notes due 2009, 107/8% Senior Notes due 2009, and 111/4% Senior Notes due 2010 and 111/2% Senior Notes due 2010. As
of November 14, 2002, neither the trustees for the defaulted notes nor the requisite number of holders of those notes have accelerated the payment of principal and interest under those notes.

Our
failure to make the February 1, 2002, May 1, 2002, August 1, 2002 and November 1, 2002 interest payments on our senior notes, and the resulting Events of
Default under the indentures relating to the senior notes and senior discount notes, gave rise to potential cross events of default under the following credit and loan facilities:



On
July 30, 2002, we transferred 22.3% of our UPC Germany shares to the holders of the remaining minority interest in UPC Germany (as described in Note 5 of the Notes to
the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q). Due to the share transfer, such holders became the majority shareholders of UPC
Germany. The EWT Facility was refinanced by the new majority shareholders and the potential cross default ceased to exist.

The
UPC Distribution Bank Facility is secured by share pledges to the banks on UPC Distribution, which is the holding company of most companies within the UPC Distribution group, and
over certain

33

---

operating companies within this group. The Exchangeable Loan is secured by pledges over the stock of Belmarken, its wholly owned subsidiary UPC Holding B.V. and UPC Internet
Holding B.V., which ownschello broadband N.V.The Exchangeable Loan continued to be held by UnitedGlobalCom, Inc. ("United") as of
November 14, 2002. The occurrence of matured cross events of default under the UPC Distribution Bank Facility and the Exchangeable Loan would have given the creditors under those facilities the
right to accelerate the maturity of the loans and to foreclose upon the collateral securing the loans.

On
March 4, 2002, we received the first waivers from the lenders under the UPC Distribution Bank Facility, the EWT Facility and the Exchangeable Loan for the potential cross
events of defaults under such facilities that existed or may exist as a result of our failure to make the interest payment due on February 1, 2002 on our outstanding 107/8%
Senior Notes due 2009, 111/4% Senior Notes due 2010 and 111/2% Senior Notes due 2010 within the applicable cure periods and any resulting cross defaults. During the
period from June 4, 2002 to September 27, 2002, we received bi-weekly waivers from the bank lenders and United. On September 27, 2002, the bank lenders and United
extended the coverage of the waivers to all our outstanding senior notes and senior discount notes and any resulting cross defaults, and the duration of the waivers until March 31, 2003.

Each
of these waivers will remain effective until the earlier of



In
addition, each of these waivers contains certain other conditions and undertakings and will terminate if there is a default by us of the terms of that waiver. The waiver under the UPC
Distribution Bank Facility subjects us to a 100 million drawdown limitation under that facility during the period in which the waiver is in place. Availability under the limitation is subject
to certain conditions. In addition, the waiver to the UPC Distribution Bank Facility includes amendments to the UPC Distribution Bank Facility which



As
of November 14, 2002, we had not made the interest payments on the 107/8% Senior Notes due 2009, 111/4% Senior Notes due 2010,
111/2% Senior Notes due 2010, 107/8% Senior Notes due 2007 and the 111/4% Senior Notes due 2009. Subscriber growth has been impacted in some countries by
our financial restructuring, however the restructuring did not have a material adverse effect on our subsidiaries or our relationships with suppliers and employees.

34

---

Agreement for Restructuring

On February 1, 2002, we signed a Memorandum of Understanding with United and its subsidiary UGC Holdings, Inc. ("UGC Holdings") (the "Memorandum of
Understanding"). The Memorandum of Understanding is a non-binding agreement in principle with United and UGC Holdings to enter into negotiations with the holders of our senior notes and
senior discount notes to attempt to reach agreement on a means to restructure our indebtedness at the holding company level.

During
the month of March 2002, we met with representatives of United, which currently holds the Exchangeable Loan and a significant portion of our senior notes and senior
discount notes, and an ad hoc noteholders' committee representing the holders of our senior notes and senior discount notes (other than United) to begin preliminary discussions with respect to a
process for, and terms of, a restructuring of those notes and the Exchangeable Loan. United and its advisors and the ad hoc noteholders committee and its advisors completed the due diligence about us
and our current financial condition.

On
September 30, 2002, we announced that a binding agreement had been reached with United and the members of the ad hoc noteholders committee on a recapitalization plan for us. If
implemented under its current terms, the agreed recapitalization will substantially delever our balance sheet eliminating approximately 4.3 billion accreted value of senior notes and senior
discount notes, accrued interest on the senior notes of 293.8 million, 942.1 million of Exchangeable Loan debt, and 1.6 billion of convertible preference shares in exchange for equity
issued by a new holding company ("New UPC"). The agreement consists primarily of the following key terms:



In
addition the restructuring agreement contains an agreement by the parties (other than us) to forbear on exercising rights and remedies relating to defaults on the senior notes, senior
discount notes and Exchangeable Loan while the restructuring agreement remains in effect.

In
order to facilitate an efficient and effective recapitalization, in accordance with the terms of the restructuring agreement, UPC, which operates as a financial holding company
intends to seek relief under (i) a debt moratorium proceeding in the Netherlands, leading to a voluntary suspension of payments, and (ii) a Chapter 11 bankruptcy proceeding in the
United States. We expect that, in these proceedings in the Netherlands and the United States, a plan of reorganization will be approved that comports with the recapitalization terms contained in the
restructuring agreement. The anticipated court proceedings in the Netherlands and the United States could result in material changes in the nature of our business, material adverse changes to our
financial condition and results of operations or our liquidation. We expect that this process will take a number of months to complete. If consummated, the recapitalization would result in the
exchange of our senior and senior discount notes and other claims against us for equity in New UPC and

35

---

the substantial dilution of our existing shareholders, including the holders of our ordinary shares, priority shares and preference shares.

In
the event that we are unable to successfully consummate the recapitalization envisioned by the restructuring agreement holders of our outstanding securities, including our ordinary
shares, priority
shares, preference shares and senior notes and senior discount notes, as well as the Exchangeable Loan, would likely lose a substantial portion, or all, of the value of their investment in our
securities.

If
we are not able to complete the restructuring contemplated by the restructuring agreement, we might be required to liquidate or take other restructuring actions, these may have a
greater adverse effect on our financial condition and results of operations and the value of our debt and equity securities.

Description of Business

We own and operate broadband communications networks in 11 countries in Europe. Our operations are organized into three principal divisions: UPC
Distribution, UPC Media andPriority Telecom. UPC Distribution, which, through its local operating systems delivers video, internet and telephone
services to residential customers (the "Triple Play"). UPC Media, which comprises our converging internet-content business and programming businesses. UPC Media provides broadband internet and
interactive digital products and services, transactional television services such as pay per view movies, digital broadcast and post production services, and thematic channels for distribution on our
network, third party networks and DTH platforms.Priority Telecom,which operates our CLEC business and provides telephone and data network solutions to
the business market. ThePriority Telecombrand is also used to offer telephone services to residential customers through UPC Distribution.

Our
subscriber base is one of the largest of any group of broadband communications networks operated across Europe. Our goal is to enhance our position as a leading
pan-European distributor of video programming services and to become a leading pan-European provider of telephone, internet and enhanced video services, offering a
one-stop shopping solution for residential and business communication needs. We plan to execute on this goal by increasing the penetration of our new services, such as digital video,
telephone and internet, primarily within our existing customer base.

Since
formation, we have developed largely through acquisitions and organic growth in new services, which have resulted in significant growth in our consolidated revenues and
expenditures.

During
2001, we reviewed our current and long-range plan for all segments of our business and we hired a strategic consultant to assist us in the process. We worked
extensively with this consultant to revise our strategic and operating plans. Our strategic vision has changed our focus from an aggressive digital roll-out to increasing the volume of our
sales of products and services that have better gross margins and profitability. The revised business plan focuses on improved average revenue per subscriber and margins, increased penetration of new
service products within existing upgraded homes, efficient deployment of capital and focus on products with positive net present values.

36

---





The following table presents an overview of our revenues by segment for the three and nine months ended September 30, 2002 and 2001.

|                            |                    | Revenue for the Three Months Ended September 30, |        
|--------------------------- | ------------------ | ------------------------------------------------ | -------
|
|
|Triple Play Distribution(1) |                    | 302,507                                          |        
|Germany                     |                    | 4,283                                            |        
|DTH                         |                    | 7,205                                            |        
|Programming                 |                    | -                                                |        
|Other                       |                    | 7,369                                            |        
|Intercompany Eliminations   |                    | -                                                |        
|                            |                    |                                                  |        
|                            | Total Distribution |                                                  | 321,364
|                            |                    |                                                  |        
|Priority Telecom            |                    | 28,952                                           |        
|UPC Media                   |                    | 17,730                                           |        
|Corporate, IT & Other       |                    | -                                                |        
|Intercompany Eliminations   |                    | (27,174                                          | )      
|                            |                    |                                                  |        
|                            | Total              |                                                  | 340,872
|                            |                    |                                                  |        

|                            |                    | Revenue for the Nine Months Ended September 30, |          
|--------------------------- | ------------------ | ----------------------------------------------- | ---------
|
|
|Triple Play Distribution(1) |                    | 906,368                                         |          
|Germany                     |                    | 29,692                                          |          
|DTH                         |                    | 21,634                                          |          
|Programming                 |                    | -                                               |          
|Other                       |                    | 27,474                                          |          
|Intercompany Eliminations   |                    | -                                               |          
|                            |                    |                                                 |          
|                            | Total Distribution |                                                 | 985,168  
|                            |                    |                                                 |          
|Priority Telecom            |                    | 91,944                                          |          
|UPC Media                   |                    | 54,105                                          |          
|Corporate, IT & Other       |                    | 123                                             |          
|Intercompany Eliminations   |                    | (85,239                                         | )        
|                            |                    |                                                 |          
|                            | Total              |                                                 | 1,046,101
|                            |                    |                                                 |          

---

Revenue
decreased 1.6 million, or 0.5%, from 342.4 million for the three months ended September 30, 2001 to 340.9 million for the three months ended
September 30, 2002. The 0.5 million improvement in UPC Distribution revenue and the 28.0 million reduction in intercompany eliminations was off-set by the
24.5 million decrease in the revenue ofPriority Telecom,the 4.3 million decrease in the revenue of UPC Media and the 1.3 million
decrease in the revenue of Corporate, IT and Other.

