SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  F O R M 10-K
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

                   For the Fiscal Year Ended December 31, 1997

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT of 1934

             For the Transition Period From __________ to __________

                           Commission File No. 0-22616

                                NTL INCORPORATED
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Delaware                                     52-1822078
---------------------------------           ------------------------------------
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

110 East 59th Street, New York, New York                         10022
----------------------------------------                       ----------
(Address of principal executive offices)                       (Zip Code)

                                 (212) 906-8440
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                   -----------

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)


<PAGE>


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.    Yes   X    No
                                          -----     -----

Indicate by check mark whether  disclosure by delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]

The  aggregate   market  value  of  the   registrant's   voting  stock  held  by
non-affiliates  at March 20, 1998,  valued in all cases in  accordance  with the
NASDAQ/NMS   closing   sale  price  for  the   Registrant's   Common  Stock  was
approximately $1,289,800,000.

Number of shares of Common Stock outstanding as at March 20, 1998: 32,294,900

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

           Document                               Part of 10-K in which
                                                       Incorporated

Definitive proxy statement for the
1998 Annual Meeting of the Stockholders
of NTL Incorporated:                                     Part III

                                  * * * * * *
This Annual  Report on Form 10-K for the year ended  December 31,  1997,  at the
time of  filing  with the  Securities  and  Exchange  Commission,  modifies  and
supersedes all prior documents filed pursuant to Section 13, 14 and 15(d) of the
Securities  Exchange  Act of 1934 for  purposes  of any  offers  or sales of any
securities after the date of such filing pursuant to any Registration  Statement
or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by
reference this Annual Report.

         "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
                              REFORM ACT OF 1995:

     Certain statements contained herein constitute "forward-looking statements"
as that term is defined under the Private  Securities  Litigation  Reform Act of
1995. When used in this Form 10-K, the words, "believe," "anticipate," "should,"
"intend,"  "plan," "will,"  "expects,"  "estimates,"  "projects,"  "positioned,"
"strategy," and similar expressions  identify such  forward-looking  statements.
Such forward-looking  statements involve known and unknown risks,  uncertainties
and other factors that may cause the actual results, performance or achievements
of the Registrant,  or industry results,  to be materially  different from those
contemplated  or projected,  forecast,  estimated or budgeted in or expressed or
implied by such forward-looking  statements. Such factors include, among others:
general  economic  and business  conditions,  industry  trends,the  Registrant's
ability to continue to design network  routes,  install  facilities,  obtain and
maintain any required government licenses or approvals and finance  construction
and development, all in a timely manner, at reasonable costs and on satisfactory
terms and conditions,  as well as assumptions about customer  acceptance,  churn
rates,  overall market penetration and competition from providers of alternative
services, and availability, terms and deployment of capital.
<PAGE>


                                TABLE OF CONTENTS
                                                                            Page
PART I
------

Item 1   Business........................................................     1

Item 2   Properties......................................................    46

Item 3   Legal Proceedings...............................................    46

Item 4   Submission of Matters to a Vote of Stockholders.................    46

PART II
-------

Item 5   Market for the Registrant's Common Stock and Related
         Stockholder Matters.............................................    47

Item 6   Selected Financial Data.........................................    48

Item 7   Management's Discussion and Analysis of Results of
         Operations and Financial Condition..............................    49

Item 7A  Quantitative and Qualitative Disclosure About Market Risk.......    57

Item 8   Financial Statements and Supplementary Data.....................    58

Item 9   Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure.............................    58

PART III
--------

Items 10, 11, 12, 13.....................................................    59

PART IV
-------

Item 14  Exhibits, Financial Statement Schedules, and
         Reports on Form 8-K.............................................    59

Exhibit Index............................................................    60

Signatures...............................................................    70

Index to Financial Statements............................................   F-1
<PAGE>


                                     PART I
                                     ------

ITEM 1.  BUSINESS.
-----------------

INTRODUCTION

     NTL Incorporated,  formerly  International  CableTel Incorporated ("NTL" or
the  "Company")  was  incorporated  in April 1993 under the laws of the State of
Delaware.

     NTL is a leading  communications  company in the United Kingdom,  providing
residential,  business and wholesale customers with the following services:  (i)
Residential  Telecoms and Television Services including  residential  telephony,
cable television and Internet access services,  (ii) National  Telecoms Services
including  national  business  telecoms,   national  and  international  carrier
telecommunications,  and satellite and radio communications  services, and (iii)
Broadcasting   Services  including  digital  and  analog  television  and  radio
broadcast transmission services.

     NTL  provides  its  broad  range  of  services  over  local,  national  and
international  network  infrastructure.  The Company operates (i) advanced local
broadband  networks  serving  entire   communities   throughout  NTL's  regional
franchise  areas,  (ii) the UK's first  synchronous  digital  hierarchy  ("SDH")
backbone  telecommunications  network,  as well as satellite  earth stations and
radio communications  facilities from NTL's tower sites across the UK, and (iii)
a broadcast  transmission  network which provides  national,  regional and local
analog and digital transmission services to customers throughout the UK.

     Management's   objective   is   to   exploit   the   convergence   of   the
telecommunications,  entertainment and information services industries to become
a premier  new era  communications  company in the UK,  which  will offer  these
services to residential,  business and wholesale  customers on a national scale.
Management  believes that the Company will be able to deliver its strategy based
on  NTL's   entrepreneurial   approach,   innovative   marketing  and  technical
excellence.

     In March 1997,  the Company  changed its name from  International  CableTel
Incorporated  to NTL  Incorporated  to reflect the  integration  of the services
provided by the Company  following its acquisition of NTL Group Limited in 1996,
and to capitalize on NTL Group  Limited's 30 year history in the United  Kingdom
as a provider of reliable communications services.

     In this  Report on Form  10-K,  references  to "pounds  sterling,"  "pounds
sterling,"  "pence" or "p" are to the lawful  currency of the United Kingdom and
references  to "U.S.  dollars,"  "dollars,"  "$" or  "cents"  are to the  lawful
currency of the United States.  Solely for the  convenience of the reader,  this
Form 10-K  contains  translations  of certain pound  sterling  amounts into U.S.
dollars and certain U.S. dollar amounts into pounds sterling. These translations
should not be  construed  as  representations  that the pound  sterling  amounts
actually  represent such U.S. dollar amounts or vice versa or could have been or
could be or will be converted into U.S. dollars or pounds sterling,  as the case
may be, at the rate indicated or at any other rate. Unless otherwise  indicated,
the  translations  of pounds  sterling into U.S.  dollars and U.S.  dollars into
pounds  sterling  have been made at $1.6517 per 1.00 pounds  sterling,  the noon
buying rate in The City of New York for cable  transfers  in pounds  sterling as
certified  for customs  purposes by the  Federal  Reserve


                                       1
<PAGE>


Bank of New York (the "Noon Buying  Rate") on December  31,  1997.  On March 20,
1998, the Noon Buying Rate was $1.6643 per 1.00 pound sterling.

PRINCIPAL BUSINESSES

   RESIDENTIAL TELECOMS AND TELEVISION SERVICES

     The Company is the third largest operator of local broadband communications
systems in the UK as measured by the number of homes in its franchise areas, and
has  achieved  the highest  customer  penetration  and lowest churn rates of any
multi-system  operator in the U.K. The Company is presently the sole provider of
broadband services in its franchise areas, offering residential telephony, cable
television  ("CATV") and Internet access services to customers  connected to its
networks.  These services are provided over local broadband fiber networks which
have both coaxial and copper connections to the home. Based on operating results
and  experience  gained by management  in the United  States  telecommunications
market,  the Company has developed  innovative  marketing  strategies which have
increased  customer   penetration   rates,   customer  retention  and  operating
profitability.

     The  industry in which the Company  participates  has  demonstrated  strong
growth over the last  several  years.  Since  January 1, 1992,  the industry has
connected over 3.4 million telephone lines.  Since January 1, 1994, the industry
has doubled its market share of multi-channel homes to 40%. The following tables
illustrates these statistics:

                     UK TELEPHONY CABLE INDUSTRY STATISTICS
<TABLE>
<CAPTION>

                                                                 TELEPHONE LINES
                              ---------------------------------------------------------------------------------
                                                                                                  RESIDENTIAL
                                     TOTAL             RESIDENTIAL                               TELEPHONE LINE
                                TELEPHONE LINES      TELEPHONE LINES         HOMES PASSED         PENETRATION
                              ---------------------------------------------------------------------------------
<S>                                <C>                  <C>                   <C>                     <C>
January 1, 1998.....               3,442,196            3,038,809             10,693,809              28%
January 1, 1997.....               2,278,113            2,039,081              8,351,310              24%
January 1, 1996.....               1,419,819            1,287,248              6,042,296              21%
January 1, 1995.....                 717,566              649,350              4,116,971              16%
January 1, 1994.....                 314,381              279,728              2,786,202              10%
January 1, 1993.....                 106,989               92,715              1,954,829               5%
January 1, 1992.....                  21,225                N/A                1,343,557               -

-------------------------
Source: ITC
</TABLE>
<TABLE>
<CAPTION>

                                                               MULTI-CHANNEL HOMES
                              ---------------------------------------------------------------------------------
                                  BROADBAND                                     TOTAL
                                    CABLE                                   MULTI-CHANNEL       BROADBAND CABLE
                                 SUBSCRIBERS            DTH HOMES               HOMES           AS A % OF TOTAL
                              ---------------------------------------------------------------------------------
<S>                                <C>                  <C>                   <C>                     <C>
January 1, 1997.....               2,373,548             3,583,000            5,956,548               40%
January 1, 1997.....               1,872,962             3,446,000            5,318,962               35%
January 1, 1996.....               1,326,842             3,170,000            4,496,842               30%
January 1, 1995.....                 908,018             2,818,000            3,726,018               24%
January 1, 1994.....                 611,423             2,438,000            3,049,423               20%

-------------------------
Source: ITC; BSkyB
</TABLE>


                                       2
<PAGE>


     As of December 31,  1997,  the Company had 321,300  residential  customers,
approximately 90% of which subscribed to both telephone and television services.
At the end of 1997 the Company had a total of 608,500  RGUs  resulting  in 37.3%
telephone  penetration,  37.8% cable  penetration  and 75.1% RGU  penetration of
homes marketed. By comparison,  based on published statistics of the Independent
Television  Commission  ("ITC")  dated March 9, 1998,  as of January 1, 1998, UK
cable penetration  averaged  approximately 28.4% for telephone and approximately
22.1% for cable  television.  As of  January  1, 1998,  the UK  telephony  cable
industry  had  connected   approximately   3.4  million   telephone   lines  and
approximately 2.4 million broadband cable customers.

     The following  table  illustrates  operating  statistics  for the Company's
newly constructed network:
<TABLE>
<CAPTION>

                                                                          DECEMBER 31,
                                                    ------------------------------------------------------
                                                       1997           1996           1995           1994
                                                    ---------      ---------      ---------      ---------
<S>                                                 <C>              <C>            <C>            <C>
Homes passed (1)............................        1,007,000        779,100        463,000        144,000
Homes marketed..............................          810,000        467,300        176,200          7,200
Homes marketed (as % of homes passed).......               80%            60%            38%             5%
Total customers (2).........................          321,300        168,200         57,700          2,280
   Dual.....................................          287,200        133,800         44,630          1,680
   Telephone-only...........................           15,300         15,950          6,620            370
   CATV-only................................           18,800         18,450          6,450            230
Total RGUs (3)..............................          608,500        302,000        102,330          3,960
Customer penetration........................               40%            36%           33%             32%
RGU penetration (4).........................               75%            65%           58%             55%
Telephone penetration.......................               37%            32%           29%             29%
CATV penetration............................               38%            33%           29%             27%
Annualized churn............................               11%            10%           NM              NM

-------------------------
(1)  "Homes passed" is the expression in common usage in the cable industry as the measurement of the size of a cabled area,
     meaning the total number of residential premises which have the potential to be connected to the Company's network.
(2)  As of December 31, 1997, the Company also provided service to approximately 36,250 customers connected to acquired cable
     systems over which it does not offer a full range of services.
(3)  An RGU (revenue generating unit) is one telephone account or one CATV account; a dual customer generates two RGUs.
(4)  RGU penetration is the number of RGUs per 100 homes marketed. As defined, maximum RGU penetration is 200%.
NM   Not meaningful due to the limited customer base and recent commencement of services.
</TABLE>

     The Company's  customer base and RGUs both increased by nearly 100% in 1997
compared to year-end 1996. The Company  believes that much of its success during
this period has been due to its marketing  strategies  and the  introduction  of
innovative  residential  services  packages  which bundle  telephone and a small
selection of CATV channels  within a single product  offering.  The Company also
gives  customers the  opportunity to purchase  additional  channel  packages and
premium channels. Consistent with the Company's objectives, the high penetration
rates  generated by this strategy  have led to increased  levels of gross profit
contribution per home passed.

     The  Company  believes  it has also  maintained  high  levels  of  customer
satisfaction as indicated by the Company's low rates of churn.  During 1997, the
Company  maintained an  annualized  churn rate of less than 11%, a rate which is
significantly  lower than the  published  churn rates of all other UK  telephony
cable  operators.  In a recent survey of a sample of its


                                       3
<PAGE>


customers  conducted by the Oxford  Research  Agency,  NTL found that 89% of its
customers would recommend the service to a friend or relative, and that only 15%
had  ever  considered   changing  their   telephone   service  back  to  British
Telecommunications plc ("BT").

   LOCAL BROADBAND NETWORK CONSTRUCTION

     NTL's local franchise areas cover approximately 2.1 million homes, spanning
a wide geography across England,  Scotland,  Wales and Northern  Ireland.  As of
December 31, 1997 the Company had  constructed  its broadband  network past over
one  million  homes  and  had  invested   approximately   $1.4  billion  in  the
construction of the network and associated plant, property and equipment.  NTL's
local broadband  networks use advanced high capacity SDH fiber rings which serve
entire  communities,  bringing  fiber  connections  directly to  businesses  and
"Siamese" coaxial/copper connections to residences. The Company's local networks
currently cover approximately 2,500 route miles of fiber backbone network,  with
approximately  175,000  fiber  miles,  and an  estimated  5,000  route  miles of
"Siamese" coaxial/copper connections.

     The Company is  installing a  full-service  network  capable of providing a
high speed, high capacity,  two-way voice, data and video communications pathway
to the customer. This approach allows the Company to pursue four revenue streams
(residential     telephony,     residential    cable    television,     business
telecommunications services and Internet access services) on its network without
a significant increase in fixed investment.

     The Company's  licenses require it to roll out its network past a specified
number of  premises  (or homes)  each year.  The total  requirement  for all the
Company's  licenses is to pass a minimum of 2,090,000 homes,  which is less than
the actual total of homes  available to the Company  should it wish to construct
its  network  past  them.  Under  the  terms of its  current  telecommunications
licenses,  by the end of  2005  the  Company  is  required  to  construct  cable
television  systems past an aggregate of  approximately  one million  additional
premises  (residential  and business).  The Company  believes it will be able to
satisfy its milestones,  but there can be no assurance that such milestones will
be met or that any application to modify those milestones would be accepted.  If
the Company is unable to meet the construction milestones required by any of its
licenses and is unable to obtain  modifications to the milestones,  the relevant
license or licenses could be revoked, which would have a material adverse effect
on the Company.

   LOCAL FRANCHISE AREAS

     The Company has 16 separate  franchises  clustered into six Regional Areas.
The Regional Areas span a wide geography  across the United Kingdom and give the
Company an operating  presence not only in England,  but in Scotland,  Wales and
Northern Ireland. In 1996, the Company acquired the remaining minority interests
in its Suburban London and South Wales Regional Areas and now has 100% ownership
interests in the licenses in all of its franchise areas.


                                       4
<PAGE>


Summary  information  for the  franchises  in each of the Regional  Areas is set
forth below:
<TABLE>
<CAPTION>

                                                                                  COMPANY'S              TOTAL
                                                                                  OWNERSHIP            HOMES IN
         REGIONAL AREA                            FRANCHISES                     PERCENTAGE           FRANCHISE(1)
<S>                                         <C>                                     <C>               <C>
Central Scotland...............             N.W. Glasgow/Clydebank                  100%                128,000
                                            Greater Glasgow                         100                 254,000
                                            Bearsden/Milngavie                      100                  14,000
                                            Paisley/Renfrew                         100                  73,000
                                            Inverclyde/Eastwood                     100                  30,000
                                                                                                      ---------
                                                                                                        499,000
                                                                                                      ---------
South Wales....................             Cardiff/Penarth                         100%                103,000
                                            Newport                                 100                  85,000
                                            Swansea/Neath                           100                 122,000
                                            Glamorgan/Gwent(2)                      100                 230,000
                                                                                                      ---------
                                                                                                        540,000
                                                                                                      ---------
Suburban London (Surrey).......             Surrey/Hampshire                        100%                136,000
                                                                                                      ---------
Suburban London (Luton)........             Central Hertfordshire                   100%                102,000
                                            East Hertfordshire                      100                  56,600
                                            North Bedfordshire                      100                  95,000
                                            South Bedfordshire                      100                  95,000
                                                                                                      ---------
                                                                                                        348,600
                                                                                                      ---------
West Yorkshire.................             Huddersfield/Dewsbury                   100%                138,400
                                                                                                      ---------
Northern Ireland(3)............                                                     100%                428,000
                                                                                                      ---------
Total all Franchises...........                                                                       2,090,000
                                                                                                      =========

------------------------
(1)  Total Homes in Franchise  represents  the  Company's  regulatory  milestones  which were derived from the 1981 census (being
     the census statistics at the date each license was granted).
(2)  The final  regulatory  milestone for the Gwent and Glamorgan  local  delivery  operator  license  ("LDL") is 230,000 homes of
     the total of 330,000 homes in the LDL.
(3)  The final  regulatory  milestone  for the  Northern  Ireland LDL is 428,000 homes of the total of 530,000 homes in the LDL.
</TABLE>

   NATIONAL TELECOMS SERVICES

     The Company offers national business  telecoms,  national and international
carrier telecoms services, radio communications, satellite services and national
Internet  services.  Based on the quarter ended  December 31, 1997,  the Company
generated  approximately  $217 million in annualized  National Telecoms Services
revenue.

     The Company's  objective in National  Telecoms  Services is to successfully
integrate  its  strategies  for   developing,   operating  and  marketing  local
telephony/cable systems with its national network to provide high-quality voice,
data and video  communications  services  throughout  the UK.  The  Company  has
constructed  a national SDH fiber  telecoms  network,  which is one of only five
independent  national  telecoms  networks  in the UK. The NTL  national  network
currently  covers  approximately  1,500  route  miles  and  40,000  fiber  miles
throughout England, Scotland and Wales. During 1998, the Company plans to extend
the network and to include the first resilient fiber connection between Northern
Ireland, the Republic of Ireland and England.

     The  Company  intends to compete in the major  segments  of the UK telecoms
market.   According  to  published   Office  of   Telecommunications   ("OFTEL")
statistics,  the  total  telecoms  market  in the UK in 1996  was  estimated  at
approximately  21 billion pounds  sterling.  Of the total telecoms  market,  the
Company  estimates  that  approximately  7 billion  pounds  sterling  represents
national business


                                       5
<PAGE>




telecoms,  2 billion pounds sterling  represents  carrier services and 1 billion
pounds  sterling  represents  international  carrier telecom  services.  The NTL
national network has significantly expanded the Company's telecoms opportunities
from the  business  within its  franchise  areas to the much greater UK national
market.

   COMBINING LOCAL AND NATIONAL NETWORKS

     A total of nine of the Company's  local switches have been connected to the
NTL national network, and the Company expects an additional switch in Belfast to
be connected  during 1998.  The Company has already begun  carrying a portion of
its own long distance voice and data traffic on the network.

     The  integration of its local networks with the national  telecoms  network
creates strategic advantages for the Company's telephony business.  The national
network allows the Company to carry  telecommunications  traffic between each of
its franchise  areas and throughout the United Kingdom and,  therefore,  achieve
significant  savings on the interconnection  fees it pays to other carriers.  In
addition,  using the national telecoms network gives the Company greater pricing
flexibility  and will  enable  the  Company  to design  and offer new  telephony
service  packages to its  customers,  which  management  believes  should have a
positive effect on the Company's penetration rates.

   NATIONAL BUSINESS TELECOMS

     NTL currently offers a variety of telecommunications services to businesses
located in its franchise  areas.  The Company's  local  networks are designed to
reach  entire  communities  in the  regional  areas and are  connected  to major
business parks, office buildings,  local hospitals,  universities and government
agencies.

     In  the  business  market,  NTL  positions  itself  as a  new  provider  of
state-of-the-art  communications  services,  with  broadband  capabilities  that
enable new potential  applications for businesses,  institutions and government.
The Company  offers a choice of telephony  services to its  business  customers,
from  Business  Exchange  Lines  ("BELs"),  typically  single or multiple  lines
delivered via twisted copper pair, to Enhanced  Telephony  Services  (ETS).  The
latter is delivered via a high quality  digital  connection to a customer's  PBX
based on a minimum  connection of 15 lines. The Company also offers managed data
services (FibreLink2),  Central Exchange ("CENTREX") services and its ISDN Basic
Rate Access ("BRA")  service.  The Company also actively  markets Closed Circuit
Television/Surveillance  Systems  ("CCTV")  to  local  and  public  authorities,
private developments and multi-occupancy situations.

     To date, the Company has been  successful in obtaining  telecoms  contracts
from businesses located within its franchise areas. As of December 31, 1997, the
Company had a total of 6,600 business  customers,  which represented more than a
95%  increase  over  year-end  1996.  In 1997,  the Company  provided one of the
largest  CENTREX  orders  in the UK to date -- over 600  lines to a health  care
trust in the  Company's  Luton  franchise.  The  Company  currently  provides  a
155Mbit, ATM network to a group of universities and hospitals in its South Wales
franchise as


                                       6
<PAGE>


part of the UK's "Super Janet" network.  This metropolitan area network links 13
sites with approximately 16,500 work stations (PCs), and generates approximately
2 million e-mail messages and approximately 12 million connections (web hits) to
the Internet per month.

     The  following  sets  forth the  Company's  business  customers  within its
franchise areas:
<TABLE>
<CAPTION>

                                DECEMBER 31,       SEPTEMBER 30,        JUNE 30,          MARCH 31,         DECEMBER 31,
                                    1997               1997               1997               1997               1996
                               --------------     --------------     --------------     --------------     --------------
<S>                                <C>                <C>                <C>                <C>                <C>
Total Businesses (1).....          140,000            140,000            140,000            140,000            140,000
Business Customers.......            6,600              6,100              5,460              4,360              3,375
Customer Penetration.....              4.7%               4.4%               3.9%               3.1%               2.4%
Business Lines...........           25,500             20,000             16,100             12,400              8,930
</TABLE>

-----------------------
(1)  Represents  total  estimated  businesses  in  the  Company's  six  regional
     franchise areas.

     Capitalizing  on the extended  reach of its national  network,  the Company
intends to compete  for a share of the  business  telecoms  market on a national
basis.  Management  believes  that it can build on the  strengths  gained in its
local franchise areas to approach targeted business users located in other areas
of the UK, initially  focusing on users with multiple  business  locations.  NTL
launched  its  national  business  telecoms  service  in  November  1997 and its
strategy is to target medium and large businesses,  beginning with those located
near the major urban areas currently served by the NTL national network.

     NTL has a variety of methods to connect the "last  mile" to the  customers'
premise  from the  national  network.  First,  as a  certified  national  public
telecommunications  operator  (PTO),  NTL can  readily  obtain  the  permits  to
construct telecoms  networks,  and can therefore simply build out its network to
reach  customers.  Although this is clearly the most costly,  the expense can be
justified in the case of large customers or when a significant  level of traffic
is obtained from several  customers.  Second, NTL has already been successful in
utilizing  its  significant  tower  infrastructure  to  efficiently  connect  to
customers  using  microwave  radio  links.  As a result of its long  history  in
broadcasting and other communications  businesses, NTL owns or has direct access
to  approximately  1,000 tower sites in attractive  locations all across the UK.
Microwave  radio  represents  an efficient  and reliable  method for  connecting
customer locations to the national network. Third, NTL can lease circuits on the
local networks of other service providers to connect to the customers  premises.
Although  this may reduce  the  operating  margin on a  particular  account,  it
requires no capital expense, it can often be installed  relatively quickly,  and
the  circuit can be  replaced  at a later date if a more  profitable  connection
method can be justified.

     In addition,  the Company has been awarded a license to operate radio fixed
access services at 10 GHz throughout the UK. The Company is currently undergoing
trials  of the  service.  If  the  trials  are  successful,  and if the  Company
determines to seek and deploy the  additional  capital  resources to pursue this
opportunity  and the networks are  developed,  the 10 GHz license  would further
facilitate the development of the Company's local access reach.


                                       7
<PAGE>


     As a complement to its national  business  telecoms  effort,  the Company's
Vision  Services  group  offers  CCTV and remote  monitoring  services.  Current
customers  include shopping  centers,  hospitals,  railways and prisons.  Vision
Services is also currently  developing a radio link camera system with potential
applications for emergency services, police patrols, broadcasters and inspection
workers.  Management believes that CCTV services offer the potential to increase
network traffic,  broaden the Company's product base, enhance relationships with
customers and reinforce the NTL image as a leading communications company.

   CARRIER SERVICES AND INTERNATIONAL

     NTL competes in the growing  market for  bandwidth and leased line services
as a  nationwide  wholesale  telecommunications  carrier.  The Company  provides
digital  leased lines from 2 Mbits/sec to 155  Mbits/sec,  which can be used for
voice,  data,  video and audio  traffic to major  regions  of the UK.  Customers
include fixed line and mobile  telecommunications  operators,  cable  operators,
Internet service providers,  and various  information  technology and facilities
management companies.  The Company's international  facilities license allows it
to carry international  traffic,  and NTL has recently entered into an agreement
for a 25 year lease of international  telecoms  capacity on a new  transatlantic
fiber optic cable  connecting The  Netherlands,  Germany,  the UK and the United
States.  NTL is also expanding its product  portfolio to include virtual private
networks,  managed data networks,  ATM and frame relay services and  multi-media
services.

     NTL first  entered  the trunk  communications  business in 1993 by building
digital  networks for Westcountry  TV,  Yorkshire Tyne Tees  Television,  Anglia
Television  and S4C to link  their  independent  studio  facilities  with  NTL's
transmission  facilities.  In 1994,  NTL broadened the scope of this business by
expanding into competitive trunk  communications  when it commissioned a network
to link Vodafone's main cellular telephone exchanges.  This network employed SDH
technology  and was the first of its kind in the United  Kingdom.  NTL has since
expanded its network's  geographic  scope and  capacity,  increased its share of
Vodafone's  traffic and added a number of new  customers  including  Orange Plc.
("Orange"), the Civil Aviation Authority and Birmingham Cable.

     The expansion of the Company's  national digital network allows the Company
to offer  state-of-the-art  network  alternatives  for large  carriers  of data,
including  cable/telephony  companies,  as well as  managed  network  facilities
ensuring  high levels of  availability  and  service.  The Company  believes the
integrated network offers other potential  customers a viable alternative to BT,
Cable & Wireless  Communications  ("C&WC") and Energis in the  provision of long
distance services throughout the United Kingdom.

   RADIOCOMMS

     The Company's Radio Communications group ("RadioComms") offers a full range
of services  including the design,  build and operation of radio based networks,
and the  provision of  infrastructure  and support  services to  customers  with
"mission critical" communications needs.


                                       8
<PAGE>


     RadioComms  is  involved  in  two  main  activities-mobile   communications
maintenance  support and facilities  leasing.  RadioComms  includes the business
operations of DTELS,  the emergency  services  communications  business that NTL
Group Limited acquired from the Home Office of the United Kingdom  Government in
1994.  In  addition  to network  maintenance,  the  Company  provides a range of
installation  and  commissioning  services  for new  network  design  and  build
projects.  This division serves an estimated 70% of the radio  installation  and
maintenance market for police and fire services in England and Wales, as well as
other major customers such as HM Coast Guard and Prison Service. These customers
provide a steady source of revenues for NTL, but are also very effective selling
references  for  business   telecoms  and  demonstrate  NTL's  track  record  of
reliability.

     The Company has been engaged by Ericsson  Telecommunications Ltd. to assist
in the design,  planning and procuring of radio sites for the Mercury  One-2-One
mobile telephone network in the United Kingdom.  In addition,  during 1997, Page
One Communications,  UK's second largest paging operator, chose NTL's RadioComms
group to project manage the roll-out of its new paging  network,  including site
acquisition, installation and commissioning of several hundred sites nationally.

     The  major  growth in the radio  communications  market  over the next five
years is  expected  to arise from the  outsourcing  of  maintenance  services by
public and private network operators.  The Company intends to obtain maintenance
service   customers   by   targeting   those  with  a  national   or  wide  area
infrastructure.  Management  believes that the  facilities  leasing  market will
continue to grow with the expanding market for the provision of mobile and fixed
wireless  telephony  services.  The  Company  currently  intends to  continue to
maximize  the  use  of its  sites  through  effective  marketing,  provision  of
end-to-end services and its continued responsiveness to customer needs.

   SATELLITE SERVICES

     NTL  provides  worldwide  connectivity  and  offers  a range  of  satellite
uplinking  services to a number of  satellites,  including  ASTRA 1C,  INTELSAT,
EUTELSAT  and Orion.  The Company  provides  connections  for clients  requiring
video,  digital audio and data services.  Customers include CBS, United Artists,
Turner Broadcasting  Systems and Virgin. This division operates three teleports,
in  Winchester,  Croydon and central  London,  which are  connected by fiber and
radio  circuits  and provide  uplinking  services to a number of United  Kingdom
cable television programming suppliers.  This group also offers an international
gateway  service,  which is capable of providing  long  distance  and  corporate
communications.


   NTL INTERNET

     NTL Internet provides  residential,  wholesale and business Internet access
and support services,  consulting and systems integration services, and Intranet
design and  implementation.  In 1995, the Company  launched its Internet  access
service as a  national  service  throughout  the United  Kingdom.  This  service
provides  access to the World Wide Web to  customers in and


                                       9
<PAGE>


outside  its  Regional  Areas.  NTL  Internet  provides  Internet  service  on a
wholesale  basis  to other  Internet  service  providers  as well as on a retail
basis.

     NTL Internet has become one of the fastest growing Internet carriers in the
UK. The Company currently  services more than 100,000 Internet users,  primarily
through its wholesale  relationships with Virgin.Net,  Which? Online and others.
The Company  also  provides  the Internet  service for cable  operators  such as
Diamond Cable and Telecential.

     In 1996, the Company  established the Virgin.Net  joint venture with Virgin
Communications Limited ("Virgin"), which began offering service in November 1996
under the name Virgin.Net. The joint venture is owned 49% by a subsidiary of the
Company  and  51% by  Virgin  and is  intended  to  offer  Internet  access  and
interactive services to United Kingdom consumers and small office/home users. In
addition, Virgin.Net has contracted NTL Internet to provide the dial-up national
network and back office  structure  necessary for access to  Virgin.Net  and the
Internet.  In 1997,  Virgin.Net was awarded  "Internet  Service  Provider of the
Year-Dial-up" by Internet magazine.

     As with the Company's local telephony  business,  management  believes that
access to the national  telecoms  network will have  strategic  benefits for NTL
Internet and the Company's  Internet  services  businesses.  Management  expects
utilization  of the  Company's  national  telecoms  network to reduce  operating
costs, increase flexibility and national reach and improve the overall marketing
and product opportunities of NTL Internet.

BROADCAST SERVICES

     The Company's  Broadcast Services group includes the original core business
of NTL Group Limited which has been providing  television and radio broadcasters
with broadcast transmission services for more than 30 years. This group designs,
installs,  operates and  maintains new  transmitter  networks and has a spectrum
planning  service to plan the  coverage of  television  and radio  networks.  It
operates a  national  infrastructure  in the UK of over  1,200  owned and shared
transmission  sites which  deliver  broadcast  signals for ITV,  Channel 4, S4C,
Channel 5, Teletext and many of the United Kingdom's independent local, regional
and national  radio  broadcasters.  In addition to  transmission  services,  the
Broadcast  Services  division  markets  value  added  services  to its  existing
television  customers including additional  monitoring services,  reserve system
services and contribution/ distribution services.

     NTL has been  involved  in  broadcast  television  since the 1950s  when it
designed and built the television  transmission  system for the United Kingdom's
first independent  commercial  television network.  The Broadcast Services group
provides the Company with a stable  contracted  revenue stream from a variety of
customers  through long-term  contracts  generally with eight to ten year terms.
The projected  total value of the Company's  currently  contracted  revenues for
national  telecoms and broadcast  services from January 1, 1998 through December
31, 2007 is approximately 783 million pounds sterling.


                                       10
<PAGE>


     The foregoing  projection of the expected  approximate  revenues receivable
pursuant to existing  contracts,  which  includes  Channel 3,  Channel 4 and S4C
transmission  contracts,  is based on various factors and was derived  utilizing
several  assumptions.  Important  assumptions and other  important  factors that
could cause  actual  revenues to differ  include,  among other  things,  general
economic  conditions,  the  regulatory  regime  prevailing  from  time to  time,
adherence to the construction,  service and other obligations of such contracts,
absence of labor or weather  difficulties,  absence  of  defaults,  particularly
payment defaults, by the counter-parties to such contracts or the termination or
non-renewal of such contracts.  The Company assumes no obligation to update this
projection  to reflect  actual  revenues  received  by the  Company,  changes in
assumptions or changes in other factors affecting the information presented. The
contracts  with the ITV companies  and Channel  4/S4C  terminate on December 31,
2002.  Although  historically  the ITV  companies and Channel 4/S4C have renewed
their  contracts  there can be no assurance that they will do so upon expiration
of the current contracts, that they will not seek to obtain more favorable terms
or that they would not seek to obtain from third parties all or a portion of the
transmission  services currently provided by the Company. The loss of any one of
these  contracts  could have a material  adverse  effect on the  business of the
Company.

   TELEVISION BROADCASTING

     The Company currently provides broadcast transmission services for three of
the five national  television  channels in the UK.  Channel 3, Channel 4/S4C and
Channel 5 are all currently broadcast from NTL's network of over 1,200 owned and
shared transmission sites. Two of the four recipients of the Digital Terrestrial
Television ("DTT")  multiplexes awarded to date have selected the Company as the
preferred  supplier of  transmission  services.  The  Company  has  successfully
concluded contractual arrangements with these multiplex operators.

   RADIO BROADCASTING

     The  Broadcast  Services  division also offers a range of services to local
and  national  radio  broadcasting  licensees in the United  Kingdom  including:
target service area planning; site location,  installation and construction; and
equipment selection,  procurement,  operation,  monitoring and maintenance. This
division offers total broadcast  contract services  ("TBCs"),  where it designs,
builds, owns and maintains the operator's transmission facilities,  and facility
management  contract  services  ("FMCs"),   where  it  maintains  customer-owned
equipment  and  administers  the  operation  of  the  transmission  service.  It
maintains  over  60  TBCs  and 50  FMCs.  Classic  FM is  one  of  two  national
independent radio networks served by the Company. In 1997, NTL was successful in
winning eight-year  transmission  contracts with all of the nine new independent
regional  radio  licensees  that  commenced  service in 1997.  NTL also recently
renewed,  for  periods  of up to ten  years,  all  but  one  of the 24  expiring
contracts of its existing customers.

     The Company believes that it has positioned itself to be one of the leading
suppliers  of  Digital  Audio  Broadcasting  ("DAB")  services.   In  1995,  NTL
demonstrated   the  United  Kingdom's


                                       11
<PAGE>


first  commercial radio DAB multiplex.  Currently,  the Company is engaged in an
extended DAB marketing trial in London with the support of key radio  customers.
The  Broadcasting  Act 1996 created a licensing  regime for digital  terrestrial
sound broadcasting and raises the prospect of full-time  commercial DAB service,
which will offer CD-quality radio for the first time.

   NTL INTERNATIONAL

     NTL International,  formerly known as Nexus,  provides broadcasting systems
design, and specializes in services  associated with the design and construction
of radio and television studio centers and technical facilities.  These services
include  installation,   commissioning,   equipment  procurement,  training  and
consultancy  for projects  ranging from  production and post  production  studio
facilities to full turnkey systems  involving  transmitter  network planning and
installation.

     NTL  International  was  responsible  for  designing and  constructing  the
international  broadcast  facility for NBC at the Barcelona  Olympic Games,  for
which it received an Emmy award in recognition of the project. NTL International
also  designed  and  built  a 60  channel  digital  audio  play-out  center  for
Music-Choice-Europe,  a digital music  supplier which is uplinked by the Company
and distributed throughout Europe by satellite.

BUSINESS STRATEGIES

     Management's   objective   is   to   exploit   the   convergence   of   the
telecommunications,  entertainment and information services industries to become
a premier  new era  communications  company in the UK,  which  will offer  these
services to residential,  business and wholesale  customers on a national scale.
Management  believes that NTL will be able to deliver its strategy  based on its
entrepreneurial  approach,  innovative marketing,  state-of-the-art  network and
technical  excellence.  The Company is currently employing several strategies to
achieve its objectives:

     Installing Flexible Integrated  Full-service Networks. This strategy allows
the  Company  to  pursue  four  revenue  streams-residential  cable  television,
residential telephony,  business telecommunications services and Internet access
services-without   significant   incremental  cost  in  fixed  investment.   The
integrated  full-service networks provide a high speed,  high-capacity,  two-way
communications  pathway  to the  consumer  that is  capable  of  delivering  new
services  which  may  emerge  from  the   convergence   of   telecommunications,
information and entertainment. Such embedded flexibility would also allow NTL to
adapt its national  network to offer Fram Relay and  Asynchronous  Transfer Mode
(ATM).

     Focusing on Target Market Segments. The Company believes that tailoring its
services to the needs of its customers  will increase the  penetration  of these
services.  Examples  of  tailored  services  include  the  development  of local
television  programming  and  advertising  and  of  private   telecommunications
networks  geared to  "captive"  local  organizations  such as  governmental  and
educational  institutions.  NTL has a track record of differentiating  itself by
providing  flexible and customized  solutions to meet its customers'  individual
requirements.


                                       12
<PAGE>


     Maximizing  Network  Capacity  Utilization.  The fixed  cost  structure  of
building   communications  networks  allows  the  Company  to  gain  significant
operating leverage from incremental services provided over its networks.  In its
local  franchises  areas,  the  Company's  strategy is to maximize  gross profit
contribution  per home passed,  rather than revenue per customer,  by increasing
overall  penetration  of the  number  of  services  provided  over its  network.
Examples of this strategy are the development of bundled product  offerings that
encourage subscriptions to multiple services,  multiple television pricing plans
that appeal to differing and distinct market segments and price points, and more
"a  la  carte"  and   transaction-oriented   services  which  increase   network
utilization.  This  strategy  resulted  in the design and launch of the  Choices
marketing  packages,  which increased the Company's overall penetration rates as
well as its percentage of dual subscribers.

     The Company's  strategy in national  telecoms is to continue to expand both
the geographical reach and breadth of services  provided,  so as to increase the
potential market of national business and wholesale  customers.  In its national
business  telecoms,  management is seeking to increase  network  utilization  by
identifying  cross-selling  opportunities  within NTL's  existing  customer base
through  new  services  that   capitalize  upon  the  convergence  of  telecoms,
entertainment and information services. For example, NTL views its CCTV activity
as a vehicle for increasing  network  utilization by facilitating  and improving
the quality of video transmission between sites.

     Providing Superior Customer Service.  The Company believes customer service
and attentiveness to the needs of customers are critical to the continued growth
of its  residential  and  business  services and places  great  significance  on
consistently  servicing  customer  requirements.  The Company operates  multiple
customer call centers,  including three large centers in Luton,  South Wales and
Central  Scotland.  Calls  are  answered  24 hours a day,  365 days a year.  The
customer  call  centers  currently  employ  approximately  200  people,  who are
specially  trained to deal with  customers'  inquiries and needs with respect to
the  Company's  various  products and  services.  Each  customer  representative
attends a four week in house specialized  training program,  which is focused on
increasing a representative's  knowledge of NTL's corporate culture and products
and providing  the  individual  with  specific  sales skills as well as a better
understanding  of the level of service  expected to be provided to potential and
existing  customers  on  an  ongoing  basis.  Finally,  as  NTL  recognizes  the
importance of the installation in the customer's satisfaction with the services,
management has focused on monitoring  installers'  performance closely to ensure
compliance with strict quality  standards and scheduling  installations  to suit
customers' requirements.

     Developing  Advanced  Management  Information  Systems.  NTL believes  that
advanced management information systems are critical to effectively, efficiently
and accurately serving its customers.  The Company uses proprietary  software to
handle its subscriber management functions from one central location. The system
uses  Windows-based  software  and can  handle  both  business  and  residential
customers as well as telephony and CATV on a single  platform.  It is capable of
managing the Company's  tariff and discounting  structures,  and will also allow
for the  introduction of new telephony and CATV services,  such as 0800 numbers.
Additionally,  the system  provides  the  functionality  to support the customer
representatives inquiry handling and contributes to NTL's high level of customer
service. For example, customer representatives have


                                       13
<PAGE>


on-line access to customers' billing, payment and subscription histories.

     Gaining  Cost   Efficiencies.   The  Company  gains  cost  efficiencies  by
centralizing  certain  services  provided to the Regional Areas in the Company's
head  office in  Farnborough.  Examples  include  network  planning,  marketing,
information systems, legal affairs and overnight network monitoring and customer
service.  Alternatively,  those cost centers which are critical to  penetration,
customer  service,  and  retention  are  located  as  close to the  customer  as
possible. Examples include construction management, sales, customer service, and
network maintenance, which are all located in each of the Regional Areas. In its
continuing  effort to gain cost  efficiencies,  in 1997 the Company  commenced a
reorganization  of certain of its  operations;  in order to serve customers more
efficiently,  the  Company  is in the  process  of  consolidating  the  Customer
Operations  departments currently serving its three English franchise areas into
one department, based in Luton.

MARKETING STRATEGIES

     The Company increases its customer base and improves market penetration for
its  services by  implementing  separate  marketing  strategies  tailored to its
residential  and  business  customers.  The  Company  believes  that  separately
marketing to residential and business  customers based on the specific  benefits
they  receive  from  the  Company's  services  is the  most  effective  means of
maximizing the Company's customer base.

   RESIDENTIAL MARKETING

     The Company  markets its local  telecoms and  television  service under the
brand name  CableTel  and  promotes  its brand image as an integral  part of the
emerging information  super-highway.  The Company is constructing its integrated
full-service  fiber optic  networks in order to bring a wide variety of services
to the consumer.  This branding strategy includes the following  concepts in the
Company's advertising, literature and other materials:

     -    positioning NTL as a local telephone company;

     -    introducing  alternative telephone service,  multi-channel  television
          and  Internet  access as the first of an  expanding  array of services
          which will be carried on the network in the future;

     -    emphasizing  that the Company is bringing  "more choice" in television
          viewing,  "better  value" in telephone  service and "state of the art"
          communications technology in providing access to the Internet;

     -    demonstrating the Company's  commitment to quality,  value and service
          in its  offerings  as  evidenced  by its Code of Practice  approved by
          OFTEL;

     -    building  interest,  awareness,  and  credibility  for  the  Company's
          services.


                                       14
<PAGE>


     The Company employs an extensive  direct  marketing and selling approach to
gain customers. The Company begins to build a relationship with customers before
construction  commences  in a given area by closely  coordinating  its  upcoming
activities with local government  authorities and community groups and eliciting
feedback on ways to minimize disruptions and inconvenience. Information packages
and construction  notices are delivered to each household prior to construction.
The Company's consumer affairs advisors personally visit affected  neighborhoods
and households in order to meet the special needs of the residents.  All written
and telephonic  inquiries from residents are input by name into a  lead-tracking
database,  so that when areas are released to  marketing,  the  Company's  sales
personnel  have  complete  customer  profiles of the  residents in their selling
area.

     The Company  initiates  its  marketing in an area by direct mail,  which is
followed  by a  personal  appointment  with a  Company  sales  advisor.  In some
regions,  the  sales  visit  is also  preceded  by the  hand  delivery  to every
household  of a  videotape  (estimated  to cost  approximately  45p each)  which
describes  NTL and its  services.  All  information  regarding  both current and
future sales  opportunities  is entered  into the  database,  and current  sales
information  is updated in the Company's  provisioning,  billing and  subscriber
management system. Unsold household data is maintained for future telemarketing,
direct mail, and re-marketing by the sales force.

     Management is currently  reviewing several  alternative sales and marketing
techniques.  For example, NTL has launched telemarketing trials in its Luton and
Wales  franchise areas to existing and new  residential  customers.  To existing
customers,  NTL  promotes  its  second  telephone  line,  second set top box and
channel  upgrades.  In  addition,  the  Company  offers a "Friend  get a Friend"
program under which it offers the current  subscriber and its friend one month's
free line rental.

     As an additional service, the Company launched pay-per-view services to its
customers  in March 1998.  The Company has  entered  into a joint  venture  with
Telewest,  General  Cable and Diamond  Cable for the  provision  of a cable-only
movie,  sport and event  pay-per-view  television  service called Front Row. The
joint  venture  comprises  nearly 50% of the UK cable  television  industry  and
represents  the  alternative  to BSkyB's  dominant  position in movie and sports
rights for pay television.  The pay-per-view  service will be available to other
cable  operators  subject to agreeing  terms of  carriage.  Front Row has signed
content  output  contracts  with  major  Hollywood  studios,   including  Warner
Brothers,  Sony Pictures  Entertainment  (Columbia/Tristar)  and the Walt Disney
Company (Walt Disney Studios, Miramax, Hollywood Pictures and Touchstone).

     Additionally,  as part of NTL's focus in ensuring and  maximizing  customer
retention,  the Company  usually charges an  installation  fee (currently  49.99
pounds sterling including VAT), which is often discounted.  It also adopts a one
year service  agreement and encourages  direct debit payment as the  "standard,"
although no discount is offered for such method of payment. The installation fee
and one year contract provide qualifying  mechanisms to ensure that the customer
understands and recognizes the value of the services, while the encouragement of
direct  debit  payment  helps  to  avoid  non-payment  or  non-payment   related
cancellations.


                                       15
<PAGE>

     Bundled Product  Offerings.  The Company's  product and pricing  strategies
emphasize choice, value, and quality and are designed to encourage  subscription
to  multiple  services  and  maximize  long-term  customer  retention.  With its
integrated  dual  service  network,  the  Company has the  opportunity  to offer
bundled telephony and CATV services. Following the success of a trial in certain
of the  Company's  franchises,  in  November  1996,  the Company  announced  the
introduction  of a  new  promotional  pricing  and  packaging  structure  called
"Choices" for its  telephony  and CATV  service.  The First Choice entry package
offers the customer the Company's telephone service, which includes call waiting
and CableTel 1471 (call return feature) at no extra charge, as well as a limited
selection of television  channels which includes all the  terrestrial  channels,
four popular CATV channels and one NTL exclusive  local TV channel.  The current
price for First Choice is 8.87 pounds sterling,  which is approximately the same
as BT's current line rental charge.  This means that NTL's customers can receive
their  telephone  line and sample cable  television for the price of the monthly
telephone  line rental alone from BT. The customer is  encouraged to choose from
several  genre-based  tiers of mini packages  called Choice  Collections and the
Popular  Collection,  each of  which  includes  a  number  of  additional  cable
channels.  The  Premium  Choices  packages  enable the  customer  to select from
several  premium  channels  each of which  can be  purchased  for an  additional
charge.

     The Company believes that this type of bundled and flexible service package
is responsive to the desires and tastes of its customers.  The packages give the
customer  the  opportunity  to trade up or down rather than churn.  NTL seeks to
gain incremental  revenues by pulling customers through to higher tier packages.
The  promotional  offer of  Sample  Choice  serves  as a shop  window  for other
incremental  services.  In  addition,  the Company  encourages  subscription  to
multiple services by offering a "two for one" discount on installation charges.

     Value for Money. The Company also emphasizes the "value" of its residential
telephone service. By bundling its telephone service with a limited selection of
cable channels for the price of BT's telephone line rental, the Company believes
that it offers its customers greater value for their money.

     In  addition  to these  savings  incentives,  using the  national  telecoms
network should give the Company greater pricing  flexibility and therefore would
enable the  Company to design and offer new  telephony  service  packages to its
customers. By integrating its national telecoms network with its local networks,
the Company will be able to bypass the  wholesale  long distance fees charged by
BT and  other  carriers  for  carrying  calls to and from  the  Company's  local
telephone  networks.   This  increased  flexibility  positions  the  Company  to
introduce  more  volume-oriented   and/or  geographically  based  calling  plans
designed to give the customer even greater choice and value. Management believes
that  increased  ability  to  design  attractive  marketing  plans and to better
package  services  versus its  competitors  should have a positive effect on the
Company's penetration rates.

     Internet Access and Other  Interactive  Services.  As part of the Company's
multiple services product  strategy,  NTL Internet offers retail Internet access
at  speeds  of up to 56.6  Kbits/sec.  Particular  emphasis  is being  placed on
jargon-free  customer  service  and  support.  The  Internet-access  service  is
currently  being  offered  for a monthly  charge of 9.95  pounds  sterling.  The
Company is testing


                                       16
<PAGE>


the provision of Internet  access at  substantially  higher speed through either
Ethernet access (10 Mbits/sec.), cable modems (4 Mbits/sec.) or ISDN access (128
Kbits/sec.).

   BUSINESS MARKETING

     In  the  business  market,  NTL  positions  itself  as a  new  provider  of
state-of-the-art  communications  services,  with  broadband  capabilities  that
enable new potential applications for businesses, institutions and government.

     The Company's sales strategy for the business market employs a consultative
direct  marketing and sales  technique.  It begins with detailed  market surveys
designed to quantify  the current and future needs of targeted  businesses.  The
Company's sales advisors call on potential customers with pertinent  information
regarding the customer and with all products in the Company's portfolio at their
disposal.  Regional customer service centers have been set up to ensure that the
needs of business customers post-sale can be met effectively. Service quality is
demonstrated  by the Company's  commitment to service  guarantees  and standards
which meet or exceed the best competitive practices,  and is ensured through the
reliability of the Company's new, state-of-the-art network.

     Business  Telephony  Services.  The  Company  offers a choice of  telephony
services to its business customers:  Business Exchange Lines ("BELs"), typically
single or  multiple  lines  delivered  via  twisted  copper  pair,  or  Enhanced
Telephony  Services.  The  latter  is  delivered  via  a  high  quality  digital
connection  to a  customer's  PBX  based on a  minimum  connection  of 15 lines.
Enhanced  features  and  facilities,  such as Caller  Line  Identification,  are
available on both services.  Additional features,  such as Direct Dialing Inward
("DDI"),  are available only on the Enhanced Telephony Service.  Two usage rates
are  currently  available,  offering  customers a choice based on their  calling
patterns.  Both usage and rental charges are competitively priced, and automatic
volume discounts give further savings to customers.

     The Company  based its initial  entry into the market on its core  business
telephony  products and has since  introduced  the first  managed data  service,
FibreLink2, CENTREX services and its ISDN BRA service. The Company also actively
markets Closed  Circuit  Television/Surveillance  Systems  ("CCTV") to local and
public authorities, private developments and multi-occupancy situations.

     CENTREX  services  give  customers  the  equivalent  of their own telephone
system (PBX or key system)  without the expense of having to  purchase,  operate
and maintain  one. The Company  believes  that the CENTREX  market in the United
Kingdom is currently underserved,  especially among small and medium businesses.
The  pricing of CENTREX  services  is based on value  provided  to the  customer
rather than pricing  lower than  competitors.  The  Company's  CENTREX  Services
include CENTREX Select, a single site service, and CENTREX Network, a multi-site
service giving transparency of voice communications  between multiple locations.
In 1997,  the Company  provided one of the largest  CENTREX  orders in the UK to
date-over 600 lines to a health care trust in the Company's Luton franchise.


                                       17
<PAGE>


     Managed Data Services.  The Company's  offerings in this area emphasize the
immediate availability of large, flexible bandwidth circuits to meet the growing
needs of the  market,  while  meeting  the  demands  of  existing  and  emerging
standards. The Company's first managed data service,  FibreLink2, was introduced
in  January  1996  and is aimed at large  businesses  which  need  data or voice
communications  between  different  locations  and  provides  a  bandwidth  of 2
Mbits/sec.  Higher  bandwidth  services  (34-155  Mbits/sec.)  are  available on
request,  as are lower bandwidth (64 Kbits/sec.)  services.  Broadband  services
will be offered to address emerging multi-media and data-intensive applications,
with rates designed to reflect the value  provided to the customer.  The Company
currently  provides  a  155Mbit,  ATM  network  to a group of  universities  and
hospitals  in its  South  Wales  franchise  as part of the  UK's  "Super  Janet"
network. This metropolitan area network links 13 sites with approximately 16,500
work stations (PCs),  and generates  approximately 3 million e-mail messages and
approximately 20 million connections (web hits) to the Internet per month.

THE NTL NETWORKS

   LOCAL BROADBAND NETWORKS

     The Company  believes  that its  advanced  network  design is  sufficiently
flexible  to permit it to  deliver a wide  variety  of  existing  entertainment,
telecommunications  and  information  services  and  will  enable  it  to  offer
anticipated new services in the future without incurring significant  additional
construction costs to adapt its existing underground network.

     Network   Design  and   Functionality.   The  Company  is  installing   its
cable/telephone    and    telecommunications     network    using    established
state-of-the-art  technology,   deploying  fiber  optics  directly  to  business
concentrations  and residential nodes averaging 600 telephone lines or 500 homes
respectively,  and employing spare duct and  transmission  capacity in excess of
anticipated  needs. In this manner,  the Company achieves the cost  efficiencies
and rapid deployment that using standardized  equipment entails, while retaining
the  flexibility  to expand and adapt its  network  over time with  little or no
additional underground or construction investment.

     The design and  construction of a new network varies depending upon factors
including  the  number  of route  miles to be  installed,  density  of homes and
businesses,  type of surface, and the architecture of the network backbone. Each
system has been  designed  with at least one head-end and at least one telephone
switching  office.  Each  system's  head-end and telephone  switching  office is
directly  connected  to each  node  by  fiber  optic  cable.  Each  node is then
connected  to a  subscriber's  premises.  Construction  of each  system has been
planned on a  neighborhood  by  neighborhood  basis to allow revenue  generating
operations to commence in a neighborhood  as  construction of the portion of the
system serving such neighborhood is completed.

     Fiber Optics. The evolution of fiber optic technology over the past decade,
including  increases in the capacity of laser  transmitters and decreases in the
price of optical receivers,  has enabled the economic  deployment of fiber optic
cable much closer to the customer  than in  traditional  coaxial  cable CATV and
twisted  copper  pair  telephone  networks,  thereby  improving  the quality and
capacity of the CATV and  telephone  service.  The main  advantages of deploying


                                       18
<PAGE>


fiber in place  of both  coaxial  cable or  copper  wire are its  smaller  size,
greater  capacity,   freedom  from  electrical  interference,   and  significant
reduction of the requirement for periodic maintenance.  The Company is deploying
fiber to nodes serving 500 homes which are no more than several  hundred  meters
from the furthest home.

   THE REGIONAL AREAS

     The Company,  through its Local  Telecoms and  Television  Services  group,
operates 16 separate  franchises  as six Regional  Areas.  Each Regional Area is
managed  and  operated  by a  local  management  team  led by a  local  managing
director. The head-ends,  telephone switches and technical and customer services
facilities  in the  Regional  Areas are  connected  by a  wide-area  fiber optic
network to the Company's National Network Management Center.

     Central Scotland.  The Central Scotland Regional Area covers nearly 500,000
homes and includes Glasgow,  the fourth largest  metropolitan area in the United
Kingdom  and the  largest  City in  Scotland.  It is  generally  considered  the
commercial  and  industrial  center  of  Scotland  and has a higher  density  of
households per kilometer of cable communications network than the United Kingdom
as a whole.  The Company offers locally  orient and originated  programming  and
advertising.

     South Wales.  South Wales is the commercial and industrial  center of Wales
and one of the United  Kingdom's  major  contiguous  urban areas.  Cardiff,  the
capital of Wales,  Swansea  (in West  Glamorgan)  and Newport (in Gwent) are the
region's major cities. The Company's licenses in South Wales cover approximately
540,000 homes and a substantial portion of the Welsh business community.

     Suburban London (Surrey and Luton).  The two Suburban London Regional Areas
comprise the Surrey and East  Hampshire  license area to the southwest of London
totaling  136,000 homes,  and the Central and East  Hertfordshire  and North and
South  Bedfordshire  (Luton)  license  areas to the  north of  London,  totaling
approximately  348,600  homes.  The Company  believes that the licenses in these
commuting residential communities offer an attractive blend of household density
and demographic  characteristics  and above average levels of disposable income.
Located  between  Heathrow and Gatwick  international  airports,  the borough of
Guildford  and  surroundings  in Surrey  have become the  headquarters  for many
multinational high technology companies (including the cable/telephone operators
Telewest  and  Partners,  as well as  British  Airways,  General  Motors and the
General  Electric  Company).  To the north of London,  Luton is a commercial and
industrial  center hosting such  manufacturers as British Aerospace and Vauxhall
(General Motors' United Kingdom  division) and is the home of the fourth largest
international airport in the South of England.

     West  Yorkshire.  Covering over 138,000 homes,  Kirklees is one of the five
districts that constitute the West Yorkshire region in north central England and
is comprised of the towns of Huddersfield,  Batley,  Clackheaton and Dewsbury. A
manufacturing  area known for textiles and  engineering  products,  Kirklees has
recently  begun to develop an active service sector which has helped to create a
stronger economy.  Kirklees is geographically located between three major


                                       19
<PAGE>


cities in the United Kingdom,  Leeds,  Sheffield and  Manchester.  Each of these
cities already has an established cable network.

     Northern Ireland.  The Northern Ireland franchise,  covering  approximately
530,000  homes,  was the  largest  remaining  cable  television,  telephone  and
telecommunications  franchise to be awarded by the ITC. The franchise covers the
entire  socio-economic  area of Northern Ireland,  with approximately 40% of the
population  located in the Greater  Belfast  area in the east and another  major
population  area centered on  Londonderry  in the west.  Although the economy of
Northern Ireland has traditionally been oriented more towards primary industries
such as  agriculture,  forestry and fishing than the United  Kingdom as a whole,
service  industries now employ over 70% of the population.  The Company believes
that  because the birth rate in the area is higher than the United  Kingdom as a
whole,  the population is younger and household sizes are larger than the United
Kingdom average. The Company's experience and market research has shown that the
presence of children in a household  significantly  increases the  propensity to
subscribe to CATV.

     Network Architecture.  The Company's cable network is being built with four
2-way  channels  having an initial  capacity of 750 MHz,  which is sufficient to
carry over 60 analog  channels of  television.  With digital  compression of the
television  signal,  many  more  channels  can be  transmitted.  The  system  is
upgradeable to 1 GHz. Generally,  a maximum of one amplifier is required between
the head-end  optical  receivers  and a home.  Traditional  cable  systems often
employ  "cascades" of more than 5 amplifiers  which degrade  signal  quality and
increase the chances of system failure.

     NTL's local  telecommunications  network  uses a SDH  redundant-ring  based
architecture,  which improves the Company's  ability to flexibly deploy capacity
and further enhances system  resilience.  Telephone signals are carried from the
node to the home over  traditional  copper pair, over a shorter distance than in
traditional telephone networks,  which improves signal quality and allows higher
bandwidth  services  to be more  easily  deployed.  To connect  its  residential
customers, the Company uses a "dual drop" consisting of "Siamese" coaxial cable,
capable of transmitting 1 GHz of bandwidth, and two copper twisted pairs capable
of providing two telephone  connections.  Large business customers are connected
to the telephone network directly through fiber optic cable.

   NATIONAL TELECOMS NETWORK

     The  Company's  national  network was  designed  specifically  for the high
volume  telecommunications  market in the UK and it  incorporates  many customer
sites directly into the backbone network.  Expertise in designing and installing
this  network  was gained  through  nearly 40 years of managing  its  television
transmission  network. The NTL national network covers approximately 1,500 route
miles and 40,000 fiber miles across  England,  Scotland and Wales.  During 1998,
the Company  plans to extend the network to include  the first  resilient  fiber
connection between Northern Ireland, the Republic of Ireland, and England.


                                       20
<PAGE>


     The network  consists of two fully redundant,  SDH digital  fiber/microwave
networks.   The  major  fiber  routes  are  complemented  with  microwave  radio
connections  which  increase the  capacity  and reach of the network.  SDH is an
advanced technology which is being increasingly adopted by the telecoms industry
for the high speed  transmission of voice,  data and video. The Company believes
that SDH technology  improves  network  reliability and performance and provides
greater flexibility than conventional network architecture. Provision speeds are
also  generally  higher with SDH because it is remotely  driven by software.  In
addition,  network availability,  reliability,  management, and routing are also
superior to conventional  network architecture because signals are automatically
re-routed to the best path available if another is degraded. Management believes
that NTL has a  competitive  advantage  over other  carriers such as BT and C&WC
because  SDH  technology  has been built in its  networks  from the start,  thus
avoiding integration  problems with older technology.  On its 62 microwave radio
routes, the Company uses primarily Nera SDH digital microwave radios.

     The NTL  national  network  has been  designed  with  significant  existing
capacity as well as the ability to efficiently  increase capacity in the future.
The fiber optic backbone  network  consists of fiber optic cable which generally
contains 24 pairs (48 fibers),  each pair providing 16 x 155Mbits/sec  (STM-16).
NTL has also  provided  for spare fiber  optic pairs as well as duct space.  For
example,  the trunk route specification  provides for two large ducts, each with
capacity for 4 sub-ducts,  only one of which is currently used.  Therefore,  the
network capacity can be increased by a further 7 times with minimal  incremental
capital cost.

     In an effort to exploit synergies between its local and national  networks,
the Company  created its  engineering  support  division in 1997.  This division
centrally manages,  monitors,  and operates both the local and national networks
from a combined network management center. From one location, NTL operators will
be able to remotely  monitor the  networks,  identify  faults and contact  local
field  operators  for  repair  (if  necessary)  and  maximize  network  capacity
utilization by accessing  information about both the local and national networks
simultaneously.

   NATIONAL BROADCAST TRANSMISSION NETWORK

     The Company's television  transmission network consists of over 1,200 owned
and shared  transmission  sites, with towers ranging from fifteen feet to nearly
twelve hundred feet in height.  The division's  transmission tower at Emley Moor
in Yorkshire is the United  Kingdom's  tallest  free-standing  structure at over
1,000 feet. These towers are complemented by other  transmission sites and relay
stations situated throughout the United Kingdom.

     In addition to the transmission sites owned by this division, this division
also shares sites  formerly  held by the BBC (now held by Castle  Transmission),
allowing it to complete its nation-wide  coverage. In all, the Company maintains
over 2,000  transmitters,  currently  monitored  from four regional  centers and
maintained by 22 strategically positioned service centers.

     The transmitters of the Broadcast  Services division range in size from a 2
watt  repeater  which serves a small  village to 500 kilowatt main stations that
cover large  metropolitan  areas.  All of the transmitters are analog and can be
divided  into two  categories,  solid state  circuitry  and


                                       21
<PAGE>


klystron tube. The klystron tube  transmitters have been manufactured by Pye and
Marconi,  while the solid state units were manufactured by Harris, all reputable
manufacturers  of  transmission   equipment.   Klystron   tube-type   television
transmitters  have a  useful  life of 20 to 25  years,  while  the  solid  state
transmitters  can last well  beyond this time  frame.  Solid state  transmitters
require less maintenance than klystron transmitters but are not available in the
high power capacity that is needed to cover the major metropolitan areas.

     In addition,  this division has built and currently  operates and maintains
radio transmission facilities for a number of independent local radio operators.
These  facilities  share  components  of the Company's  television  transmission
network infrastructure.

PROPOSED PARTNERS ACQUISITION

     On February 5, 1998,  the Company  entered  into an  Agreement  and Plan of
Amalgamation   (the   "Agreement")   with  Comcast  UK  Cable  Partners  Limited
("Partners").  Under the Agreement,  Partners'  shareholders will receive 0.3745
shares of the  Company's  Common Stock for each share of Partners  Common Stock.
Based on the  closing  price of the  Company's  Common  Stock on the date of the
Agreement, the transaction is valued at approximately $600 million.

     The  Agreement  contains  provisions  such that if the  purchase  price per
Partners'  share falls below  $10.00,  Partners has the right to  terminate  the
transaction,  subject to the Company's  right to adjust the exchange  ratio such
that  Partners'  shareholders  would receive an amount of the  Company's  Common
Stock  having  a  value  of  $10.00  for  each  Partners  share.  Under  certain
circumstances,  the  consideration  payable  to  Partners'  shareholders  may be
adjusted  based on the proceeds of the potential  exercise of certain  rights of
first refusal with respect to Partners'  interests in the London and  Birmingham
operations described below. Completion of the transaction is subject to a number
of closing conditions  including regulatory  approvals,  shareholder approval by
the  Company  and  Partners  and  consents  from  their   respective  banks  and
bondholders.

     NTL believes that the acquisition of Partners will provide the Company with
the opportunity to achieve certain strategic and financial  benefits  including:
(i) improved operating performance and reduced operating costs, (ii) an enhanced
return on its  national  telecoms  assets  through  increased  network  capacity
utilization,  (iii)  increased  penetration  in the national  business  telecoms
market by expanding its local presence and  increasing its geographic  coverage,
and (iv) benefits of scale in equipment procurement and programming acquisition.

PARTNERS

     Partners was  incorporated  in 1992. As of December 31, 1997,  Partners had
interests in four operations (the "Partners  Operating  Companies"):  Birmingham
Cable Corporation  Limited,  in which the Partners owns a 27.5% interest,  Cable
London PLC, in which Partners owns a 50.0% interest,  Cambridge  Holding Company
Limited,  in which  Partners owns a 100% interest and two companies  holding the
franchises for Darlington and Teesside,  England,  in which Partners owns a 100%
interest.


                                       22
<PAGE>


     The  Partners  Operating  Companies'  systems  are  reported  to  have  the
potential to serve  approximately  1.6 million homes and the  businesses  within
their franchise areas when their build-out is complete. As of December 31, 1997,
Partners'  reported that the Partners  Operating  Companies' systems passed more
than 1,197,000 homes or approximately 75% of the homes in their franchise areas,
and served  approximately  360,000 residential  telephony  subscribers,  298,000
cable subscribers and 11,400 business telephony subscribers.

COMPETITION

     The  Company  faces  significant   competition  from  established  and  new
competitors in the areas of residential telephony,  business  telecommunications
services  and cable  television.  The Company  believes  that  competition  will
intensify   in   each   of   these   business   areas,   particularly   business
telecommunications.

     Residential Telephony.  The Company competes primarily with BT in providing
telephone  services  to  residential  customers.  BT,  formerly  the only  major
national PTO in the United Kingdom,  has an established  market presence,  fully
built  networks and resources  substantially  greater than those of the Company.
According to OFTEL, at March 31, 1997, nearly 90% of United Kingdom  residential
telephone  exchange line customers are customers of BT. The Company's  growth in
telecommunications  services,  therefore,  depends  upon its ability to convince
BT's  customers  to switch to the  Company's  telecommunications  services.  The
Company  believes  that value for money is currently  one of the most  important
factors  influencing the decision of United Kingdom  customers to switch from BT
to a  cable  telecommunications  service.  BT  has,  however,  introduced  price
reductions in certain categories of calls and, due to regulatory price controls,
BT  will  be  making  further  reductions  in  its  telecommunications   prices.
Accordingly,  although the Company intends to remain competitive,  in the future
it may be unable to offer  residential  telephone  services  at rates lower than
those offered by BT. In such case,  the Company may  experience a decline in its
average  per  line  residential  telecommunications  revenues,  may not  achieve
desired penetration rates and may experience a decline in total revenues.  There
can be no assurance that any such decline in revenues or penetration  rates will
not adversely  affect the Company.  In addition to BT, other  telecommunications
competitors  which may have  substantially  greater  resources than those of the
Company could prevent the Company from  increasing its share of the  residential
telecommunications market.

     On February 8, 1996, the Department of Trade and Industry ("DTI") announced
the award of two licenses to operate  radio fixed  access  services in the 2 GHz
band. These new licenses enable the two licensees,  BT and RadioTEL Systems,  to
provide telecommunications  services to customers living in defined remote rural
areas  mainly in  Scotland,  Wales and  Northern  Ireland  and create  potential
additional  competition  for the  Company's  residential  telephony  services in
certain  remote rural areas of the Company's  Northern  Ireland  franchise.  The
Company also competes with mobile networks. This technology could grow to become
a competitive threat to the Company's networks, particularly if call charges are
reduced further on the mobile networks. The Company's Radio Communications group
may enable the Company to benefit from the growth in this technology.  There can
be no assurance,  however, that the Company will be able to


                                       23
<PAGE>


compete successfully with BT or such other telecommunications operators.

     The Company believes that it has a competitive advantage in the residential
market   because  of  its   ability  to  offer   integrated   telephone,   CATV,
telecommunications  services  (including  interactive and on-line  services) and
dual  product  packages  designed to  encourage  customers  to subscribe to both
services.  However,  there can be no assurance that this  competitive  advantage
will  continue.  Indeed,  BT, C&WC and other  national  PTOs will be entitled to
convey CATV services from 2001 and,  subject to a review by the Director General
(which is already underway), possibly from as early as 1998.