37

---

Revenue
increased 12.7 million, or 1.2%, from 1,033.4 million for nine months ended September 30, 2001 to 1,046.1 million for the nine months ended
September 30, 2002. The 54.1 million improvement from UPC Distribution and 57.9 million improvement in intercompany eliminations was substantially off-set by the
91.4 million decrease in the revenue ofPriority Telecom,the 4.7 million decrease in the revenue of UPC Media and 3.3 million
decrease in the revenue of Corporate, IT and Other.

UPC Distribution.For the three months ended September 30, 2002, revenue from UPC Distribution
increased 0.5 million to 321.4 million, from 320.9 million for the three months ended September 30, 2001, a 0.2% increase. Increases of 31.0 million from Triple Play
were partially offset by a 9.5 million decrease as a result of the deconsolidation of our German operations, a 14.8 million decrease in DTH and 5.5 million decrease in Other. For
the nine months ended September 30, 2002, revenue from UPC Distribution increased 54.1 million to 985.2 million, from 931.1 million for the nine months ended
September 30, 2001, a 5.8% increase. Increases of 122.1 million from Triple Play were partially offset by a 9.3 million decrease in Germany, a 46.2 million decrease in DTH
and 10.3 million decrease in Other.

Of
the 31.0 million increase in Triple Play revenue for the three months ended September 30, 2002, 4.2 million was from cable television and digital,
6.2 million was from telephony, and 20.6 million was from internet.

Of
the 122.1 million increase in Triple Play revenue for the nine months ended September 30, 2002, 25.7 million was from cable television and digital,
27.4 million from telephony, and 69.0 million from internet. The increase of Triple Play revenue is a combination of an increase in revenue generating units ("RGUs") through organic
growth, as well as an increase in average revenue per subscriber ("ARPU"). At September 30, 2002, Triple Play RGUs were approximately 7,822,200, which represents an increase of 290,300 from
September 30, 2001 when Triple Play RGUs were approximately 7,531,900.

The
9.5 million and 9.3 million decrease in Germany revenue for the three and nine months ended September 30, 2002, respectively, is attributable to the fact that as
of August 1, 2002, UPC Germany was deconsolidated.

The
14.8 million and 46.2 million decrease in DTH revenue for the three and nine months ended September 30, 2002, respectively, was attributable to the fact that our
Polish DTH business, which generated revenue of 22.0 million and 67.8 million for the three and nine months ended September 30, 2001, respectively, was contributed, as of
December 7, 2001 to Telewizyjna Korporacja Partycypacyjna S.A. ("TKP"), a newly formed, non-consolidated, joint venture with Canal+, in which we have a 25% investment.

UPC
Distribution no longer has any programming revenue due to the closure of the sports channels in the Central European region as of December 2001.

Other
revenue is primarily revenue recognized for the provision of network related services toPriority Telecom.UPC Distribution has
entered into agreements withPriority Telecomfor the provision by UPC Distribution of network, maintenance and operations services. This intercompany
revenue is eliminated in our consolidated results. The primary reason for the decline in Other revenue is a reduction in the amount of services that UPC Distribution has provided to Priority Telecomin
2002.

Priority Telecom.Priority Telecomrevenue decreased
24.5 million from 53.4 million for the three months ended September 30, 2001 to 29.0 million for the three months ended September 30, 2002. Priority Telecomrevenue decreased
91.4 million from 183.3 million for the nine months ended September 30, 2001 to
91.9 million for the nine months ended September 30, 2002. The decrease in revenue was primarily attributable to the closure of the international wholesale voice and data business and,
to a lesser extent, the closure of operations in non-core countries.

UPC Media.UPC Media revenue decreased 4.3 million from 22.1 million for the three
months ended September 30, 2001 to 17.7 million for the three months ended September 30, 2002. UPC Media revenue

38

---

decreased 4.7 million from 58.8 million for the nine months ended September 30, 2001 to 54.1 million for the nine months ended September 30, 2002. The decrease in
UPC Media's revenue was attributable to the revision of thechello broadbandaffiliate agreement, which reduced UPC Media's revenue share from 40% of
internet access in 2001 to 20% in 2002 as the result of the transfer of the chello technology organization to UPC Distribution in December 2001. In addition, revenue decreased due to the
closure of under performing thematic channels. The decrease in revenue as a result of the change in thechello broadbandinternal revenue share was
largely offset by an increase in revenue achieved through improved average revenue per subscriber ("ARPU") and stable subscriber growth.

Corporate, IT and Other.The decrease in Corporate, IT and Other revenue of 1.3 million and
3.3 million for the three and nine months ended September 30, 2002, respectively, related to the loss of management fees from Tevel, which filed for bankruptcy protection in Israel in
March 2002.

Intercompany eliminations.Intercompany eliminations decreased by 28.0 million from
55.2 million for the three months ended September 30, 2001 to 27.2 million for the three months ended September 30, 2002. Intercompany elimination decreased by
57.9 million from 143.2 million for the nine months ended September 30, 2001 to 85.2 million for the nine months ended September 30, 2002. Intercompany revenue
relates to inter-divisional revenue that is received byPriority Telecom, UPC Media, and UPC Distribution.

Priority Telecomreceived 4.7 million and 13.8 million switch and other revenue from UPC Distribution for the three and nine
months ended September 30, 2002, respectively, forPriority Telecom'sservices relating to UPC Distribution's residential customers. UPC Media
received 14.8 million and 42.7 million from UPC Distribution for the three and nine months ended September 30, 2002, respectively, for providing affiliated local operators with
high speed internet connectivity, caching, local language broadband portals and marketing support. The services and fees charged under the franchise agreements changed in 2002 so that among other
things,chello broadband'srevenue fee per subscriber has been reduced, resulting in lower services to UPC Distribution. UPC Distribution received
7.7 million and 28.7 million in revenue primarily fromPriority Telecomprimarily for the provision of network related services for the
three and nine months ended September 30, 2002, respectively.

39

---



The following table presents an overview of our Adjusted EBITDA by segment for the three and nine months ended September 30, 2002 and 2001.

|                            |                    | Adjusted EBITDA(1) for the Three Months Ended September 30, |       
|--------------------------- | ------------------ | ----------------------------------------------------------- | ------
|
|
|Triple Play Distribution(2) |                    | 85,340                                                      |       
|Germany                     |                    | 2,291                                                       |       
|DTH                         |                    | (592                                                        | )     
|Programming                 |                    | -                                                           |       
|Other                       |                    | 9,071                                                       |       
|                            |                    |                                                             |       
|                            | Total Distribution |                                                             | 96,110
|                            |                    |                                                             |       
|Priority Telecom            |                    | 528                                                         |       
|UPC Media                   |                    | 402                                                         |       
|Corporate, IT & Other       |                    | (18,946                                                     | )     
|                            |                    |                                                             |       
|                            | Total              |                                                             | 78,094
|                            |                    |                                                             |       

|                            |                    | Adjusted EBITDA(1) for the Nine Months Ended September 30, |        
|--------------------------- | ------------------ | ---------------------------------------------------------- | -------
|
|
|Triple Play Distribution(2) |                    | 244,875                                                    |        
|Germany                     |                    | 13,180                                                     |        
|DTH                         |                    | 174                                                        |        
|Programming                 |                    | -                                                          |        
|Other                       |                    | 21,074                                                     |        
|                            |                    |                                                            |        
|                            | Total Distribution |                                                            | 279,303
|                            |                    |                                                            |        
|Priority Telecom            |                    | (5,621                                                     | )      
|UPC Media                   |                    | (5,285                                                     | )      
|Corporate, IT & Other       |                    | (67,995                                                    | )      
|                            |                    |                                                            |        
|                            | Total              |                                                            | 200,402
|                            |                    |                                                            |        

---

40

---



For
the three months ended September 30, 2002, Adjusted EBITDA improved by 114.9 million, or 312.0%, from negative 36.8 million for the three months ended
September 30, 2001 to positive 78.1 million for the three months ended September 30, 2002. Of this improvement, 50.9 million was from UPC Distribution, 32.5 million
was fromPriority Telecom, 26.8 million was from UPC Media and 4.7 million was from Corporate, IT and Other.

For
the nine months ended September 30, 2002, Adjusted EBITDA improved by 352.4 million, or 231.8%, from negative 152.0 million for the nine months ended
September 30, 2001 to positive 200.4 million for the nine months ended September 30, 2002. Of this improvement, 178.6 million was from UPC Distribution, 73.8 million
was fromPriority Telecom, 90.3 million was from UPC Media and 9.7 million was from Corporate, IT and Other.