     British  Sky  Broadcasting   Limited   ("BskyB")  is  currently   marketing
telecommunications  services  both  independently  and on behalf of BT.  BSkyB's
joint  marketing  efforts with BT enable  BSkyB's  customers to earn  additional
discounts on BT's  residential  telecommunications  volume  discount  plans.  In
addition,  it has  been  reported  from  time to  time  that  BT and  BSkyB  are
discussing  the  formation of  cooperative  arrangements.  Given the  respective
market  positions  of BT and  BSkyB,  the  Company  believes  that,  if the  two
companies  successfully  combine  their  respective  marketing  strengths,   the
resulting  combination would provide significant  competition to cable operators
including the Company.

     Business Telecommunications.  BT is also the Company's principal competitor
in providing  business  telecommunications  services.  In addition,  the Company
competes  with  C&WC,  Energis,  Scottish  Telecom  in  Scotland  and with other
companies  that have recently been granted  telecommunications  licenses such as
WorldCom  and Colt.  In the future,  the Company  may  compete  with  additional
entrants  to  the  business   telecommunications   market,  such  as  AT&T  U.K.
Competition  is based on price  range and quality of  services,  and the Company
expects  price  competition  to intensify if C&WC,  Energis and other new market
entrants  compete  aggressively.  Most of  these  competitors  have  substantial
resources and there can be no assurance that these or other competitors will not
expand their  businesses in the Company's  existing  markets or that the Company
will be able to continue to compete  successfully  with such  competitors in the
business telecommunications market.

     CATV. The Company's CATV systems compete with direct reception over-the-air
broadcast  television,  direct-to-home  ("DTH") satellite services and satellite
master antenna systems.  In addition,  pay television and pay-per-view  services
offered by the Company compete to varying degrees with other  communications and
entertainment  media,  including home video, cinema exhibition of feature films,
live theater and newly emerging multimedia  services.  The Company expects that,
in  the  future,   it  may  face  competition   from  programming   provided  by
video-on-demand  services,  including  those that may be  provided  by PTOs with
national licenses (i.e.,  national PTOs).  Certain companies  associated with BT
and Mercury  (which  recently  merged with three cable  operators that hold such
licenses-NYNEX  CableComms,  Bell  Cablemedia plc and Videotron  Holdings plc-to
form C&WC) hold  licenses to provide  cable  telephone/television  systems  that
cannot,  under current ITC policy, be built in any of the Company's  franchises.
This ITC policy  position  may change.  Any such  change in policy  could have a
material adverse effect on the Company.


                                       24
<PAGE>


     On September 29, 1993, the ITC issued a statement pursuant to which it took
the position  (shared by OFTEL and DTI) that BT and the other  national PTOs may
provide  "video-on-demand"  service under their existing licenses.  No assurance
can be given that  video-on-demand  will not provide substantial  competition to
the Company within its markets in the future.

     The   Broadcasting   Act  1996  provides  for  the  regulation  of  digital
terrestrial  television  ("DTT") that will initially provide an additional 18 or
more  new  terrestrial  channels  serving  between  60%  and  90% of the  United
Kingdom's population. Some of the channels are reserved for digital simultaneous
broadcasting by the existing terrestrial broadcasters.  The introduction of DTT,
as well as digital satellite television will provide both additional programming
sources as well as increased  competition for the Company and its  subsidiaries.
There can be no assurance that  satisfactory  (or any) terms of carriage will be
obtained by the Company for digital satellite programs or channels.

     The full extent to which existing or future  competitors  using existing or
developing media will compete with cable television systems may not be known for
several years. There can be no assurance, however, that existing, proposed or as
yet undeveloped  technologies  will not become dominant in the future and render
cable television systems less profitable or even obsolete.

     Broadcast Services.  In February,  1997, the United Kingdom Government sold
the BBC's Home Service and World Service transmission businesses to a consortium
led by Castle Tower Corporation. There can be no assurance that the Company will
not  encounter   significant   competition  from  Castle  Transmission  for  its
transmission  business from expiration of the Company's  current  contracts with
the ITV contractors and Channel 4/S4C.

REGULATION

     The following section summarizes certain regulatory matters relating to the
businesses of the Company.

LOCAL TELECOMS AND TELEVISION SERVICES

     CATV and cable telephony/telecommunications operators in the United Kingdom
are governed by  legislation  under the  Broadcasting  Act 1990 (the "1990 Act")
(which  replaced  the  Cable  and  Broadcasting  Act  1984  (the  "CBA")),   the
Broadcasting Act 1996 (the "1996 Act") and the  Telecommunications Act 1984 (the
"Telecommunications Act"). An operator of a cable television and cable telephony
franchise  in the United  Kingdom  covering  more than 1,000 homes  requires the
following two licenses for each cable franchise area:

          (a) a CATV license, which authorizes the provision of cable television
     services within a defined geographical area and which may be either:

               (i) a  prescribed  diffusion  service  license  ("PDSL")  (issued
          pursuant to the CBA prior to January 1, 1991 and  continued  in effect
          under  the 1990  Act)  which  allows  an  operator  to  provide  cable
          television services by means of a cable network; or


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<PAGE>


               (ii) a local  delivery  operator  license  ("LDL")  issued  since
          January 1, 1991  pursuant to the 1990 Act which  allows an operator to
          deliver television and other licensed programming services by means of
          a licensed  telecommunications  network,  including a cable network or
          microwave distribution system; and

          (b) a telecommunications  license, issued under the Telecommunications
     Act by the  Secretary of State for Trade and Industry  (the  "Secretary  of
     State"),   which   authorizes  the   installation   and  operation  of  the
     telecommunications  network  used to  provide  CATV and  telecommunications
     services.

     The  CATV  licenses  and   telecommunications   licenses   contain  various
conditions  which are  enforced by the ITC, or OFTEL as  appropriate.  It is ITC
policy to grant  licensees  the  exclusive  right to  provide  cable  television
services in the area governed by their  licenses ("ITC  Licenses").  The Company
holds such licenses for each of its 16 franchise areas. The ITC or the Secretary
of State has the power ultimately to revoke such licenses.

     The Company's  United Kingdom  businesses are further subject to regulation
by the European Union ("EU").

THE BROADCASTING ACTS

   LICENSING

     The television  services provided by the Company are regulated  principally
by the ITC,  which  was  established  under the 1990 Act to  license  commercial
television  services (except for BBC services and services provided by the Welsh
Authority), whether delivered terrestrially,  by cable or satellite.  Subsequent
to the 1996 Act the ambit of the ITC also extends to digital  services.  The ITC
regulates these services by monitoring  compliance  with license  conditions and
has a range of enforcement powers if licensees fail to comply with them.

     Before the 1990 Act, the ITC Licenses awarded by the Cable Authority (under
the CBA) were PDSLs.  PDSLs are no longer  granted,  but they continue in effect
unchanged  under the 1996 Act. Now ITC  Licenses  are granted as LDLs.  The main
distinction between a PDSL and an LDL is a competitive tendering process and the
role the ITC plays in monitoring  the  development  of services by licensees and
the  opportunity to apply for the 40Ghz  microwave  video  distribution  service
license within the LDL area.

     A local  delivery  service is a service using a  telecommunications  system
including cable or microwave systems for the purpose of delivering television or
radio services to two or more homes,  and is licensable  only if more than 1,000
homes can be served.  In  advertising  a new LDL franchise the ITC specifies the
percentages of qualifying  revenue ("PQRs") payable by any successful  applicant
for each year for the period of the license. An LDL is then awarded on the basis
of competitive  tendering  usually to the applicant  submitting the highest cash
bid  (payable  annually  over the 15-year  period of the license and indexed for
inflation)  although the ITC will


                                       26
<PAGE>


not make a license  award to the  applicant  who has  submitted the highest cash
bid,  where it appears to the ITC that the proposed  coverage by an  alternative
applicant is much higher than the ITC or the highest bidding applicant, proposed
to achieve.  When awarding a licence the ITC may make it  conditional on meeting
certain  specified  financing  requirements.  The fees  payable  to the ITC,  in
addition to the original  cash bid and PQR  payments,  consist of an initial fee
payable on grant of the license and annual fees  thereafter  as may from time to
time be fixed by the ITC and  representing a proportion of the costs incurred by
the ITC in carrying out its functions.

     A  prescribed  diffusion  service,  the  forerunner  to the local  delivery
service,  is a service  involving  a cable  system  capable  of serving at least
10,000 homes. The ITC has inherited the responsibility for monitoring the way in
which the licensee  develops the services which were originally  proposed by the
applicant  for  distribution  throughout  its  franchise  areas (such as a local
channel). The fee currently payable to the ITC for a PDSL is an annual fee based
on a proportion of the ITC's costs and expenses.

   DURATION OF ITC LICENSES

     The duration and terms for renewal of the  Company's  PDSLs and LDLs are as
follows:

     PDSLs.  PDSLs are issued for an initial  period of 15 years,  although  the
Company is entitled to seek an extension  for a further  8-year  period.  If the
Company elects to extend a PDSL,  upon  expiration of an extended  license,  the
Company  must  apply  for a new LDL  under  the  competitive  tendering  process
described  above.  If the Company does not elect to extend a PDSL the Company is
entitled  to apply for the  grant of an LDL for the same  area for a further  15
year  period,  and the ITC  will set the  amount  of  notional  cash bid and PQR
payments  payable  over the period of the  license.  The ITC can only  refuse to
grant the LDL to the existing licensee in such circumstances if (i) they propose
to grant a new LDL in respect of a  different  area,  (ii) the  licensee  is not
operating  throughout  the whole of the  franchise  area,  (iii) the  licensee's
proposed service under the LDL would not cover the entire franchise area or (iv)
its proposed telecommunications system is not acceptable.

     LDLs. LDLs are issued for a period of 15 years and can be renewed on one or
more occasions for 15 years.  On renewal of the LDL, the ITC will set the amount
of notional  cash bid and PQR  payments  payable  over the period of the renewed
LDL.  The ITC can only refuse to renew the LDL if: (i) the ITC proposes to grant
a new LDL for a different  area; or (ii) in the case of a licensee that fails to
achieve the required  coverage  specified in its technical  plan, the ITC is not
satisfied  that the licensee  would be able to achieve the required  coverage on
renewal of the license.

     The majority of the Company's ITC licenses will expire in December 2005 and
are not currently due for renewal or extension.  Applications for renewal of the
LDL may be made  within  five  years of the expiry of the LDL and not later than
the date the ITC would need to invite  applicants for a new LDL for the relevant
franchise to replace the LDL upon its expiry.

     The Company has a number of "transitional" LDLs ("LDTs") for areas in South
Wales


                                       27
<PAGE>


acquired from Metro Cable TV Limited  ("Metro") in 1995.  LDTs were issued under
the 1990 Act to replace old diffusion  service licenses which were not PDSLs and
which  were  outside a cable  franchise  area.  These are  issued for an initial
period of 5 years,  and may be renewed for further 5-year  periods.  On renewal,
the ITC may specify the amount of a notional  cash bid and PQR payments over the
period of the LDT. All the Company's LDTs have been renewed without any cash bid
or PQR  payment  requirements  and will  expire  in 1999.  The  Company  will be
entitled to seek a renewal of its LDTs for further 5-year periods.

   ENFORCEMENT AND REVOCATION

     The ITC is empowered to revoke a license where it considers it necessary to
do so for the purpose of complying with the restrictions on ownership  contained
in the 1990 Act as amended by the 1996 Act.  Where the  licensee  is a corporate
entity,  the  ITC  may  revoke  the  license  if any  change  in the  nature  or
characteristics  of that corporate  entity,  or any change in the persons having
control  over or interests in it, are such that,  had they  occurred  before the
granting  of the  license,  they would  have  induced  the ITC to  refrain  from
granting  the license.  A license can also be revoked if the  operator  fails to
comply  with  any  license  condition  (including,  in the  case of an LDL,  the
establishment  of the service in accordance with the technical plan submitted by
the licensee) or direction  from the ITC and the ITC considers  revocation to be
in the public interest or if the ITC is satisfied that the licensee ceases to be
a fit and proper person.  With respect to LDLs and other  licenses  issued under
the 1990 Act, the ITC can also impose fines and shorten license periods.

OWNERSHIP RESTRICTIONS

     The 1996 Act has substantially amended the media ownership rules set out in
the 1990 Act. The amended rules came into force on November 1, 1996.

     The new rules do not change the foreign  ownership  rules  affecting  cable
operations;  therefore,  non-EC  bodies will not be prevented  from owning cable
licenses,  but they are restricted from holding a Channel 3 license and licenses
for certain other broadcasting and commercial radio services.

     The ITC remains  under a duty to ensure that  certain  entities,  including
local  authorities,  political  bodies  and  religious  bodies,  do not hold ITC
Licenses.  The  Secretary  of State  for  Culture,  Media  and  Sport has a wide
discretion to amend the rules restricting participation in ITC Licenses.

     The  1996  Act  introduces  new  ownership  rules  on  licensed  television
interests  in  the  UK  which  will,   broadly  speaking,   relax  the  existing
restrictions.  It revokes all the existing  ownership rules applying between the
various means of television distribution and applies one overriding rule, namely
that no one person may hold two or more licenses where his audience time exceeds
15% of the total United Kingdom  audience time for the last 12 months.  The type
of licenses  referred to include all terrestrial  television  services  (whether
analog or digital licenses,  licensed satellite program services,  or licensable
program  services).  ITC Licenses are not included within


                                       28
<PAGE>


the new  restrictions.  The  intention  is that  cable is treated as a method of
delivery only, and will only be included where the cable operator in question is
responsible for the editorial content of that programming.

   LOCAL SERVICES REQUIREMENT

     The Company's PDSLs (i.e. all its ITC Licenses except the Northern  Ireland
and Gwent and Glamorgan LDLs) require the provision of local services (including
text  information,  community access and programming  dedicated to the Company's
local  communities).  In recent meetings with the ITC, the Company has begun the
formulation of a plan to develop and provide some of these services.  In January
1997, the Company  successfully  applied for, and was awarded, a license for its
proposed new local  program  series to be called "On T.V." In 1997,  the Company
launched  On T.V.  in each of its  Regional  Areas  in  partnership  with  local
organizations such as local universities, technical colleges, radio stations and
newspapers.

   RESTRICTIONS ON TRANSFER

     The 1990 Act permits  the  transfer of an ITC License to a third party with
the prior written consent of the ITC. The ITC has absolute  discretion to refuse
any proposed transfer of such a license.

PROGRAM ORIGINATION

     Under the 1990 Act,  cable  operators  with  PDSLs and LDLs may only  carry
licensed  program  services on their  systems and present only  advertising  and
programs   (including   foreign   satellite   programs)  which  conform  to  the
restrictions  set forth in codes produced by the ITC in relation to advertising,
program sponsorship and programming content.

     The 1996 Act introduced two main changes to cable "must carry" provisions:-

          (i) PDSL holders were required  under the 1990 Act to carry the public
     analog  terrestrial  channels of BBC1 and 2, the  regional  ITV channel and
     Channel 4. This  obligation has been extended under the 1996 Act to include
     teletext services carried on the above channels; and

          (ii) the 1996 Act  provides  that when a cable system (PDSL or LDL) is
     transmitting  programs in a digital format and the ITC is satisfied that it
     is appropriate to treat the system as a digital system,  the ITC will serve
     a notice on the licensee,  at which point the licensee is required to carry
     all free to air services  provided by the BBC, BBC teletext,  Channels 3, 4
     and 5 and the public teletext on Channels 3 and 4.

     Cable operators have no copyright liabilities for "must carry" services.


                                       29
<PAGE>


THE TELECOMMUNICATIONS ACT

   LICENSING

     The  installation  and  operation of the  Company's  United  Kingdom  cable
systems,  over which it provides  its  television  and other  telecommunications
services,  requires a license  issued  under the  Telecommunications  Act by the
Secretary of State for Trade and Industry (a "DTI  License").  The Company has a
number of DTI Licenses  covering  areas which coincide with the areas covered by
its ITC Licenses, as well as national and international services PTO licenses.

     A DTI  License  authorizes  a cable  operator  to install  and  operate the
physical network used to provide entertainment and  telecommunications  services
in its franchise. It also authorizes the operator to connect its system to other
television  and  telecommunications  systems,  including  those  operated by the
terrestrial broadcasting authorities,  satellite broadcasters and PTOs. Although
the DTI License granted to a cable operator is for a particular  franchise area,
other operators can be granted DTI licenses for that same area.

     A cable operator's DTI License contains conditions regulating the manner in
which  the   licensee   operates   its   telecommunications   system,   provides
telecommunications  services,  connects  its  systems  to others  and  generally
operates its business.  A cable operator's DTI License also contains a number of
detailed  provisions  relating to the technical  aspects of the licensed  system
(e.g.,  numbering,  metering and the use of technical interfaces) and the manner
in which the licensee conducts its business (e.g.,  publicity of certain prices,
terms and  conditions).  In addition,  a cable  operator's DTI License  contains
prohibitions  on  undue  preference  and  discrimination  in  providing  certain
services and unfair cross-subsidy of certain services.  The cable operator's DTI
License also  requires the licensee to comply with certain codes of practice and
fair trading conditions and to provide information which the Director General of
OFTEL (the "Director General") may require to carry out his statutory functions.

     The fees  payable for the DTI License  consist of an initial fee payable on
the grant of the  license and annual  fees  thereafter.  The fees are based on a
proportion  of the costs of the Director  General in  exercising  his  functions
under  the  Telecommunications   Act.  OFTEL  is  currently  considering  basing
licensing fees on a percentage of turnover.

     A DTI  License  is not  transferable.  However,  a change of  control  of a
licensee may be permitted subject to compliance with a notification  requirement
provided that, among other things, the proposed change is not, in the opinion of
the Secretary of State,  against the interests of national security or relations
with the government of a country or territory outside the United Kingdom.

     The  Telecommunications  Act provides a licensing and regulatory  framework
for  telecommunications  activities in the UK and  established the office of the
Director  General as an  independent  regulatory  authority.  Telecommunications
policy is overseen by the DTI. The Secretary of State also has primary licensing
authority  under the  Telecommunications  Act,  although  he may  delegate  that
authority  to the  Director  General.  The  principal  functions of the


                                       30
<PAGE>


Director General are, among other things, to monitor and enforce compliance with
DTI   License    conditions,    establish   and    administer    standards   for
telecommunications   equipment  and  contractors,   investigate  complaints  and
exercise  certain  functions  concurrently  with other  regulators to promote or
ensure  competition  in  telecommunications  markets.  The Director  General may
modify DTI  Licenses  either  with the  agreement  of the  licensee  following a
statutory period of public  consultation or following a report of the Monopolies
and Mergers  Commission (the "MMC").  The Director  General is also empowered to
issue enforcement orders requiring  compliance with DTI License conditions which
have been breached.

   TERM, RENEWAL AND REVOCATION

     DTI Licenses  originally were granted for an initial period of either 15 or
23 years  (depending on the technology used by the licensee),  commencing on the
date service was first provided to customers. In July 1992 following the Duopoly
Review (a review of a government  policy not to license  operators other than BT
and  Mercury  (now  part of  C&WC)),  technology-related  discrimination  in DTI
License length was abandoned.  The United Kingdom government invited all holders
of 15-year DTI Licenses to apply for new 23-year licenses.  However,  a licensee
also had the right to extend a 15-year  DTI  License to 23 years if it  provided
certain  technical  undertakings  within five years of the date of the  original
grant of license. The Company has given such undertakings with respect to all of
its DTI Licenses  and,  consequently,  the Company's DTI Licenses will expire at
various times between 2008 and 2017.

     Upon  expiration,  a DTI License cannot be renewed and application  must be
made for a new license. If the ITC License is renewed for a franchise, a new DTI
License  for the same area  covered by the ITC  License is likely  although  not
guaranteed to be issued.

     A DTI License may be revoked if the  licensee  fails to pay the license fee
when due, if the licensee  fails to comply with an enforcement  order,  upon the
occurrence of certain  insolvency-related  events or if any ITC License relating
to a licensee's  system is revoked.  A DTI License may also be revoked if, among
other things, the licensee fails to give the required notification to the DTI of
changes in shareholders and agreements  affecting  control of the licensee or if
the DTI  concludes  that any such  change  would be  against  the  interests  of
national security or the United Kingdom government's international relations.

   NETWORK CONSTRUCTION

     DTI Licenses for PDSL areas specify the build  schedule of the system which
the cable  operator is required to  implement  (by  reference  to the numbers of
premises  passed)  and the  particular  technical  characteristics  to which the
system must adhere. It is OFTEL's  responsibility to enforce compliance with the
build  schedules.  The DTI Licenses for LDL areas,  such as Northern Ireland and
Glamorgan and Gwent, do not specify a build schedule. This schedule is contained
in the LDL  issued by the ITC,  and it is the ITC's  responsibility  to  enforce
compliance  with those build  schedules.  Persistent  failure to comply with the
build schedules could result in license revocation.


                                       31
<PAGE>


     Under a DTI License,  the cable  operator is subject to and has the benefit
of the Telecommunications Code promulgated under the Telecommunications Act. The
Telecommunications  Code provides certain rights and obligations with respect to
installing  and  maintaining  equipment  such as ducts,  cables and  cabinets on
public or private  land  (including  the  installation  of  equipment  on public
highways).  Cable  operators  also have the  benefit of the New Roads and Street
Works Act 1991 (and equivalent  legislation in Northern  Ireland) which provides
them with the same rights and  responsibilities  with respect to construction on
public  highways  as other  public  utilities.  Cable  operators  generally  are
required to post bonds with local  authorities in respect of their obligation to
ensure  reinstatement  of roads and  streets in the event the  operator  becomes
insolvent,  ceases to carry on business or has its DTI  License  terminated.  In
order to install  equipment on private  property,  cable operators  should first
seek the  agreement of  occupiers,  property  owners and others,  but where such
agreement is not  forthcoming,  they may apply for a court order dispensing with
the requirement for such an agreement.

     A planning order issued in April 1994 imposes planning consent requirements
on certain  works  carried  out under the  Telecommunications  Code.  Under this
planning    order,    installation,    alteration   or    replacement   of   any
telecommunications  apparatus  on, or within  the land  surrounding,  a dwelling
house is deemed to be development for which planning consent is required.  There
is some uncertainty as to the extent to which this restriction  could affect the
development and maintenance of television and  telecommunications  systems.  The
Department of the Environment, however, takes the view that cabling a house is a
"minor  operation"  and is not,  therefore,  "development"  unless it alters the
external appearance of a building.

   TELEPHONE OPERATIONS

     The ability of cable television  operators to provide telephony services is
subject to the restrictions  contained in their DTI Licenses.  All the Company's
DTI  Licenses  permit the Company to provide  voice  telephony  services  and to
switch their own traffic.  Additionally,  under the UK  regulatory  regime,  the
Company has the right to require BT, C&WC and other public  telephone  operators
("PTOs")  (including  cable operators) to provide  interconnection  and, failing
agreement on the interconnection  terms, the right to request OFTEL to determine
the interconnection  conditions. The Company has interconnection agreements with
BT and C&WC.

     Telephone Number  Portability.  At the request of a DTI licensed  operator,
and if so directed by the Director  General,  BT is obligated to offer customers
number  portability  (i.e.  the ability of  telephone  customers to retain their
telephone numbers when changing to another telephony operator).

     Pursuant to a hearing by the MMC, BT's license was amended on July 29, 1996
in accordance with the MMC's findings. The license modifications require that BT
split total number  portability  costs 70:30 with the cable operator  requesting
number portability. This meant that BT bore the systems' set up costs; the other
operator paid the per line set up costs;  and BT and the other  operator  shared
extra costs associated with routing a call to a ported number until October 1997
when BT was due to introduce a new method of routing ported number calls,


                                       32
<PAGE>


called the "call dropback"  method under which BT will bear any costs associated
with call dropback as well as any  additional  costs which BT incurs should they
fail to introduce the "call  dropback"  method by October 1997.  These costs are
expected to be minimal.  The Company  intends to offer  number  portability  for
customers in the future.

     In December  1997,  OFTEL also  modified all other PTO Licenses  (including
those held by the Company) to require the provision of number  portability  when
requested by another operator able to offer reciprocal number portability.

     DTI  licensees  are  obliged  to notify  OFTEL of the  rates  for  licensed
services.  The  Company  is  required  to  publish  rates  with  OFTEL for cable
television.  BT is currently subject to controls on certain prices it may charge
customers.

     BT has been permitted to offer retail  discounts  nationally to high volume
users,  albeit subject to several conditions.  Importantly,  BT is restricted in
the manner in which it can offer discounted services by virtue of the obligation
not to  show  undue  preference  to or  exercise  undue  discrimination  against
particular  persons or persons of any class or description  (cable operators are
also subject to a similar  prohibition on undue preference or  discrimination in
relation to services). Except as mentioned above, BT is not, therefore,  allowed
to offer discounted  services in local markets without offering them nationally.
For so long as this policy of geographic averaging remains in effect, BT will be
restricted  in its  ability to  respond  through  differential  pricing to local
competition  from cable  operators.  OFTEL has indicated  that it remains firmly
committed to the  principle  of  geographic  averaging  for the majority of BT's
services including voice telephony.

     OFTEL also  imposes  controls on BT's retail  pricing  which is proposed to
apply for a 4 year  period  from  July  1997.  OFTEL has  chosen to adopt a more
deregulated  approach  to  permit  market  forces  to  determine  pricing  where
competition exists in particular  markets.  The principal features of the regime
are: (i) to control retail prices through 2001 only where consumer protection is
required (namely,  low to medium spending residential  customers  (approximately
the first 80% by bill spend) and additional guarantees for small businesses-this
control is expected to cover only  approximately  25% of BT's  revenues;  (ii) a
value of X, for the purposes of the price cap formula (RPI minus X), of 4.5% for
those residential  customers and protection for the top 20% of customers by bill
spend and small  businesses;  (iii) that this be the last retail price  control;
(iv) the  introduction  of price controls on network charges (the input costs of
operators  competing with BT); and (v) the so-called "fair trading" condition in
BT's license which enables the Director  General more  effectively  to deal with
anti-competitive  behavior by BT.  OFTEL's  price cap scheme  represents a first
step towards  deregulation  of pricing in the United  Kingdom  telecommunication
markets.

     On October 1, 1996,  the fair trading  condition was  introduced  into BT's
license and came into  effect on January 1, 1997.  This fair  trading  condition
provides  similar  prohibitions to those set out in Articles 85 and 86 of the EC
Treaty in relation to  anti-competitive  agreements  and the abuse of a dominant
position  in the  United  Kingdom.  OFTEL has  incorporated  this  fair  trading
condition into all other significant telecommunications operators licenses.


                                       33
<PAGE>


     Interconnection  and Accounting  Separation.  The  commercial  viability of
voice and other telecommunications  services provided by cable operators depends
on their  ability to connect  with  other  telecommunications  systems in a cost
effective manner. Cable operators' systems must connect with systems operated by
other PTOs for calls that do not  originate or terminate on their  system.  Each
holder of a public  telecommunications  license  (including  NTL, BT and C&WC as
well as cable operators) is required to negotiate an  interconnection  agreement
with any other  license  holder  that  seeks one and  either  party may  request
intervention  from the Director General if there is a failure to agree on terms.
The Director General also has the power, at present,  to make determinations and
directions in respect of certain  obligations of any party to an interconnection
agreement.  However,  determinations  by the  Director  General may be liable to
challenge in the courts. In addition,  BT is required by its license to make all
interconnection agreements that it has entered into publicly available.

     On March 31, 1995,  OFTEL  modified  BT's  license to implement  accounting
separation for BT's "retail", "access" and "network" businesses.

     OFTEL  announced  in July  1997  changes  to the  regime  controlling  BT's
interconnection services, to take effect from October 1997 until September 2001.
The principle  elements of these changes were a new price cap for BT's wholesale
interconnection  charges  for call  termination,  call  origination  and  within
network  conveyance  of  RPI-8%,  with  additional  safeguard  caps of RPI-0% on
certain other  wholesale  services.  The basis for  calculating  BT's costs (and
hence  charges)  was changed  from Fully  Allocated  Historic  Costs to Long-Run
Incremental  Current  Costs,  the  effect  being  to  impose a  further  one-off
reduction in charges of about 10% on average. The review also introduced further
developments of BT's management accounts and cost information to provide greater
transparency to those purchasing or competing with BT's wholesale services.

     OFTEL  has  stated  that  operators  may be  required  to  provide  network
information to BT for  interconnection  purposes in much the same way as BT must
publish   information  about  its  own  network  and,  once  BT  is  subject  to
quality-of-service  targets and publication  requirements  in relation  thereto,
similar  requirements  may apply to other  operators.  Such  "symmetry"  will be
applied to other operators in respect of wider interconnection obligations (such
as  accounting   separation  and   transparency   of  charge   calculation   for
interconnection)  if OFTEL concludes that any such operator has market power and
is in a position to distort  competition  to the detriment of  consumers.  OFTEL
does  not  currently  propose  to  require  other  operators  to  publish  their
interconnection agreements.

     Indirect Access. In July 1996, OFTEL published a Statement of its policy on
indirect  access and equal access.  It defined  indirect access as the situation
where a customer buys a telecommunications  service from an operator to which it
is not directly  connected  and where that operator  pays another  operator,  to
which the customer is  connected,  for use of that  connection.  This  statement
confirmed that while OFTEL has  implemented a policy of indirect  access to BT's
customers,  it remains of the view that it is  generally  undesirable  to oblige
non-dominant   operators  to  provide   indirect  access.   Accordingly,   if  a
telecommunications  operator does not


                                       34
<PAGE>


have 25% of the  connections  in a relevant  market,  OFTEL would be unlikely to
conclude that indirect  access should be required.  If the operator did have 25%
or more of  connections,  OFTEL would want to consider other market  conditions,
such as the share of connections held by other  operators,  the existence of any
barriers to switching or whether,  in the long run,  mandating  indirect  access
under such  circumstances  was likely to enhance  competition  or  diminish  it.
Consideration  of these  factors  would create a framework in which a request to
mandate indirect access could be considered.

     Equal Access.  The licenses of BT, and C&WC enable OFTEL to require them to
make  available  to  customers  the  ability  to  have  their  long-distance  or
international calls carried by another operator without extra procedures, either
by pre-selection or on a call-by-call basis.

     OFTEL's  statement of July 1996 also confirmed that in accordance with BT's
DTI License,  a full cost-benefit  analysis of equal access had been undertaken.
This analysis  raised doubts about the overall  economic  benefit of introducing
equal access.  Accordingly,  OFTEL has concluded  that, on balance,  there is no
case at present for directing BT to provide equal access.

     In December  1997,  the  European  Telecommunications  Council of Ministers
approved an  amendment  to the  Interconnection  Directive  which would  require
Member  States to ensure that  operators  with  Significant  Market  Power (SMP)
introduced  equal  access-or  carrier  pre-selection  (CPS) by  January 1, 2000.
(OFTEL has indicated that in the UK it considers BT and Kingston  Communications
to be the only operators to have SMP for this purpose.) The UK Government argued
unsuccessfully  that this  measure  was  unnecessary,  given the doubts over the
benefits  which would result.  The  Directive  would enable the UK to argue that
introducing  CPS in  the UK  should  be  deferred  if it  would  be  excessively
burdensome on an operator or category of operators. The proposals do not however
allow for balloting or proportional  assignment of customers which may limit the
effect of CPS compared with other countries which have introduced it.

     There can be no  assurance  that the  implementation  of equal or  indirect
access  by  the  Director   General  or  the  effect  of  the  European  Union's
Interconnection  Directive  will  not  adversely  affect  the  ability  of cable
television/telecommunications   operators  to  market  their  telecommunications
services.

TECHNICAL AND REPORTING REQUIREMENTS

     The principal technical requirements for the cable systems are contained in
the  DTI  Licenses  and  address  technical   requirements  for   transmissions,
performance  requirements  specified as British  Standards  relating to wideband
cable distribution systems and, in all cases, radio interference restrictions.

     The Company's DTI Licenses  impose  obligations to provide any  information
which OFTEL may require for the purpose of exercising their statutory functions.
This includes  financial  reporting,  market data,  and  information on customer
complaint and fault handling procedures.


                                       35
<PAGE>


EUROPEAN UNION LEGISLATION

   TELECOMMUNICATIONS REGULATION

     Most of  European  Union (EU)  States'  communications  regimes  are not as
liberal as the UK's. Member States are now however typically in agreement on the
importance of liberalizing their communications  sectors,  which is facilitating
the European  Commission attempts to fully liberalize the voice telephony market
and  infrastructure   across  the  EU  as  from  January  1,  1998  (subject  to
transitional  periods for certain  Member  States).  Some of the key  Commission
Directives which became effective on January 1, 1998 in this field are:

     A Directive  requiring  Member  States to abolish all  restrictions  on the
supply of transmission  capacity by CATV network  operators to service operators
and allow  the use of cable  networks  for the  carriage  of  telecommunications
services, other than voice telephony, within Member States from January 1, 1996.
The Directive does not affect the provision of CATV services.

     A  Directive  which  provides  for full  competition  in  telecommunication
services and network  infrastructure  by January 1, 1998.  This  Directive  also
provided  for  the  liberalization  of  self-provided  infrastructure  (such  as
utilities'  networks) for the provision of services  other than voice  telephony
from July 1, 1996.  Voice  telephony  was  liberalized  on January 1, 1998.  The
Directive's  provisions are generally  comparable to the existing United Kingdom
regime  which  is  already   liberalized   with  respect  to  the  provision  of
telecommunication services and infrastructure.  Following industry consultation,
the duopoly which had allowed BT and Mercury to operate international facilities
has been  abolished  and the Company was awarded a license to run  international
facilities on December 19, 1996.

     A Directive on the application of open network  provision  ("ONP") to voice
telephony.  This Directive sets rules and targets for basic telephone service in
areas such as telephone directories,  tariffs, billing procedures and quality of
service.  It also requires  telephone  companies to provide  interconnection  on
open, objective and  non-discriminatory  terms, (which is now generally the case
for cable  operators in the United  Kingdom).  The Commission has proposed a new
Directive to replace this ONP voice  telephony  Directive  during 1998. This new
Directive does not deal with  interconnection  which is the subject of a further
Directive.

     A  Directive  on  Interconnection  in  telecommunications  with  regard  to
ensuring universal service and  interoperability  through application of the ONP
principles  came  into  force on  January  1,  1998.  The  Directive  sets out a
harmonized  framework to be implemented by Member State  regulatory  authorities
regarding the interconnection of public telecommunications networks and services
utilizing   the   ONP    principles    of    transparency,    objectivity    and
non-discrimination.  This  proposal  aims to ensure open access to networks  and
services and to guarantee  the rights and  obligations  of operators and service
providers  for  interconnection  with the networks  and services of others.  The
Directive  is  broadly in line with the  approach  which  OFTEL is  implementing
through its  interconnection  and  accounting  separation  program in the United
Kingdom.  The Directive links  obligations in these areas to the concept of SMP.
OFTEL has said that it does not  regard  companies  such as NTL as having SMP at
present.  This situation could


                                       36
<PAGE>


change if NTL were to  substantially  increase its market  share.  The Directive
does contain an obligation for operators with "Special and Exclusive  Rights" in
a sector  other  than  telecommunications  to  introduce  accounting  separation
between their activities in that sector and the  telecommunications  sector. The
UK  authorities  have said that they consider  companies  with cable  television
franchises  to have such rights.  It is unclear at this stage  whether this will
result in significant or onerous obligations.

     A European  Directive on  telecommunications  licensing  came into force on
January 1, 1998 and introduced  some changes to the licensing  regime.  The main
effect was to require license terms and conditions to be  non-discriminatory  as
between different  categories of operations,  to introduce greater  transparency
into the process of granting or refusing a license; to prescribe that fees which
can be charged for licenses must be no more than necessary to cover the costs of
administering and enforcing the license; to set out the administrative procedure
to be followed when revoking a license, and to prescribe the broad categories of
conditions  which may be included in  individual  and general  licenses.  During
1998, the DTI and OFTEL intend to review and if necessary amend all existing PTO
licenses under the  Telecommunications Act 1934 in order to fully implement this
Directive.  It is not  envisaged  at this time  that  this will have a  material
effect on the rights and obligations which NTL faces under its licenses.

OTHER REGULATORY ISSUES

     Following a review  completed by the Office of Fair Trading ("OFT") in July
1996,  BSkyB has accepted  new  undertakings  to the OFT to address  concerns in
respect  of  its  wholesale  pricing  in  addition  to  modifications  to  those
undertakings  agreed  to in March  1995  (which  addressed  concerns  about  the
bundling of programs and rate card  discount  schemes).  The OFT also  announced
that a new industry ratecard would be approved only after  consultation with the
cable industry.

     This consultation  ended on November 5, 1996. On December 16, 1996, the OFT
approved the structure of the ratecard.  Since this date,  subsequent  ratecards
have been  approved  by the OFT to reflect  changes in BSkyB's  programming  and
pricing.  BSkyB's  wholesale  prices for cable  operators  are  contained in the
industry ratecard, the structure of which (although not the level of pricing) is
subject to approval by the OFT. Changes to the structure of the ratecard must be
approved by the OFT  although  further  changes to the  ratecard  may occur as a
result  of  commercial  negotiations  between  BSKyB  and  the  cable  operators
regarding the pricing levels within the ratecard  structure or following further
regulatory developments.

     BSkyB's  wholesale  prices for its premium  channels  are  calculated  as a
percentage of its own DTH retail  price.  Following its review of BSkyB in 1996,
the OFT  concluded  that there was no  evidence  that such  linkage  between the
direct-to-home  ("DTH")  retail price and its  wholesale  price charged to cable
operators  was  anti-competitive  and that no action was required on this issue.
Additionally,  the OFT  said  that it had  reviewed  BSkyB's  accounts  and will
continue   to  do  so  every  six   months,   to  ensure   that   BSkyB  is  not
cross-subsidizing  its retail DTH business from revenues of its wholesale  cable
supply business to the detriment of competition.


                                       37
<PAGE>


     However in relation to BSkyB's  requirement  that cable operators carry its
basic  channels to 100% of their  subscribers,  the OFT found in its 1996 review
that this was  inhibiting  cable  operators in their  ability to offer  tailored
packages  and was  inhibiting  the  growth of local  cable  industry.  BSkyB has
accepted an undertaking not to require  carriage in excess of 80% in the future,
although BSkyB will be permitted to increase the prices of its basic channels by
1.25% for each percentage point by which carriage of the channels falls short of
100%.  BSkyB also accepted an undertaking  not to bundle bonus programs (such as
occurred in respect of the Disney Channel) with premium  channels in the future.
The ITC is currently investigating the handling of channels at all levels and is
including within such  investigation a complaint  concerning the terms of supply
of the Disney Channel.

REGULATION OF COMPETITION

     The Company is subject to UK and European Community competition law regimes
administered  by the OFT and OFTEL in the UK,  and by the  Commission  and civil
courts in each member state of the EU and to individual  national regimes in the
countries where it operates, presently the UK.

   UK REGIME

     UK law  controls  agreements  and  arrangements  which  affect  competition
through the  Restrictive  Trade  Practices  Act 1976  ("RTPA"),  monopolies  and
mergers   through   the  Fair   Trading   Act  1973   ("FTA")   and   unilateral
anti-competitive practices through the Competition Act 1980 ("CA").

     In relation to the mergers  provisions  of the FTA, the  Secretary of State
must  either  take  certain  undertakings  or  assurances  from the  enterprises
concerned or refer them to the MMC for investigation and consideration against a
broad public interest test laid down in the FTA. Monopolies and anti-competitive
practices  are  considered  by the MMC  against  the same test.  Monopolies  and
anti-competitive  practices references to the MMC are made by the DGFT, although
in the latter case, he may accept undertakings or assurances instead of making a
reference. In all three cases, the MMC may recommend action where they find that
there are matters  operating,  or which can be  expected to operate  against the
public  interest.  Ultimately,  the Secretary of State has  extensive  powers to
impose  remedial  action in  respect  of matters  operating  against  the public
interest  (including   divestment  and  the  imposition  of  conditions  on  the
contracts, pricing policies and other conduct of the enterprises) either through
undertakings negotiated by the DGFT or by secondary legislation.

     Under the  Telecommunications  Act,  the  Director  General has  concurrent
jurisdiction  with the DGFT under the CA in relation to courses of conduct which
may   restrict,   distort   or   prevent   competition   in  the   markets   for
telecommunications  apparatus and telecommunications  services and under the FTA
relating  to  monopoly  situations  (as  defined  in the  FTA)  in  relation  to
commercial  activities  connected  with  telecommunications  and in  relation to
courses of conduct which may affect interests of consumers of telecommunications
apparatus, and telecommunications services.


                                       38
<PAGE>


     A legislative  bill is currently  passing  through the UK Parliament  which
would  introduce new and stronger  competition  law within the UK. The proposals
envisage  a  regime  modelled  on  Articles  85 and 86 of the EC  Treaty,  which
prohibit  agreements  that  have  the  effect  of  preventing,   restricting  or
distorting competition in the UK and abuses of market power. It is proposed that
the prohibitions will be accompanied by strong  investigatory powers including a
right of forcible entry,  rights to third party actions,  and fines of up to 10%
of a company's turnover.  The government proposes the powers will be enforceable
in the telecommunications  sector by the Director General of Telecommunications.
The company  envisages  that this will provide a much  stronger  framework  than
hitherto  for  addressing   anti-competitive  behaviour  by  dominant  firms  in
telecommunications and broadcasting markets.

   EUROPEAN COMMUNITY REGIME

     EC competition law governs  agreements  which prevent,  restrict or distort
competition and the abuse of dominant market  positions  through Articles 85 and
86 of the EC Treaty.

     Article 85(1) renders unlawful agreements and concerted practices which may
affect trade between  member states and which have as their object or effect the
prevention,  restriction or distortion of  competition  within the common market
(that is, the member  states of the EC/EEA  collectively).  Article  85(2) makes
offending  provisions (if severable from the main agreement) void. Article 85(3)
allows for exemption (on an individual  basis or by category of agreements) from
the  provisions  of  Article  85(1) and 85(2) for  agreements  whose  beneficial
effects in  improving  production  or  distribution  or  promoting  technical or
economic progress outweigh their  restrictive  effects,  provided that consumers
receive a fair share of the benefit, that competition will not be eliminated and
that no  unnecessary  restrictions  are accepted.  The word  "agreement" in this
context is not confined to legally  binding  agreements  and  agreements  may be
written or oral and can consist in an informal continuing business relationship.

     The Commission is entrusted with the principal  enforcement powers, and the
exclusive right to grant  exemptions under Article 85(3). It has power to impose
heavy  fines (up to 10% of a group's  annual  revenue) in respect of breaches of
Article 85(1).  A prohibited  agreement  will also be  unenforceable  before the
national courts. In most cases notification of potentially infringing agreements
to the Commission under Article 85 with a request for an exemption under Article
85(3) protects against the risk of fines from the date of notification.

     Article 86 prohibits abuse by one or more  enterprises of a dominant market
position in the EU or a substantial  part of it, insofar as the abuse may affect
trade between member states.  A company may be dominant in several Member States
or part of a single Member State. A company enjoys a dominant  position whenever
it  possesses  such market  strength  that it can act to an  appreciable  extent
independently  of  its  competitors  and  customers.   Determining   whether  an
undertaking  occupies  a  dominant  position  is a complex  question  of law and
economics,  but broadly a market share of as little as 40% may confer  dominance
in a market for a product.  However,  dominance is not unlawful per se; only the
abuse of a dominant  position is  prohibited  by Article 86. An  enterprise  may
abuse a dominant  position under Article 86, for example,


                                       39
<PAGE>


engaging in excessive  pricing of its products or services,  or by denying other
enterprises  access to an  essential  facility or asset which it  controls.  Any
action that is designed to, or could,  seriously injure competitors,  suppliers,
or  distributors  is likely to raise issues under Article 86. The Commission has
the same powers to fine in relation to abusive  conduct as in relation to breach
of Article 85, but there is no procedure for obtaining exemption.

     It is  possible  that a third  party  who  suffers  loss as a result of the
performance  by an entity of an agreement  which  infringes  Article 85(1) could
claim damages  against such entity to compensate it for its  quantifiable  loss.
The position in relation to infringement of Article 86 is similar. The Directors
believe  that no such claim is pending or likely to be brought  successfully  in
respect of any  agreement to which the Company is currently  party or in respect
of its business practices.

BROADCAST AND NATIONAL TELECOMS SERVICES

     A significant proportion of the Company's total revenues is attributable to
the provisions of television and radio  transmission and  distribution  services
and the provision of  telecommunications  services.  In the United Kingdom,  the
provision  of such  services is governed by the  Telecommunications  Act and The
Wireless Telegraphy Act 1949 (the "Wireless Telegraphy Act"). Set forth below is
a brief summary of the principal licenses of the Company's National Telecoms and
Broadcast Services divisions granted pursuant to these Acts.

TELECOMMUNICATIONS ACT LICENSES

     The  Company  holds  five  licenses  under the  Telecommunications  Act (in
addition to Telecommunications Act licenses for its cable franchises).

     License to run  telecommunications  systems for the provision of television
and radio transmission services (the "Transmission  License").  The Transmission
License enables the Company to run telecommunications  systems for the provision
of television and radio transmission  services.  It permits NTL to carry out its
core  business  of  providing  transmission  services  to  television  and radio
broadcasters.  The  Transmission  License was granted on December 20, 1990 for a
period of 25 years from January 1, 1991. It is subject to revocation  thereafter
on 10 years'  notice in  writing.  No notice may be given  before the end of the
fifteenth year.

     The Company's Transmission License contains conditions and other provisions
which,  among  other  things:  (i)  require  the  Company to  provide  specified
telecommunications  services  to  specified  persons on  request;  (ii)  specify
certain  criteria to be met by the Company in providing  those  services;  (iii)
require the connection of the Company's telecommunications systems with those of
certain other transmission  operators and the transmission over those systems by
such  operators of messages for general  reception;  (iv) require the Company to
publish its charges and terms and  conditions  of business and not to show undue
preference to or exercise undue discrimination against particular persons in the
provision of certain  telecommunications  services;  (v) requires the Company to
hold  Wireless  Telegraphy  Act  licenses  in respect  of each item of


                                       40
<PAGE>


wireless  telegraphy  comprised  in its  system;  (vi)  impose on the Company an
obligation to share its transmission  sites with other  transmission  operators;
(vii)  restrict  the  prices  which the  Company  is  allowed  to charge for the
provision of certain services.  (see "-Price Cap Review" below); (viii) prohibit
the Company from  cross-subsidizing  the unregulated  side of its business,  and
(ix) impose a  requirement  for separate  accounts to be produced in relation to
both the regulated and unregulated parts of the Company's business. However, the
Company is not obliged to do anything "not reasonably practicable."

     The  Secretary  of  State  may  revoke  the  Transmission  License  in  the
circumstances  described  under "The  Telecommunications  Act-Term,  Renewal and
Revocation" above.

     License to run  telecommunications  systems  for the  provision  of outside
broadcasting services by means of satellite systems (the "OBS License"). The OBS
License,  which  permits the Company to run  telecommunications  systems for the
provision  of  outside  broadcasting  services  by means of  satellite  systems,
enables the Company to operate  satellite  up-links from outside broadcast sites
(sites which are not  permanently  equipped or adapted for  television  or radio
broadcasting).  The OBS  License was granted on February 6, 1991 for a period of
25 years from  February 7, 1991,  thereafter  revocable  on 10 years'  notice in
writing.  No notice may be given before the end of the fifteenth  year.  The OBS
License contains  conditions similar to those in the Transmission  License.  The
OBS  License  specifies  the  circumstances  in which it may be  revoked  by the
Secretary of State which include on revocation of the Transmission License.

     License  to  run  telecommunications   systems  ("Telecoms  License").  The
Telecoms  License  enables the Company to convey messages  (including  voice and
data) between points on NTL's telecommunications  networks. The Telecoms License
also  contains  conditions  and  revocation  provisions  similar to those in the
Transmission  License. The Telecoms License was granted on December 30, 1992 for
a period of 10 years from 30 December  1992.  Thereafter  it is  revocable  on 5
years' written notice. No notice may be given before the end of the fifth year.

     License to run telecommunications  systems ("PTO License"). The PTO License
permits  the  Company to run  telecommunications  systems  of every  description
within  the  United  Kingdom  and to provide  telecommunications  services  both
authorizations are subject to certain exceptions.  The Company's PTO License was
granted  on  February  14,  1996  for a  period  of 25  years  from  that  date.
Thereafter,  it is revocable on 10 years' written notice. No notice may be given
before the end of the fifteenth  year. The Company's PTO License also includes a
condition obliging it, subject to certain exceptions, to enter into an agreement
to connect its system to the system of any operator  which requires it to do so,
provided that operator has been granted a license  authorizing it to connect its
system to the  Company's  system.  The PTO License  details the  exceptions  and
conditions  subject  to which  the  Telecommunications  Code  will  apply to the
Company. The  Telecommunications  Code confers certain important rights on PTO's
in relation to network construction, buildings and land.

     International  Facilities  License.  The international  facilities  license
permits the Company to provide direct  international  facilities based services,
without being  required to do so via BT or Mercury.  The license will enable the
Company  to  take   advantage  of  the   expanding   volumes  of


                                       41
<PAGE>


international  telecommunication  traffic,  especially data services such as the
internet,  and substantially reduce the Company's  international call conveyance
costs.  In this  connection,  the Company has been awarded a  telecommunications
license in the  Republic  of Ireland  and  intends  to submit  applications  for
further such licenses in the United States, France,  Germany,  Italy, Greece and
The Netherlands.

WIRELESS TELEGRAPHY ACT LICENSES

     The Company holds a number of Wireless Telegraphy Act licenses of which the
most important are the following:

     License for the  Transmission  of Broadcasting  Services.  This license was
granted  on  January  1, 1991 and  permits  the  licensee  to  operate  wireless
telegraphy  stations  at those sites set out in a schedule  to the  License.  In
respect  of each  station,  site  and  mast  heights,  power,  polarisation  and
frequency to be used are specified.

     Microwave  Fixed  Link  License.  This  license  permits  the  licensee  to
establish and use fixed stations for sending and receiving  wireless  telegraphy
at those sites as detailed in the schedule to the license.

     Private  Mobile  Radio  License.  This  license  permits  the  licensee  to
establish  sending and  receiving  stations for wireless  telegraphy  (both base
stations  and mobile  stations)  and to use these  stations  for the  purpose of
sending and receiving spoken messages concerning the business of the licensee.

     Earth Station Licenses. The Company holds 12 earth station licenses.  These
licenses permit the licensee to establish earth stations at specified  locations
in the UK for the purpose of providing wireless  telegraphy up-links between the
earth station and specified geo-stationary satellites.

     Each of the four types of license  referred to above continue in force from
year to year  unless  revoked  by the  Secretary  of State or unless  any of the
license  fees are  unpaid by the  licensee  in which case the  relevant  license
expires.

     Licenses for the Transmission of Broadcasting  Services  (special  status).
The Company provides  transmission services for a large number of radio stations
pursuant to its License for the  Transmission  of  Broadcasting  Services  dated
January 1, 1991 (see above).  In respect of two radio  stations,  Classic FM and
Virgin Radio,  NTL has been issued  licenses  which are specific for those radio
stations. This has been done for the sake of administrative convenience because,
in both  cases,  the license  fees are paid  direct to the Radio  Communications
Agency by the radio station concerned.

     Radio Fixed Access  License.  A Radio Fixed Access License has been granted
for  services  provided at 10 GHz.  This  license  allows the Company to provide
short-range radio-links between business customers and its network.


                                       42
<PAGE>


     Miscellaneous  Licenses.  The  Company  holds  a  number  of  miscellaneous
Wireless Telegraphy Act licenses including testing and development  licenses and
commissioned programme makers licenses.

     Conditions  in  NTL's  Wireless  Telegraphy  Act  Licenses.  The  Company's
Wireless  Telegraphy Act licenses contain  conditions  relating to revocation of
the Licenses  and  notifications  to the  Secretary  of State.  In general,  the
Secretary  of State may revoke a Wireless  Telegraphy  Act  license at any time.
There are no notification  requirements  in respect of a change of control.  The
license for the transmission of broadcasting  services contain  provisions which
enable the Secretary of State to revoke the license if, among other things,  (1)
the licensee is, in the opinion of the Secretary of State,  not a fit and proper
body to hold such a license; (ii) it appears to him requisite or expedient to do
so for purposes connected with the EU or any other international organization or
obligation or co-operation;  (iii) the licensee ceases to hold any contracts for
the  broadcasting  of  television  or sound  broadcasting  services  or (iv) the
licensee's  license granted under the  Telecommunications  Act is for any reason
revoked.

     At  present,  Wireless  Telegraphy  License  fees  are  set  as to  recover
administration  costs  only.  Under  new  legislation,  the  DTI  has  published
proposals to supplement this system with additional fees designed to reflect the
scarcity value of certain types of spectrum,  notably congested  microwave fixed
link bands.  These proposals would not affect  broadcasting  spectrum,  nor that
allocated in connection with the Company's 10GHz license.

     DAB  Testing.  The  Company  is  currently  testing  DAB  under a series of
temporary  licenses in  anticipation  of applying for a local or national  radio
multiplex  license in accordance  with proposals  contained in the  Broadcasting
Act.  These  temporary  licenses  are  issued by the Radio  Authority  under the
Broadcasting  Act 1990.  Under this Act, a body which is, or which is controlled
by a body which is, not formed  under the law of an EC member state is currently
disqualified  from  holding  a license  to test DAB.  The  current  license  is,
therefore, held by an independent industry association on behalf of the Company.
However,  under the  present  Broadcasting  Act,  a non-EC  company  will not be
prohibited  from holding a license to provide local or national radio  multiplex
services, and this interim position will be regularized in due course.

PRICE CAP REVIEW

     The Company's regulated business may be divided into two categories:  Price
Regulated  Business and  Applicable  Rate  Business.  Price  Regulated  Business
comprises  those  telecommunication  services  which the  Company  is obliged to
provide  pursuant  to its  Transmission  License  and in respect of which  price
controls are imposed.  The Company's  Applicable  Rate Business  comprises those
telecommunications services which the Company is obliged to provide but which do
not  fall  within  the  definition  of Price  Regulated  Business.  Charges  for
Applicable  Rate  Business  are agreed  between  the  Company  and the  relevant
customer.  If despite all reasonable efforts agreement cannot be reached between
the Company and a  significant  proportion  of its  customers  in respect of any
particular  telecommunications  service,  the charge will be  determined  by the
Director General.


                                       43
<PAGE>


     In respect of any  services  provided  by the  Company  which are not Price
Regulated  Business  or  Applicable  Rate  Business,  the prices  charged by the
Company are wholly unregulated,  except for the overriding duty not to engage in
any pricing policy which  constitutes  undue preference or undue  discrimination
against any person or class of person in respect of telecommunications services.
The Company's  unregulated income would include,  for example,  charges for site
rentals to PCN operators.

     The Company's  Price  Regulated  Business is,  essentially,  the television
transmission service provided to the ITV (Channel 3) companies and Channel 4/S4C
including  the  operation  and  maintenance  of  transmission  equipment and the
provision to third party transmission operators of the accommodation,  masts and
antennae necessary for the operation of broadcast transmission services.

     On December 24, 1996, the Director  General issued the formal  modification
to the Company's  Telecommunications  Act Licenses to effect the price  controls
which  are to apply to the  Company  for the  period  from  January  1,  1997 to
December 31, 2002. The Price Cap Review had two purposes: (1) to establish a new
"Po" (the  Company's  allowable  revenues for the first year of the next control
period,  1997, in respect of the Company's Maximum Price Regulated Business) and
(2) to establish a new "X" (the  percentage by which such revenues  must,  after
allowing for consumer price  inflation,  be reduced each year  thereafter).  The
Director General's review concluded that, on present assumptions,  the new Po is
53.15 million pounds sterling and the new X is 4.0%.

     In addition to price control, the Price Cap Review raised a number of other
issues  which will impact upon the  Company's  Price  Regulated  Business in the
future. In particular, the Director General suggested that it would be desirable
for the Company to "unbundle" the prices for  operational  services and required
site rentals which it charges to each broadcaster (such as Channel 3 and Channel
4/S4C) in the form of a  transmission  fee in order to expose those  elements of
the service which are potentially  competitive and allow  broadcasters to choose
an alternative  supplier if they wish.  OFTEL has proposed to review whether the
Company should  publish a ratecard with a menu of prices for unbundled  services
in 2002 when the Company's  regulated  business is next due for full review.  At
present,  the  system  for  calculating  the  proportion  of  Channel  3's total
transmission fee which is charged to each individual  franchisee is based on net
advertising revenues ("NAR") accruing to each franchisee,  rather than the costs
of actually providing the transmission service to each of the franchisees.

     OFTEL  proposed that the Company  should  continue to charge Channel 3 as a
group a single price for each component of its transmission service, albeit that
each  component  would  be  separately  distinguished.  This  arrangement  would
continue  unless and until NAR  arrangements  no longer  applied.  This decision
could only be taken after  agreement with the  Department of Culture,  Media and
Sport and consultation with other interested bodies.


                                       44
<PAGE>


EUROPEAN UNION LEGISLATION

     NTL's  business  is  further  regulated  by the EU under  various  European
Commission  Directives.  In addition,  EU law, in  particular  Directive  94/46,
regulates  the  provision  of  satellite  services  within the EU. In  addition,
possible future EU legislation  (Green Paper on Convergence)  NTL may be subject
to  additional  controls  as a result  of  dealing  both with  broadcasting  and
telephony services on a single network.

GENERAL

RESEARCH AND DEVELOPMENT

     The Company's  research and development  activities involve the analysis of
technological  developments  affecting  its  cable  television,   telephone  and
telecommunications  business,  the evaluation of existing services and sales and
marketing techniques and the development of new services and techniques.

PATENTS, COPYRIGHTS AND LICENSES

     The Company does not have any material  patents or  copyrights  nor does it
believe  that  patents  play a material  role in its  business.  The  Company is
substantially   dependent  on  the  licenses  and  franchises   granted  by  the
legislative agencies which regulate their respective businesses. The loss of any
one or more of the licenses and  franchises of the Company could have a material
adverse effect on the Company's business and financial  condition.  There are no
material  intellectual  property  licenses used by the Company the loss of which
would have such an effect.

CUSTOMERS

     Except for the Company's  broadcast services business,  no material part of
the Company's  business is dependent upon a single  customer or a few customers,
the loss of any one or more of which would have a materially  adverse  effect on
the  Company.  The  broadcast  services  business  is,  however,   substantially
dependent on the  revenues it receives  pursuant to its  contracts  with the ITV
companies,  Channel 4/S4C and Vodafone the loss of one or more of which may have
a material adverse effect on the Company.

EMPLOYEES

     At December  31, 1997 the Company and its  subsidiaries  had  approximately
4,135   employees.   Approximately   1,200  employees  are  represented  by  the
Broadcasting, Entertainment, Cinematographic and Theatre Union which has entered
into a collective  bargaining  agreement with NTLIH.  No other  employees of the
Company are represented by any labor organization. The Company believes that its
relationship with its employees is good.


                                       45
<PAGE>


ITEM 2.  PROPERTIES
-------------------

PROPERTIES

     The  Company's  subsidiaries  own,  lease or  occupy  under  license  eight
business  unit  and  regional   head-offices  in  Glasgow,   Cardiff,   Newport,
Huddersfield,  Fleet, Belfast, Luton and London and the corporate head-office in
Farnborough.  In  addition,  the  Company's  subsidiaries  own  or  lease  eight
switching   centers/head-ends   and  38  operational   hub-sites  together  with
warehouses  and  other  non-operational  properties,  as well as  various  cable
television,  telephone  and  telecommunications  equipment  used  in each of its
regional systems.

     The Company through NTL Investment Holdings Limited ("NTLIH"),  an indirect
wholly-owned  subsidiary  of the  Company  and the  parent  company of NTL Group
Limited,   also  owns,  leases  or  occupies  under  license  approximately  770
properties,  of which  approximately  700 are  used as  transmitter  sites.  The
Company's staff are present at 72 of such  properties,  which are used either as
operational  bases or as offices.  Approximately  200 of the sites are freehold,
approximately  440 leasehold and  approximately  130 occupied under license.  In
addition,  the  Company  through  NTLIH  also  is  the  lessee  or  licensee  of
approximately 600 transmitter  sites which are owned by Castle  Transmission and
shared  between  the two  organizations  pursuant to a site  sharing  agreement.
Substantially  all the Company's  assets and properties are subject to fixed and
floating   charges  securing  the  amounts   outstanding   under  the  Company's
outstanding bank facility.

     The Company  maintains  offices under lease for its corporate  staff in New
York City and in Princeton, New Jersey.

     The Company  believes that its facilities are presently  adequate for their
current use. The Company intends to continue to expand its systems in accordance
with the  requirements  of its network build  schedules and acquire new sites as
part of the ongoing expansion of its transmission networks.

ITEM 3.  LEGAL PROCEEDINGS.
--------------------------

LEGAL PROCEEDINGS

     The Company is involved in, or has been involved in,  certain  disputes and
litigation  arising in the ordinary  course of its  business,  including  claims
involving  contractual  disputes and claims for damages to property and personal
injury  resulting  from  the  construction  of the  Company's  networks  and the
maintenance and servicing of the Company's transmission masts, none of which are
expected to have a material adverse effect on the Company's financial position.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS.
--------------------------------------------------------

     There  were no  matters  that  were  submitted  to a vote of the  Company's
stockholders during the quarter ended December 31, 1997.


                                       46
<PAGE>


                                     PART II
                                     -------

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
        MATTERS.
------------------------------------------------------------------------

     The Company's Common Stock is traded on the Nasdaq Stock Market's  National
Market under the symbol  "NTLI" and on EASDAQ under the symbol  "NTLI.ED".  From
October 14, 1993 through March 26, 1997, the Common Stock traded on Nasdaq Stock
Market's  National  Market under the symbol  "ICTL".  The  following  table sets
forth, for the periods indicated,  the high and low last sale prices as reported
on Nasdaq Stock Market's National Market.

                                                       LAST SALE PRICE
                                                    HIGH             LOW
                                                   -----------------------
       1996
       ----
       First Quarter                               $30.13           $22.00
       Second Quarter                               33.25            28.00
       Third Quarter                                30.00            22.63
       Fourth Quarter                               28.00            23.13

       1997
       ----
       First Quarter                                26.75            18.25
       Second Quarter                               27.00            19.25
       Third Quarter                                27.63            20.75
       Fourth Quarter                               29.13            25.25

       1998
       ----
       First Quarter (through March 20)             44.50            27.06


     On March 20, 1998,  the closing sale price for the Company's  Common Stock,
as reported on the Nasdaq Stock Market's National Market was $44.50. As of March
20, 1998, there were  approximately 522 record holders of the Common Stock. This
figure does not reflect beneficial ownership of shares held in nominee name.

     The Company has never paid cash dividends on its Common Stock.  Pursuant to
the  indentures  governing the Company's  Senior Notes and the  Certificates  of
Designation   governing  the  Company's  Preferred  Stock,   certain  provisions
currently  materially  limit  the  Company's  ability  to pay  dividends  on the
Company's  equity  securities.  In  addition,  there are  legal and  contractual
restrictions  on the ability of the Company's  subsidiaries to transfer funds to
the Company in the form of cash dividends,  loans or advances. See "Management's
Discussion  and  Analysis of Results of  Operations  and  Financial  Condition -
Liquidity and Capital  Resources".  The Company does not currently intend to pay
cash dividends in the  foreseeable  future on shares of its capital  stock.  The
Company anticipates that for the foreseeable future any cash flow generated from
subsidiaries'  operations  will be used to  develop  and  expand  the  Company's
business and for debt  service.  Any future  determination  as to the payment of
dividends will be at


                                       47
<PAGE>


the  discretion  of the  Company's  Board of Directors  and will depend upon the
Company's  operating  results,  financial  condition  and capital  requirements,
indenture and other contractual  restrictions,  general business  conditions and
such other factors as the Company's Board of Directors deems relevant. There can
be no assurance that the Company will pay dividends at any time in the future.

ITEM 6.  SELECTED FINANCIAL DATA.
--------------------------------

     The following  table sets forth certain  financial data for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993. This information should be read in
conjunction  with  the  consolidated  financial  statements  and  notes  thereto
appearing elsewhere in this Form 10-K.

<TABLE>
<CAPTION>

                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                           YEAR ENDED DECEMBER 31,
                                                  --------------------------------------------------------------------
                                                     1997             1996           1995          1994         1993
                                                  --------------------------------------------------------------------
                                                                       (1)
<S>                                                <C>             <C>            <C>            <C>          <C>
INCOME STATEMENT DATA:
    Operating revenues                             $  491,755       $ 228,343      $  33,741     $ 13,745     $ 10,078
    (Loss) before extraordinary item                 (328,557)       (254,454)       (90,785)     (29,573)     (11,076)
    Net (loss)                                       (333,057)       (254,454)       (90,785)     (29,573)     (11,076)
    Basic and diluted net (loss) per
      common share:
    (Loss) before extraordinary item (2)               (10.60)          (8.20)         (3.01)        (.98)        (.83)
    Net (loss) per common share (2)                    (10.74)          (8.20)         (3.01)        (.98)        (.83)
    Weighted average number of common
      shares used in the computation of
      basic and diluted net loss per common            32,117          31,041         30,190       30,175       13,327
      share (2)
</TABLE>
<TABLE>
<CAPTION>


                                                                              AS OF DECEMBER 31,
                                                  --------------------------------------------------------------------
                                                      1997            1996           1995          1994         1993
                                                  --------------------------------------------------------------------
                                                                       (1)
<S>                                                <C>             <C>            <C>            <C>          <C>
BALANCE SHEET DATA:
     Working capital (deficiency)                  $  (51,916)     $  242,102     $   76,128     $251,544     $410,421
     Fixed assets, net                              1,756,985       1,459,528        639,674      191,725       36,422
     Total assets                                   2,421,639       2,454,611      1,010,669      664,366      594,976
     Long-term debt                                 2,015,057       1,732,168        513,026      143,488      130,553
     Senior Redeemable Exchangeable
       Preferred Stock                                108,534               -              -            -            -
     Shareholders' equity (deficiency)                (61,668)        328,114        339,257      436,534      452,402
</TABLE>


(1)  In May 1996,  the Company  purchased  NTL Group  Limited  for an  aggregate
     purchase  price  of  approximately  $439,000,000,   including  goodwill  of
     approximately $263,000,000. The net assets and results of operations of NTL
     Group Limited are included in the  consolidated  financial  statements from
     the date of the acquisition.
(2)  After giving retroactive effect to the four-for-three stock split by way of
     stock dividend paid in August 1995.
The  Company  did not  declare  or pay  any  cash  dividends  during  the  years
indicated.


                                       48
<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION.
--------------------------------------------------------------------------

                              RESULTS OF OPERATIONS

     As a result of the  acquisition  of NTL  Group  Limited  in May  1996,  the
Company  consolidated  the results of  operations  of NTL Group Limited from the
date of acquisition.

Years Ended December 31, 1997 and 1996
--------------------------------------

     Local  telecommunications and television revenues increased to $189,407,000
from  $89,209,000  as a result of customer  growth that  increased the Company's
current revenue stream.

     National  and  international   telecommunications   revenues  increased  to
$162,738,000  from  $45,430,000  as a result  of the  acquisition  of NTL  Group
Limited in May 1996,  plus the new site  acquisition,  installation,  design and
construction projects and additional site sharing revenue in 1997.

     Broadcast  transmission and other revenues  increased to $130,799,000  from
$83,618,000  as a result of the  acquisition  of NTL Group  Limited in May 1996,
plus the  revenues  from NTL Group  Limited's  ten-year  contract  to  broadcast
Channel 5 in the United Kingdom which commenced in 1997.

     Operating expenses  increased to $301,644,000 from $144,315,000.  NTL Group
Limited operating expenses in the year ended December 31, 1997 and in the period
from  May  9,  1996,  the  date  of  acquisition,  to  December  31,  1996  were
$185,995,000  and $71,871,000,  respectively.  The remainder of the increase was
primarily the result of increases in programming and interconnection costs.

     Selling, general and administrative expenses increased to $169,133,000 from
$114,992,000.  NTL Group Limited selling, general and administrative expenses in
the year ended December 31, 1997 and in the period from May 9, 1996, the date of
acquisition, to December 31, 1996 were $18,799,000 and $9,384,000, respectively.
The remainder of the increase was the result of increases in  telecommunications
and CATV sales and marketing  costs and in additional  personnel and overhead to
service the increasing customer base.

     Franchise   fees  of  $23,587,000   and   $13,117,000  in  1997  and  1996,
respectively,  are for the Northern Ireland  license.  Franchise fee expense was
incurred upon the start of operations in Northern Ireland in June 1996.

     Corporate expenses increased to $18,324,000 from $14,899,000  primarily due
to an increase in personnel and related costs. The 1997 and 1996 amounts include
$1,852,000  and  $2,906,000,   respectively,  of  non-cash  expense  related  to
non-compete agreements.


                                       49
<PAGE>


     Nonrecurring charges of $20,642,000 in 1997 include  restructuring costs of
$15,629,000 and deferred costs  written-off of $5,013,000.  Restructuring  costs
include  costs of employee  severance  and related  costs,  lease exit costs and
penalties  associated  with the  cancellation  of contractual  obligations.  The
deferred costs of $5,013,000  written-off arose in connection with the Company's
unsuccessful bid for DTT multiplex licenses.