UPC Distribution.UPC Distribution Adjusted EBITDA increased by 50.9 million from
45.2 million for the three months ended September 30, 2001 to 96.1 million for the three months ended September 30, 2002. Of the 50.9 million increase,
39.5 million was from Triple Play, 7.6 million was from Programming and 8.6 million was from Other. These increases were partially offset by a 4.0 million decrease in
Adjusted EBITDA as a result of the deconsolidation of our German operations. For the nine months ended September 30, 2002 Adjusted EBITDA increased 178.6 million to 279.3 million
from 100.7 million for the nine months ended September 30, 2001. Of the 178.6 million increase, 131.9 million was from Triple Play, 7.8 million was from DTH,
30.4 million was from Programming and 14.7 million was from Other. These increases were partially offset by a 6.2 million decrease in Adjusted EBITDA upon deconsolidation of UPC
Germany. The improvement in Adjusted EBITDA for both the three months and nine months ended September 30, 2002 were the result of a number of factors including: increased operational
efficiencies achieved by cost control, improvements in processes and systems and organizational rationalization, improved gross margins brought about by continued negotiations with major vendors and
the improvement in gross profit brought about by successfully driving higher service penetration in existing customer base and continuing to achieve increased ARPU.

Priority Telecom.For the three months ended September 30, 2002 Adjusted EBITDA improved
32.5 million to 0.5 million, from negative 32.0 million for the three months ended September 30, 2001. For the nine months ended September 30, 2002 Adjusted EBITDA
improved 73.8 million to negative 5.6 million, from negative 79.5 million for the nine months ended September 30, 2001. Adjusted EBITDA has improved due to the termination
of non-profitable business lines (the international wholesale voice and data business) and the cessation of operations in non-core countries. In addition, strong cost control
procedures have been put into place to reduce operating expenses.

UPC Media.For the three months ended September 30, 2002 Adjusted EBITDA improved
26.8 million to 0.4 million, from negative 26.4 million for the three months ended September 30, 2001. For the nine months ended September 30, 2002 Adjusted EBITDA
improved 90.3 million to negative 5.3 million, from negative 95.6 million for the nine months ended September 30, 2001. Improved Adjusted EBITDA, for the three and nine
months ended September 30, 2002, primarily reflected the continued focus on profitable revenue growth and cost reduction within the UPC Media division and the transfer of the operating expenses
associated with the provision of broadband internet access services to UPC Distribution in December 2001.

41

---

Corporate, IT and Other.For the three months ended September 30, 2002, Adjusted EBITDA
improved 4.7 million to negative 18.9 million from negative 23.6 million for the three months ended September 30, 2001. For the nine months ended September 30, 2002
Adjusted EBITDA improved 9.7 million to negative 68.0 million, from negative 77.7 million for the nine months ended September 30, 2001. Adjusted EBITDA for Corporate, IT
and Other includes costs for our corporate functions, development costs relating to our digital set-top computer, the research of new technologies and development of our integrated
pan-European IT platform. As with the other divisions in the group, organizational rationalism and continued corporate cost control is improving Adjusted EBITDA.

Our
consolidated Adjusted EBITDA reconciles to the consolidated statements of operations as follows:

|                                                          |                              | For the Three Months Ended September 30, |        | For the Nine Months
Ended September 30, |        
|--------------------------------------------------------- | ---------------------------- | ---------------------------------------- | ------ | --------------------------------------- | -------
|
|
|Operating loss                                            |                              | (115,551                                 | )      | (346,160                                | )      
|Depreciation and amortization                             |                              | 189,779                                  |        | 262,437                                 |        
|Stock-based compensation expense and retention bonuses(1) |                              | 5,279                                    |        | 8,544                                   |        
|Impairment and restructuring charges                      |                              | (1,413                                   | )      | 38,345                                  |        
|                                                          |                              |                                          |        |                                         |        
|                                                          | Consolidated Adjusted EBITDA |                                          | 78,094 |                                         | (36,834
|                                                          |                              |                                          |        |                                         |        

---

Operating Expenses

Operating expenses include direct costs and costs relating to network operations, customer operations, customer care, billing and collecting, broadcasting,
technology, programming, content and franchise fees.

For
the three months ended September 30, 2002, our consolidated operating expenses decreased 34.8 million to 186.2 million, from 221.0 million for the three
months ended September 30, 2001. The 34.8 million decrease consisted of a 27.0 million decrease in direct costs and 7.8 million decrease in other operating expenses. Of the
27.0 million decrease in direct costs, 18.1 million was attributable to the decrease in programming and DTH costs, 7.8 million to the decrease in business telephony costs,
4.2 million to the decrease in internet costs and 1.0 million to the decrease in television costs. These decreases were partially offset by a 4.8 million increase in digital
costs. For the nine months ended September 30, 2002 our consolidated operating expenses decreased 157.9 million to 567.0 million, from 724.9 million for the nine months
ended September 30, 2001. The 157.9 million decrease in operating expenses consisted of a 117.9 million decrease in direct costs and 40.0 million decrease in other
operating expenses. Of the 117.9 million decrease in direct costs, 64.5 million was attributable to the decrease in programming and DTH costs, 49.7 million to the decrease in
business telephony costs and 18.8 million to the decrease in internet costs. These decreases were partially offset by a 15.1 million increase in residential telephony, television and
other direct costs. For the three months and nine months ended September 30, 2002, the decrease in programming costs was primarily attributable to the deconsolidation of Poland DTH and the
closure of sport channels in the central European region, as of December 2001. The decrease in business telephony costs was primarily attributable to the closure of the international wholesale
voice and data business and the decrease in internet direct costs reflects a reallocation from direct costs to operating expenses, which was the result of the transfer of the internet access business
fromchello broadbandto UPC Distribution.

42

---

The
7.8 million and 40.0 million decrease in other operating expenses for the three and nine months ended September 30, 2002 was primarily attributable to the
decrease in network and customer operations, programming and content costs, and numerous initiatives targeted to improve operational efficiencies.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include costs relating to human resources, IT, general services, management, finance, and customer acquisition costs.
Selling, general and administrative expenses include stock-based compensation.

For
the three months ended September 30, 2002 our consolidated selling, general and administrative expenses decreased 84.9 million to 81.8 million, from
166.8 million for the three months ended September 30, 2001. For the nine-month period ended September 30, 2002 our consolidated selling, general and administrative
expenses decreased 162.9 million to 297.9 million, from 460.8 million for the nine months ended September 30, 2001. The decrease in selling, general and administrative
expenses reflects various initiatives that have successfully reduced overall cost levels throughout the group.

Depreciation and Amortization

During the three months ended September 30, 2002, our depreciation and amortization expense decreased 72.7 million to 189.8 million, from
262.4 million for the three months ended September 30, 2001, a 27.7% decrease. During the nine months ended September 30, 2002, our depreciation and amortization expense decreased
233.3 million to 534.7 million, from 768.0 million for the nine months ended September 30, 2001, a 30.4% decrease. This was mainly due to the fact that, in accordance with
the adoption of SFAS 142, we ceased amortizing goodwill, effective January 1, 2002.

Impairment and Restructuring Charges

For the nine months ended September 30, 2002, we incurred 23.6 million of restructuring charges. These restructuring charges related mainly to our
financial debt restructuring. For the three months ended September 30, 2002,Priority Telecomreleased 10.3 million of its restructuring
provision which relates to the extinguishment of vendor financing. This gain offsets the restructuring charges of 9.6 million in UPC Media andPriority
Telecom.

Interest Expense

During the three months ended September 30, 2002 as compared to the three months ended September 30, 2001, interest expense decreased
8.9 million to 213.9 million, from 222.9 million, a 4.0% decrease. The decrease was mainly associated with the unwinding of certain swap agreements. During the nine months ended
September 30, 2002 as compared to the nine months ended September 30, 2001, interest expense decreased 19.1 million to 669.1 million, from 688.2 million, a 2.8%
decrease. Of the interest expense for the three and nine months ended September 30, 2002, 59.4 million and 182.4 million, respectively, was classified as Interest Expense Related
Party due to United's acquisition of a portion of our senior notes and senior discount notes and the Exchangeable Loan in the first quarter of 2002. We continue to accrue for the interest on the
senior notes and senior discount notes, including the notes owned by United.

43

---



|                       |                    | For the Three Months Ended September 30, |         | For the Nine Months Ended September 30, |        
|---------------------- | ------------------ | ---------------------------------------- | ------- | --------------------------------------- | -------
|
|
|Cash Current Pay:      |                    |                                          |         |                                         |        
|                       | Bank               |                                          | (59,320 | )                                       | (59,913
|                       | Senior Notes(1)    |                                          | (69,308 | )                                       | (74,935
|                       |                    |                                          |         |                                         |        
|                       |                    | (128,628                                 | )       | (134,848                                | )      
|                       |                    |                                          |         |                                         |        
|Non-Cash Accretion:    |                    |                                          |         |                                         |        
|                       | Discount Notes     |                                          | (66,540 | )                                       | (67,804
|                       | Exchangeable Loan  |                                          | (14,356 | )                                       | (14,742
|                       | New DIC Loan       |                                          | -       |                                         | (169   
|                       | Deferred Financing |                                          | (4,423  | )                                       | (5,290 
|                       |                    |                                          |         |                                         |        
|                       |                    | (85,319                                  | )       | (88,005                                 | )      
|                       |                    |                                          |         |                                         |        
|Total Interest Expense |                    | (213,947                                 | )       | (222,853                                | )      
|                       |                    |                                          |         |                                         |        

---

In
the first quarter of 2002, we commenced discussions with holders of our senior notes and senior discount notes, as well as with United, our parent company, as holder of the
Exchangeable Loan and a portion of such notes, aimed at reaching an agreement on restructuring of such indebtedness, including the reduction or elimination of such indebtedness. If our
recapitalisation is consummated under the terms described under "Agreement for Restructuring" above, there would be a substantial reduction in our cash and non-cash interest expenses in
2003 and thereafter. If we are unable to consummate the recapitalisation or otherwise restructure our indebtedness, it is likely that our cash and non-cash interest expense will increase
in 2003 and thereafter as a result of accretion in value of the senior discount notes and the interest on potential additional draw downs on the UPC Distribution Bank Facility.

Foreign Exchange Gain (Loss) and Other Income (Expense)

The net loss from foreign exchange gain (loss) and other income (expense) decreased 254.7 million from a loss of 295.5 million for the three months
ended September 30, 2001 to a loss of 40.8 million for the three months ended September 30, 2002. The net gain from foreign exchange gain (loss) and other income (expense)
increased 771.4 million from a loss of 467.7 million for the nine months ended September 30, 2001 to a gain of 303.7 million for the nine months ended September 30,
2002. The gain in the nine months ended September 30, 2002 was mainly a result of an increase in foreign exchange result on the dollar denominated debt as the Euro strengthened against the U.S.
dollar. For the three and nine months ended September 30, 2002, we recorded in other income and expense a gain of 1.0 million and a loss of 179.7 million, respectively, in
connection with mark-to-market valuations.

Share in Results of Affiliated Companies, Net

For the three months ended September 30, 2002, our share in net losses of affiliated companies decreased 48.5 million to 2.8 million in net
profits, from 45.7 million for the three months ended September 30, 2001, a 106.1% decrease, as the losses in our affiliates decreased. The 2.8 million positive result recorded in
the three months ended September 30, 2002, is due to net positive results in our affiliated operations and because we did not recorded any share in results of Xtra Music as we have completely
written of our investment in Xtra Music. For the nine months ended September 30, 2002, our share in net losses of affiliated companies decreased 70.8 million to 36.9 million, from
107.7 million for the nine months ended September 30, 2001, a 65.7% decrease. The decrease for the nine months ended

44

---

September 30, 2002 relates to the implementation of SFAS 142, as we did not record amortization of excess basis on our equity investments and we did not recorded any losses on Tevel as
we have completely written off our investment in Tevel.

Extraordinary Gain

The extraordinary gain of 471.7 million for the nine months period ended September 30, 2002, in part relates to the restructuring and cancellation
of costs associated with excess capacity of certainPriority Telecom N.V.vendor contracts of 124.5 million recognized during the first
three months of 2002 and an extraordinary gain of 347.2 million associated with the unwinding of certain swap agreements, recognized during the three months ended June 30, 2002.

On
February 1, 2002, we amended certain swap agreements with a bank effective as of January 31, 2002. We entered into swap agreements in connection with the issuance of
some of our senior notes and senior discount notes. The swap agreements were subject to early termination upon the occurrence of certain events, including the defaults described above. The amendment
provided that the bank's obligations to us under the swap agreements were substantially fixed and the agreements were to be unwound on or prior to July 30, 2002. In settlement of the bank's
obligations to us, the bank was to deliver to us approximately 400 million, in aggregate principal amount of our senior notes and senior discount notes held by that bank, subject to adjustment
in case of certain circumstances, and subject to movements in the EUR/USD exchange rate. On June 28, 2002, the bank delivered to us 353.2 million in aggregate principal amount of our
senior notes and senior discount notes held by that bank in settlement of the bank's obligation.

On
June 11, 2002, we unwound certain swap agreements with a bank. The swap agreements were entered into in connection with the issuance of some of our senior notes and senior
discount notes. The swap agreements were subject to a potential event of default as a result of our non-payment of interest on the senior notes, during which time the bank was not obliged
to make payments to us under the swap agreement. In settlement of the bank's obligations to us, the bank delivered approximately 51.4 million in aggregate principal amount of our senior notes
and senior discount notes held by that bank.

On
delivery of the senior notes and senior discount notes described in the two transactions above, our indebtedness was reduced by 404.6 million and we recognized an extraordinary
gain of 347.2 million during the three months ended June 30, 2002 on the cross currency swaps. In addition, we reduced our accrued interest expense associated with these notes.

Cumulative effect of Change in Accounting Principle

Effective January 1, 2001, we adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative and Hedging
Activities" ("SFAS 133"), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging
activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. The adoption of SFAS 133 on January 1,
2001, resulted in a cumulative increase to income of 21.3 million and a cumulative increase to "Other Comprehensive Income" ("OCI") of 36.7 million. The increase to income was
attributable to a loss of approximately 36.7 million reclassified from OCI for the value of certain warrants held by us, which are derivatives and are not designated as a hedging instrument,
and income of approximately 58.0 million related to gains associated with the cross currency swaps which are held by us, which do not qualify as hedging instruments as defined by
SFAS 133. We seek to use derivative instruments to manage exposures to foreign currency and interest rate risks.

45

---

New Accounting Principles

We adopted SFAS 142, "Goodwill and Other Intangible Assets",effective January 1, 2002. Under
SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized, but are tested for impairment on an annual basis and whenever indicators of impairment arise. In
addition, goodwill on equity method investments is no longer amortized, but tested for impairment in accordance with APB 18. The goodwill impairment test, which is based on fair value, is performed on
a reporting unit level. All recognized intangible assets that are deemed not to have an indefinite life are amortized over their estimated useful lives. We finalized the process of comparing the fair
value of our reporting units with their respective carrying amounts, including goodwill. This process enabled us to identify any potential goodwill impairment from the adoption of SFAS 142. If
the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the
second step of the goodwill impairment test will be performed to measure the amount of impairment loss. The first step of the goodwill impairment test was performed and the carrying test of certain
reporting units exceed their fair value, including reporting units in the Netherlands, Sweden, Hungary, the Czech Republic, France, Slovakia and Poland andPriority
Telecom. The Company is currently carrying out the second step of the test to quantify how much of the total goodwill will be impaired. A substantial cumulative effect
adjustment will be required as a result of this process. The determination of the potential impairment adjustment will be completed
by the end of the year. Net goodwill of approximately 2.8 billion is included in the accompanying condensed consolidated balance sheets as of September 30, 2002.

In
April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). SFAS 145, which updates, clarifies and simplifies existing accounting pronouncements, addresses the
reporting of debt extinguishments and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The provisions of
SFAS 145 are generally effective for our 2003 fiscal year, or in the case of specific provisions, for transactions occurring after May 15, 2002 or financial statements issued on or after
May 15, 2002. For certain provisions, including the rescission of Statement No. 4, early application is encouraged. We have not adopted SFAS 145 and are currently evaluating the
impact of SFAS 145 on our consolidated financial statements. We do not believe that the adoption of SFAS 145 will have a material impact on our net loss, financial position or cash
flows.

On
June 28, 2002 the Financial Accounting Standards Board voted in favor of issuing SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146").
SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in the EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The scope of SFAS 146 also includes (1) costs related to
terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. SFAS 146 will be effective for financial statements issued for fiscal years beginning
after December 31, 2002. We have not yet determined the impact of SFAS 146 on our results of operations and financial position.

Statements of Cash Flows

We had cash and cash equivalents of 301.1 million as of September 30, 2002, a decrease of 553.9 million from 855.0 million as of
December 31, 2001.

46

---

Cash Flows from Operating Activities

During the nine months ended September 30, 2002, net cash flow used in operating activities was 298.7 million compared to a use of
805.2 million for the comparable period in 2001. This decrease of cash used for operating activities was mainly related to a decrease in cash used for operating expenses,
a decrease in cash used in selling, general and administrative activities, and by a considerably lower decrease in current liabilities in the three months ended September 30, 2002.

The
interest payments due on our outstanding 107/8% Senior Notes due 2009, 111/4% Senior Notes due 2010, 111/2% Senior Notes due 2010,
107/8% Senior Notes due 2007, 111/4% Senior Notes due 2009 were not paid. Our failure to make the interest payments on these notes did not affect our operating cashflows
as it was offset by an increase in current liabilities.

Cash Flows from Investing Activities

We used 206.3 million of net cash flow in investing activities during the nine months ended September 30, 2002, compared to 708.1 million for
the nine months ended September 30, 2001. This decrease was primarily related to a decrease in our capital expenditures.

Cash Flows from Financing Activities

We had 50.1 million of cash outflows from financing activities during the nine months ended September 30, 2002, compared to 817.4 million of
cash inflows during the nine months ended September 30, 2001. The decrease related to the fact that we did not have substantial net proceeds from either long-term or
short-term borrowings, whereas we had a 600.0 million cash inflow from the UPC Distribution Bank Facility and a 1.0 billion cash inflow from the Exchangeable Loan, which were
partially offset by a 750.0 million cash outflow from the repayment of UPC Bridge Facility in the first nine months of 2001.

Consolidated Capital Expenditures

Since 1995, we have been upgrading our existing cable television system infrastructure and constructing our new-build infrastructure with
two-way high capacity technology to support digital video, telephone and internet/data services. Capital expenditures for the upgrade and new-build construction can be reduced
at our discretion, although such reductions require lead-time in order to complete work-in-progress and can eventually result in higher total costs of construction
upon completion of the project. At the end of 2001, we completed a strategic review of our business, which eventually has resulted in a reduced capital expenditure program for 2002, as we focus on
increasing penetration of new services in our existing upgraded operating area and efficient deployment of capital on a limited basis, aimed at causing product deployment to result in positive net
present values.

In
addition to the network infrastructure and related equipment and capital resources described above, development of our newer businesses,chello broadband,
Priority Telecom,our digital distribution
platform and DTH, including expansion into Central Europe, requires capital expenditures for construction and development of our pan-European distribution and programming facilities,
including our origination facility, network operating center, and related support systems, information technology and equipment.