     Depreciation  and  amortization  expense  increased  to  $150,509,000  from
$98,653,000.  The increase was primarily due to an increase in  depreciation  of
telecommunications and CATV equipment.  Depreciation and amortization expense of
NTL Group Limited and  amortization  of goodwill as a result of the  acquisition
was  $37,724,000  and $20,339,000 in the year ended December 31, 1997 and in the
period  from May 9,  1996,  the  date of  acquisition,  to  December  31,  1996,
respectively.

     Interest  expense  increased to $202,570,000  from  $137,032,000 due to the
issuance  of the 10% Senior  Notes in  February  1997,  the  issuance  of the 7%
Convertible Subordinated Notes in June 1996 and the increase in accretion of the
original  issue discount on the deferred  coupon notes.  Interest of $78,817,000
and  $37,889,000  was paid in the  years  ended  December  31,  1997  and  1996,
respectively.

     Other gains of  $21,497,000  in 1997 include a gain on sale of fixed assets
of $11,497,000 and a $10,000,000  payment from LeGroupe  Videotron Ltee pursuant
to the settlement of a lawsuit.

     In connection with the repayment of debt, a subsidiary of NTL Group Limited
recorded an  extraordinary  loss in 1997 of  $4,500,000  from the  write-off  of
unamortized deferred financing costs.

Years Ended December 31, 1996 and 1995
--------------------------------------

     Local  telecommunications  and television revenues increased to $89,209,000
from  $24,804,000  as a result of customer  growth that  increased the Company's
current revenue stream.

     National  and  international   telecommunications   revenues  increased  to
$45,430,000 from none as a result of the acquisition of NTL Group Limited.

     Broadcast  transmission  and other revenues  increased to $83,618,000  from
none as a result of the acquisition of NTL Group Limited.

     Operating  expenses  increased to $144,315,000 from $24,415,000.  NTL Group
Limited  operating  expenses from May 9, 1996, the date of acquisition,  through
December 31, 1996 were $71,871,000. The remainder of the increase was the result
of increases in programming costs,  interconnection costs and costs of operating
the telecommunications and CATV network.

     Selling, general and administrative expenses increased to $114,992,000 from
$57,932,000. NTL Group Limited selling, general and administrative expenses from
May 9, 1996, the date of acquisition, through December 31, 1996 were $9,384,000.
The remainder of the increase was the


                                       50
<PAGE>


result of increases in telecommunications and CATV sales and marketing costs and
in additional personnel and overhead to service the increasing customer base.

     Franchise fees of $13,117,000 in 1996 are for the Northern  Ireland license
and were payable to the ITC beginning in January 1997. Franchise fee expense was
incurred upon the start of operations in Northern Ireland in June 1996.

     Corporate  expenses  increased to $14,899,000  from  $14,697,000  due to an
increase in  personnel  and related  costs.  The 1996 and 1995  amounts  include
$2,906,000  and  $3,256,000,   respectively,  of  non-cash  expense  related  to
non-compete agreements.

     Depreciation  and  amortization   expense  increased  to  $98,653,000  from
$29,823,000.  Depreciation  and  amortization  expense of NTL Group  Limited and
amortization of goodwill as a result of the acquisition was $20,339,000 from May
9, 1996, the date of  acquisition,  through  December 31, 1996. The remainder of
the   increase   was   primarily   due  to  an  increase  in   depreciation   of
telecommunications and CATV equipment.

     Interest and other income  increased to $33,634,000 from $21,185,000 due to
an increase in funds available for short-term investment.

     Interest  expense  increased to  $137,032,000  from  $28,379,000 due to the
interest on the bank loan in connection  with the NTL Group Limited  acquisition
in 1996 plus the issuance of the 11-1/2% Series B Senior  Deferred  Coupon Notes
and the 7% Convertible  Subordinated Notes in 1996.  Interest of $37,889,000 and
$13,918,000  was paid  during  the  years  ended  December  31,  1996 and  1995,
respectively.

                         LIQUIDITY AND CAPITAL RESOURCES

     The  Company  will  continue to require  significant  amounts of capital to
finance  construction  of its local and national  networks,  for  connection  of
telephone,  telecommunications  and CATV  customers to the  networks,  for other
capital  expenditures,  as well as for  cash  interest  payments.  Based  on the
information  currently  available,  the Company  estimates that, from January 1,
1998 through  December 31, 1998 (assuming  conversion of the 7-1/4%  Convertible
Subordinated  Notes due to the March 1998 call for  redemption  in April  1998),
these  requirements  will aggregate 436 million pounds  sterling  (approximately
$720 million).  The Company  intends to fund its  requirements  from cash,  cash
equivalents  and marketable  securities on hand of $103.9 million as of December
31, 1997 and from the aggregate  proceeds of approximately  $1.25 billion (after
discounts,  commissions  and  expenses)  from  the  issuance  in  March  1998 of
125,000,000  pounds  sterling  principal  amount,  9-1/2% Senior Notes due 2008,
300,000,000 pounds sterling accreted value, 10-3/4% Senior Deferred Coupon Notes
due 2008 and $1,300,000,000  accreted value, 9-3/4% Senior Deferred Coupon Notes
due 2008 (together the "New Notes"). The Company's commitments for equipment and
services at December 31, 1997 of  approximately  $78 million are included in the
anticipated requirements.


                                       51
<PAGE>


     In 1997, NTL (UK) Group,  Inc., a  wholly-owned  subsidiary of the Company,
which is the holding  company for its United  Kingdom  operations and the parent
company of NTLIH,  and NTLIH entered into an agreement with The Chase  Manhattan
Bank pursuant to which Chase has agreed to fully underwrite a 555 million pounds
sterling,  eight-year  term loan  facility with an initial  four-year  revolving
period (the "New Credit  Facility").  By April 14, 1999, Chase's commitment will
be reduced to no less than 480,000,000 pounds sterling or such greater amount as
is necessary to ensure that the Company's United Kingdom operations remain fully
funded by reference to an agreed  business plan. The New Credit Facility will be
used to finance  capital  expenditures  and working  capital  for the  Company's
United   Kingdom   operations,   including   its   local   broadband,   national
telecommunications  and national digital television  networks.  A portion of the
New Credit  Facility  (75  million  pounds  sterling)  is  conditional  upon the
execution of contracts to provide digital  television  transmission  services to
certain third parties.  Chase has provided a portion of the New Credit  Facility
in the form of a 350 million pounds sterling facility to the Company on the same
terms as to restrictions,  covenants, guarantees and security as the 555 million
pounds  sterling  facility.  As of March 20,  1998,  the  Company had 10 million
pounds sterling outstanding under the New Credit Facility.  The principal amount
outstanding  under the 350 million  pounds  sterling  facility is required to be
repaid on December 31, 2005.  Interest is payable either  monthly,  quarterly or
semi-annually,  at the option of NTLIH,  at LIBOR plus, at a maximum,  2.25% per
annum.  The commitment  fee is .375% per annum on the unutilized  portion of the
350 million pounds sterling  facility and is payable  quarterly in arrears.  The
New Credit  Facility is secured by first  fixed and  floating  charges  over all
present and future assets and  undertakings of the United Kingdom group. The New
Credit Facility contains customary financial covenants, and certain restrictions
relating to, among other things:  (i) incurrence of additional  indebtedness  or
guarantees,  (ii)  investments,  acquisitions and mergers and (iii) dividend and
other payment restrictions. In the absence of a default, the New Credit Facility
generally  permits  payments to the Company to pay  interest  and  principal  of
existing indebtedness of the Company.

     In  connection  with the New Credit  Facility,  the Company  entered into a
European  Currency  Option with a bank in which the Company  may  purchase  U.S.
dollars at a fixed rate of 1 pound sterling to $1.40.  The option is exercisable
on specified dates through June 2001 for specified amounts of U.S. dollars.  The
dates and U.S. dollar amounts correspond to the Company's interest payment dates
and amounts for its U.S.  dollar  denominated  debt and  anticipated  amounts of
parent company expenses.

     The Company is highly leveraged. After giving effect to the issuance of the
New Notes,  the  accreted  value at  December  31, 1997 of the  Company's  total
long-term   indebtedness   (including   the  Redeemable   Preferred   Stock)  is
approximately   $3.4   billion,   representing   approximately   102%  of  total
capitalization. The following tables summarizes the terms of those


                                       52
<PAGE>


notes and redeemable preferred stock issued by the Company.

<TABLE>
<CAPTION>


                                    11-1/2%             12-3/4%             10-7/8%              10-3/4%               9-3/4%
                                Series B Senior     Series A Senior     Senior Deferred      Senior Sterling           Senior
                                Deferred Coupon     Deferred Coupon          Coupon          Deferred Coupon      Deferred Coupon
                                    Notes               Notes                Notes                Notes               Notes
<S>                              <C>                 <C>                 <C>                  <C>                  <C>

Denomination................     $                   $                   $                    Pounds Sterling      $
Net Proceeds (in 000's).....     582,000             145,125             119,797              170,584              778,340
Issue Date..................     January 30, 1996    April 20, 1995      October 7, 1993      March 13, 1998       March 13, 1998
Issue Price(1)..............     57.155%             53.995%             58.873%              58.62%               61.724%

Aggregate Principal Amount
  at Maturity (in 000's)....     1,050,000           277,803             212,000              300,000              1,300,000
Maturity Date...............     February 1, 2006    April 15, 2005      October 15, 2003     April 1, 2008        April 1, 2008
Yield or Interest Rate(2)...     11-1/2%             12-3/4%             10-7/8%              10-3/4%              9-3/4%

Interest or Dividend             February 1 and      April 15 and        April 15 and         April 1 and          April 1 and
  Payment                        August 1            October 15          October 15           October 1            October 1
  Dates.....................     from 8-1-01         from 10-15-00       From 4-15-99         from 10-1-2003       from 10-1-2003
Earliest Optional
  Redemption Date(4)........     February 1, 2001    April 15, 2000      October 15, 1998     April 1, 2003        April 1, 2003
Redemption                       105.75 (2001)       103.64 (2000)       103.107 (1998)       105.375 (2003)       104.875 (2003)
  Price(%)(5)...............     to 100 (2003)       to 100 (2002)       to  100 (2000)       to 100 (2006)        to 100 (2006)

Conversion Price(6).........     N/A                 N/A                 N/A                  N/A                  N/A
Senior/Subordinated.........     Senior              Senior              Senior               Senior               Senior

</TABLE>

(table continues on the following page)


                                       53
<PAGE>


<TABLE>
<CAPTION>


                                      7%                7-1/4%
                                 Convertible          Convertible             9-1/2%              10%             Redeemable
                                 Subordinated        Subordinated        Senior Sterling        Series B          Preferred
                                    Notes               Notes (7)             Notes           Senior Notes           Stock

<S>                              <C>                 <C>                 <C>                 <C>                  <C>
Denomination................     $                   $                   Pounds Sterling     $                    $
Net Proceeds (in 000's).....     267,437             186,065             121,161             389,000              96,625
Issue Date..................     June 12, 1996       April 20, 1995      March 13, 1998      February 14, 1997    February 14, 1997
Issue Price(1)..............     100%                100%                99.670%             100%                 100%

Aggregate Principal Amount
  at Maturity (in 000's)....     275,000             191,750             125,000             400,000              100,000
Maturity Date...............     June 15, 2008       April 15, 2005      April 1, 2008       February 15, 2007    February 15, 2009
Yield or Interest Rate(2)...     7%                  7-1/4%              9-1/2%              10%                  13%

Interest or Dividend             June 15 and         April 15 and        April 1 and         February 15 and      May 15, August 15,
  Payment                        December 15         October 15          October 1           August 15            November 15 and
  Dates.....................     from 12-15-96       from 10-15-95       From 10-1-98        from 8-15-97         February 15
                                                                                                                  from 5-15-97(3)
Earliest Optional
  Redemption Date(4)........     June 15, 1999       April 15, 1998      April 1, 2003       February 15, 2002    February 15, 2002
Redemption                       104.9 (1999)        105.08 (1998)       104.75 (2003)       105 (2002)           106.5 (2002)
  Price(%)(5)...............     to 100 (2006)       to 100.73 (2004)    to 100 (2006)       to 100 (2005)        to 100 (2005)

Conversion Price(6).........     37.875              27.56               N/A                 N/A                  N/A
Senior/Subordinated.........     Subordinated        Subordinated        Senior              Senior               N/A

-------------------------

(1) Percent of aggregate principal amount at maturity (or aggregate liquidation preference in the case of the Redeemable Preferred
    Stock).
(2) Percent per annum.
(3) Dividend payments on the Redeemable Preferred Stock are payable in cash or additional shares of Redeemable Preferred Stock, at
    the Company's option. From May 15, 2004, dividend payments are payable in cash.
(4) This is the first date when redeemable at the Company's option. The Redeemable Preferred Stock is mandatorily redeemable for
    cash on February 15, 2009.
(5) Expressed as a percentage of principal amount or liquidation preference, as applicable, plus, in each case, accrued and unpaid
    interest or dividends thereon to the applicable redemption date.
(6) This is the conversion price per share of the Company's common stock, adjusted for the four-for-three stock split in August 1995
    and subject to further adjustments in certain events.
(7) These notes have been called for redemption effective April 20, 1998, unless converted on or prior to April 19, 1998.
</TABLE>


     Pursuant  to the  terms of the  Northern  Ireland  LDL,  CableTel  Northern
Ireland Limited (a  wholly-owned  subsidiary of the Company) is required to make
annual cash payments to the ITC for fifteen years in the amount of approximately
14.4 million pounds sterling  (subject to adjustments  for inflation).  CableTel
Northern  Ireland  Limited began making  payments of 1.2 million pounds sterling
per month in January 1997.  Such payments are in addition to the  percentages of
qualifying  revenue  already set by the ITC of 0% for the first ten years and 2%
for the last five years of the fifteen  year


                                       54
<PAGE>


license.  Pursuant to the terms of the Glamorgan and Gwent LDL,  CableTel  South
Wales  Limited (a  wholly-owned  subsidiary  of the Company) is required to make
annual cash payments to the ITC for fifteen years,  commencing in the first full
calendar  year after the start of  operations,  in the amount of 104,188  pounds
sterling (subject to adjustment for inflation). Such payments are in addition to
the percentages of qualifying revenue already set by the ITC of 0% for the first
five  years,  2% for the second five years and 4% for the last five years of the
fifteen year license.

     The Company has significant capital  requirements for the completion of its
telephone,  telecommunications  and CATV  network  passed the total of 2,090,000
homes required by its regulatory build  schedules,  for its LDL payments and for
scheduled  cash interest and principal  payments,  as well as  requirements  for
other capital expenditures.  The Company expects to fund these requirements with
cash on hand,  proceeds from the New Notes,  funds from the New Credit  Facility
and  cash  from  operations.   There  can  be  no  assurance  that:  (i)  actual
construction  costs will not exceed the  amounts  estimated  or that  additional
funding  substantially in excess of the amounts  estimated will not be required,
(ii)  conditions  precedent to advances  under the New Credit  Facility  will be
satisfied when funds are required,  (iii) the Company and its subsidiaries  will
be  able  to  generate   sufficient   cash  from   operations  to  meet  capital
requirements, debt service and other obligations as they fall due when required,
(iv) the Company  will be able to access such cash flow or (v) the Company  will
not incur losses from its exposure to exchange rate fluctuations or be adversely
affected by interest rate fluctuations.

     The  Company's  operations  are  conducted  through its direct and indirect
wholly-owned   subsidiaries.   As  a  holding  company,  the  Company  holds  no
significant   assets  other  than  its   investments  in  and  advances  to  its
subsidiaries.  The Company is therefore dependent upon the receipt of sufficient
funds  from its  subsidiaries  to meet  its own  obligations.  Accordingly,  the
Company's ability to make scheduled  interest and principal payments when due to
holders of  indebtedness  of the Company and the  Company's  ability to pay cash
dividends to its  stockholders is dependent upon the receipt of sufficient funds
from its subsidiaries.

     To the extent that the Company  obtains  financing in United States dollars
and incurs costs in the  construction  and operation of the  Company's  regional
systems in the United  Kingdom in British  pounds  sterling,  it will  encounter
currency   exchange  rate  risks.   At  December  31,  1997,   the  Company  had
approximately  $42 million in pounds sterling cash accounts to reduce this risk.
In  addition,  the  Company's  New  Credit  Facility  and  the  pounds  sterling
denominated  New Notes will also reduce this risk.  Furthermore,  the  Company's
revenues are generated  primarily in British pounds  sterling while its interest
and  principal  obligations  with  respect  to  most of the  Company's  existing
indebtedness  are  payable in dollars.  The  Company has entered  into an option
agreement  to hedge some of the risk of exchange  rate  fluctuations  related to
interest payments on U.S. dollar denominated debt.

     The information in the preceding  paragraphs does not include the impact of
the proposed Partners acquisition. In addition, the information in the preceding
paragraphs includes projections; in reviewing such information it should be kept
in  mind  that  actual  results  may  differ   materially  from  those  in  such
projections.  These  projections  were based on various factors and were derived
utilizing  numerous  assumptions.  Important  assumptions and factors that could


                                       55
<PAGE>


cause  actual  results  to differ  materially  from  those in these  projections
include  the  Company's   ability  to  continue  to  design  networks,   install
facilities,  obtain and maintain any required governmental licenses or approvals
and finance  construction and development,  all in a timely manner at reasonable
costs and on  satisfactory  terms and conditions,  as well as assumptions  about
customer  acceptance,  churn rates,  overall market  penetration and competition
from providers of alternative  services.  The failure of such  assumptions to be
realized  as well as other  factors  may also  cause  actual  results  to differ
materially  from those  projected.  The Company assumes no obligations to update
these  projections to reflect actual results,  changes in assumptions or changes
in other factors affecting such projections.

YEAR 2000

     Many computer systems  experience  problems  handling dates beyond the year
1999.  Therefore,  some computer  hardware and software will need to be modified
prior to the year 2000 in order to remain  functional.  The Company is assessing
both the internal  readiness of its computer  systems and the  compliance of the
computer systems of certain  significant  customers and vendors for handling the
year 2000.  The  Company  expects to  implement  successfully  the  systems  and
programming  changes necessary to address year 2000 issues, and does not believe
that the  cost of such  actions  will  have a  material  adverse  effect  on the
Company. There can be no assurance,  however, that there will not be a delay in,
or increased costs associated with, the implementation of such changes,  and the
Company's  inability to implement  such changes could have an adverse  effect on
the Company.  In addition,  the failure of certain of the Company's  significant
customers  and  vendors  to address  the year 2000  issue  could have a material
adverse effect on the Company.

CONSOLIDATED STATEMENTS OF CASH FLOWS

     Cash used in operating  activities was  $17,271,000  and $21,405,000 in the
years ended December 31, 1997 and 1996, respectively.  The decrease in cash used
in  operating  activities  is primarily  due to changes in operating  assets and
liabilities.

     Purchases of fixed assets were  $503,656,000  in 1997 and  $505,664,000  in
1996 as a result of the continuing  fixed asset  purchases and  construction  in
1997. In May 1997, the Company paid  $57,330,000 to the former  shareholders  of
NTL Group Limited in respect of the final payment of deferred purchase price.


                                       56
<PAGE>


     Proceeds  from  borrowings  and sale of preferred  stock,  net of financing
costs,  of  $490,302,000 in 1997 is comprised of the proceeds from the 10% Notes
and the  Redeemable  Preferred  Stock of  $500,000,000,  net of financing  costs
incurred of $15,660,000, plus proceeds from borrowings under the NTLIH Term Loan
and Revolving  Facility (the "NTLIH Facility") of $13,104,000 less $7,142,000 of
financing  costs  paid in  connection  with the New Credit  Facility.  Principal
payments of  $242,424,000  represent the repayment of the NTLIH Facility  (which
was a requirement of the New Credit Facility).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
------------------------------------------------------------------

     NTL is required to provide these  disclosures  in its Annual Report on Form
10-K for the year ending December 31, 1998.




                                       57
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
---------------------------------------------------


The consolidated  financial  statements of the Company are filed under this Item
commencing on page F-1 of this Report.

The following is a summary of the quarterly  results of operations for the years
ended December 31, 1997 and 1996.

<TABLE>
<CAPTION>

                                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                             1997
                                                                                      THREE MONTHS ENDED
                                                       -----------------------------------------------------------------------------
                                                            MARCH 31           JUNE 30          SEPTEMBER 30        DECEMBER 31
                                                       -----------------------------------------------------------------------------
<S>                                                        <C>                 <C>                <C>                <C>
Revenues                                                   $106,817            $114,822           $126,734           $143,402
Operating loss                                              (45,231)            (51,772)           (54,438)           (40,623)
Loss before extraordinary item                              (85,761)            (87,674)           (83,357)           (71,765)
Net loss                                                    (85,761)            (87,674)           (83,357)           (76,265)
Basic and diluted loss per common
   share before extraordinary item                            (2.73)              (2.84)             (2.70)             (2.34)
Basic and diluted net loss per common share                   (2.73)              (2.84)             (2.70)             (2.48)

</TABLE>
<TABLE>
<CAPTION>
                                                                                             1996
                                                                                      THREE MONTHS ENDED
                                                       -----------------------------------------------------------------------------
                                                            MARCH 31           JUNE 30          SEPTEMBER 30        DECEMBER 31
                                                       -----------------------------------------------------------------------------
<S>                                                        <C>                 <C>                <C>                <C>
Revenues                                                   $ 18,434            $ 47,783           $ 77,256           $ 84,870
Operating loss                                              (28,183)            (33,751)           (44,390)           (51,309)
Net loss                                                    (42,724)            (59,158)           (74,070)           (78,502)
Basic and diluted net loss per common share                   (1.41)              (1.95)             (2.35)             (2.45)
</TABLE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.
---------------------------------------------------------

         Not applicable.


                                       58
<PAGE>


                                    PART III
                                    --------

ITEMS 10, 11, 12, AND 13.
------------------------

     The  information  required  by  PART  III  (Items  10,  11,  12 and  13) is
incorporated  by  reference  from  the  Company's   definitive  proxy  statement
involving the election of directors which the Company expects to file,  pursuant
to Regulation 14A, within 120 days following the end of its fiscal year.


                                     PART IV
                                     -------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
-------------------------------------------------------------------------

   (a)(1) Financial Statements - See list of Financial Statements on page F-1.

      (2) Financial  Statement  Schedules  - See  list  of  Financial  Statement
          Schedules on page F-1.

      (3) Exhibits - See Exhibit Index on page 60.

   (b)    During the fourth  quarter of 1997, the Company filed a Current Report
          on Form 8-K dated October 20, 1997  (reporting a matter under Item 5 -
          Other Events). No financial statements were filed with this report.

   (c)    Exhibits - The  response to this  portion of Item 14 is submitted as a
          separate section of this report.

   (d)    Financial  Statement  Schedules  - See  list  of  Financial  Statement
          Schedules on page F-1.



                                       59
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.
----------

   2.1    Amended and Restated  Agreement of Reorganization  and Plan of Merger,
          dated as of May 28, 1993, among the Company,  OCOM and CableTel Merger
          Inc.  (Incorporated by reference to Exhibit 2,  Registration  File No.
          33-63570)

   2.2    Deed of  Irrevocable  undertaking  dated  March 28,  1996 by and among
          Addroute Limited,  certain  shareholders in the NTL Group Limited, NTL
          Group  Limited  and the  Company  (Incorporated  by  reference  to the
          Company's Registration Statement on Form S-4, File No. 333-1010).

   2.3    Form of Offer  Document  dated March 28, 1996 of Addroute  Limited for
          NTL  Group  Limited   (Incorporated  by  reference  to  the  Company's
          Registration Statement on Form S-4, File No. 333-1010).

   2.4    Deed of Adjustment  dated March 28, 1996 by and among Addroute Limited
          and Mercury Asset  Management plc.  (Incorporated  by reference to the
          Company's Registration Statement on Form S-4, File No. 333-1010).

   2.5    Share  Exchange  Agreement,  dated as of August 30, 1996, by and among
          the Company,  B/G Co., Booth American  Company,  Columbia  Management,
          Inc. and Robert T. Goad  (Incorporated  by reference to the  Company's
          Registration Statement on Form S-3, File No. 333-16751).

   2.6    Share  Purchase  Agreement,  dated  October 7, 1996,  by and among the
          Company,  South  Wales  Electricity  plc and Swalec  Telco  Investment
          Limited  (Incorporated  by  reference  to the  Company's  Registration
          Statement on Form S-3, File No. 333-16751).

   3.1    Restated Certificate of Incorporation. (Incorporated by reference from
          the Company's  Registration  Statement on Form S-3,  Registration File
          No. 333-07879)

   3.1(a) Certificate  of  Ownership  and  Merger,  dated  as of  March 26, 1997
          (Incorporated by reference to Company's Form 8-K, dated and filed with
          the Commission on March 26, 1997).

   3.2    Restated   By-Laws   (Incorporated   by   reference  to  Exhibit  3.2,
          Registration No. 33-63570)

   4.1    Specimen of Common  Stock  Certificate  (Incorporated  by reference to
          Exhibit 4.1, Registration File No. 33-63570)


                                       60
<PAGE>


   4.2    Warrant  Agreement  dated  February  14, 1996  between the Company and
          Chemical  Bank as Warrant  Agent  (Incorporated  by  reference  to the
          Company's Registration Statement on Form S-4, File No. 333-00118)

   4.3    Form of Warrant to Purchase Common Stock (included in Exhibit 4.2)

   4.4    Indenture, dated as of October 1, 1993, by and between the Company and
          Chemical Bank with respect to the 10-7/8%  Senior Notes  (Incorporated
          by reference to Exhibit 4.1, Registration File No. 33-63572)

   4.5    Indenture,  dated as of April 20, 1995, by and between the Company and
          Chemical  Bank as Trustee,  with  respect to the 12-3/4%  Senior Notes
          (Incorporated by reference from the Company's  Registration  Statement
          on Form S-4, File No. 33-92794)

   4.6    Indenture,  dated as of January 30,  1996,  by and between the Company
          and Chemical Bank as Trustee, with respect to the 11-1/2% Senior Notes
          (Incorporated by reference from the Company's  Registration  Statement
          on Form S-4, File No. 333-00118)

   4.7    First  Supplemental  Indenture,  dated as of January 22, 1996,  by and
          among the Company and Chemical  Bank, as Trustee,  with respect to the
          12-3/4%  Senior Notes  (Incorporated  by reference  from the Company's
          Registration Statement on Form S-4, File No. 333-00118)

   4.8    First  Supplemental  Indenture,  dated as of January 23, 1996,  by and
          among the Company and Chemical  Bank, as Trustee,  with respect to the
          10-7/8%   Notes   (Incorporated   by  reference   from  the  Company's
          Registration Statement on Form S-4, File No. 333-00118)

   4.9    Indenture,  dated as of February 12, 1997,  by and between the Company
          and The Chase  Manhattan  Bank,  as Trustee,  with  respect to the 10%
          Senior Notes  (Incorporated  by reference from the Company's 1996 Form
          10-K)

   4.10   Indenture,  dated as of March 13, 1998, by and between the Company and
          The Chase  Manhattan  Bank,  as  Trustee,  with  respect to the 9-1/2%
          Senior Notes

   4.11   Indenture,  dated as of March 13, 1998, by and between the Company and
          The Chase  Manhattan  Bank,  as  Trustee,  with  respect to the 9-3/4%
          Senior Deferred Coupon Notes

   4.12   Indenture,  dated as of March 13, 1998, by and between the Company and
          The Chase  Manhattan  Bank,  as Trustee,  with  respect to the 10-3/4%
          Senior Deferred Coupon Notes


                                       61
<PAGE>


   4.13   Certificate of  Designation,  dated February 12, 1997, with respect to
          the 13% Redeemable Preferred Stock (Incorporated by reference from the
          Company's 1996 Form 10-K)

   4.14   Certificate of  Designation,  dated October 7, 1996, in respect of the
          Company's  Series A Preferred Stock  (Incorporated by reference to the
          Company's Form 8-K, filed on October 9, 1996).

   4.15   Registration  Rights Agreement,  dated February 12, 1997, by and among
          the Company and Donaldson,  Lufkin & Jenrette Securities  Corporation,
          Chase  Securities,  Inc.  and Merrill  Lynch,  Pierce,  Fenner & Smith
          Incorporated  with  respect to the 10% Senior Notes  (Incorporated  by
          reference from the Company's 1996 Form 10-K)

   4.16   Registration  Rights Agreement,  dated February 12, 1997, by and among
          the Company and Donaldson,  Lufkin & Jenrette Securities  Corporation,
          Chase  Securities,  Inc.  and Merrill  Lynch,  Pierce,  Fenner & Smith
          Incorporated  with  respect to the 13% Senior Notes  (Incorporated  by
          reference from the Company's 1996 Form 10-K)

   4.17   Registration  Rights  Agreement,  dated as of March 13,  1998,  by and
          among the  Company  and  Donaldson,  Lufkin & Jenrette  International,
          Morgan  Stanley  &  Co.   International   Limited,   BT  Alex.   Brown
          International,    Chase   Securities   Inc.   and   Salomon   Brothers
          International Limited with respect to the 9-1/2% Senior Notes

   4.18   Registration  Rights  Agreement,  dated as of March 13,  1998,  by and
          among  the  Company  and  Donaldson,   Lufkin  &  Jenrette  Securities
          Corporation,  Morgan  Stanley  &  Co.  Incorporated,  BT  Alex.  Brown
          Incorporated,  Chase  Securities  Inc.  and Salomon  Brothers Inc with
          respect to the 9-3/4% Senior Deferred Coupon Notes

   4.19   Registration  Rights  Agreement,  dated as of March 13,  1998,  by and
          among the  Company  and  Donaldson,  Lufkin & Jenrette  International,
          Morgan  Stanley  &  Co.   International   Limited,   BT  Alex.   Brown
          International,    Chase   Securities   Inc.   and   Salomon   Brothers
          International  Limited  with  respect to the 10-3/4%  Senior  Deferred
          Coupon Notes

   4.20   Form of Preferred Stock  (Incorporated by reference from the Company's
          1996 Form 10-K)

   4.21   Indenture,  dated as of June 12, 1996,  by and between the Company and
          Chemical Bank, as Trustee,  with respect to the 7%  Convertible  Notes
          (Incorporated by reference from the Company's  Registration  Statement
          on Form S-3, File No. 333-07879)


                                       62
<PAGE>


   4.22   Registration  Rights Agreement,  dated June 12, 1996, by and among the
          Company and Donaldson,  Lufkin & Jenrette  Securities  Corporation and
          Salomon  Brothers  Inc,  with  respect  to  the 7%  Convertible  Notes
          (Incorporated by reference from the Company's  Registration  Statement
          on Form S-3, File No. 33-07879)

   4.23   Indenture,  dated as of April 20,  1995,  by and among the Company and
          Chemical  Bank,  as Trustee,  with  respect to the 7-1/4%  Convertible
          Notes  (Incorporated  by  reference  from the  Company's  Registration
          Statement on Form S-3, File No. 333-92792)

   4.24   Registration Agreement, dated April 12, 1995, by and among the Company
          and Salomon  Brothers  Inc,  Donaldson,  Lufkin & Jenrette  Securities
          Corporation  and  Goldman  Sachs & Co.,  with  respect  to the  7-1/4%
          Convertible  Notes  (Incorporated  by  reference  from  the  Company's
          Registration Statement on Form S-3, File No. 333-92792)

   4.25   Rights  Agreement  entered into by the Company and  Continental  Stock
          Transfer & Trust  Company  (Incorporated  by reference to Exhibit 4.2,
          Registration No. 33-63570)

   10.1   Compensation  Plan  Agreements,  as  amended  and  restated  effective
          June 3, 1997

   10.2   Form of Director  and Officer  Indemnity  Agreement  (together  with a
          schedule of executed Indemnity Agreements)  (Incorporated by reference
          from  the  Company's  Registration  Statement  on Form  S-4,  File No.
          33-92794)

   11     Statement re computation of per share earnings

   21     Subsidiaries of the Registrant

   23     Consent of Ernst & Young LLP

   27.1   Financial Data Schedule, for the year ended December 31, 1997

   27.2   Restated Financial Data Schedule,  for the quarter ended September 30,
          1997

   27.3   Restated Financial Data Schedule, for the quarter ended June 30, 1997

   27.4   Restated Financial Data Schedule, for the quarter ended March 31, 1997

   27.5   Restated Financial Data Schedule, for the year ended December 31, 1996

   27.6   Restated Financial Data Schedule,  for the quarter ended September 30,
          1996

   27.7   Restated Financial Data Schedule, for the quarter ended June 30, 1996


                                       63
<PAGE>


   27.8   Restated Financial Data Schedule, for the quarter ended March 31, 1996

   99.1   Prescribed  Diffusion Service License,  dated July 21, 1987, issued to
          British  Cable  Services  Limited  (now held by  CableTel  Surrey  and
          Hampshire  Limited)  for the area of West  Surrey and East  Hampshire,
          England  (Incorporated  by reference to the Company's  Form 8-K, filed
          with the Commission on March 19, 1996)

   99.2   Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to  Clyde  Cablevision  (renamed  CableTel  Glasgow)  for the  area of
          Inverclyde,  Scotland (Incorporated by reference to the Company's Form
          8-K, filed with the Commission on March 19, 1996)

   99.3   Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to  Clyde  Cablevision  (renamed  CableTel  Glasgow)  for the  area of
          Bearsden and  Milngavie,  Scotland  (Incorporated  by reference to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.4   Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to  Clyde  Cablevision  (renamed  CableTel  Glasgow)  for the  area of
          Paisley  and  Renfrew,  Scotland  (Incorporated  by  reference  to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.5   Prescribed  Diffusion Service License,  dated July 10, 1984, issued to
          Clyde  Cablevision  (renamed  CableTel  Glasgow) for the area of North
          Glasgow  and  Clydebank,   Strathclyde,   Scotland   (Incorporated  by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.6   Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to  Clyde  Cablevision  (renamed  CableTel  Glasgow)  for the  area of
          Greater Glasgow,  Scotland (Incorporated by reference to the Company's
          Form 8-K, filed with the Commission on March 19, 1996)

   99.7   Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to Newport Cablevision Limited (renamed CableTel Newport) for the area
          of Newport,  Wales  (Incorporated  by reference to the Company's  Form
          8-K, filed with the Commission on March 19, 1996)

   99.8   Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to Cable and Satellite  Television Holdings Ltd (renamed CableTel West
          Glamorgan Limited) for the area of West Glamorgan, Wales (Incorporated
          by reference to the Company's  Form 8-K,  filed with the Commission on
          March 19, 1996)