For
the year 2002, we planned a significant reduction in capital expenditures. In this regard, customer premise equipment ("CPE") costs in 2002 have been decreasing based on current
negotiated prices, which are continuing to decrease further as market rates for such equipment continue to fall aided by centrally led contract negotiations. In addition, tighter field controls have
been implemented leading to higher rates of CPE retrieval.

47

---

We
expect that network and upgrade capital expenditure will also see a significant reduction as we plan to limit additional network investment primarily to that needed to cover
maintenance and costs necessary to support expansion of services with our existing network being expected to largely cope with the anticipated increase in traffic. In addition, we plan to limit new
build expenditures primarily to areas where essential franchise commitments require investment and to limit additional upgrade investment until such a time that existing upgraded areas are fully
serviced.

Liquidity and Capital Resources

Historically, we have financed our operations and acquisitions primarily from:



In
general, we have been primarily dependent on the capital markets in the past to fund acquisitions, developing systems and products and corporate overhead, using the cash contributed
by United Europe, Inc. upon formation and debt and equity raised at the holding company levels for such purposes. However, going forward, we may not be able to access the capital markets as a
source of capital. Our current plans do not anticipate such access, although we might access such markets if we are able and the terms of such financing are acceptable to us.

In
addition, we have financed our established systems and, when possible, our developing systems, with debt at the subsidiary levels and with operating cash flow. Established systems
generally have stable positive cash flows that are used to partially offset funding necessary for new product offerings, including telephone and internet/data. Developing systems are at various stages
of construction and development and generally depend on us for some of the funding for their operating needs until alternative financing can be secured.

In
2002 and thereafter, we anticipate that the sources of capital possibly available to us will include working capital and operating cash flows, proceeds from the disposal of
non-core investments, and further internal reorganization and alignment of businesses, draw downs under the UPC Distribution Bank Facility (if our recapitalization is successful) and
vendor financing. We do not anticipate access to the capital markets as a source of funding unless we are able to restructure our existing indebtedness. If we are able to complete our planned
recapitalization satisfactorily and are able to implement a rationalization of our non-core investments and improve our operating performance, we believe that our existing cash balances,
our working capital and operating cash flow and draw downs available under the UPC Distribution Bank Facility will be sufficient to fund operations for the foreseeable future. However, during the
period in which we are implementing our recapitialization plan, we have a draw down limitation of 100 million under the UPC Distribution Bank Facility, 65 million of which has already
been drawn down as of November 14, 2002. Drawings under the limitation are subject to certain conditions. Should our planned debt restructuring, further internal reorganization and alignment of
businesses and the investment rationalization program be unsuccessful, or should our planned recapitalization be unsuccessful and our operating results fall behind our current business plan, there is
uncertainty whether we will have sufficient

48

---

funds to meet our planned capital expenditures and/or existing debt commitments and it is doubtful we would be able to continue as a going concern.

Liquidity Requirements

As a result of our failure to pay interest when due on our senior notes, the maturity of those senior notes, our senior discount notes, the Exchangeable Loan and
the UPC Distribution Facility may be accelerated at any time, subject, in the case of the Exchangeable Loan and the UPC Distribution Facility to conditional waivers granted by the holders of such
indebtedness. Consequently, all such indebtedness has been classified as current portion of long-term debt. The table below shows the maturity dates of our future obligations, based on the
classification of our defaulted indebtedness as current portion of long-term debt.

Contractual Obligations

|                                   |  | Payments due by Period
|---------------------------------- |  | ----------------------
|
|
|Short term debt                    |  | 6,093                 
|Long term debt                     |  | 8,458,338             
|Operating Leases                   |  | 49,076                
|Unconditional Purchase Obligations |  | 38,528                
|Other Long term Obligations        |  | 43,571                
|                                   |  |                       
|Total Contractual Cash             |  | 8,595,606             
|                                   |  |                       

In
addition to the programming commitments specified in table above, all UPC Distribution affiliates are parties to channel carriage agreements obliging the affiliate to make the channel
available to subscribers throughout the term of the agreement and in a specified package. The payments due under these programming commitments are dependent upon the actual number of subscribers.

We
have entered into a framework agreement for the supply of various types of equipment. Under this agreement, we have a remaining one to three year obligation to buy 197,000 STCs at
market price and a one year obligation to buy 61,500 modems.

Even
if the indebtedness described above were not in default and were classified as short- or long-term indebtedness in accordance with the contractual terms of the
indebtedness, we would have substantial liquidity requirements in 2002 and thereafter. For example, cash payable in 2002 under the existing contractual terms of our senior notes and senior discount
notes, the Exchangeable Loan, the UPC Distribution Bank Facility and other short- and long-term indebtedness amounts to approximately 89.8 million. In addition, scheduled principal
payments in 2002 under the existing contractual terms for such indebtednes amount to approximately 68.6 million.

Our
non-restricted cash and cash equivalents were 301.0 million at September 30, 2002. Our ability to draw on available cash under borrowing facilities may be
limited because of existing defaults. Because of our future cash obligations, our anticipated cash flows and our belief that we will not be able to access the capital markets in the short term, we
have undertaken our planned recapitalization of our company.

Restrictions under our July 1999, October 1999 and January 2000 Indentures

Our activities are restricted by the covenants of our indentures dated July 30, 1999, October 29, 1999 and January 20, 2000, under which our
senior notes and senior discount notes were issued. Among other things, our indentures place certain limitations on our ability, and the ability of our subsidiaries, to borrow

49

---

money, pay dividends or repurchase stock, make investments, create certain liens, engage in certain transactions with affiliates, and sell certain assets or merge with or into other companies.

Sources of Capital

We had approximately 301.0 million of cash and cash equivalents on hand as of September 30, 2002. Of our 301.0 million of cash and cash
equivalents on hand, USD 75.7 million is held by UPC Polska, our Polish subsidiary, and, as a result of the limitations imposed by the indentures governing the UPC Polska Notes, is
limited in its utilization. Our ability to access our borrowing capacity at the holding company and subsidiary level was restricted or eliminated as a result of the payment defaults under our senior
notes in the first nine months of 2002, as discussed in Item 2 "Developments". To date, our principal sources of capital have been debt and equity capital raised at our holding company level
and debt securities and bank debt issued or borrowed by subsidiaries. We do not expect to access these sources of capital in 2002 and thereafter, except for the permitted borrowing of
100 million under the UPC Distribution Bank Facility (65 million of which was drawn down as of November 14, 2002),unless we are able to restructure our existing indebtedness.

As
of September 30, 2002, the amount outstanding under the UPC Distribution Bank Facility has not increased as compared to amounts outstanding as of December 31, 2001. As
of September 30, 2002, 3.1 billion is outstanding under this Facility.

In
May 2001, we completed the placement of the Exchangeable Loan, receiving proceeds of USD 856.8 million (1.0 billion). The holder of the Exchangeable Loan
has the right to exchange the loan, which was borrowed by our wholly-owned subsidiary, Belmarken, into our ordinary shares under certain circumstances at USD 6.85 per share. The Exchangeable
Loan was transferred to United on January 30, 2002, as a part of a transaction between Liberty, the original holder of the Exchangeable Loan, and United. We may exchange the loan for our
ordinary shares at USD 6.85 per share subject to certain conditions. Our planned recapitalization provides for the exchange of the Exchangeable Loan into equity of New UPC. See Item 2
"DevelopmentsAgreement for Restructuring" above.

50

---



Item 3. Quantitative and Qualitative Disclosure About Market Risk

Investment Portfolio

As of September 30, 2002, we had cash and cash equivalents of approximately 301.0 million. We have invested this cash in highly liquid instruments,
which meet high credit quality standards with original maturities at the date of purchase of less than three months. These investments will be subject to interest rate risk and foreign exchange
fluctuations (with respect to amounts invested in currencies outside the European Monetary Union). However, we do not expect any material losses with respect to our investment portfolio.

Inflation and Foreign Currency Exchange Rate Changes

To date, we have not been impacted materially by inflation.

The
value of our monetary assets and liabilities is affected by fluctuations in foreign currency exchange rates as accounts payable for certain equipment purchases and certain operating
expenses, such as DTH and programming expenses, are denominated in currencies other than the functional currency of the entity making such payments. We and some of our operating companies have notes
payable and notes receivable that are denominated in, and loans payable that are linked to, a currency other than their own functional currency, exposing us to foreign currency exchange risks on these
monetary assets and liabilities. Historically, we have not hedged our exposure to foreign currency exchange rate operating risks. Accordingly, we may experience economic loss and a negative impact on
earnings and equity with respect to our holdings solely as a result of foreign currency exchange rate fluctuations. In connection with our offerings of senior notes in July 1999,
October 1999 and January 2000 we entered into cross-currency swap agreements, exchanging U.S. dollar denominated obligations for Euro denominated obligations. These swap agreements were
unwound as of June 30, 2002.

The
functional currency for our operations generally is the applicable local currency for each operating company. We have consolidated operations in countries outside of the European
Monetary Union including Norway, Sweden, Poland, Hungary, Romania, Slovak Republic and Czech Republic, and operations, which report in U.S. dollars. Assets and liabilities of foreign subsidiaries are
translated at the exchange rates in effect at period-end, and the statements of operations are translated at the average exchange rates during the period. Exchange rate fluctuations on
translating foreign currency financial statements into Euros result in unrealized gains or losses referred to as translation adjustments. Cumulative translation adjustments are recorded as a separate
component of shareholders' equity. Transactions denominated in currencies other than the local currencies are recorded based on exchange rates at the time such transactions arise. Subsequent changes
in exchange rates result in transaction gains and losses, which are reflected in income as unrealized, based on period-end translations, or realized upon settlement of the transactions.

Cash
flows from our operations in foreign countries are translated based on their reporting currencies. As a result, amounts related to assets and liabilities reported on the
consolidated statements of cash flows will not agree to changes in the corresponding balances on the consolidated balance sheets. The effects of exchange rate changes on cash balances held in foreign
currencies are reported as a separate line below cash flows from financing activities.

Impact of Foreign Currency Rate Changes

We are exposed to foreign exchange rate fluctuations related to our monetary assets and liabilities, including those of our operating subsidiaries, which are
denominated in currencies outside of the European Monetary Union, notably the EUR/USD risk arising from our U.S. dollar denominated liabilities. Our exposure to foreign exchange rate fluctuations also
arises from intercompany charges.

The
table below provides information about UPC's and its consolidated subsidiaries' foreign currency exchange risk for cash which is denominated in foreign currencies outside of the
European Monetary

51

---

Union as of September 30, 2002. The information is presented in Euro equivalents, as the Euro is our reporting currency.

|         |  | Amount Outstanding as of September 30, 2002
|-------- |  | -------------------------------------------
|
|
|USD Cash |  | 99,585                                     

We
are risk adverse towards foreign currency risk and therefore actively seek to manage our foreign currency risk by entering into hedge instruments where appropriate and available to us
in the financial markets. We use cross currency swaps, currency deposits and forward contracts to hedge the exposure. We actively monitor the various financial instruments available to us and expect
to shift the use of instruments to less credit capacity intensive instruments in the near future, driven by the current credit risk appetite in the financial markets. We seek to manage our foreign
currency risk through the use of these instruments, however we do not manage our foreign currency risk associated with revenues.

For
descriptions of our senior notes, our senior discount notes, the Exchangeable Loan, the UPC Distribution Bank Facility and our other debt, we refer to Note 9 to our audited
consolidated financial statements for the year December 31, 2001 included in our Annual Report on Form 10-K for the year ended December 31, 2001. The interest rates of
the senior notes are included in the interest rate sensitivity tables to which we refer.

The
tables below provide information about us and our consolidated subsidiaries' foreign currency exchange risk for debt which is denominated in foreign currencies outside of the
European Monetary Union as of September 30, 2002, including cash flows based on the expected repayment date and related weighted-average interest rates for debt. The information is presented in
Euro equivalents, which is our reporting currency. The instruments' actual cash flows are denominated in U.S. dollars.

|                                                   |  | Amount Outstanding as of September 30, 2002 |  | Expected Repayment(1) as of September 30,
|-------------------------------------------------- |  | ------------------------------------------- |  | -----------------------------------------
|
|
|UPC Senior Notes due 2009                          |  | 773,497                                     |  | 38,675                                   
|UPC Senior Notes due 2007                          |  | 172,549                                     |  | 8,627                                    
|UPC Senior Notes due 2009                          |  | 241,940                                     |  | 12,097                                   
|UPC Senior Notes due 2010                          |  | 231,802                                     |  | 11,590                                   
|UPC Senior Discount Notes due 2009                 |  | 597,968                                     |  | 29,857                                   
|UPC Senior Discount Notes due 2009                 |  | 369,281                                     |  | 19,417                                   
|UPC Senior Discount Notes due 2010                 |  | 733,026                                     |  | 40,621                                   
|UPC Senior Notes due 2010                          |  | 574,133                                     |  | 28,707                                   
|PCI Notes                                          |  | 14,734                                      |  | 745                                      
|@Entertainment 1998 Senior Discount Notes          |  | 185,288                                     |  | 11,958                                   
|@Entertainment 1999 Senior Discount Notes          |  | 165,258                                     |  | 11,382                                   
|@Entertainment 1999 Series C Senior Discount Notes |  | 19,371                                      |  | 1,828                                    
|Exchangeable Loan                                  |  | 942,129                                     |  | 942,129                                  

---

52

---

In
connection with our offering of senior notes in July 1999, October 1999 and January 2000, as well as the UPC Distribution Bank Facility, we entered into
cross-currency and interest rate swap agreements, exchanging U.S. dollar-denominated obligations for Euro denominated obligations. The cross-currency and interest rate swap agreements on
July 1999, October 1999 and January 2000 senior notes were unwound as of June 30, 2002.

On
February 1, 2002, we amended certain swap agreements with one of our banks. The swap agreements were entered into in connection with the issuance of certain of our notes. The
swap agreements were subject to early termination upon the occurrence of certain events. The amendment provided that the bank's obligations to us under the swap agreements were substantially fixed and
the
agreements were to be unwound on or prior to July 30, 2002. In settlement of the bank's obligations to us, the bank was to deliver to us approximately 400 million in aggregate principle
amount of our senior notes described above held by that bank, subject to adjustment in the case of certain circumstances, and subject to movements in EUR/USD exchange rate. On June 28, 2002, we
received senior notes and senior discount notes with an aggregate amount of 404.6 million. Accordingly, we recognized an extraordinary gain of 347.2 million in the nine months ended
September 30, 2002.

On
June 11, 2002, we unwound certain swap agreements with a bank. The swap agreements were entered into in connection with the issuance of some of our senior notes and senior
discount notes. The swap agreements were subject to a potential event of default as a result of our non-payment of interest on the senior notes, during which time the bank was not obliged
to make payments to us under the swap agreement. In settlement of the bank's obligations to us, on June 11, 2002 the bank delivered approximately 51.4 million in aggregate principal
amount of our senior notes and senior discount notes held by that bank.

Interest Rate Sensitivity

We actively seek to manage our exposure to interest rates and use various financial instruments like interest rate swaps, interest rate caps and fixed and
floating rate credit instruments, when available to us and appropriate. We aim at fixing a minimum 50% of the interest rates on our bank debt to average tenors with a minimum tenor of one year. We
actively monitor the various financial instruments available to us and expect to shift the use of instruments to less credit capacity intensive instruments in the near future, driven by the current
credit risk appetite in the financial markets. We have consistently managed, were possible, our interest rate exposure through the use of these instruments.

For
descriptions of our senior notes, our senior discount notes, the Exchangeable Loan, the UPC Distribution Bank Facility and our other debt, we refer to Note 9 of our audited
consolidated financial statements for the year December 31, 2001 included in our Annual Report on Form 10-K for the year ended December 31, 2001.

The
table below provides information about our financial instruments that are sensitive to changes in interest rates as of September 30, 2002, including cash flows based on the
expected repayment dates and

53

---

the related weighted-average interest rates. The information is presented in Euro equivalents, which is our reporting currency.

|                                  |                                        | Amount Outstanding as of September 30, 2002 |  | Expected Repayment(1) as of September 30,
|--------------------------------- | -------------------------------------- | ------------------------------------------- |  | -----------------------------------------
|
|
|UPC Distribution Bank Facility(1) |                                        | 3,127,939                                   |  | 3,127,939                                
|                                  | EURIBOR/USD LIBOR +0.75%-4.00%,(2)     |                                             |  |                                          
|                                  | Average interest rate of 6.97% in 2002 |                                             |  |                                          

---

54

---



|                                                   |                       | Amount Outstanding
as of
September 30, 2002 |        | Expected Repayment(1)
as of September 30,
|-------------------------------------------------- | --------------------- | ------------------------------------------- | ------ | -----------------------------------------
|
|
|UPC Senior Notes due 2009                          |                       | 773,497                                     |        | 38,675                                   
|                                                   | Average interest rate |                                             | 10.875 | %                                        
|UPC Senior Notes due 2007                          |                       | 172,549                                     |        | 8,627                                    
|                                                   | Average interest rate |                                             | 10.875 | %                                        
|UPC Senior Notes due 2009                          |                       | 241,940                                     |        | 12,097                                   
|                                                   | Average interest rate |                                             | 11.250 | %                                        
|UPC Senior Notes due 2009                          |                       | 213,057                                     |        | 10,653                                   
|                                                   | Average interest rate |                                             | 10.875 | %                                        
|UPC Senior Discount Notes due 2009                 |                       | 597,968                                     |        | 29,857                                   
|                                                   | Average interest rate |                                             | 12.500 | %                                        
|UPC Senior Discount Notes due 2009                 |                       | 369,281                                     |        | 19,417                                   
|                                                   | Average interest rate |                                             | 13.375 | %                                        
|UPC Senior Discount Notes due 2009                 |                       | 141,328                                     |        | 7,640                                    
|                                                   | Average interest rate |                                             | 13.375 | %                                        
|UPC Senior Notes due 2007                          |                       | 69,166                                      |        | 3,458                                    
|                                                   | Average interest rate |                                             | 10.875 | %                                        
|UPC Senior Notes due 2009                          |                       | 69,761                                      |        | 3,488                                    
|                                                   | Average interest rate |                                             | 11.250 | %                                        
|UPC Senior Discount Notes due 2010                 |                       | 733,026                                     |        | 40,621                                   
|                                                   | Average interest rate |                                             | 13.750 | %                                        
|UPC Senior Notes due 2010                          |                       | 231,802                                     |        | 11,590                                   
|                                                   | Average interest rate |                                             | 11.500 | %                                        
|UPC Senior Notes due 2010                          |                       | 574,133                                     |        | 28,707                                   
|                                                   | Average interest rate |                                             | 11.250 | %                                        
|UPC Senior Notes due 2010                          |                       | 145,721                                     |        | 7,286                                    
|                                                   | Average interest rate |                                             | 11.250 | %                                        
|PCI Notes                                          |                       | 14,734                                      |        | 745                                      
|                                                   | Average interest rate |                                             | 9.875  | %                                        
|@Entertainment 1998 Senior Discount Notes          |                       | 185,288                                     |        | 11,958                                   
|                                                   | Average interest rate |                                             | 14.500 | %                                        
|@Entertainment 1999 Senior Discount Notes          |                       | 165,258                                     |        | 11,382                                   
|                                                   | Average interest rate |                                             | 14.500 | %                                        
|@Entertainment 1999 Series C Senior Discount Notes |                       | 19,371                                      |        | 1,828                                    
|                                                   | Average interest rate |                                             | 7.000  | %                                        
|DIC Loan                                           |                       | 54,269                                      |        | -                                        
|                                                   | Average interest rate |                                             | 10.000 | %                                        
|Exchangeable Loan                                  |                       | 942,129                                     |        | 942,129                                  
|                                                   | Average Interest rate |                                             | 6.000  | %                                        