                                       64
<PAGE>


   99.9   Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to British Cable Services Limited for the area of Cardiff and Penarth,
          Wales  (now  held  by  CableTel  Cardiff  Limited)   (Incorporated  by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.10  Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to  Kirklees  Cable  (renamed  CableTel  Kirklees)  for  the  area  of
          Huddersfield and Dewsbury,  West Yorkshire,  England  (Incorporated by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.11  Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to CableVision  Communications  Company of Hertfordshire  Ltd (renamed
          CableTel  Hertfordshire  Limited) for the area of Broxbourne  and East
          Hertfordshire,  England  (Incorporated  by reference to the  Company's
          Form  8-K,  filed  with  the  Commission  on  March  19,  1996)

   99.12  Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to CableVision  Communications  Company Ltd (renamed  CableTel Central
          Hertfordshire   Limited)  for  the  area  of  Central   Hertfordshire,
          England(Incorporated  by reference to the  Company's  Form 8-K,  filed
          with the Commission on March 19, 1996)

   99.13  Prescribed Diffusion Service License,  dated March 26, 1990, issued to
          CableVision  Bedfordshire Limited (renamed CableTel Bedfordshire Ltd.)
          for  the  area  of  Luton  and  South  Bedfordshire  (Incorporated  by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.14  Prescribed  Diffusion Service License,  dated December 3, 1990, issued
          to  CableVision   North   Bedfordshire  Ltd  (renamed  CableTel  North
          Bedfordshire  Ltd.)  for  the  area  of  North  Bedfordshire,  England
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.15  Local  Delivery  Service  License,  dated  October 2, 1995,  issued to
          CableTel  Northern Ireland Limited for Northern Ireland  (Incorporated
          by reference to the Company's  Form 8-K,  filed with the Commission on
          March 19, 1996)

   99.16  Local Delivery  Service  License,  dated  December 6, 1995,  issued to
          CableTel   South  Wales  Limited  for   Glamorgan  and  Gwent,   Wales
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.17  Local  Delivery  Service  License,  dated  March 13,  1991,  issued to
          Maxwell Cable TV Limited for Pembroke Dock, Dyfed,  Wales (now held by
          Metro South Wales Limited) (Incorporated by reference to the Company's
          Form 8-K, filed with the Commission on March 19, 1996)


                                       65
<PAGE>


   99.18  Local  Delivery  Service  License,  dated  March 15,  1991,  issued to
          Maxwell Cable TV Limited for Camarthen, Wales (now held by Metro South
          Wales Limited)  (Incorporated  by reference to the Company's Form 8-K,
          filed with the Commission on March 19, 1996)

   99.19  Local  Delivery  Service  License,  dated  March 15,  1991,  issued to
          Maxwell Cable TV Limited for Milford  Haven,  Wales (now held by Metro
          South Wales Limited)  (Incorporated by reference to the Company's Form
          8-K, filed with the Commission on March 19, 1996)

   99.20  Local  Delivery  Service  License,  dated  March 15,  1991,  issued to
          Maxwell Cable TV Limited for Cwmgors (Amman  Valley),  West Glamorgan,
          Wales (Incorporated by reference to the Company's Form 8-K, filed with
          the Commission on March 19, 1996)

   99.21  Local  Delivery  Service  License,  dated  March 15,  1991,  issued to
          Maxwell  Cable  TV  Limited  for  Ammanford,  West  Glamorgan,   Wales
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.22  Local  Delivery  Service  License,  dated  March 15,  1991,  issued to
          Maxwell Cable TV Limited for Brecon,  Gwent,  Wales  (Incorporated  by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.23  Local  Delivery  Service  License,  dated  March 15,  1991,  issued to
          Maxwell   Cable  TV  Limited   for   Haverfordwest,   Preseli,   Wales
          (Incorporated  by reference to the the Company's  Form 8-K, filed with
          the Commission on March 19, 1996)

   99.24  Local  Delivery  Service  License,  dated  March 15,  1991,  issued to
          Maxwell  Cable TV Limited  for  Neyland,  Preseli,  Wales (now held by
          Metro South Wales Limited) (Incorporated by reference to the Company's
          Form 8-K, filed with the Commission on March 19, 1996)

   99.25  License, dated January 11, 1991, issued to Cablevision  Communications
          the  Company of  Hertfordshire  Ltd  (renamed  CableTel  Hertfordshire
          Limited)  for the  Hertford,  Cheshunt  and Ware  (Lea  Valley)  cable
          franchise,  England  (Incorporated  by reference to the Company's Form
          8-K, filed with the Commission on March 19, 1996)

   99.26  License, dated December 8, 1990, issued to Cablevision  Communications
          the  Company  Limited  for  Central  Hertfordshire  (renamed  CableTel
          Central Hertfordshire Limited),  England (Incorporated by reference to
          the Company's Form 8-K, filed with the Commission on March 19, 1996)


                                       66
<PAGE>


   99.27  License,  dated August 23, 1989,  issued to  Cablevision  Bedfordshire
          Limited for Bedford and surrounding  areas,  England  (Incorporated by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.28  License,   dated  January  9,  1991,   issued  to  Cablevision   North
          Bedfordshire  Ltd for North  Bedfordshire,  England  (Incorporated  by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.29  License,  dated January 29, 1991, issued to Clyde Cablevision (renamed
          CableTel  Glasgow)  for  the  Inverclyde  Cable  Franchise,   Scotland
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.30  License,  dated January 29, 1991, issued to Clyde Cablevision (renamed
          CableTel  Glasgow)  for the Bearsden and  Milngavie  Cable  Franchise,
          Scotland  (Incorporated  by reference to the Company's Form 8-K, filed
          with the Commission on March 19, 1996)

   99.31  License,  dated January 29, 1991, issued to Clyde Cablevision (renamed
          CableTel  Glasgow)  for  the  Paisley  and  Renfrew  Cable  Franchise,
          Scotland  (Incorporated  by reference to the Company's Form 8-K, filed
          with the Commission on March 19, 1996)

   99.32  License,  dated June 7, 1985, issued to Clyde Cablevision Ltd (renamed
          CableTel  Glaswgow)  for North West  Glasgow and  Clydebank,  Scotland
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.33  License,  dated January 29, 1991, issued to Clyde Cablevision (renamed
          CableTel  Glasgow) for the Greater Glasgow cable  franchise,  Scotland
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.34  License,  dated  October 13,  1993,  issued to Insight  Communications
          Cardiff Limited (renamed CableTel Cardiff Limited) for Cardiff,  Wales
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.35  License,  dated  January  22,  1991,  issued  to  Newport  Cablevision
          Limited (renamed CableTel Newport),  for Newport Cable franchise Wales
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.36  License,  dated May 18, 1990, issued to Cable and Satellite Television
          Holdings  Limited (renamed  CableTel West Glamorgan  Limited) for West
          Glamorgan, Wales (Incorporated by reference to the Company's Form 8-K,
          filed with the Commission on March 19, 1996)


                                       67
<PAGE>


   99.37  License,  dated  December 20, 1990,  issued to Kirklees Cable (renamed
          CableTel  Kirklees) for the Huddersfield and Dewsbury cable franchise,
          England  (Incorporated  by reference to the Company's  Form 8-K, filed
          with the Commission on March 19, 1996)

   99.38  License,  dated  October 13,  1993,  issued to Insight  Communications
          Guildford Limited (renamed CableTel Surrey and Hampshire  Limited) for
          the West Surrey/East  Hampshire  (Guildford) Cable Franchise,  England
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.39  License,  dated January 20, 1995, issued to CableTel Bedfordshire Ltd.
          for the area of South Bedfordshire, England (Incorporated by reference
          to the  Company's  Form 8-K,  filed with the  Commission  on March 19,
          1996)

   99.40  License,   dated   January  20,   1995,   issued  to  CableTel   North
          Bedfordshire  Ltd. for the area of Bedford,  England  (Incorporated by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.41  License,  dated  January  20,  1992,  issued  to Cable  and  Satellite
          Television  Holdings Limited (renamed CableTel West Glamorgan Limited)
          for the area of Swansea, Neath and Port Talbot, Wales (Incorporated by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.42  License,  dated  January 20,  1995,  issued to Cabletel  Hertfordshire
          Ltd. for the area of Hertford, Cheshunt and Ware (Lea Valley), England
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.43  License,   dated  January  20,  1995,   issued  to  Cabletel   Central
          Hertfordshire  Ltd.  for the area of  Central  Hertfordshire,  England
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.44  License,   dated  July  21,   1995,   issued  to   CableTel   Kirklees
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.45  License,  dated June 8, 1995,  issued to  CableTel  Bedfordshire  Ltd.
          (Incorporated  by reference to the Company's  Form 8-K, filed with the
          Commission on March 19, 1996)

   99.46  License,  dated October 27, 1995,  issued to Metro South Wales Limited
          for the area of  Neyland,  Wales  (Incorporated  by  reference  to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)


                                       68
<PAGE>


   99.47  License,  dated October 27, 1995,  issued to Metro South Wales Limited
          for the area of  Cwmgors,  Wales  (Incorporated  by  reference  to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.48  License,  dated October 27, 1995,  issued to Metro South Wales Limited
          for the area of  Ammanford,  Wales  (Incorporated  by reference to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.49  License,  dated October 27, 1995,  issued to Metro South Wales Limited
          for the area of Carmarthen,  Wales  (Incorporated  by reference to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.50  License,  dated October 27, 1995,  issued to Metro South Wales Limited
          for the area of Haverfordwest, Wales (Incorporated by reference to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.51  License,  dated October 27, 1995,  issued to Metro South Wales Limited
          for the area of Pembroke Dock, Wales (Incorporated by reference to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.52  License,  dated October 27, 1995,  issued to Metro South Wales Limited
          for the area of Milford Haven, Wales (Incorporated by reference to the
          Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.53  License,  dated  October  27,  1995,  issued to  CableTel  South Wales
          Limited for the area of Glamorgan and Gwent,  Wales  (Incorporated  by
          reference to the  Company's  Form 8-K,  filed with the  Commission  on
          March 19, 1996)

   99.54  License,  dated  January  26,  1996,  issued to  Cabletel  South Wales
          Limited,  for part of the Glamorgan area (Incorporated by reference to
          the Company's Form 8-K, filed with the Commission on March 19, 1996)

   99.55  License,  dated November 3, 1997,  issued to NTL (UK) Group,  Inc. for
          the Provision of Radio Fixed Access Operator Services.

   99.56  Agreement   and  Plan  of   Amalgamation;   Undertaking   of   Comcast
          Corporation;   Undertaking   of  Warburg,   Pincus   Investors,   L.P.
          (Incorporated by reference to the Company's Form 8-K dated February 5,
          1998)


                                       69
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

     Dated: March 26, 1998

     NTL INCORPORATED


     By:  /s/ J. Barclay Knapp
     --------------------------------------
      J. Barclay Knapp
      President, Chief Executive Officer
      and Chief Financial Officer
      (Principal Executive and Principal
         Financial Officer)

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant in the capacities and on the date indicated.


Signature                    Title                              Date
---------                    -----                              ----


/s/ J. Barclay Knapp         President, Chief  Executive        )
-------------------------    Officer and Chief Financial        )
J. Barclay Knapp             Officer (Principal Executive and   )
                             Principal Financial Officer)       )
                                                                )
                                                                )
                                                                )
/s/ George S. Blumenthal     Chairman of the Board and          )
-------------------------    Treasurer                          ) March 26, 1998
George S. Blumenthal                                            )
                                                                )
                                                                )
/s/ Gregg Gorelick           Vice President-Controller          )
-------------------------    (Principal Accounting Officer)     )
Gregg Gorelick                                                  )
                                                                )
                                                                )
/s/ Sidney R. Knafel         Director                           )
-------------------------                                       )
Sidney R. Knafel                                                )


                                       70
<PAGE>

                                                                )
                                                                )
/s/ Ted H. McCourtney        Director                           )
-------------------------                                       )
Ted H. McCourtney                                               )
                                                                )
                                                                )
                                                                )
/s/ Del Mintz                Director                           )
-------------------------                                       )
Del Mintz                                                       )
                                                                )
                                                                )
                                                                )
/s/ Alan J. Patricof         Director                           ) March 26, 1998
-------------------------                                       )
Alan J. Patricof                                                )
                                                                )
                                                                )
                                                                )
/s/ Warren Potash            Director                           )
-------------------------                                       )
Warren Potash                                                   )
                                                                )
                                                                )
                                                                )
/s/ Michael S. Willner       Director                           )
-------------------------                                       )
Michael S. Willner                                              )









                                       71
<PAGE>

                        Form 10-K - Item 14(a)(1) and (2)

                        NTL Incorporated and Subsidiaries

                   Index of Consolidated Financial Statements
                        and Financial Statement Schedules


The  following   consolidated  financial  statements  of  NTL  Incorporated  and
Subsidiaries are included in Item 8:


Report of Independent Auditors...........................................    F-2
Consolidated Balance Sheets - December 31, 1997 and 1996.................    F-3
Consolidated Statements of Operations - Years ended
   December 31, 1997, 1996 and 1995......................................    F-5
Consolidated Statement of Shareholders' Equity (Deficiency) -
   Years ended December 31, 1997, 1996 and 1995..........................    F-6
Consolidated Statements of Cash Flows - Years ended
   December 31, 1997, 1996 and 1995......................................    F-7
Notes to Consolidated Financial Statements...............................    F-9


The following consolidated financial statement schedules of NTL Incorporated and
Subsidiaries are included in Item 14(d):

Schedule I - Condensed Financial Information of Registrant ..............   F-35
Schedule II - Valuation and Qualifying Accounts..........................   F-41

All other  schedules for which  provision is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable and, therefore have been omitted.


                                      F-1
<PAGE>


                         Report of Independent Auditors


The Board of Directors and Shareholders
NTL Incorporated

We  have  audited  the  consolidated  balance  sheets  of NTL  Incorporated  and
Subsidiaries  as of  December  31, 1997 and 1996,  and the related  consolidated
statements of operations,  shareholders'  equity (deficiency) and cash flows for
each of the three years in the period ended  December 31, 1997.  Our audits also
included the financial  statement  schedules  listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedules based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of NTL
Incorporated   and   Subsidiaries  at  December  31,  1997  and  1996,  and  the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity  with generally
accepted  accounting  principles.  Also, in our opinion,  the related  financial
statement  schedules,  when  considered  in  relation  to  the  basic  financial
statements  taken  as a whole,  present  fairly  in all  material  respects  the
information set forth therein.



                                                               ERNST & YOUNG LLP

New York, New York
March 20, 1998


                                      F-2
<PAGE>


                        NTL Incorporated and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                       DECEMBER 31
                                                                 1997              1996
                                                            --------------    --------------
<S>                                                         <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents                                $   98,902,000    $  445,884,000
   Marketable securities                                         4,998,000                 -
   Accounts receivable - trade, less allowance for
     doubtful accounts of $8,056,000 (1997) and
     $3,870,000 (1996)                                          66,022,000        28,340,000
   Other                                                        67,232,000        66,817,000
                                                            --------------    --------------
Total current assets                                           237,154,000       541,041,000

Fixed assets, net                                            1,756,985,000     1,459,528,000
Intangible assets, net                                         364,479,000       392,933,000
Other assets, net of accumulated amortization
   of $25,889,000 (1997) and $21,789,000  (1996)                63,021,000        61,109,000
                                                            ==============    ==============
Total assets                                                $2,421,639,000    $2,454,611,000
                                                            ==============    ==============
</TABLE>



                                      F-3
<PAGE>


                        NTL Incorporated and Subsidiaries
                     Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>

                                                                       DECEMBER 31
                                                                 1997              1996
                                                            --------------    --------------
<S>                                                         <C>               <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
   Accounts payable                                         $   45,475,000    $   57,960,000
   Accrued expenses and other                                  181,605,000       101,228,000
   Accrued construction costs                                   26,930,000        62,723,000
   Deferred revenue                                             35,060,000        16,491,000
   Deferred purchase price                                               -        60,537,000
                                                            --------------    --------------
Total current liabilities                                      289,070,000       298,939,000

Long-term debt                                               2,015,057,000     1,732,168,000
Other                                                              428,000           459,000
Commitments and contingent liabilities
Deferred income taxes                                           70,218,000        94,931,000
Senior redeemable exchangeable preferred stock,
   $.01 par value, plus accreted dividends;
   liquidation preference $107,000,000; less
   unamortized discount of $3,444,000 (1997);
   issued and outstanding 110,000 shares (1997)
   and none (1996)                                             108,534,000                 -

Shareholders' equity (deficiency):
   Series preferred stock - $.01 par value;
      authorized 2,500,000 shares; liquidation
      preference $78,000,000; issued and
      outstanding 780 shares (1997 and 1996)                             -                 -
   Common stock - $.01 par value; authorized
      100,000,000 shares; issued and outstanding
      32,210,000 (1997) and 32,066,000 (1996) shares               322,000           321,000
   Additional paid-in capital                                  538,054,000       548,647,000
   Cumulative translation adjustment                           117,008,000       163,141,000
   (Deficit)                                                  (717,052,000)     (383,995,000)
                                                            --------------    --------------
                                                               (61,668,000)      328,114,000
                                                            --------------    --------------
Total liabilities and shareholders' equity (deficiency)     $2,421,639,000    $2,454,611,000
                                                            ==============    ==============
</TABLE>

See accompanying notes.


                                      F-4
<PAGE>


                        NTL Incorporated and Subsidiaries
                      Consolidated Statements of Operations
<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31
                                                                 1997              1996              1995
                                                            --------------    --------------    --------------
<S>                                                         <C>               <C>               <C>
REVENUES
Local telecommunications and television                     $  189,407,000    $   89,209,000    $   24,804,000
National and international telecommunications                  162,738,000        45,430,000                 -
Broadcast transmission and other                               130,799,000        83,618,000                 -
Other telecommunications                                         8,831,000        10,086,000         8,937,000
                                                            --------------    --------------    --------------
                                                               491,775,000       228,343,000        33,741,000

COSTS AND EXPENSES
Operating expenses                                             301,644,000       144,315,000        24,415,000
Selling, general and administrative expenses                   169,133,000       114,992,000        57,932,000
Franchise fees                                                  23,587,000        13,117,000                 -
Corporate expenses                                              18,324,000        14,899,000        14,697,000
Nonrecurring charges                                            20,642,000                 -                 -
Depreciation and amortization                                  150,509,000        98,653,000        29,823,000
                                                            --------------    --------------    --------------
                                                               683,839,000       385,976,000       126,867,000
                                                            --------------    --------------    --------------
Operating (loss)                                              (192,064,000)     (157,633,000)      (93,126,000)

OTHER INCOME (EXPENSE)
Interest and other income                                       28,415,000        33,634,000        21,185,000
Interest expense                                              (202,570,000)     (137,032,000)      (28,379,000)
Other gains                                                     21,497,000                 -                 -
Foreign currency transaction gains                                 574,000         2,408,000            84,000
                                                            --------------    --------------    --------------
(Loss) before income taxes, minority interests
   and extraordinary item                                     (344,148,000)     (258,623,000)     (100,236,000)
Income tax benefit (provision)                                  15,591,000        (7,653,000)        2,477,000
                                                            --------------    --------------    --------------
(Loss) before minority interests and
   extraordinary item                                         (328,557,000)     (266,276,000)      (97,759,000)
Minority interests                                                       -        11,822,000         6,974,000
                                                            --------------    --------------    --------------
(Loss) before extraordinary item                              (328,557,000)     (254,454,000)      (90,785,000)
Loss from early extinguishment of debt                          (4,500,000)                -                 -
                                                            --------------    --------------    --------------
Net (loss)                                                  $ (333,057,000)   $ (254,454,000)   $  (90,785,000)
                                                            ==============    ==============    ==============


Basic and diluted net (loss) per common share:
   (Loss) before extraordinary item                                $(10.60)           $(8.20)           $(3.01)
   Extraordinary item                                                 (.14)                -                 -
                                                            --------------    --------------    --------------
   Net (loss) per common share                                     $(10.74)           $(8.20)           $(3.01)
                                                            ==============    ==============    ==============

</TABLE>

See accompanying notes.


                                      F-5
<PAGE>


                        NTL Incorporated and Subsidiaries
           Consolidated Statement of Shareholders' Equity (Deficiency)

<TABLE>
<CAPTION>

                                           SERIES               COMMON STOCK -
                                       PREFERRED STOCK         $.01 PAR VALUE        ADDITIONAL      CUMULATIVE
                                      ------------------   ----------------------     PAID-IN        TRANSLATION
                                       SHARES     PAR        SHARES        PAR        CAPITAL        ADJUSTMENT       (DEFICIT)
                                      -------------------------------------------------------------------------------------------
<S>                                   <C>       <C>        <C>          <C>         <C>             <C>             <C>
Balance, December 31, 1994                                 22,635,000   $ 226,000   $ 462,197,000   $ 12,867,000    $ (38,756,000)
Exercise of stock options                                      20,000       1,000         101,000
Stock split                                                 7,547,000      75,000         (75,000)
Net loss for the year ended
   December 31, 1995                                                                                                  (90,785,000)
Currency translation adjustment                                                                       (6,594,000)
                                      -------------------------------------------------------------------------------------------
Balance, December 31, 1995                                 30,202,000     302,000     462,223,000      6,273,000     (129,541,000)
Exercise of stock options                                     396,000       4,000       1,362,000
Exercise of warrants                                           53,000       1,000         298,000
Issuance of warrants in connection
   with consent solicitations                                                           1,641,000
Shares issued for acquisitions        780       $  -        1,415,000      14,000      83,123,000
Net loss for the year ended
   December 31, 1996                                                                                                 (254,454,000)
Currency translation adjustment                                                                      156,868,000
                                      -------------------------------------------------------------------------------------------
Balance, December 31, 1996            780          -       32,066,000     321,000     548,647,000    163,141,000     (383,995,000)
Exercise of stock options                                     119,000       1,000       1,532,000
Exercise of warrants                                           25,000                     138,000
Accreted dividends on senior
   redeemable exchangeable
   preferred stock                                                                    (11,978,000)
Accretion of discount on senior
   redeemable exchangeable
   preferred stock                                                                       (285,000)
Net loss for the year ended
   December 31, 1997                                                                                                 (333,057,000)
Currency translation adjustment                                                                      (46,133,000)
                                      ===========================================================================================
Balance, December 31, 1997            780       $  -       32,210,000   $ 322,000    $538,054,000   $117,008,000    $(717,052,000)
                                      ===========================================================================================
</TABLE>
See accompanying notes.


                                      F-6
<PAGE>


                        NTL Incorporated and Subsidiaries
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                    YEAR ENDED DECEMBER 31
                                                                        1997                 1996                 1995
                                                                  ---------------------------------------------------------
<S>                                                               <C>                  <C>                   <C>
OPERATING ACTIVITIES
Net loss                                                          $ (333,057,000)      $ (254,454,000)       $ (90,785,000)
Adjustment to reconcile net loss to net cash
   (used in) operating activities:
      Depreciation and amortization                                  150,509,000           98,653,000           29,823,000
      Loss from early extinguishment of debt                           4,500,000                    -                    -
      Amortization of non competition agreements                       1,852,000            2,906,000            3,256,000
      Provision for losses on accounts receivable                      6,891,000            2,597,000              709,000
      Minority interests                                                       -          (11,822,000)          (6,974,000)
      Deferred income taxes                                          (16,852,000)           5,063,000                    -
      Amortization of original issue discount                        122,639,000          104,264,000           29,379,000
      Other                                                           (8,148,000)           8,578,000            6,229,000
      Changes in operating assets and liabilities, net
        of effect from business acquisitions:
           Accounts receivable                                       (30,430,000)          10,050,000           (6,496,000)
           Other current assets                                       (6,563,000)         (20,316,000)          (6,749,000)
           Other assets                                                2,303,000              (24,000)            (123,000)
           Accounts payable                                           (4,615,000)          (2,869,000)          20,583,000
           Accrued expenses and other                                 74,706,000           35,691,000            9,926,000
           Deferred revenue                                           18,994,000              278,000            1,075,000
                                                                  ----------------------------------------------------------
Net cash (used in)  operating activities                             (17,271,000)         (21,405,000)         (10,147,000)

INVESTING ACTIVITIES
Purchase of fixed assets                                            (503,656,000)        (505,664,000)        (445,550,000)
Payment of deferred purchase price                                   (57,330,000)                   -                    -
Increase in other assets                                              (4,322,000)          (6,013,000)          (3,361,000)
Acquisitions of subsidiaries and minority
   interests, net of cash acquired                                             -         (332,693,000)         (12,412,000)
Purchase of marketable securities                                   (145,939,000)                   -                    -
Proceeds from sales of marketable securities                         142,596,000                    -                    -
                                                                  ----------------------------------------------------------
Net cash (used in) investing activities                             (568,651,000)        (844,370,000)        (461,323,000)
</TABLE>



                                      F-7
<PAGE>


                        NTL Incorporated and Subsidiaries
                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31
                                                                        1997                1996                   1995
                                                                  ----------------------------------------------------------
<S>                                                               <C>                  <C>                   <C>
FINANCING ACTIVITIES
Proceeds from borrowings and sale of preferred
   stock,  net of financing costs                                 $  490,302,000       $1,146,190,000        $ 326,166,000
Principal payments                                                  (242,424,000)         (95,283,000)          (9,963,000)
Cash released from escrow                                                      -            1,600,000            2,810,000
Capital contribution from minority partner                                     -                    -           12,626,000
Proceeds from borrowings from minority partner                                 -           31,232,000           19,065,000
Proceeds from exercise of stock options and warrants                   1,671,000            1,665,000              102,000
                                                                  ----------------------------------------------------------
Net cash provided by financing activities                            249,549,000        1,085,404,000          350,806,000

Effect of exchange rate changes on cash                              (10,609,000)          50,972,000            1,345,000
                                                                  ----------------------------------------------------------
Increase (decrease) in cash and cash equivalents                    (346,982,000)         270,601,000         (119,319,000)
Cash and cash equivalents at beginning of year                       445,884,000          175,283,000          294,602,000
                                                                  ----------------------------------------------------------
Cash and cash equivalents at end of year                          $   98,902,000       $  445,884,000       $  175,283,000
                                                                  ==========================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive
   of amounts capitalized                                         $   72,047,000       $   27,595,000       $    1,735,000
Income taxes paid                                                      1,107,000              367,000            1,695,000

SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on senior redeemable
   exchangeable preferred stock                                   $   12,263,000       $            -       $            -
Warrants issued in connection with consent solicitations                       -            1,641,000                    -
Common stock issued for acquisition                                            -           34,137,000                    -
Preferred stock issued for acquisition of minority interest,
   including notes payable to minority partner                                 -           49,000,000                    -
Liabilities incurred in connection with acquisitions                           -           81,906,000                    -

</TABLE>

See accompanying notes.


                                      F-8
<PAGE>


                        NTL Incorporated and Subsidiaries
                   Notes to Consolidated Financial Statements

1.  ORGANIZATION

NTL Incorporated  (the "Company"),  through its subsidiaries and joint ventures,
owns and operates television and radio broadcasting, cable television, telephone
and telecommunications  systems in the United Kingdom and provides long-distance
telephone  service in the United  States.  Based on  revenues  and  identifiable
assets,  the Company's  predominant  lines of business are  television and radio
broadcasting, cable television, telephone and telecommunications services in the
United Kingdom.

2.  SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements include the accounts of the Company, its
wholly-owned  subsidiaries and entities where the Company's  interest is greater
than  50%.  Significant   intercompany   accounts  and  transactions  have  been
eliminated in consolidation.

FOREIGN CURRENCY TRANSLATION

The  financial  statements  of the  Company's  foreign  subsidiaries  have  been
translated  into  U.S.   dollars  in  accordance  with  Statement  of  Financial
Accounting  Standards  ("SFAS")  No. 52,  "Foreign  Currency  Translation."  All
balance sheet accounts have been translated  using the current exchange rates at
the respective  balance sheet dates.  Statement of operations  amounts have been
translated using the average exchange rates for the respective  years. The gains
or  losses  resulting  from the  change in  exchange  rates  have been  reported
separately as a component of shareholders' equity (deficiency).

CASH EQUIVALENTS

Cash  equivalents  are  short-term  highly liquid  investments  purchased with a
maturity  of three  months  or  less.  Cash  equivalents  were  $55,894,000  and
$339,249,000  at  December  31,  1997 and 1996,  respectively,  which  consisted
primarily of repurchase  agreements and corporate  commercial paper. At December
31, 1997 and 1996, none and $238,862,000, respectively, of such cash equivalents
were denominated in British pounds sterling.


                                      F-9
<PAGE>


                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

MARKETABLE SECURITIES

Marketable securities are classified as available-for-sale, which are carried at
fair value.  Unrealized holding gains and losses on securities,  net of tax, are
carried  as a separate  component  of  shareholders'  equity  (deficiency).  The
amortized cost of debt  securities is adjusted for  amortization of premiums and
accretion of discounts to maturity.  Such  amortization  is included in interest
income.  Realized gains and losses and declines in value judged to be other than
temporary will be included in interest  income.  The cost of securities  sold or
matured is based on the specific  identification method.  Interest on securities
is included in interest income.

Marketable  securities  at December  31, 1997 consist of federal  agency  notes.
During the year ended December 31, 1997,  there were no realized gains or losses
on sales of securities. All of the marketable securities as of December 31, 1997
had a contractual maturity of less than one year.

FIXED ASSETS

Fixed assets are stated at cost,  which includes  amounts  capitalized for labor
and  overhead  expended  in  connection  with the  design  and  installation  of
operating  equipment.  Depreciation is computed by the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as follows:
operating equipment - 5 to 40 years and other equipment - 3 to 22.5 years.

Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate that the carrying amount may not be recoverable.  If the
sum of the  expected  future  undiscounted  cash flows is less than the carrying
amount of the asset, a loss is recognized  for the  difference  between the fair
value and the carrying value of the asset.

INTANGIBLE ASSETS

Intangible assets include goodwill and license  acquisition  costs.  Goodwill is
the excess of the purchase  price over the fair value of net assets  acquired in
business  combinations  accounted for as  purchases.  Goodwill is amortized on a
straight-line  basis over the periods benefited,  principally 30 years.  License
acquisition costs represent the portion of purchase price allocated to the cable
television and  telecommunications  licenses acquired in business  combinations.
License  acquisition  costs are  amortized  on a  straight-line  basis  over the
remaining  life of the license as follows:  cable  television  license - 7 to 12
years and telecommunications license - 23 years. The Company continually reviews
the  recoverability  of the  carrying  value  of  these  assets  using  the same
methodology that it uses for the evaluation of its other long-lived assets.

                                      F-10
<PAGE>


                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

OTHER ASSETS

Other assets consist primarily of noncompetition agreements obtained in exchange
for the  issuance of warrants to  purchase  an  aggregate  of 899,000  shares of
common stock and deferred  financing costs. The  noncompetition  agreements were
valued at the  difference  between the fair market  value of the common stock on
the date of grant and the exercise  price of the  warrants.  The  noncompetition
agreements are being expensed on a straight-line  basis over the  noncompetition
period of  primarily  five  years.  Deferred  financing  costs were  incurred in
connection  with the  issuance  of debt and are  amortized  over the term of the
related debt.

CAPITALIZED INTEREST

Interest is capitalized as a component of the cost of fixed assets  constructed.
In 1997, 1996 and 1995,  interest of $6,770,000,  $10,294,000  and  $12,183,000,
respectively, was capitalized.

REVENUE RECOGNITION

Revenues are recognized at the time the service is provided to the customer.

CABLE TELEVISION SYSTEM COSTS, EXPENSES AND REVENUES

The  Company  accounts  for  costs,  expenses  and  revenues  applicable  to the
construction   and   operation   of  its   cable   television,   telephone   and
telecommunications  systems in accordance with SFAS No. 51, "Financial Reporting
by Cable Television Companies."

ADVERTISING EXPENSE

The Company expenses the cost of advertising as incurred. Advertising costs were
$31,003,000, $22,727,000 and $10,370,000 in 1997, 1996 and 1995, respectively.

NET (LOSS) PER SHARE

In February 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share".  SFAS 128 replaced the calculation of primary and
fully  diluted  earnings  per share with basic and diluted  earnings  per share.
Unlike  primary  earnings  per share,  basic  earnings  per share  excludes  any
dilutive  effects of  options,  warrants  and  convertible  securities.  Diluted
earnings  per share is very similar to the  previously  reported  fully  diluted
earnings per share. The Company adopted SFAS No. 128 for each of the three years
in the period ended December 31, 1997.

                                      F-11
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


2.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION

The  Company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123,
"Accounting for Stock-Based  Compensation."  The Company applies APB Opinion No.
25,  "Accounting for Stock Issued to Employees" and related  interpretations  in
accounting for its stock option plans.

RECLASSIFICATIONS

Certain  prior  year  amounts  have been  reclassified  to  conform  to the 1997
presentation.

3.  RECENT ACCOUNTING PRONOUNCEMENTS

COMPREHENSIVE INCOME

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income".
SFAS No. 130 requires  that all items that are required to be  recognized  under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December  15,  1997.  The Company  will adopt SFAS No. 130 in the first  interim
period for its fiscal year ending December 31, 1998.

SEGMENT REPORTING

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related Information".  SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual  financial  statements  and  requires  that those  enterprises  report
selected  information  about  operating  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services, geographic areas, and major customers. SFAS No. 131
is effective for financial  statements for periods  beginning after December 15,
1997.  The Company  will adopt SFAS No. 131 for its fiscal year ending  December
31, 1998.

4.  CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES

NEED FOR ADDITIONAL FINANCING

The Company will  require  additional  financing in the future.  There can be no
assurance that the required financing will be obtainable on acceptable terms.


                                      F-12
<PAGE>


                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


4.  CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES (CONTINUED)

REQUIREMENTS TO MEET BUILD MILESTONES

The  telecommunications  license  for each  United  Kingdom  franchise  contains
specific  construction   milestones.   Based  on  current  network  construction
scheduling,  the Company  believes it will be able to satisfy its  milestones in
the future,  but there can be no assurance that such  milestones will be met. If
the Company is unable to meet the construction milestones required by any of its
licenses and is unable to obtain  modifications to the milestones,  the relevant
licenses could be revoked.

CONCENTRATIONS

The  Company's  television  and radio  broadcasting  business  is  substantially
dependent  upon  contracts  with a small  group of  companies  for the  right to
broadcast  their  programming,  and upon a site  sharing  agreement  for a large
number of its transmission  sites. The loss of any one of these contracts or the
site sharing  agreement could have a material  adverse effect on the business of
the Company.

LIMITED ACCESS TO PROGRAMMING

The  Company's  ability  to make a  competitive  offering  of  cable  television
services is dependent on the Company's  ability to obtain access to  programming
at a reasonable  cost.  There can be no  assurance  that the  Company's  current
programming  will continue to be available on acceptable  commercial terms or at
all.

CURRENCY RISK

To the extent that the Company  obtains  financing in United States  dollars and
incurs  construction  and operating  costs in British pounds  sterling,  it will
encounter currency exchange rate risks. In addition,  the Company's revenues are
generated  primarily in British pounds sterling while its interest and principal
obligations  with respect to most of the  Company's  existing  indebtedness  are
payable  in United  States  dollars.  The  Company  has  entered  into an option
agreement  to hedge some of the risk of exchange  rate  fluctuations  related to
interest payments on United States dollar denominated debt.