---

55

---

Equity Prices

As of September 30, 2002, we are exposed to equity price fluctuations related to our investments in equity securities. Our investment in United is
classified as available for sale. Changes in the price of the stock are reflected as unrealized gains (losses) in our statement of shareholders' equity, until such time as the stock is sold and any
unrealized gain (loss) will be reflected in the statement of operations. Our investments in PrimaCom and SBS are accounted for under the equity method of accounting.

|            |  | Number of Shares |  | Fair Value as of
September 30, 2002
|----------- |  | ---------------- |  | -----------------------------------
|
|United      |  | 5,569,240        |  | 9,277                              
|PrimaCom AG |  | 4,948,039        |  | 1,682                              
|SBS         |  | 6,000,000        |  | 79,943                             

As
of September 30, 2002, we are also exposed to equity price fluctuations related to our debt, which is convertible into our ordinary shares. The table below provides information
about our convertible debt, including expected cash flows and related weighted-average interest rates

|                  |                | Amount Outstanding
as of September 30, 2002 |  | Expected Repayment
as of September 30,
|----------------- | -------------- | ------------------------------------------- |  | --------------------------------------
|
|
|
|DIC Loan          |                | 54,269                                      |  | -                                     
|                  | 10% per annum  |                                             |  |                                       
|Exchangeable Loan |                | 942,129                                     |  | 942,129                               
|                  | 6.0% per annum |                                             |  |                                       

Derivative Instruments

We use derivative instruments from time to time to manage interest rate risk on our floating-rate debt facilities and reduce our exposure to foreign
currency exchange rate risk. In connection with certain borrowings, we have entered into both cross-currency swaps and interest rate swaps, providing economic hedges to both currency and interest rate
exposure.

The
following table details the fair value of the derivate instruments outstanding as of September 30, 2002 by related borrowing:

|Borrowing                      |                                            | Type of Instrument                |  | As of
September, 30
2002 |         | As of
December, 31
2001 |        
|------------------------------ | ------------------------------------------ | --------------------------------- |  | ------------------------ | ------- | ----------------------- | -------
|
|July 1999 Notes                |                                            | Cross currency/interest rate swap |  | -                        |         | 101,736                 |        
|October 1999 Notes             |                                            | Cross currency/interest rate swap |  | -                        |         | 55,522                  |        
|January 2000 Notes             |                                            | Cross currency/interest rate swap |  | -                        |         | 36,741                  |        
|UPC Distribution Bank Facility |                                            | Cross currency/interest rate swap |  | (70,423                  | )       | (47,065                 | )      
|                               |                                            |                                   |  |                          |         |                         |        
|                               | Total derivative (liabilities) assets, net |                                   |  |                          | (70,423 | )                       | 146,934
|                               |                                            |                                   |  |                          |         |                         |        

The
UPC Distribution Bank Facility swaps include an interest rate swap of 13.8 million, which qualifies as an accounting cash flow hedge. Accordingly, the changes in fair value of
this instrument are recorded through other comprehensive income in the consolidated statement of shareholders' deficit. The remaining instruments are marked to market each period with the
corresponding fair value gain or loss recorded as a part of foreign currency exchange gain (loss) and other income (expense) in the consolidated

56

---

statement of operations. The fair values consider all rights and obligations of the respective instruments, including the set-off provisions described below. For the three months ended
September 30, 2002 and 2001, we recorded a gain of 1.0 million and a loss of 85.1 million, respectively, and for the nine months ended September 30, 2002 and 2001, we
recorded a loss of 179.7 million and a loss of 59.6 million, respectively, in connection with the mark-to-market valuations.

As
per the waiver letter of September 30, 2002, the lending banks under the UPC Distribution Bank Facility have agreed to temporarily waive certain of their rights under the UPC
Distribution Bank
Facility, subject to certain conditions including the resolution of certain issues arising under the Senior Hedging Agreements. These issues were resolved when:

(i)
the mark to market positions under the cross currency hedges with a notional amount of USD 347.5 million (swapped into a notional amount of EUR 408.1 million) were
frozen, (ii) we repaid these positions with a cash payment of 12 million and (iii) the counter parties agreed to extend the remainder position totalling approximately
54 million to August 2003.

Certain
derivative instruments include set-off provisions that provide for early termination upon the occurrence of certain events, including an event of default. In an event
of default, any amount payable to one party by the other party, will, at the option of the non-defaulting party, be set off against any matured obligation owed by the
non-defaulting party to such defaulting party. If we are the defaulting party and the counterparty to the swap holds bonds of our company, these bonds may be used to settle the obligation
of the counterparty to us. In such an event of settlement, we would recognize an extraordinary gain upon the delivery of the bonds. The amount of bonds that must be delivered is based on the principal
(i.e. face) amount of the bonds held and not the fair value, which may be substantially less. In June 2002, we recognized an extraordinary gain of 347.2 million from the delivery
by certain banks of 404.6 million in aggregate principal amount of our senior notes and senior discount notes as settlement of the interest rate/cross currency derivative contracts on our
July 1999 Senior Notes, our October 1999 Senior Notes and our January 2000 Senior Notes.

The
condensed consolidated balance sheets reflect these instruments as derivative assets or liabilities as appropriate.

57

---



Item 4. Controls and Procedures

Within the 90-day period prior to the filing of this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant
to Rule 13a-14 under the Securities Exchange Act of 1934. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures were effective. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to
the date of the evaluations.

58

---



PART IIOTHER INFORMATION

Item 1Legal Proceedings

Information regarding developments in the current legal proceedings to which the Company or any of its subsidiaries is a party, see Note 9 ("Commitments
and ContingenciesLitigation and Claims) and Note 14 ("Subsequent EventsTevel", "Proceedings by Certain Institutional Lenders", "Legal
Proceedings Médiaréseaux" and "Philips Legal Proceedings") in the notes to the unaudited condensed consolidated financial statements of the Company for the
three and nine months ended September 30, 2002 contained Part I, Item 1Financial Statements, of this Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2002.

Item 2Changes in Securities and Use of Proceeds

None.

Item 3Defaults Upon Senior Securities

Information regarding the defaults on our senior securities is contained in Part I, Item 2Management's Discussion and Analysis of Financial
Condition and Results of Operations, Developments of this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002.

Item 4Submission of Matters to a Vote of Security Holders

None.

59

---



Item 5. Other Information

|                 |                             | As at September 30, 2002
|---------------- | --------------------------- | ------------------------
|
|Multi Channel TV |                             |                         
|                 | Consolidated companies:     |                         
|                 | Norway                      |                         
|                 | Sweden                      |                         
|                 | Belgium                     |                         
|                 | France                      |                         
|                 | The Netherlands             |                         
|                 | Austria                     |                         
|                 |                             |                         
|                 |                             | Total Western Europe    
|                 |                             |                         
|                 | Poland                      |                         
|                 | Hungary                     |                         
|                 | Czech Republic              |                         
|                 | Romania                     |                         
|                 | Slovak Republic             |                         
|                 |                             |                         
|                 |                             | Total Eastern Europe    
|                 |                             |                         
|                 |                             | Total consolidated      
|                 |                             |                         
|                 | Non-consolidated companies: |                         
|                 | Germany (PrimaCom)(6)       |                         
|                 | Israel(7)                   |                         
|                 | Malta                       |                         
|                 | Poland (TKP)(8)             |                         
|                 | Germany (EWT/TSS)(9)        |                         
|                 |                             |                         
|                 |                             | Total non-consolidated  
|                 |                             |                         
|                 |                             | Total                   
|                 |                             |                         

---

60

---

|                    |                            | As at September 30, 2002 
|------------------- | -------------------------- | -------------------------
|
|Cable Telephony     |                            |                          
|                    | Consolidated companies:    |                          
|                    | Norway                     |                          
|                    | France                     |                          
|                    | The Netherlands            |                          
|                    | Austria                    |                          
|                    |                            |                          
|                    |                            | Total consolidated       
|                    |                            |                          
|                    | Non-consolidated companies |                          
|                    | Germany(EWT/TSS)(1)       |                          
|                    |                            |                          
|                    |                            | Total non-consolidated   
|                    |                            |                          
|Non-cable Telephony |                            |                          
|                    | Consolidated companies:    |                          
|                    | Czech Republic(2)          |                          
|                    | Hungary(2)                 |                          
|                    |                            |                          
|                    |                            | Total non-cable Telephony
|                    |                            |                          
|                    |                            | Total                    
|                    |                            |                          

---

61

---



|         |                             | As at September 30, 2002
|-------- | --------------------------- | ------------------------
|
|Internet |                             |                         
|         | Consolidated companies:     |                         
|         | Norway                      |                         
|         | Sweden                      |                         
|         | Belgium                     |                         
|         | France                      |                         
|         | The Netherlands             |                         
|         | Austria                     |                         
|         |                             |                         
|         |                             | Total Western Europe    
|         |                             |                         
|         | Poland                      |                         
|         | Hungary                     |                         
|         | Czech Republic              |                         
|         |                             |                         
|         |                             | Total Eastern Europe    
|         |                             |                         
|         |                             | Total consolidated      
|         |                             |                         
|         | Non-consolidated companies: |                         
|         | Germany (PrimaCom)(2)       |                         
|         | Israel(3)                   |                         
|         | Malta                       |                         
|         | Germany (EWT/TSS)(4)        |                         
|         |                             |                         
|         |                             | Total non-consolidated  
|         |                             |                         
|         |                             | Total                   
|         |                             |                         

---

62

---

|                 |                             | As at September 30, 2001 
|---------------- | --------------------------- | -------------------------
|
|Multi Channel TV |                             |                          
|                 | Consolidated companies:     |                          
|                 | Norway                      |                          
|                 | Sweden                      |                          
|                 | Belgium                     |                          
|                 | France                      |                          
|                 | The Netherlands             |                          
|                 | Austria                     |                          
|                 |                             |                          
|                 |                             | Total Western Europe     
|                 |                             |                          
|                 | Poland                      |                          
|                 | Hungary                     |                          
|                 | Czech Republic              |                          
|                 | Romania                     |                          
|                 | Slovak Republic             |                          
|                 |                             |                          
|                 |                             | Total Eastern Europe     
|                 |                             |                          
|                 |                             | Total consolidated       
|                 |                             |                          
|                 | Non-consolidated companies: |                          
|                 | Germany (EWT/TSS)(6)        |                          
|                 | Germany (Primacom)          |                          
|                 | Israel                      |                          
|                 | Malta                       |                          
|                 |                             |                          
|                 |                             | Total non-consolidated   
|                 |                             |                          
|                 | Total                       |                          
|                 |                             |                          
|                 | Disposed Operations         |                          
|                 | Poland(7)                   |                          
|                 |                             |                          
|                 |                             | Total Disposed Operations
|                 |                             |                          
|                 |                             | Total                    
|                 |                             |                          

---

63

---

|                    |                             | As at September 30, 2001 
|------------------- | --------------------------- | -------------------------
|
|Cable Telephony     |                             |                          
|                    | Consolidated companies:     |                          
|                    | Norway                      |                          
|                    | France                      |                          
|                    | The Netherlands             |                          
|                    | Austria                     |                          
|                    |                             |                          
|                    |                             | Total consolidated       
|                    |                             |                          
|                    | Non-consolidated companies: |                          
|                    | Germany(EWT/TSS)(1)        |                          
|                    |                             |                          
|                    |                             | Total non-consolidated   
|                    |                             |                          
|                    |                             | Total cable telephony    
|                    |                             |                          
|Non-cable Telephony |                             |                          
|                    | Consolidated companies:     |                          
|                    | Czech Republic(2)           |                          
|                    | Hungary(2)                  |                          
|                    |                             |                          
|                    |                             | Total non-cable Telephony
|                    |                             |                          
|                    |                             | Total                    
|                    |                             |                          

---

64

---



|         |                             | As at September 30, 2001
|-------- | --------------------------- | ------------------------
|
|Internet |                             |                         
|         | Consolidated companies      |                         
|         | Norway                      |                         
|         | Sweden                      |                         
|         | Belgium                     |                         
|         | France                      |                         
|         | The Netherlands             |                         
|         | Austria                     |                         
|         |                             |                         
|         |                             | Total Western Europe    
|         |                             |                         
|         | Poland                      |                         
|         | Hungary                     |                         
|         | Czech Republic              |                         
|         | Romania                     |                         
|         | Slovak Republic             |                         
|         |                             |                         
|         |                             | Total Eastern Europe    
|         |                             |                         
|         |                             | Total consolidated      
|         |                             |                         
|         | Non-consolidated companies: |                         
|         | Germany (EWT/TSS)(2)        |                         
|         | Germany (PrimaCom)          |                         
|         | Malta                       |                         
|         |                             |                         
|         |                             | Total non-consolidated  
|         |                             |                         
|         |                             | Total                   
|         |                             |                         

---

Residential Revenue Generating Units

The operating data set forth below reflect the aggregate statistics of the operating systems in which the Company has an ownership interest. Revenue Generating
Units ("RGUs") are the sum of basic cable, digital, residential internet, residential telephone and DTH subscribers. For example, if a residential

65

---

customer in our Austrian system subscribed to our basic cable service, digital video service, telephony service and internet services, the customer would constitute four RGUs.

|           |                        | As at
September 30,
2002  |           | As at
September 30,
2001
|---------- | ---------------------- | ------------------------- | --------- | ------------------------
|Total RGUs |                        |                           |           |                         
|           | Consolidated companies |                           |           |                         
|           | Norway                 |                           | 413,800   |                         
|           | Sweden                 |                           | 339,100   |                         
|           | Belgium                |                           | 149,300   |                         
|           | France                 |                           | 542,000   |                         
|           | The Netherlands        |                           | 2,863,500 |                         
|           | Austria                |                           | 819,300   |                         
|           |                        |                           |           |                         
|           |                        | Total Western Europe      |           | 5,127,000               
|           |                        |                           |           |                         
|           | Poland                 |                           | 998,100   |                         
|           | Hungary                |                           | 826,000   |                         
|           | Czech Republic         |                           | 360,100   |                         
|           | Romania                |                           | 321,600   |                         
|           | Slovak Republic        |                           | 305,600   |                         
|           |                        |                           |           |                         
|           |                        | Total Eastern Europe      |           | 2,811,400               
|           |                        |                           |           |                         
|           | Disposed operations:   |                           |           |                         
|           | Germany(EWT/TSS)(1)   |                           | -         |                         
|           | Poland(2)              |                           | -         |                         
|           |                        |                           |           |                         
|           |                        | Total disposed operations |           | -                       
|           |                        |                           |           |                         
|           |                        | Total consolidated        |           | 7,938,400               
|           |                        |                           |           |                         

---

Other Information

On June 20, 2002, the Company held its annual general shareholders meeting. The matters voted upon, and approved by holders of over a majority of the
Company's outstanding ordinary shares A, at this meeting were the approval of the Company's annual accounts for 2001, release of liability with respect to such accounts, to renew the
authorization to repurchase the Company's stock and to elect auditors. No directors were elected. The outcome of the meeting was disclosed in the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 2002, which was filed with the U.S. Securities and Exchange Commission ("SEC") on August 14, 2002.

As
concerns this meeting, the Company did not comply with the requirements of Section 14 of the Exchange Act. On May 14, 2002, the Company filed a preliminary proxy statement with
the SEC to solicit proxies from the holders of the Company's ADSs (which represent approximately 8.3% of the Company's ordinary shares A). The Company filed with the SEC amended preliminary
proxy statements to respond to comments from the SEC's. Due to timing constraints in connection with this filing as well as the ongoing review of other SEC filings and the deadline for the meeting
under Dutch law, the Company did not solicit proxies from the holders of its ADSs. The Company did not mail proxy statements or information statements to the holders of the ADSs as required by Section
14 of the Exchange Act.

66

---



Item 6. Exhibits and Reports on Form 8-K

|     |  |                                                                                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|99.1 |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

|Date Filed         |  | Date of Event      |  | Item Reported                                                                                                                                                                                
|------------------ |  | ------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|July 1, 2002       |  | July 1, 2002       |  | Item 5Announcement of extension of waivers of default until July 15, 2002.                                                                                                                  
|July 9, 2002       |  | June 19, 2002      |  | Item 4Announcement of changes in certifying accountant.                                                                                                                                     
|July 10, 2002      |  | June 20, 2002      |  | Item 4Announcement of the engagement of KPMG Accountants N.V. as independent auditor of UPC, based upon the recommendation by the Supervisory Board base upon advice of the audit committee.
|July 15, 2002      |  | July 15, 2002      |  | Item 5Announcement of extension of waivers of default until July 29, 2002.                                                                                                                  
|July 16, 2002      |  | June 19, 2002      |  | Item 4Announcement of changes in certifying accountant.                                                                                                                                     
|July 25, 2002      |  | July 25, 2002      |  | Item 5Announcement of issuance of press release regarding UPC's capitalization.                                                                                                             
|July 30, 2002      |  | July 29, 2002      |  | Item 5Announcement of extension of waivers of default until September 12, 2002. Announcement of non-payment of interest of EUR 124 million, which is covered by the waivers of default.     
|September 12, 2002 |  | September 12, 2002 |  | Item 5Announcement of extension of waivers of default until September 23, 2002.                                                                                                             
|September 23, 2002 |  | September 23, 2002 |  | Item 5Announcement of extension of waivers of default until September 27, 2002.                                                                                                             
|September 30, 2002 |  | September 30, 2002 |  | Item 5Announcement of entering into a Restructuring Agreement and announcement of entering into a waiver and amendment to the UPC Distribution Bank Facility.                               

67

---



SIGNATURE

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.

|                        |  | UNITED PAN-EUROPE COMMUNICATIONS N.V.
|----------------------- |  | -------------------------------------
|                        |  | By:                                  
|Date: November 14, 2002 |  |                                      

68

---



CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John F. Riordan, President and Chief Executive Officer of United Pan-Europe Communications N.V., certify that:





|Date: November 14, 2002 |  |    
|----------------------- |  | ---
|                        |  | By:

69

---



CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles H.R. Bracken, Chief Financial Officer of United Pan-Europe Communications N.V., certify that:





|Date: November 14, 2002 |  |    
|----------------------- |  | ---
|                        |  | By:

70

---

QuickLinks