                                  F-13
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


5.  FIXED ASSETS

Fixed assets consists of:

                                                     DECEMBER 31
                                            1997                      1996
                                     ------------------------------------------
Operating equipment                    $1,612,440,000            $1,080,135,000
Other equipment                           225,514,000               197,368,000
Construction-in-progress                  134,795,000               305,372,000
                                     ------------------------------------------
                                        1,972,749,000             1,582,875,000
Accumulated depreciation                 (215,764,000)             (123,347,000)
                                     ------------------------------------------
                                       $1,756,985,000            $1,459,528,000
                                     ==========================================

6.  INTANGIBLE ASSETS

Intangible assets consists of:

                                                      DECEMBER 31
                                            1997                      1996
                                     ------------------------------------------
License acquisition costs, net
  of accumulated amortization
  of $46,620,000 (1997) and
  $34,894,000 (1996)                     $123,116,000              $134,909,000
Goodwill, net of accumulated
  amortization of $13,449,000
  (1997) and $5,986,000 (1996)            241,363,000               258,024,000
                                     ------------------------------------------
                                         $364,479,000              $392,933,000
                                     ==========================================

In October  1996,  the Company  acquired the  remaining  40% interest it did not
already own in  CableTel  Newport in  exchange  for 780 shares of the  Company's
Series A Preferred Stock.  CableTel Newport owns and operates cable  television,
telephone  and  telecommunications  franchises  in  South  Wales.  The  Series A
Preferred Stock was valued at $49,000,000,  based on an appraisal as of the date
of issuance.  The fair value of the net tangible  assets acquired of $67,710,000
exceeded the aggregate  purchase price of $49,062,000  (including costs incurred
of $62,000)  by  $18,648,000,  which is  classified  as a  reduction  to license
acquisition costs.

In September 1996, the Company  acquired the remaining 30% minority  interest of
English  Cable  Enterprises,  Inc.  ("ECE")  that the  Company  did not own,  in
exchange  for  1,415,000   shares  of  its  common  stock.   ECE,   through  its
subsidiaries,  owns four  cable  television,  telephone  and  telecommunications
licenses in the northern  suburbs of London.  The value of the shares,  based on
the market price on the date of issuance,  of $34,137,000 plus costs incurred of
$204,000  exceeded  the  fair  value  of the net  tangible  assets  acquired  by
$28,649,000, which is classified as license acquisition costs.


                                      F-14
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


6.  INTANGIBLE ASSETS (CONTINUED)

In May 1996, an indirect wholly-owned  subsidiary of the Company, NTL Investment
Holdings  Limited  ("NTLIH"),   acquired  NTL  Group  Limited  for  payments  of
approximately 204,000,000 pounds sterling at closing, 17,100,000 pounds sterling
in October 1996 and  35,000,000  pounds  sterling in May 1997. NTL Group Limited
provides  television  and  radio  transmission  services  and a range  of  other
services in the broadcasting and telecommunications industries. This acquisition
has been  accounted  for as a  purchase,  and,  accordingly,  the net assets and
results  of   operations  of  NTL  Group  Limited  have  been  included  in  the
consolidated  financial  statements from the date of acquisition.  The aggregate
purchase price of 256,100,000 pounds sterling ($439,000,000) plus costs incurred
of  $3,700,000  exceeded the fair value of the net tangible  assets  acquired by
$263,000,000, which is classified as goodwill.

The pro forma  unaudited  consolidated  results of operations for the year ended
December 31, 1996 assuming  consummation of the above mentioned  transactions as
of January 1, 1996 is as follows:


      Total revenue                                      $289,638,000
      Net loss                                           (265,180,000)
      Basic and diluted net loss per share                      (8.31)


In October 1995,  CableTel  South Wales Limited,  a  wholly-owned  subsidiary of
CableTel  Newport,  acquired  the cable  television  business  of Metro Cable TV
Limited in South Wales  ("Metro  Wales"),  and  CableTel  Central  Hertfordshire
Limited,  a  wholly-owned  subsidiary  of ECE,  acquired  the  cable  television
business  of Metro Cable TV Limited in  Hertfordshire  ("Metro  Herts"),  for an
aggregate  consideration of $12,125,000.  These acquisitions have been accounted
for as purchases, and, accordingly,  the net assets and results of operations of
Metro Wales and Metro Herts have been  included  in the  consolidated  financial
statements from the date of acquisition.  The aggregate  purchase price exceeded
the fair value of the net  tangible  assets  acquired by  $10,167,000,  which is
classified  as license  acquisition  costs.  In 1996,  the Metro  Wales  license
acquisition costs were reduced by $565,000.


                                      F-15
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


7.  LONG-TERM DEBT

Long-term debt consists of:
<TABLE>
<CAPTION>

                                                                               DECEMBER 31
                                                                      1997                     1996
                                                           ---------------------------------------------------
<S>                                                             <C>                      <C>
10-7/8% Senior Deferred Coupon Notes
   ("10-7/8% Notes") (a)                                        $  194,959,000           $  175,368,000
12-3/4% Series A Senior Deferred Coupon Notes
   ("12-3/4% Notes") (b)                                           209,387,000              185,043,000
11-1/2% Series B Senior Deferred Coupon Notes
   ("11-1/2% Notes") (c)                                           743,961,000              665,257,000
10% Series B Senior Notes ("10% Notes") (d)                        400,000,000                        -
7-1/4% Convertible Subordinated Notes
   ("7-1/4 Convertible Notes") (e)                                 191,750,000              191,750,000
7% Convertible Subordinated Notes
   ("7% Convertible Notes") (f)                                    275,000,000              275,000,000
Term Loan and Revolving Facility (g)                                         -              239,750,000
                                                           ---------------------------------------------------
                                                                $2,015,057,000           $1,732,168,000
                                                           ========================== ========================
</TABLE>


(a)  In October 1993, the Company issued $212,000,000 aggregate principal amount
     of 10-7/8%  Senior  Deferred  Coupon Notes due 2003. The 10-7/8% Notes were
     issued at a price to the  public of 58.873% or  $124,811,000.  The  Company
     incurred  $5,019,000  in fees and  expenses  which is  included in deferred
     financing  costs. The original issue discount on the 10-7/8% Notes accretes
     at a rate of 10-7/8%,  compounded  semiannually,  to an aggregate principal
     amount of $212,000,000 by October 15, 1998. Interest will thereafter accrue
     at 10-7/8% per annum,  payable  semiannually  beginning  on April 15, 1999.
     During 1997, 1996 and 1995, the Company recognized $19,591,000, $17,620,000
     and $15,851,000,  respectively,  of the original issue discount as interest
     expense.

     The 10-7/8% Notes are  effectively  subordinated to all existing and future
     indebtedness  and  other  liabilities  and  commitments  of  the  Company's
     subsidiaries. The 10-7/8% Notes may be redeemed at the Company's option, in
     whole or in part,  at any time on or after October 15, 1998 at 103.107% the
     first year, 101.554% the second year and 100% thereafter,  plus accrued and
     unpaid  interest to the date of  redemption.  The  indenture  governing the
     10-7/8% Notes contains  restrictions  relating to, among other things:  (i)
     incurrence of additional indebtedness and issuance of preferred stock; (ii)
     dividend and other payment restrictions; and (iii) mergers,  consolidations
     and sales of assets.


                                      F-16
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


7.  LONG-TERM DEBT (CONTINUED)

(b)  In April 1995, the Company issued  $277,803,500  aggregate principal amount
     of 12-3/4%  Senior  Deferred  Coupon Notes due 2005. The 12-3/4% Notes were
     issued at a price to the  public of 53.995% or  $150,000,000.  The  Company
     incurred $6,192,000 in fees and expenses in connection with the issuance of
     12-3/4% Notes which is included in deferred  financing  costs. The original
     issue discount accretes at a rate of 12-3/4%,  compounded semiannually,  to
     an aggregate  principal amount of $277,803,500 by April 15, 2000.  Interest
     will thereafter accrue at 12-3/4% per annum, payable semiannually beginning
     on October 15, 2000.  During 1997,  1996 and 1995,  the Company  recognized
     $24,344,000,  $21,515,000 and $13,528,000,  respectively, of original issue
     discount as interest expense.

     The 12-3/4% Notes are  effectively  subordinated to all existing and future
     indebtedness  and  other  liabilities  and  commitments  of  the  Company's
     subsidiaries, rank pari passu in right of payment with all senior unsecured
     indebtedness  and  rank  senior  in right of  payment  to all  subordinated
     indebtedness  of the  Company.  The  12-3/4%  Notes may be  redeemed at the
     Company's  option,  in whole or in part,  at any time on or after April 15,
     2000  at  103.64%  the  first  year,  101.82%  the  second  year  and  100%
     thereafter, plus accrued and unpaid interest to the date of redemption. The
     indenture  governing the 12-3/4% Notes contains  restrictions  relating to,
     among other things: (i) incurrence of additional  indebtedness and issuance
     of preferred stock, (ii) dividend and other payment  restrictions and (iii)
     mergers, consolidations and sales of assets.

(c)  In January 1996,  the Company  issued  $1,050,000,000  aggregate  principal
     amount of  11-1/2%  Series B Senior  Deferred  Coupon  Notes due 2006.  The
     11-1/2%  Notes  were  issued  at a price to  investors  of  57.155%  of the
     aggregate  principal  amount  at  maturity  or  $600,127,500.  The  Company
     incurred  $19,273,000 in fees and expenses in connection  with the issuance
     of the 11-1/2%  Notes which is included in deferred  financing  costs.  The
     original  issue  discount  accretes  at  a  rate  of  11-1/2%,   compounded
     semiannually,  to  an  aggregate  principal  amount  of  $1,050,000,000  by
     February 1, 2001.  Interest  will  thereafter  accrue at 11-1/2% per annum,
     payable semiannually beginning on August 1, 2001. During 1997 and 1996, the
     Company  recognized  $78,704,000 and $65,129,000 of original issue discount
     as interest expense.

     The 11-1/2% Notes are  effectively  subordinated to all existing and future
     indebtedness  and  other  liabilities  and  commitments  of  the  Company's
     subsidiaries, rank pari passu in right of payment with all senior unsecured
     indebtedness  and  rank  senior  in right of  payment  to all  subordinated
     indebtedness  of the  Company.  The  11-1/2%  Notes may be  redeemed at the
     Company's  option, in whole or in part, at any time on or after February 1,
     2001 at  105.75%  the  first  year,  102.875%  the  second  year  and  100%
     thereafter, plus accrued and unpaid interest to the date of redemption. The
     indenture  governing the 11-1/2% Notes contains  restrictions  relating to,
     among other things: (i) incurrence of additional  indebtedness and issuance
     of preferred stock; (ii) dividend and other payment  restrictions and (iii)
     mergers, consolidations and sales of assets.


                                      F-17
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


7.  LONG-TERM DEBT (CONTINUED)

(d)  In February  1997,  the Company  issued  $400,000,000  aggregate  principal
     amount of 10% Senior Notes due 2007.  The Company  received net proceeds of
     $389,000,000  after discounts and commissions  from the issuance of the 10%
     Notes.  Discounts,  commissions  and other fees incurred of $11,885,000 are
     included in deferred  financing costs. The 10% Notes accrue interest at 10%
     per annum, payable semiannually as of August 15, 1997.

     The 10% Notes are  effectively  subordinated  to all  existing  and  future
     indebtedness  and  other  liabilities  and  commitments  of  the  Company's
     subsidiaries.  The 10% Notes may be redeemed at the  Company's  option,  in
     whole or in part, at any time on or after February 15, 2002 at a redemption
     price of 105% that declines annually to 100% in 2005, in each case together
     with accrued and unpaid  interest to the date of redemption.  The indenture
     governing  the 10% Notes  contains  restrictions  relating  to, among other
     things:  (i)  incurrence  of  additional  indebtedness  and the issuance of
     preferred  stock,  (ii) dividend and other payment  restrictions  and (iii)
     mergers, consolidations and sales of assets.

(e)  In April and May 1995, the Company issued $191,750,000  principal amount of
     7-1/4% Convertible  Subordinated Notes due 2005. Interest payments began on
     October 15, 1995 and interest is payable every six months  thereafter.  The
     7-1/4%  Convertible  Notes  will  mature  on April  15,  2005.  The  7-1/4%
     Convertible  Notes are  unsecured  obligations  convertible  into shares of
     common stock prior to maturity at a  conversion  price of $27.56 per share,
     subject to adjustment.  There are approximately  6,958,000 shares of common
     stock reserved for issuance upon the  conversion of the 7-1/4%  Convertible
     Notes. The 7-1/4% Convertible Notes are redeemable, in whole or in part, at
     the option of the  Company  at any time on or after  April 15,  1998,  at a
     redemption  price of 105.08% that declines  annually to 100.73% in 2004, in
     each case  together  with  accrued  interest to the  redemption  date.  The
     Company  incurred  $6,822,000 in fees and expenses in  connection  with the
     issuance  of the 7-1/4%  Convertible  Notes,  which is included in deferred
     financing costs.

     In March 1998, the Company announced that it was calling for redemption all
     of the 7-1/4%  Convertible Notes. The redemption date is April 20, 1998 and
     the redemption price is 105.08% of the principal  amount,  plus accrued and
     unpaid interest through the date of redemption.

(f)  In June 1996, the Company issued $275,000,000 aggregate principal amount of
     7%  Convertible  Subordinated  Notes due 2008.  Interest  payments began on
     December 15, 1996 and interest is payable every six months thereafter.  The
     7% Convertible  Notes mature on June 15, 2008. The 7% Convertible Notes are
     unsecured  obligations  convertible  into  shares of common  stock prior to
     maturity at a conversion price of $37.875 per share, subject to adjustment.
     There are  approximately  7,261,000  shares of common  stock  reserved  for
     issuance upon  conversion of the 7% Convertible  Notes.  The 7% Convertible
     Notes are redeemable,  in whole or in part, at the option of the Company at
     any time on or after June 15, 1999,  at a  redemption  price of 104.9% that
     declines annually to 100% in 2006, in


                                      F-18
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


7.  LONG-TERM DEBT (CONTINUED)

     each case together with accrued and unpaid interest to the redemption date.
     The Company incurred $8,616,000 in fees and expenses in connection with the
     issuance  of the 7%  Convertible  Notes,  which  is  included  in  deferred
     financing costs.

(g)  To  finance  a  substantial  portion  of the  purchase  price for NTL Group
     Limited,  NTLIH  obtained from a syndicate of lenders  senior  secured loan
     facilities  (the  "NTLIH  Facility")  of  a  maximum  principal  amount  of
     165,000,000  pounds sterling comprised of: (i) a long-term loan facility of
     140,000,000  pounds  sterling  and  (ii) a  revolving  credit  facility  of
     25,000,000 pounds sterling. One of the Lenders also made available to NTLIH
     a  secured  loan  facility  of  60,000,000  pounds  sterling  (the  "Bridge
     Facility")  to finance  the  remainder  of the  payment  due at closing and
     acquisition  costs  and  expenses  due at  closing.  Loans  under the NTLIH
     Facility  incurred  interest at an annual rate equal to LIBOR plus a margin
     that  varied  from  0.75% per annum to 1.75% per  annum,  based on  certain
     financial  ratios of NTLIH and certain of its  subsidiaries.  Interest  was
     payable either monthly, quarterly or semiannually,  at the option of NTLIH.
     The effective  interest rate on the NTLIH Facility at December 31, 1996 was
     7.972%.  The Bridge  Facility was repaid in full in August 1996. In October
     1997,  the  principal  and  accrued  interest  outstanding  under the NTLIH
     Facility of 140,138,000  pounds  sterling  ($231,466,000)  was repaid using
     cash on hand.

In 1997, NTL (UK) Group, Inc., a wholly-owned  subsidiary of the Company,  which
is the holding company for the United Kingdom  operations and the parent company
of NTLIH,  and NTLIH  entered into an agreement  with The Chase  Manhattan  Bank
pursuant  to which Chase has agreed to fully  underwrite  a  555,000,000  pounds
sterling,  eight-year  term loan  facility with an initial  four-year  revolving
period.  By April 14, 1999,  Chase's  commitment will be reduced to no less than
480,000,000  pounds  sterling or such  greater  amount as is necessary to ensure
that the Company's United Kingdom operations remain fully funded by reference to
an  agreed  business  plan.  The  facility  will  be  used  to  finance  capital
expenditures  and working capital for the Company's  United Kingdom  operations,
including its local broadband,  national telecommunications and national digital
television  networks.  A portion of the facility (75,000,000 pounds sterling) is
conditional  upon the  execution  of  contracts  to provide  digital  television
transmission services to certain third parties.  Chase has provided a portion of
the  555,000,000  pounds sterling  facility in the form of a 350,000,000  pounds
sterling  facility  to  the  Company  on  the  same  terms  as to  restrictions,
covenants,  guarantees and security as the 555,000,000 pounds sterling facility.
As of March 20, 1998,  10,000,000  pounds sterling  ($16,517,000) is outstanding
under the 350,000,000 pounds sterling facility. The principal amount outstanding
under the  350,000,000  pounds  sterling  facility  is  required to be repaid on
December  31,  2005.   Interest  is  payable   either   monthly,   quarterly  or
semi-annually,  at the option of NTLIH,  at LIBOR plus, at a maximum,  2.25% per
annum.  The commitment  fee is .375% per annum on the unutilized  portion of the
350,000,000  pounds sterling facility and is payable  quarterly in arrears.  The
facility is secured by first  fixed and  floating  charges  over all present and
future assets and undertakings of the United Kingdom group. The facility


                                      F-19
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

7.  LONG-TERM DEBT (CONTINUED)

contains customary financial covenants,  and certain  restrictions  relating to,
among other things:  (i)  incurrence of additional  indebtedness  or guarantees,
(ii) investments,  acquisitions and mergers and (iii) dividend and other payment
restrictions.  In the  absence  of a default,  the  facility  generally  permits
payments to the Company to pay interest and  principal of existing  indebtedness
of the Company.  At December 31, 1997,  restricted net assets were approximately
$1,861,000,000.

In  March  1998,  the  Company  issued  125,000,000  pounds  sterling  aggregate
principal  amount of 9-1/2% Senior Notes due 2008 (the "Sterling Senior Notes"),
300,000,000  pounds  sterling  aggregate  principal  amount  of  10-3/4%  Senior
Deferred  Coupon  Notes due 2008 (the  "Sterling  Deferred  Coupon  Notes")  and
$1,300,000,000 aggregate principal amount of 9-3/4% Senior Deferred Coupon Notes
due 2008 (the "Dollar  Deferred Coupon Notes")  (together the "New Notes").  The
Sterling  Senior Notes,  Sterling  Deferred Coupon Notes and the Dollar Deferred
Coupon  Notes  were  issued at a price to the  public  of 99.67% or  124,588,000
pounds  sterling,   58.62%  or  175,860,000   pounds  sterling  and  61.724%  or
$802,412,000,  respectively.  The Company  received net proceeds of  121,161,000
pounds sterling,  170,584,000 pounds sterling and $778,340,000,  after discounts
and  commissions,  from the issuance of the Sterling Senior Notes,  the Sterling
Deferred Coupon Notes and the Dollar Deferred Coupon Notes, respectively.

The original issue discount of the Sterling  Deferred Coupon Notes accretes at a
rate of 10-3/4%,  compounded  semiannually,  to an aggregate principal amount of
300,000,000 pounds sterling by April 1, 2003. The original issue discount of the
Dollar  Deferred  Coupon  Notes  accretes  at  a  rate  of  9-3/4%,   compounded
semiannually,  to an aggregate  principal amount of  $1,300,000,000  by April 1,
2003.  Interest on each of the  Sterling  Deferred  Coupon  Notes and the Dollar
Deferred Coupon Notes will thereafter accrue at 10-3/4% per annum and 9-3/4% per
annum,  respectively,  payable  semiannually,  beginning on October 1, 2003. The
Sterling Senior Notes accrue interest at 9-1/2% per annum, payable semiannually,
beginning on October 1, 1998.

The  New  Notes  are  effectively   subordinated  to  all  existing  and  future
indebtedness   and  other   liabilities   and   commitments   of  the  Company's
subsidiaries,  rank pari passu in right of payment  with each other and with all
senior unsecured indebtedness of the Company and rank senior in right of payment
to all subordinated indebtedness of the Company.

The New Notes may be redeemed at the Company's  option,  in whole or in part, at
any time on or  after  April 1,  2003,  at a  redemption  price of  104-3/4%  to
105-3/8%  that  declines  annually to 100% in 2006,  in each case  together with
accrued and unpaid interest to the date of redemption.

The indentures governing the New Notes contain  restrictions  relating to, among
other things:  (i)  incurrence of  additional  indebtedness  and the issuance of
preferred stock, (ii) dividend and other payment restrictions and (iii) mergers,
consolidations and sales of assets.


                                      F-20
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

8.  REDEEMABLE PREFERRED STOCK

In February 1997, the Company issued  $100,000,000 of its 13% Senior  Redeemable
Exchangeable  Preferred Stock (the "Redeemable  Preferred  Stock").  The Company
received net proceeds of $96,625,000  after discounts and  commissions  from the
issuance of the Redeemable  Preferred  Stock.  Discounts,  commissions and other
fees incurred of $3,729,000 were recorded as unamortized discount at issuance.

Of the 2,500,000  authorized shares of Series Preferred Stock, 100,000 shares of
Redeemable Preferred Stock were issued.  Dividends accrue at 13% per annum ($130
per share) and are payable  quarterly in arrears as of May 15, 1997.  Dividends,
whether or not earned or declared,  will accrue without  interest until declared
and paid,  which  declaration  may be for all or part of the accrued  dividends.
Dividends  accruing on or prior to  February  15, 2004 may, at the option of the
Company,  be paid in cash,  by the issuance of additional  Redeemable  Preferred
Stock or in any  combination  of the  foregoing.  As of December 31,  1997,  the
Company has  accrued  $11,978,000  for  dividends  and has issued  approximately
10,000  shares  for  $10,187,000  of  such  accrued  dividends.  The  Redeemable
Preferred Stock may be redeemed,  at the Company's  option, in whole or in part,
at any time on or after February 15, 2002 at a redemption price of 106.5% of the
liquidation  preference  of $1,000 per share that  declines  annually to 100% in
2005, in each case together with accrued and unpaid  dividends to the redemption
date.  The  Redeemable  Preferred  Stock is subject to mandatory  redemption  on
February 15, 2009. On any scheduled  dividend  payment date, the Company may, at
its  option,  exchange  all of the  shares of  Redeemable  Preferred  Stock then
outstanding for the Company's 13% Subordinated Exchange Debentures due 2009 (the
"Subordinated Debentures").

The Subordinated Debentures,  if issued, will bear interest at a rate of 13% per
annum, payable semiannually in arrears on February 15 and August 15 of each year
commencing  with the  first  such  date to  occur  after  the date of  exchange.
Interest  accruing  on or prior to  February  15, 2004 may, at the option of the
Company, be paid in cash, by the issuance of additional  Subordinated Debentures
or in any  combination of the foregoing.  The  Subordinated  Debentures  will be
redeemable,  at the Company's  option, in whole or in part, on or after February
15, 2002 at a redemption price of 106.5% that declines annually to 100% in 2005,
in each case together with accrued and unpaid interest to the redemption date.

9.  NONRECURRING CHARGES INCLUDING RESTRUCTURING CHARGES

Nonrecurring  charges of $20,642,000 in 1997 include deferred costs  written-off
of  $5,013,000  and  restructuring  costs of  $15,629,000.  The  deferred  costs
written-off relate to the Company's  unsuccessful bid for United Kingdom digital
terrestrial  television  multiplex  licenses.  Restructuring costs relate to the
Company's  announcement in September 1997 of a reorganization  of certain of its
operations.  The Company is consolidating  the Customer  Operations  departments
that serve its three  franchise  areas in England  into one  department,  and is
consolidating  certain  operations  and  management  groups within the Broadcast
Services division,


                                      F-21
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

9.  NONRECURRING CHARGES INCLUDING RESTRUCTURING CHARGES (CONTINUED)

as well as certain other consolidations or cessations of activities. This charge
consisted  of  employee   severance  and  related   costs  of   $6,726,000   for
approximately 280 employees to be terminated, lease exit costs of $6,539,000 and
penalties  of  $2,364,000   associated  with  the  cancellation  of  contractual
obligations. As of December 31, 1997, $5,441,000 of the provision has been used.

10.  OTHER GAINS

Other gains of $21,497,000 in 1997 include a legal settlement of $10,000,000 and
a gain on the sale of fixed assets of  $11,497,000.  In October 1997,  following
the U.S.  District Court's decision to dismiss the Company's  complaint  against
LeGroupe  Videotron  Ltee  and  its  subsidiary,  the  Company  entered  into  a
Settlement  Agreement  dismissing  the  Company's  complaint  in exchange  for a
payment of $10,000,000.  In December 1997, a U.S. subsidiary of the Company sold
its  fixed and other  assets  utilized  in its  microwave  transmission  service
business and recognized a gain of $11,497,000.

11.  INCOME TAXES

The provision (benefit) for income taxes consists of the following:


                                             YEAR ENDED DECEMBER 31
                                  1997               1996              1995
                            ---------------------------------------------------
  Current:
     Federal                 $          -        $        -       $  (181,000)
     State and local            1,261,000           344,000           167,000
     Foreign                            -         2,246,000        (2,463,000)
                            ---------------------------------------------------
  Total current                 1,261,000         2,590,000        (2,477,000)
                            ---------------------------------------------------

  Deferred:
     Federal                            -                 -                 -
     State and local                    -                 -                 -
     Foreign                  (16,852,000)        5,063,000                 -
                            ---------------------------------------------------
  Total deferred              (16,852,000)        5,063,000                 -
                            ---------------------------------------------------
                             $(15,591,000)       $7,653,000       $(2,477,000)
                            ===================================================

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for


                                      F-22
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

11.  INCOME TAXES (CONTINUED)

income tax purposes.  Significant components of the deferred tax liabilities and
assets are as follows:


                                                           DECEMBER 31
                                                      1997             1996
                                               ---------------------------------
Deferred tax liabilities:
   Fixed assets                                 $  68,380,000     $  78,433,000
   Depreciation and amortization                            -        30,623,000
   Other                                            4,894,000         6,018,000
                                               ---------------------------------
Total deferred tax liabilities                     73,274,000       115,074,000
Deferred tax assets:
   Net operating losses                           107,208,000        99,227,000
   Net deferred interest expense                   94,689,000        51,770,000
   Depreciation and amortization                   16,935,000                 -
   Other                                           18,164,000        10,396,000
                                               ---------------------------------
Total deferred tax assets                         236,996,000       161,393,000
Valuation allowance for deferred
   tax assets                                    (233,940,000)     (141,250,000)
                                               ---------------------------------
Net deferred tax assets                             3,056,000        20,143,000
                                               ---------------------------------
Net deferred tax liabilities                    $  70,218,000     $  94,931,000
                                               =================================

At December  31,  1997,  the Company had net  operating  loss  carryforwards  of
approximately  $56,000,000  for U.S.  federal income tax purposes that expire as
follows:  $500,000 in 2008, $1,100,000 in 2009, $21,000,000 in 2010, $27,700,000
in 2011 and  $5,700,000  in  2012.  The  Company  also has  United  Kingdom  net
operating  loss  carryforwards  of  approximately  $290,000,000  which  have  no
expiration date. Pursuant to United Kingdom law, these losses are only available
to offset income of the separate entity that generated the loss.

The  reconciliation  of income taxes computed at U.S. federal statutory rates to
income tax expense is as follows:

                                               YEAR ENDED DECEMBER 31
                                        1997            1996             1995
                                   ---------------------------------------------
Provision (benefit) at
  federal statutory rate (35%)     $(120,452,000)   $(90,518,000)  $(35,083,000)
Add (deduct):
  State and local income tax,
    net of federal benefit               820,000         224,000        109,000
  Foreign losses with no benefit      59,804,000      44,610,000      6,699,000
  Amortization of goodwill and
    license acquisition costs          3,925,000       4,031,000      3,696,000
  U.S. losses with no benefit         40,312,000      49,184,000     22,507,000
  Other                                        -         122,000       (405,000)
                                   ---------------------------------------------
                                   $ (15,591,000)     $7,653,000    $(2,477,000)
                                   =============================================


                                      F-23
<PAGE>

                        NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)


12.  FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

     Cash  and  cash   equivalents:   The  carrying   amounts  reported  in  the
     consolidated balance sheets approximate fair value.

     Long-term  debt: The fair values of the 10-7/8%  Notes,  the 12-3/4% Notes,
     the 11-1/2% Notes, the 10% Notes, the 7-1/4%  Convertible  Notes and the 7%
     Convertible  Notes are based on the quoted market price.  The fair value of
     the Term Loan and Revolving  Facility is estimated  using  discounted  cash
     flow  analysis,  based  on the  Company's  incremental  borrowing  rate for
     similar types of borrowing arrangements.

     Redeemable  Preferred  Stock:  The fair value is based on the quoted market
     price.

The carrying amounts and fair values of the Company's financial  instruments are
as follows:

<TABLE>
<CAPTION>

                                                      DECEMBER 31, 1997                     DECEMBER 31, 1996
                                             -------------------------------     ----------------------------------
                                                CARRYING                              CARRYING
                                                 AMOUNT          FAIR VALUE            AMOUNT           FAIR VALUE
                                             ----------------------------------------------------------------------
<S>                                          <C>               <C>                 <C>                <C>
Cash and cash equivalents                    $  98,902,000     $  98,902,000       $ 445,884,000      $ 445,884,000
Long-term debt:
    10-7/8% Notes                              194,959,000       199,810,000         175,368,000        179,140,000
    12-3/4% Notes                              209,387,000       230,577,000         185,043,000        202,797,000
    11-1/2% Notes                              743,961,000       819,000,000         665,257,000        714,000,000
    10% Notes                                  400,000,000       422,000,000                   -                  -
    7-1/4% Convertible Notes                   191,750,000       212,843,000         191,750,000        206,611,000
    7% Convertible Notes                       275,000,000       264,688,000         275,000,000        251,625,000
    Term Loan and Revolving Facility                     -                 -         239,750,000        239,750,000
    Redeemable Preferred Stock                 108,534,000       121,846,000                   -                  -
</TABLE>

13.  RELATED PARTY TRANSACTIONS

On  July  25,  1990,   Cellular   Communications,   Inc.  ("CCI")  and  AirTouch
Communications,  Inc.  ("AirTouch")  entered  into a Merger  and  Joint  Venture
Agreement,  as  amended  as of  December  14,  1990.  In  connection  with  this
agreement,  on July 31, 1991, CCI distributed to its  shareholders  the stock of
the Company.


                                      F-24
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

13.  RELATED PARTY TRANSACTIONS (CONTINUED)

Through  August 1996, CCI provided  management,  financial and legal services to
the  Company.  Amounts  charged  to the  Company  included  direct  costs  where
identifiable,  and  indirect  costs  allocated  utilizing  direct labor hours as
reported by the common  officers and  employees of CCI and the Company.  For the
years ended December 31, 1996 and 1995, CCI charged $1,194,000,  and $1,644,000,
respectively,  which is included in corporate expenses. In August 1996, upon the
merger  of CCI  with  AirTouch,  the  Company  commenced  providing  management,
financial,   legal   and   technical   services   to   Cellular   Communications
International,  Inc. ("CCII") and CoreComm Incorporated  ("CoreComm").  In 1996,
the Company charged CCII and CoreComm $351,000 and $200,000, respectively, which
included direct costs where identifiable and allocated  corporate overhead based
upon the amount of time  incurred  on CCII and  CoreComm  business by the common
officers and employees of the Company, CCII and CoreComm.  These charges reduced
corporate expenses in 1996.

In  January  1997,  the  Company,  CoreComm  and CCII  agreed to a change in the
Company's  fee for the  provision  of  services.  In 1997,  the Company  charged
CoreComm and CCII $1,492,000 and $871,000,  respectively, for direct costs where
identifiable  and a fixed  percentage of its corporate  overhead.  These charges
reduced  corporate  expenses.  In the opinion of management of the Company,  the
allocation methods are reasonable.

As of December  31, 1997 and 1996,  the Company had  receivables  of $69,000 and
$586,000 from CCII and $71,000 and $102,000 from CoreComm, respectively.

In  1993,  the  Company  entered  into  a  consulting   agreement  with  Insight
Communications Company, L.P. ("Insight U.S."), under which Insight U.S. provided
advice and  assistance  to the  Company  with  respect to its cable  television,
telephone and  telecommunications  operations in the United Kingdom. Two members
of the Company's Board of Directors are partners in Insight U.S. Pursuant to the
consulting agreement,  which had a term of three years, the Company paid Insight
U.S. a fee of $50,000  per month for the first  year,  $40,000 per month for the
second year and  $30,000  per month for the third  year.  The fees for the years
ended  December 31, 1996 and 1995 of $270,000 and  $450,000,  respectively,  are
included in corporate expenses.


                                      F-25
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

14.  NET LOSS PER COMMON SHARE

The following table sets forth the computation of basic and diluted net loss per
share:

<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31
                                                   1997                     1996                    1995
                                              --------------------------------------------------------------
<S>                                           <C>                     <C>                      <C>
Numerator:
Loss before extraordinary item                $(328,557,000)          $(254,454,000)           $(90,785,000)
Preferred stock dividend                        (11,978,000)                       -                      -
                                              --------------------------------------------------------------
                                               (340,535,000)            (254,454,000)           (90,785,000)
Extraordinary item                               (4,500,000)                       -                      -
                                              --------------------------------------------------------------
Loss available to common shareholders         $(345,035,000)           $(254,454,000)          $(90,785,000)
                                              --------------------------------------------------------------

Denominator for basic net loss
   per common share                              32,117,000               31,041,000             30,190,000
Effect of dilutive securities                             -                        -                      -
                                              --------------------------------------------------------------
Denominator for diluted net loss
   per common share                              32,117,000               31,041,000             30,190,000
                                              --------------------------------------------------------------

Basic and diluted net loss per common share:
   Loss before extraordinary item                   $(10.60)                  $(8.20)                $(3.01)
   Extraordinary item                                  (.14)                       -                      -
                                              --------------------------------------------------------------
   Net (loss)                                       $(10.74)                  $(8.20)                $(3.01)
                                              ==============================================================

</TABLE>

Stock  options,  warrants  and  convertible  securities  are  excluded  from the
calculation of net loss per common share as their effect would be antidilutive.

15.  SHAREHOLDERS' EQUITY (DEFICIENCY)

STOCK SPLIT

On July 25,  1995,  the Company  declared a 4-for-3  stock split by way of stock
dividend,  which was paid on August  11,  1995.  All  common  stock  data in the
Consolidated Financial Statements give effect to the stock split.

SERIES PREFERRED STOCK

In October  1996,  the Board of Directors  created and  authorized  for issuance
2,000 shares of 5% Non-Voting  Convertible  Preferred Stock, Series A ("Series A
Preferred  Stock"),  of which 780  shares  were  issued in  connection  with the
CableTel  Newport  acquisition.  Each  share of Series A  Preferred  Stock has a
stated value of $100,000, subject to certain exceptions. The holders of


                                      F-26
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

15.  SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

Series A Preferred Stock are entitled to receive cumulative  dividends beginning
in October 2001 at the rate of 5% of the stated value, payable  semi-annually in
arrears,  subject  to certain  exceptions.  Dividends  may be paid,  in the sole
discretion of the Board of Directors,  in cash, in common stock or in additional
shares of Series A Preferred  Stock.  The Company has the right,  exercisable at
any time, to redeem all or some of the Series A Preferred Stock at a price equal
to the  aggregate  stated value of the shares to be redeemed,  together with all
accrued and unpaid dividends, in cash or in shares of common stock (based on the
average  market price of the common stock,  as defined).  The holder of Series A
Preferred Stock has the right to convert shares of Series A Preferred Stock into
common stock equal to the  aggregate  stated  value of Series A Preferred  Stock
divided  by the  greater of (a) $40.00 or (b) the  average  market  price of the
common  stock,  as  defined.  The  Series A  Preferred  Stock has a  liquidation
preference  equal  to the  stated  value  per  share  plus  accrued  and  unpaid
dividends.

WARRANTS

In 1993, the Company issued  warrants to purchase an aggregate of  approximately
899,000  shares of common stock at an initial  exercise price of $8.35 per share
in  connection  with  certain  noncompetition  agreements.  The  exercise  price
decreased to $6.96 per share in the second year after the grant and to $5.57 per
share  thereafter.  The  warrants  were valued at  $13,193,000,  the  difference
between the fair market value of the common stock on the date of grant and $5.57
per share. The warrants expire in 2000.

In 1996,  pursuant to the terms of the consent  solicitations  to the holders of
the 10-7/8%  Notes and to the holders of the  12-3/4%  Notes to gain  consent to
modify certain indenture provisions, the Company paid an aggregate of $3,592,000
in consent  payments and issued  warrants to purchase  164,000  shares of common
stock at an  exercise  price of $23.78 per share in lieu of  additional  consent
payments of $1,641,000. The warrants expire in 2006.

SHAREHOLDER RIGHTS PLAN

The Rights  Agreement  provides that one Right will be issued with each share of
common stock issued on or after  October 13,  1993.  The Rights are  exercisable
upon the  occurrence  of certain  potential  takeover  events and will expire in
October 2003 unless previously redeemed by the Company.  When exercisable,  each
Right  entitles the owner to purchase  from the Company one  one-hundredth  of a
share of  Series A  Junior  Participating  Preferred  Stock  ("Rights  Preferred
Stock") at a purchase price of $100.


                                      F-27
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

15.  SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

The Rights Preferred Stock will be entitled to a minimum preferential  quarterly
dividend payment of $.01 per share and will be entitled to an aggregate dividend
of 100 times the dividend,  if any,  declared per share of common stock.  In the
event of liquidation,  the holders of Rights Preferred Stock will be entitled to
a minimum preferential  liquidation payment of $1 per share and will be entitled
to an aggregate payment of 100 times the payment made per share of common stock.
Each share of Rights  Preferred Stock will have 100 votes and will vote together
with the  common  stock.  In the  event of any  merger,  consolidation  or other
transaction in which shares of common stock are changed or exchanged, each share
of Rights  Preferred  Stock will be  entitled  to  receive  100 times the amount
received  per share of common  stock.  These  rights are  protected by customary
antidilution provisions.

There  are  2,500,000  authorized  shares  of  Series  Preferred  Stock of which
1,000,000 shares are designated Rights Preferred Stock.

STOCK OPTIONS

There are 2,164,000  shares of common stock reserved for issuance under the OCOM
Corporation (a  wholly-owned  subsidiary of the Company) 1991 Stock Option Plan.
The plan provides that incentive  stock options  ("ISOs") be granted at the fair
market value of OCOM's common stock on the date of grant, and nonqualified stock
options  ("NQSOs")  be granted at not less than 85% of the fair market  value of
OCOM's common stock on the date of grant.  Options are  exercisable as to 20% of
the shares subject thereto on the date of grant and become  exercisable as to an
additional 20% of the shares subject thereto on each January 1 thereafter, while
the optionee  remains an employee of the Company.  Options will expire ten years
after the date of the grant.

There are 6,653,000  shares of common stock  reserved for issuance under the NTL
Incorporated  1993 Stock  Option Plan.  The exercise  price of an ISO may not be
less than 100% of the fair market  value of the  Company's  common  stock on the
date of grant,  and the exercise price of a NQSO may not be less than 85% of the
fair market value of the  Company's  common stock on the date of grant.  Options
are exercisable as to 20% of the shares subject thereto on the date of grant and
become exercisable as to an additional 20% of the shares subject thereto on each
January 1  thereafter,  while the  optionee  remains an employee of the Company.
Options will expire ten years after the date of the grant.

There are 100,000  shares of common stock  reserved for issuance  under the OCOM
Corporation  Non-Employee Director Stock Option Plan. The plan provides that all
options be granted at the fair market  value of OCOM's  common stock on the date
of grant, and options will expire ten years after the date of the grant. Options
are exercisable as to 20% of the shares subject thereto on the date of grant and
become exercisable as to an additional 20% of the shares subject thereto on each
subsequent  anniversary of the grant date, while the optionee remains a director
of the Company. Options will expire ten years after the date of the grant.


                                      F-28
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

15.  SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

There are 320,000  shares of common stock  reserved  for issuance  under the NTL
Incorporated  1993  Non-Employee  Director Stock Option Plan. Under the terms of
this plan,  options will be granted to members of the Board of Directors who are
not  employees of the Company or any of its  affiliates.  The plan provides that
all options be granted at the fair market value of the Company's common stock on
the date of grant,  and  options  will  expire  ten years  after the date of the
grant.  Options are  exercisable as to 20% of the shares subject  thereto on the
date of grant and  become  exercisable  as to an  additional  20% of the  shares
subject  thereto  on each  subsequent  anniversary  of the grant  date while the
optionee remains a director of the Company.  Options will expire ten years after
the date of the grant.

Pro forma  information  regarding net loss and net loss per share is required by
SFAS No. 123, and has been  determined  as if the Company had  accounted for its
employee stock options under the fair value method of that  Statement.  The fair
value  for  these  options  was  estimated  at  the  date  of  grant  using  the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions for 1997, 1996 and 1995:  risk-free  interest rates of 5.89%,  6.56%
and 6.61%, respectively, dividend yield of 0%, volatility factor of the expected
market price of the Company's common stock of .276, .255 and .255, respectively,
and a weighted-average expected life of the option of 10 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the Company's stock options have  characteristics  significantly  different from
those of traded options and because changes in the subjective input  assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is  amortized  to expense over the  options'  vesting  period.  Following is the
Company's pro forma information:


                                              YEAR ENDED DECEMBER 31
                                       1997            1996              1995
                                 -----------------------------------------------

Pro forma net (loss)             $(343,850,000)   $(261,245,000)   $(93,688,000)
Basic and diluted pro
   forma net (loss) per share          $(11.08)          $(8.42)         $(3.10)


                                      F-29
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

15.  SHAREHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

A summary of the Company's stock option activity and related information for the
years ended December 31, follows:

<TABLE>
<CAPTION>

                                                1997                          1996                         1995
                                      ----------------------------------------------------------------------------------
                                                    WEIGHTED-                     WEIGHTED-                    WEIGHTED-
                                      NUMBER        AVERAGE         NUMBER        AVERAGE        NUMBER        AVERAGE
                                      OF            EXERCISE        OF            EXERCISE       OF            EXERCISE
                                      OPTIONS       PRICE           OPTIONS       PRICE          OPTIONS       PRICE
                                      ----------------------------------------------------------------------------------
<S>                                   <C>           <C>             <C>           <C>            <C>           <C>
Outstanding-beginning of year         6,738,000     $ 14.10         5,934,000     $11.04         4,795,000      $8.09
Granted                               1,571,000       23.97         1,390,000      25.94         1,164,000      23.07
Exercised                              (119,000)      12.85          (396,000)      3.44           (21,000)      4.78
Forfeited                               (33,000)      23.78          (190,000)     27.39            (4,000)     17.50
                                      ---------                     ---------                    ---------
Outstanding-end of year               8,157,000      $15.98         6,738,000     $14.10         5,934,000     $11.04
                                      =========                     =========                    =========

Exercisable at end of year            5,663,000      $12.39         4,258,000     $10.71         3,410,000     $ 8.22
                                      =========                     =========                    =========
</TABLE>

Weighted-average  fair  value of  options,  calculated  using the  Black-Scholes
option pricing model,  granted during 1997, 1996 and 1995 is $12.74,  $13.98 and
$12.47, respectively.

The following table  summarizes the status of the stock options  outstanding and
exercisable at December 31, 1997:

<TABLE>
<CAPTION>

                                  STOCK OPTIONS OUTSTANDING                 STOCK OPTIONS EXERCISABLE
-------------------   -----------------------------------------------   ---------------------------------
                                          WEIGHTED-        WEIGHTED-                          WEIGHTED-
                          NUMBER          REMAINING        AVERAGE          NUMBER            AVERAGE
     RANGE OF             OF              CONTRACTUAL      EXERCISE         OF                EXERCISE
 EXERCISE PRICES          OPTIONS         LIFE             PRICE            OPTIONS           PRICE
-------------------   -----------------------------------------------   ---------------------------------
<S>                       <C>             <C>              <C>              <C>               <C>
 $0.19 to $0.56              77,000       3.6 Years         $0.245             77,000          $0.245
 $0.73 to $1.12             150,000       3.6 Years         $0.745            150,000          $0.745
 $1.53 to $2.69             356,000       3.6 Years         $2.157            356,000          $2.157
 $3.09 to $4.50              75,000       4.4 Years         $3.230             75,000          $3.230
 $8.81 to $14.63          3,312,000       5.4 Years         $8.873          3,305,000          $8.861
$15.19 to $22.88          1,498,000       7.4 Years        $21.685            882,000         $21.659
$23.06 to $32.38          2,689,000       8.9 Years        $25.038            818,000         $25.213
-------------------   -----------------------------------------------   ---------------------------------
      Total               8,157,000                                         5,663,000
===================   ===============================================   =================================
</TABLE>

The Company has 25,309,000 shares of its common stock reserved for issuance upon
the  exercise  of warrants  and stock  options  and the  conversion  of debt and
preferred stock.


                                      F-30
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

16.  EMPLOYEE BENEFIT PLANS

     Certain subsidiaries of NTL Group Limited operate a defined benefit pension
plan in the  United  Kingdom.  The assets of the Plan are held  separately  from
those of NTL Group Limited and are invested in specialized  portfolios under the
management of an  investment  group.  The pension cost is  calculated  using the
attained  age method.  The  Company's  policy is to fund  amounts to the defined
benefit plan necessary to comply with the funding  requirements as prescribed by
the laws and  regulations  in the United  Kingdom.  The change in the  projected
benefit obligation in 1997 is due to the change in actuarial assumptions used.

The components of net pension costs are as follows:

                                              YEAR ENDED DECEMBER 31
                                         1997                       1996
                                    --------------------------------------------
Service cost                        $  10,693,000                 $7,997,000
Interest cost                          12,765,000                 11,679,000
Actual return on plan assets          (30,852,000)               (16,103,000)
Net amortization and deferral          17,327,000                  4,241,000
                                    --------------------------------------------
                                    $   9,933,000                 $7,814,000
                                    ============================================

The  funded  status  (assets  exceed  accumulated  benefits)  of the  plan is as
follows:
<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                                   1997                      1996
                                                               ---------------------------------------
<S>                                                            <C>                       <C>
Accumulated benefit obligation:
   Vested                                                      $178,828,000              $148,809,000
   Nonvested                                                              -                         -
                                                               ---------------------------------------
                                                               $178,828,000              $148,809,000
                                                               =======================================
Fair value of plan assets,
   principally U.K. equity securities                          $195,226,000              $166,195,000
Projected benefit obligation                                    204,340,000               170,795,000
                                                               ---------------------------------------
Excess of projected benefit obligation over assets               (9,114,000)               (4,600,000)
Unrecognized net transition obligation                           10,203,000                11,541,000
Unrecognized net gain                                            (1,065,000)               (5,098,000)
                                                               ---------------------------------------
Prepaid pension cost                                           $     24,000                $1,843,000
                                                               =======================================
Actuarial assumptions:
   Weighted average discount rate                                      7.25%                     8.25%
   Weighted average rate of compensation increase                      8.00%                     8.00%
   Expected long-term rate of return on plan assets                    9.00%                     9.50%

</TABLE>

                                      F-31
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

17.  LEASES

Leases for  buildings,  office space and equipment  extend  through 2031.  Total
rental  expense  for the years  ended  December  31,  1997,  1996 and 1995 under
operating leases was $20,674,000, $14,886,000 and $2,607,000, respectively.

Future  minimum  lease  payments  under  noncancellable  operating  leases as of
December 31, 1997 are as follows:

     Year ended December 31:
             1998                            $21,169,000
             1999                             20,933,000
             2000                             20,572,000
             2001                             20,235,000
             2002                             16,352,000
             Thereafter                       82,420,000
                                            ------------
                                            $181,681,000
                                            ============

18.  COMMITMENTS AND CONTINGENT LIABILITIES

As of  December  31,  1997,  the  Company  was  committed  to pay  approximately
$78,000,000 for equipment and services.

The Company has licenses  issued by the United  Kingdom  Department of Trade and
Industry  ("DTI")  and the  United  Kingdom  Independent  Television  Commission
("ITC") for its cable television, telephone and telecommunications business. The
initial terms of the Company's licenses was 23 years for the DTI licenses and 15
years for the ITC licenses.  The Company's  licenses  expire in 2008 to 2016 for
the DTI licenses and 1999 to 2005 for the ITC licenses. The DTI requires a fixed
annual  renewal fee of 2,500  pounds  sterling  ($4,200)  per  license.  The ITC
requires an annual  license fee ranging from 1,300 pounds  sterling  ($2,200) to
7,900 pounds sterling  ($13,100) per license based on the number of homes in the
licensed area, which is subject to adjustment  annually.  The Company's  license
fees in 1997 were $316,000.

In addition, the Company was awarded certain newly issued licenses by the ITC in
1995.  Pursuant to the terms of the local delivery  license ("LDL") for Northern
Ireland  granted to a  wholly-owned  subsidiary  of the Company,  the Company is
required to make annual cash payments to the ITC for fifteen years commencing in
January  1997  in  the  amount  of  approximately   14,400,000  pounds  sterling
($23,800,000)  (subject to  adjustments  for  inflation).  Such  payments are in
addition to the  percentages of qualifying  revenue already set by the ITC of 0%
for the  first ten years  and 2% for the last  five  years of the  fifteen  year
license. The Company paid $23,587,000 in 1997.


                                      F-32
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

18.  COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

Pursuant to the terms of the LDL for  Glamorgan  and Gwent,  Wales  granted to a
wholly-owned  subsidiary of the Company,  the Company is required to make annual
cash  payments  to the ITC for  fifteen  years,  commencing  in the  first  full
calendar  year after the start of  operations,  in the amount of 104,188  pounds
sterling  ($172,000).  Such  payments  are in  addition  to the  percentages  of
qualifying revenue already set by the ITC of 0% for the first five years, 2% for
the  second  five  years  and 4% for the last  five  years  of the  fifteen-year
license.

A significant  portion of NTL Group  Limited's  revenues is  attributable to the
provision of television and radio transmission and distribution services and the
provision of  telecommunications  services. In the United Kingdom, the provision
of such  services  is governed by the  Telecommunications  Act and The  Wireless
Telegraphy   Act  1949.   NTL  Group  Limited  holds  five  licenses  under  the
Telecommunications Act. The initial terms of these licenses were 10 or 25 years.
These  licenses  expire  in 2002 to 2021.  NTL Group  Limited  holds a number of
Wireless  Telegraphy Act licenses which continue in force primarily from year to
year unless  revoked or unless any of the license fees are not paid. The Company
paid $3,447,000 in 1997 in connection with these licenses.

The  Company is involved  in, or has been  involved  in,  certain  disputes  and
litigation  arising in the ordinary  course of its  business,  including  claims
involving  contractual  disputes and claims for damages to property and personal
injury  resulting  from  the  construction  of the  Company's  networks  and the
maintenance  and servicing of the Company's  transmission  masts.  None of these
matters  are  expected  to  have a  material  adverse  effect  on the  Company's
financial position, results of operations or cash flows.

19.  INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS

The Company  operates its long distance  telephone  and  microwave  transmission
business in the United States and its television and radio  broadcasting,  cable
television,  telephone and telecommunications  businesses in the United Kingdom.
The Company  acquired  its national and  international  telecom  segment and its
broadcast transmission and other segment in 1996.  Identifiable corporate assets
consist  primarily  of cash and cash  equivalents.  The  industry  segments  and
geographic  area  information  as of and for the years ended  December 31, 1997,
1996 and 1995 are as follows:


                                      F-33
<PAGE>

                    NTL Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (continued)

19.  INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS (CONTINUED)

<TABLE>
<CAPTION>
                                             Long
                                           Distance
                                          Telephone        Local          National        Broadcast
                                             and          Telecom           and          Transmission
                                          Microwave         and         International        and
                                         Transmission    Television       Telecom           Other       Corporate      Consolidated
                                        --------------------------------------------------------------------------------------------
                                                                       (In  thousands)
<S>                                     <C>              <C>            <C>             <C>             <C>            <C>
YEAR ENDED DECEMBER 31, 1997
Total revenues                          $  8,831         $   189,407    $162,738        $ 130,799       $       -      $  491,775
Operating income (loss)                   (1,207)           (208,815)     (5,327)          42,652         (19,367)       (192,064)
Depreciation and amortization              2,368             103,704      17,454           20,328           6,655         150,509
Identifiable assets                       27,623           1,579,044     350,704          358,302         105,966       2,421,639
Fixed asset additions                      1,541             333,037     101,088           38,984             156         474,806

YEAR ENDED DECEMBER 31, 1996
Total revenues                          $ 10,086         $    89,209    $ 45,430        $  83,618       $       -      $  228,343
Operating income (loss)                      773            (164,108)     (7,774)          26,376         (12,900)       (157,633)
Depreciation and amortization              2,744              69,200       8,601           13,152           4,956          98,653
Identifiable assets                       15,660           1,655,759     220,764          412,989         149,439       2,454,611
Fixed asset additions                        552             478,761      38,812           26,056           1,894         546,075

YEAR ENDED DECEMBER 31, 1995
Total revenues                          $  8,937         $    24,804    $      -        $       -       $       -      $   33,741
Operating (loss)                          (4,531)            (76,161)          -                -         (12,434)        (93,126)
Depreciation and amortization              2,729              25,650           -                -           1,444          29,823
Identifiable assets                       15,774             892,935           -                -         101,960       1,010,669
Fixed asset additions                      1,557             473,795           -                -               -         475,352
</TABLE>

20. SUBSEQUENT EVENT

In February 1998, the Company entered into an agreement and plan of amalgamation
(the "Agreement") with Comcast UK Cable Partners Limited ("Partners"). Under the
Agreement,  Partners'  shareholders  will receive 0.3745 shares of the Company's
Common Stock for each share of Partners Common Stock. Based on the closing price
of the Company's  Common Stock on the date of the Agreement,  the transaction is
valued at approximately  $600,000,000.  The Agreement  contains  provisions such
that if the purchase price per Partners  share falls below $10.00,  Partners has
the right to terminate the transaction, subject to the Company's right to adjust
the exchange  ratio such that  Partners'  shareholders  would receive $10.00 for
each Partners share. Under certain  circumstances,  the consideration payable to
Partners'  shareholders  may be adjusted  based on the proceeds of the potential
exercise of certain rights of first refusal with respect to Partners'  interests
in the  London and  Birmingham  franchises.  Completion  of the  transaction  is
subject  to a number  of  closing  conditions  including  regulatory  approvals,
shareholder  approvals  and  consents  from the  holders  of the  Company's  and
Partners' debt.


                                      F-34
<PAGE>


                                NTL Incorporated
           Schedule I - Condensed Financial Information of Registrant
                            Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                       1997                   1996
                                                                  -------------------------------------
<S>                                                               <C>                    <C>
ASSETS
Current assets:
   Cash and cash equivalents                                      $   46,421,000         $  101,555,000
   Marketable securities                                               4,998,000                      -
   Other                                                               8,804,000              1,008,000
                                                                  -------------------------------------
Total current assets                                                  60,223,000            102,563,000

Office improvements and equipment, net of accumulated
   depreciation of $555,000 (1997) and $191,000 (1996)                 1,551,000              1,759,000
Investments in and loans to subsidiaries                           1,970,114,000          1,672,695,000
Deferred financing costs, net of accumulated amortization of
   $13,141,000 (1997) and $6,850,000 (1996)                           50,771,000             45,132,000
Other assets, net of accumulated amortization
   of $11,803,000 (1997) and $9,952,000 (1996)                         1,540,000              4,597,000
                                                                  -------------------------------------
Total assets                                                      $2,084,199,000         $1,826,746,000
                                                                  =====================================

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities                                               $   22,276,000         $    6,214,000
Long-term debt                                                     2,015,057,000          1,492,418,000
Senior redeemable exchangeable preferred stock                       108,534,000                      -

Shareholders' equity (deficiency):
   Series preferred stock                                                      -                      -
   Common stock                                                          322,000                321,000
   Additional paid-in capital                                        538,054,000            548,647,000
   Cumulative translation adjustment                                 117,008,000            163,141,000
   (Deficit)                                                        (717,052,000)          (383,995,000)
                                                                  -------------------------------------
                                                                     (61,668,000)           328,114,000
                                                                  -------------------------------------
Total liabilities and shareholders' equity (deficiency)           $2,084,199,000         $1,826,746,000
                                                                  =====================================

</TABLE>

See accompanying notes.


                                      F-35
<PAGE>


                                NTL Incorporated
     Schedule I - Condensed Financial Information of Registrant (continued)
                       Condensed Statements of Operations

<TABLE>
<CAPTION>

                                                                         YEAR ENDED DECEMBER 31
                                                             1997                 1996                 1995
                                                       --------------------------------------------------------
<S>                                                    <C>                   <C>                   <C>
COSTS AND EXPENSES
Corporate expenses                                     $  12,811,000         $  14,144,000         $ 14,697,000
Depreciation and amortization                              6,655,000             4,954,000            1,445,000
                                                       --------------------------------------------------------
Operating (loss)                                         (19,466,000)          (19,098,000)         (16,142,000)

OTHER INCOME (EXPENSE)
Interest and other income                                  4,490,000             5,017,000            7,470,000
Interest expense                                        (191,124,000)         (128,755,000)         (39,033,000)
Other gain                                                10,000,000                     -                    -
Foreign currency transaction gains (losses)               (2,221,000)            1,376,000              (23,000)
                                                       --------------------------------------------------------
(Loss) before income taxes and equity in net
   (loss) of subsidiaries                               (198,321,000)         (141,460,000)         (47,728,000)
Income tax (provision)                                    (1,083,000)             (193,000)                   -
                                                       --------------------------------------------------------
(Loss) before equity in net (loss) of subsidiaries      (199,404,000)         (141,653,000)         (47,728,000)
Equity in net (loss) of subsidiaries                    (133,653,000)         (112,801,000)         (43,057,000)
                                                       --------------------------------------------------------
Net (loss)                                             $(333,057,000)        $(254,454,000)        $(90,785,000)
                                                       ========================================================

</TABLE>

See accompanying notes.

                                      F-36
<PAGE>


                                NTL Incorporated
     Schedule I - Condensed Financial Information of Registrant (continued)
                       Condensed Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                  YEAR ENDED DECEMBER 31
                                                                     1997                  1996                   1995
                                                              -----------------------------------------------------------
<S>                                                           <C>                    <C>                    <C>
Net cash (used in) operating activities                       $ (55,467,000)         $ (28,152,000)         $ (10,448,000)

INVESTING ACTIVITIES
Purchase of office improvements and equipment                      (156,000)            (1,891,000)                     -
Purchase of marketable securities                              (145,939,000)                     -                      -
Proceeds from sales of marketable securities                    142,596,000                      -                      -
Increase in investments in and loans to subsidiaries           (436,046,000)          (955,652,000)          (337,120,000)
                                                              -----------------------------------------------------------
Net cash (used in) investing activities                        (439,545,000)          (957,543,000)          (337,120,000)

FINANCING ACTIVITIES
Proceeds from borrowings and sale of preferred stock,
   net of financing costs                                       484,340,000            842,820,000            328,731,000
Proceeds from exercise of stock options and warrants              1,671,000              1,665,000                102,000
                                                              -----------------------------------------------------------
Net cash provided by financing activities                       486,011,000            844,485,000            328,833,000
Effect of exchange rate changes on cash                         (46,133,000)           156,868,000             (6,594,000)
                                                              -----------------------------------------------------------
Increase (decrease) in cash and cash equivalents                (55,134,000)            15,658,000            (25,329,000)
Cash and cash equivalents at beginning of year                  101,555,000             85,897,000            111,226,000
                                                              -----------------------------------------------------------
Cash and cash equivalents at end of year                      $  46,421,000          $ 101,555,000          $  85,897,000
                                                              ===========================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest                      $  53,485,000          $  23,687,000          $           -
Income taxes paid                                                         -                193,000                      -

SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on senior
   redeemable exchangeable preferred stock                    $  12,263,000          $           -          $           -
Warrants issued in connection with consent
   solicitations                                                          -              1,641,000                      -
Common stock issued for acquisition                                       -             34,137,000                      -
Preferred stock issued for acquisition of minority
   interest, including notes payable to minority partner                  -             49,000,000                      -
Liabilities incurred in connection with acquisitions                      -             81,906,000                      -
</TABLE>

See accompanying notes.


                                      F-37
<PAGE>

                                NTL Incorporated
           Schedule I - Condensed Financial Information of Registrant
                     Notes to Condensed Financial Statements


1.    BASIS OF PRESENTATION

In the NTL Incorporated condensed financial statements, the Company's investment
in subsidiaries is stated at cost plus equity in the  undistributed  earnings of
the subsidiaries since the date of acquisition.  The Company's share of net loss
of its  unconsolidated  subsidiaries is included in consolidated  net loss using
the equity method of accounting.  The condensed  financial  statements should be
read in conjunction with the Company's consolidated financial statements.

2.    LONG-TERM DEBT

Long-term debt consists of:
<TABLE>
<CAPTION>

                                                                     DECEMBER 31
                                                            1997                    1996
                                                      --------------------------------------
<S>                                                   <C>                     <C>
10-7/8% Senior Deferred Coupon Notes
   ("10-7/8% Notes") (a)                              $  194,959,000          $  175,368,000
12-3/4% Series A Senior Deferred Coupon Notes
   ("12-3/4% Notes") (b)                                 209,387,000             185,043,000
11-1/2% Series B Senior Deferred Coupon Notes
   ("11-1/2% Notes") (c)                                 743,961,000             665,257,000
10% Series B Senior Notes ("10% Notes") (d)              400,000,000                       -
7-1/4% Convertible Subordinated Notes
   ("7-1/4 Convertible Notes") (e)                       191,750,000             191,750,000
7% Convertible Subordinated Notes
   ("7% Convertible Notes") (f)                          275,000,000             275,000,000
                                                      --------------------------------------
                                                      $2,015,057,000          $1,492,418,000
                                                      ======================================
</TABLE>


(a)  In October 1993, the Company issued $212,000,000 aggregate principal amount
     of 10-7/8%  Senior  Deferred  Coupon Notes due 2003. The 10-7/8% Notes were
     issued at a price to the public of 58.873% or $124,811,000.

(b)  In April 1995, the Company issued  $277,803,500  aggregate principal amount
     of 12-3/4%  Senior  Deferred  Coupon Notes due 2005. The 12-3/4% Notes were
     issued at a price to the public of 53.995% or $150,000,000.

(c)  In January 1996,  the Company  issued  $1,050,000,000  aggregate  principal
     amount of  11-1/2%  Series B Senior  Deferred  Coupon  Notes due 2006.  The
     11-1/2%  Notes  were  issued  at a price to  investors  of  57.155%  of the
     aggregate principal amount at maturity or $600,127,500.


                                      F-38
<PAGE>

                                NTL Incorporated
           Schedule I - Condensed Financial Information of Registrant
               Notes to Condensed Financial Statements (continued)


2.    LONG-TERM DEBT (CONTINUED)

(d)  In February  1997,  the Company  issued  $400,000,000  aggregate  principal
     amount of 10% Senior Notes due 2007.

(e)  In April and May 1995, the Company issued $191,750,000  principal amount of
     7-1/4% Convertible  Subordinated Notes due 2005. Interest payments began on
     October 15, 1995 and interest is payable every six months  thereafter.  The
     7-1/4% Convertible Notes will mature on April 15, 2005.

     In March 1998, the Company announced that it was calling for redemption all
     of the 7-1/4%  Convertible Notes. The redemption date is April 20, 1998 and
     the redemption price is 105.08% of the principal  amount,  plus accrued and
     unpaid interest through the date of redemption.

(f)  In June 1996, the Company issued $275,000,000 aggregate principal amount of
     7%  Convertible  Subordinated  Notes due 2008.  Interest  payments began on
     December 15, 1996 and interest is payable every six months thereafter.  The
     7% Convertible Notes mature on June 15, 2008.

In  March  1998,  the  Company  issued  125,000,000  pounds  sterling  aggregate
principal  amount of 9-1/2% Senior Notes due 2008 (the "Sterling Senior Notes"),
300,000,000  pounds  sterling  aggregate  principal  amount  of  10-3/4%  Senior
Deferred  Coupon  Notes due 2008 (the  "Sterling  Deferred  Coupon  Notes")  and
$1,300,000,000 aggregate principal amount of 9-3/4% Senior Deferred Coupon Notes
due 2008 (the  "Dollar  Deferred  Coupon  Notes").  The Sterling  Senior  Notes,
Sterling  Deferred Coupon Notes and the Dollar Deferred Coupon Notes were issued
at a price to the public of 99.67% or  124,588,000  pounds  sterling,  58.62% or
175,860,000 pounds sterling and 61.724% or $802,412,000, respectively.

3.    REDEEMABLE PREFERRED STOCK

In February 1997, the Company issued  $100,000,000 of its 13% Senior  Redeemable
Exchangeable  Preferred Stock (the "Redeemable  Preferred  Stock").  The Company
received net proceeds of $96,625,000  after discounts and  commissions  from the
issuance of the Redeemable  Preferred  Stock.  Discounts,  commissions and other
fees incurred of $3,729,000 were recorded as unamortized discount at issuance.

Of the 2,500,000  authorized shares of Series Preferred Stock, 100,000 shares of
Redeemable Preferred Stock were issued.  Dividends accrue at 13% per annum ($130
per share) and are payable  quarterly in arrears as of May 15, 1997.  Dividends,
whether or not earned or declared,  will accrue without  interest until declared
and paid, which declaration may be for all or part of


                                      F-39
<PAGE>

                                NTL Incorporated
           Schedule I - Condensed Financial Information of Registrant
               Notes to Condensed Financial Statements (continued)


3.    REDEEMABLE PREFERRED STOCK (CONTINUED)

the accrued dividends.  Dividends accruing on or prior to February 15, 2004 may,
at the option of the Company,  be paid in cash,  by the  issuance of  additional
Redeemable  Preferred  Stock  or in  any  combination  of the  foregoing.  As of
December 31, 1997,  the Company has accrued  $11,978,000  for  dividends and has
issued  approximately  10,000 shares for $10,187,000 of such accrued  dividends.
The Redeemable  Preferred  Stock is subject to mandatory  redemption on February
15,  2009.  On any  scheduled  dividend  payment  date,  the Company may, at its
option,   exchange  all  of  the  shares  of  Redeemable  Preferred  Stock  then
outstanding for the Company's 13% Subordinated Exchange Debentures due 2009.

4.    LEASES

Leases for office space extend through 2004.  Total rental expense for the years
ended  December 31, 1997,  1996 and 1995 under  operating  leases was  $503,000,
$220,000 and $22,000, respectively.

Future  minimum  lease  payments  under  noncancellable  operating  leases as of
December 31, 1997 are as follows:

        Year ended December 31:
               1998                            $  565,000
               1999                               475,000
               2000                               462,000
               2001                               462,000
               2002                               462,000
               Thereafter                         924,000
                                               ----------
                                               $3,350,000
                                               ==========

5.    OTHER GAIN

In October 1997,  following the U.S.  District  Court's  decision to dismiss the
Company's  complaint  against  LeGroupe  Videotron Ltee and its subsidiary,  the
Company entered into a Settlement  Agreement  dismissing the Company's complaint
in exchange for a payment of $10,000,000.

6.    OTHER

No cash dividends were paid to the registrant by subsidiaries in any of the last
three years.


                                      F-40
<PAGE>


                        NTL Incorporated and Subsidiaries

                 Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>

               COL. A                         COL. B                  COL. C                     COL. D             COL. E
-----------------------------------------------------------------------------------------------------------------------------
                                                                    ADDITIONS
                                                            --------------------------
                                                                                (2)
                                                               (1)           CHARGED
                                           BALANCE AT       CHARGED TO       TO OTHER                              BALANCE
                                           BEGINNING        COSTS AND        ACCOUNTS-         DEDUCTIONS          AT END
            DESCRIPTION                    OF PERIOD        EXPENSES         DESCRIBE          DESCRIBE            OF PERIOD
-----------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>              <C>               <C>                 <C>
Year ended December 31, 1997
   Allowance for doubtful accounts
                                           $3,870,000       $6,891,000       $      -          $(2,705,000)(a)     $8,056,000
                                           ==================================================================================

Year ended December 31, 1996:
   Allowance for doubtful accounts
                                           $  767,000       $2,597,000       $      -          $   506,000 (b)     $3,870,000
                                           ==================================================================================

Year ended December 31, 1995:
   Allowance for doubtful accounts
                                           $   22,000       $  709,000       $      -          $    36,000 (c)     $  767,000
                                           ==================================================================================
</TABLE>

(a)  Uncollectible  accounts  written-off,  net of recoveries of $2,604,000  and
     $101,000 foreign currency translation adjustments.

(b)  Uncollectible accounts written-off,  net of recoveries of $645,000,  offset
     by $804,000  allowance  for  doubtful  accounts as of  acquisition  date of
     purchased subsidiary and $347,000 foreign currency translation adjustments.

(c)  Recoveries  of  accounts  previously  written-off,   net  of  uncollectible
     accounts  written-off of $49,000 less $13,000 foreign currency  translation
     adjustments.


                                      F-41